2009 (6) TMI 763 - AT - Central Excise

Summary

Issues: Duty demand on grey fabrics cleared without payment, Barred by limitation, Possession of factory premises, Manufacturing operations, De facto possession, Financial difficulty, Prima facie case, Pre-deposit requirement.

Analysis:
1. Duty Demand and Limitation: The appellant, a 100% EOU, filed a stay petition and appeal against the duty demand of Rs. 26,61,280 with interest and penalty imposed for clearing grey fabrics without payment of duty. The issue raised was the limitation period as the show cause notice was issued after 3 years from the factory visit, contended by the appellant's consultant.

2. Possession of Factory Premises: The investigations revealed that the factory premises were not in the appellant's possession during the relevant period. Statements from the loom manager and excise clerk indicated that manufacturing operations were conducted on behalf of other individuals who owned the premises, contradicting the appellant's claim of fabric production.

3. Financial Difficulty and Prima Facie Case: The appellant claimed financial distress to avoid making a pre-deposit. However, the tribunal found discrepancies in the appellant's financial situation, with significant bank balances and amounts due from creditors. The tribunal concluded that the appellant failed to establish a prima facie case regarding the duty demand and financial hardship.

4. Pre-deposit Requirement: Considering the duty liability and the appellant's rights, the tribunal directed a deposit of 20% of the duty demanded within sixteen weeks as per Section 35F of the Central Excise Act, 1944. The stay against the recovery of the remaining amount was granted subject to this pre-deposit, with compliance to be reviewed on a specified date.

In conclusion, the tribunal upheld the duty demand against the appellant for clearing grey fabrics without payment, rejected the limitation argument, highlighted discrepancies in possession of factory premises and manufacturing operations, dismissed the claim of financial difficulty, and imposed a pre-deposit requirement for granting the stay against the remaining duty, interest, and penalty amounts.