2008 (12) TMI 504 - AT - Central Excise

Summary

Issues Involved: Application for waiver of pre-deposit and stay of recovery u/s an amount demanded by the Commissioner for duty-free raw materials destroyed in a fire accident by a 100% EOU.

Summary:
The Appellate Tribunal CESTAT, Mumbai considered an application for waiver of pre-deposit and stay of recovery u/s an amount demanded by the Commissioner from a 100% EOU for duty-free raw materials destroyed in a fire accident. The appellants procured raw materials duty-free through indigenous purchase and imports as per relevant Notifications. Following a fire accident in 2002 that destroyed the raw materials, the Insurance claim did not cover the Customs/Central Excise duty payable in case of non-fulfillment of Notification conditions. The department issued a show-cause notice for the duties, which the party contested citing eligibility for remission u/s Rule 21 of Central Excise Rules 2002 and Section 23 of the Customs Act. The Commissioner agreed on eligibility for remission but held that breach of EOU license and B-17 Bond conditions made the appellants liable for duties on unused raw materials, leading to the demand.

Upon examination, the Tribunal noted that Rule 6 of Central Excise Rules 2001 outlined the procedure for EOUs claiming benefits under Notification No. 1/95-C.E., stating that if concessional rate goods are not used for the intended purpose, the manufacturer must pay the differential duty along with interest. An explanation to the Rule exempted goods lost or destroyed by natural causes or accidents during transport or handling from being deemed used for the intended purpose. The B-17 Bond also mandated duty payment in case of Notification condition breaches. Considering these provisions, the Tribunal upheld the Commissioner's order, emphasizing the appellants' awareness of the consequences of breaching Notification conditions. The Tribunal found no prima facie case for the appellants, who had already paid Rs. 15 lakhs and directed them to deposit an additional Rs. 15 lakhs within four weeks for the appeal.

The Tribunal's decision highlighted the importance of compliance with Notification conditions for duty-free procurement and the consequences of breaching such conditions, ultimately upholding the demand for duty payment on raw materials destroyed in the fire accident.