2009 (5) TMI 701 - AT - Central Excise

100% EOU - Stay/Dispensation of pre-deposit - Financial hardship - DTA sale - Notification No. 23/2003-C.E. dated 31-3-2003

Issues Involved:
1. Whether 'deemed export' clearances can be considered along with physical exports to determine the Domestic Tariff Area (DTA) sale entitlement of a 100% Export Oriented Unit (EOU).
2. The financial condition of the appellant and the plea of undue hardship.
3. The prima facie case for granting a stay on the recovery of the demanded duty, interest, and penalties.

Issue-wise Detailed Analysis:

1. 'Deemed Export' Clearances and DTA Sale Entitlement:

The core issue in the appeals is whether 'deemed export' clearances can be considered along with physical exports to determine the DTA sale entitlement of a 100% EOU. The appellants argued that they had mistakenly not included 'deemed export' clearances when determining their DTA entitlement. They later sought and received provisional permission from the Development Commissioner to include these clearances, which was subsequently canceled. The appellants contended that this cancellation was challenged in the Bombay High Court, which referred the matter back to the Development Commissioner for reconsideration.

The respondents argued that the appellants had been unauthorizedly clearing goods into the DTA at concessional rates beyond their permitted quantity. They emphasized that the Ministry of Commerce clarified that only physical exports should be considered for DTA entitlement, not 'deemed exports'. The respondents also highlighted that the CESTAT and courts have consistently held that the DGFT/Ministry of Commerce is the final authority to interpret Foreign Trade Policy provisions.

2. Financial Condition and Plea of Undue Hardship:

The appellants claimed that they were not in a financially sound condition, with their assets taken over by M/s. ARCIL for recovery of outstanding dues. They had already paid a significant portion of the demanded duty in one of the Orders-in-Original and argued that further payment would cause undue hardship.

The respondents countered this claim by presenting a report indicating that the appellants had substantial profits, cash and bank balances, and inventories. They argued that the Tribunal needed to balance the claim of undue hardship against safeguarding government revenue, especially given the potential difficulty in recovering dues if the company's assets were sold.

3. Prima Facie Case for Stay:

The Tribunal noted that the Revenue had a strong prima facie case, given the rejection of the appellants' request to include 'deemed export' clearances for DTA entitlement by the Development Commissioner and the Ministry of Commerce's clarification. The Tribunal decided that the implications of various judgments cited by both sides would be examined in detail during the final hearing of the main appeals.

Regarding the plea of undue financial hardship, the Tribunal agreed with the respondents that a balance needed to be struck. The Supreme Court had emphasized this aspect in several decisions. Consequently, the Tribunal directed the appellants to pre-deposit an amount of Rs. 4 crores towards duty in one appeal and acknowledged the amount already deposited in the other appeal as sufficient compliance.

Conclusion:

The Tribunal directed the appellants to pre-deposit Rs. 4 crores towards duty for one appeal and considered the amount already deposited in the other appeal as sufficient. The pre-deposit of the balance amount of duty, interest, and penalty was waived, and recovery stayed pending disposal of the appeals. Failure to comply would result in the vacation of stay and dismissal of the appeal.

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