2009 (2) TMI 631 - AT - Central Excise

Confiscation and penalty - Export Oriented Unit, 100% EOU - Manufacture - Demand and penalty - Limitation

Summary

Issues Involved:
1. Eligibility for customs duty exemption under Notification No. 52/03-Cus.
2. Liability for confiscation and penalty under Customs Act and Central Excise Act.
3. Eligibility for concessional rate of Central Excise duty under Notification No. 23/03-C.E.
4. Applicability of extended limitation period and penalty under Section 114A of the Customs Act.

Detailed Analysis:

1. Eligibility for Customs Duty Exemption:
The Appellant company, a 100% EOU, imported marble blocks duty-free under Notification No. 52/03-Cus. The Department contended that these imports were not used for manufacturing goods for export, as the exports were primarily of serpentine stone products, not marble. The Appellant argued that serpentine stone is commercially known as 'green marble' and thus, the export obligation was met. The Tribunal disagreed, noting that marble and serpentine are distinct in HSN classifications and chemical composition. Consequently, the imported marble blocks were not used for the intended purpose, disqualifying them from duty exemption.

2. Liability for Confiscation and Penalty:
Given the misuse of duty-free imported marble blocks, the Tribunal upheld the confiscation under Section 111(o) of the Customs Act. However, since the goods were not available for confiscation, no redemption fine was imposed. The Appellant company and its Director were found liable for penalties under Section 112(a) of the Customs Act but not under Section 114A, as there was no suppression of facts with intent to evade duty.

3. Eligibility for Concessional Rate of Central Excise Duty:
The Appellant contended that the process of cutting marble blocks into slabs/tiles did not amount to manufacture, citing Supreme Court judgments. The Tribunal agreed, noting that during the dispute period, there was no chapter note in the Central Excise tariff defining such processes as manufacture. Thus, no Central Excise duty was chargeable on DTA clearances of marble products, only customs duty on imported marble blocks.

4. Applicability of Extended Limitation Period and Penalty:
The Tribunal found no suppression of facts by the Appellant, as the Department was aware of the nature of exports and DTA sales. Therefore, the extended limitation period under Section 28(1) of the Customs Act was not applicable, and penalties under Section 114A were not justified. However, penalties under Section 112(a) were upheld for violation of import conditions.

Conclusion:
The Tribunal set aside the central excise duty demands and penalties under Section 11AC and Section 114A of the Customs Act, as well as the redemption fine. It held that customs duty exemption was not available for imported marble blocks, but duty was recoverable only within the normal limitation period. The case was remanded to the Commissioner for re-determination of customs duty and penalties under Section 112(a).