2007 (9) TMI 514 - AT - Customs

Demand - 100% EOU - Held that - the respondent, a 100% EOU used the imported raw materials namely POY and manufactured grey fabrics and the grey fabrics has been admittedly diverted instead of being exported. When there is a demand on diverted finished products, the sustainability of the demand on the raw materials which has been used in the manufacture of finished goods cannot be upheld - appeal dismissed.

Summary

Issues: Appeal against order of Commissioner (Appeals) regarding demand of duty on finished goods diverted by 100% EOU and dropping of demand on raw materials consumed in manufacturing.

Analysis:
1. Issue of Demand on Finished Goods:
The Appellate Tribunal considered the appeal by the Department against the order of the Commissioner (Appeals) regarding the demand of duty on finished goods diverted by the 100% EOU. The Commissioner (Appeals) had confirmed the demand on the finished goods but dropped the demand of Rs. 93,479 on the raw materials consumed in the manufacture of finished products. The Tribunal noted that the imported raw materials, namely POY, were used by the EOU to manufacture grey fabrics, which were diverted instead of being exported. The Tribunal observed that when there is a demand on diverted finished products, the sustainability of the demand on the raw materials used in the manufacture of finished goods cannot be upheld. This decision was supported by precedents set by the Tribunal in similar cases.

2. Reasoning of Commissioner (Appeals):
The Tribunal analyzed the reasoning adopted by the Commissioner (Appeals) for dropping the proceedings related to the demand on raw materials. The Commissioner (Appeals) pointed out discrepancies in the preparation of the Show Cause Notice (SCN) by the department, noting that the SCN was confused in its wording. The Commissioner (Appeals) highlighted that the duty foregone should have been customs duty since the raw materials were imported. The Tribunal agreed with the Commissioner (Appeals) that the amount of duty foregone should have been ascertained based on the specific bill of entry under which the goods were imported, rather than being approximated. The Tribunal found no error in the reasoning adopted by the Commissioner (Appeals) and upheld the decision to drop the demand on raw materials.

3. Decision of the Tribunal:
After considering the submissions of the ld. SDR and reviewing the facts of the case, the Tribunal concluded that the appeal by the Department lacked merit. The Tribunal rejected the appeal, affirming the order of the Commissioner (Appeals) regarding the demand on the finished goods and the dropping of the demand on the raw materials consumed in the manufacturing process. The appeal was dismissed by the Tribunal, and the decision was dictated and pronounced in court.

In summary, the Appellate Tribunal upheld the decision of the Commissioner (Appeals) regarding the demand of duty on finished goods diverted by the 100% EOU and the dropping of the demand on the raw materials consumed in the manufacturing process. The Tribunal found no error in the reasoning provided by the Commissioner (Appeals) and dismissed the appeal by the Department, citing precedents set by the Tribunal in similar cases.