2008 (8) TMI 679 - AT - Central Excise

Summary

Issues involved: Dispute regarding duty liability on excess cotton waste generated by a 100% Export-Oriented Unit (EOU) using duty-free imported cotton for manufacturing cotton yarn for export u/s Customs Notification No. 53/97.

Summary:
1. The dispute involved the duty liability on excess cotton waste generated by the EOU using duty-free imported cotton for manufacturing cotton yarn for export between Dec. '99 to March '02, exceeding the permissible wastage limit of 25% for EOUs. The department demanded customs duty, surcharge, and interest based on Customs Notification No. 53/97, which was contested by the respondents. The original authority dropped the duty demand on limitation grounds, leading to an appeal by the department to the Commissioner (Appeals).

2. The main ground raised in the appeal was the applicability of the time limit specified in Section 28(1) for duty payment on the imported raw material used in generating excess cotton waste. The department argued that duty could be demanded without a time limit under Section 72(1) due to unsatisfactory accounting of excess waste, as per contractual obligations. The appeal was based on these grounds reiterated by the ld. SDR.

3. The counsel for the respondents contended that the show-cause notice (SCN) only referred to Section 28 of the Customs Act and not Section 72, emphasizing the need for proper notice as per legal precedents. After careful consideration, it was found that the SCN primarily invoked Section 28 for demanding duty, with peripheral mention of Section 72. The department's claim of invoking Section 72(1)(d) was deemed factually incorrect, as the SCN focused on duty demand under the proviso to Section 28(1). The appeal was dismissed based on these findings, upholding the Commissioner (Appeals) decision.

(Separate Judgment by Judge P.G. Chacko, J.)
- The judgment addressed the incorrect invocation of Section 72(1)(d) in the show-cause notice, emphasizing the necessity of proper notice and factual allegations in line with legal provisions. The appeal was dismissed, affirming the Commissioner (Appeals) decision on duty demand under the proviso to Section 28(1) of the Customs Act.