2008 (7) TMI 691 - AT - Central Excise

Summary

Issues:
- Duty demand on goods produced by a 100% EOU and cleared to units in DTA without payment of duty.
- Applicability of proviso to Section 3(1) of the Central Excise Act.
- Interpretation of duty rate applicable to clearance by 100% EOU.
- Justification for invocation of extended period of limitation.

The judgment involved three appeals arising from a common order of the Commissioner (Appeals) dated 8-2-2004. The first appellant, a 100% EOU, manufactured guar gum powder for other appellants on a job work basis and cleared them without payment of duty or permission from the Development Commissioner. The original authority demanded duty from the first appellant for availing duty-free imports and clearing goods to DTA units, imposing penalties. The duty demand was for the period 1-4-95 to 31-3-97 based on a show cause notice dated 14-6-99, which was upheld by the Commissioner (Appeals).

The appellants contended that the proviso to Section 3(1) was not applicable in their case, arguing that only the main section should apply. They claimed that prior to 21-3-97, all goods were exported except for a quantity of guar gum powder cleared in the local market without duty payment. The appellants argued that if the main provision applied, their product would not be covered by the Central Excise Tariff, making no duty leviable. They also highlighted differing interpretations of the rate of duty applicable to clearance by 100% EOU by various authorities and the Tribunal.

The advocate representing the appellants pointed out the conflicting interpretations by field officers, the Board, and the Tribunal regarding the demand for duty in such situations. The advocate cited circulars clarifying the applicability of the main section versus the proviso to Section 3(1) of the Central Excise Act. The advocate emphasized that the appellants' belief that no duty was payable on the cleared product was bona fide due to the prevailing differences in interpretation.

The Tribunal agreed with the advocate's contention that there was no justification for invoking the extended period of limitation in this case. Consequently, the Tribunal held that the demand for duty and the imposition of penalties were not justified, and the appeals were allowed on the ground of limitation. The operative part of the order was pronounced in open court by the Tribunal.