2008 (8) TMI 627 - AT - Central Excise

Summary

Issues:
1. Duty demand and penalty imposition for bringing capital goods before obtaining approval from the Development Commissioner.

Analysis:
The case involved the appellants setting up a new unit adjacent to an existing one without prior approval from the Development Commissioner. Subsequently, a duty demand was raised, and a penalty was proposed by the Department. The Additional Commissioner confirmed the demand and imposed a penalty, which was later reduced by the Commissioner (Appeals) to Rs. 1 lakh, considering the subsequent regularization of the procedural irregularity.

During the appeal, the appellant's advocate cited various decisions, including the Larger Bench decision in M/s. Godrej Soaps v. C.C.E, Mumbai, to argue that when a demand is dropped, confiscation and penalty cannot be upheld as they are penal in nature. On the other hand, the Revenue representative contended that the cases cited by the appellant were not applicable to the present scenario, emphasizing that the installation of capital goods without approval was against the notification and relevant rules, justifying the penalty imposition.

Upon evaluation of the submissions, the judge noted the relevance of the Tribunal's decision in M/s. Orchid Chemicals and Pharmaceuticals v. CC, Chennai, which stated that when duty demand is dropped against a 100% Export Oriented Unit (EOU), penal provisions are not applicable. Considering that the appellant had applied for permission to use the premises before both the Development Commissioner and Central Excise authorities, the judge concluded that the offense of using the premises without permission was not severe enough to warrant penal provisions. Consequently, the penalty imposed was set aside, and the appeal was allowed with consequential relief.