2007 (3) TMI 37 - AT - Customs

EOU Revenue alleged that respondent had not obtained any permission for the job work on behalf of the DTA exports and also contravened the provisions and accordingly liable to pay duty alongwith penalty Held that allegation and demand is correct

Issues:
1. Recovery of Central Excise duty on exported goods.
2. Job work undertaken by the respondent without permission.
3. Contravention of Exim Policy and Circular leading to duty recovery and penalty.
4. Interpretation of Notification No. 22/2003-C.E. and related conditions.
5. Disposal of goods and export obligations under Exim Policy.
6. Liability for duty payment on inputs due to breach of conditions.
7. Applicability of duty exemption and penalties.

Analysis:
1. The Appellate Tribunal addressed the issue of recovery of Central Excise duty on goods exported by the respondent. The Commissioner (Appeals) had set aside the duty recovery and penalty, emphasizing that the goods were actually exported by another party, M/s. Kapoor Industries. The Tribunal noted that the manufacturer who exported the goods could claim rebate on raw materials under Rule 18, leading to a "nil" revenue effect. Therefore, the recovery of duty from the respondent was deemed unjustified.

2. The Tribunal examined the respondent's job work activities without obtaining permission, as required by Circular No. 67/98-Cus. The respondent, an EOU unit, did not pay duty on consumables used in job work for M/s. Kapoor Industries. The Revenue alleged contravention of Exim Policy Paragraph 6.15(b) and Circular No. 7/98-Cus., leading to penal action under Section 117 of the Customs Act and interest payment under Section 11AB of the Central Excise Act.

3. The Tribunal considered the conditions of Notification No. 22/2003-C.E. and the Exim Policy regarding the disposal of goods and export obligations. The Revenue argued that the respondent's actions contravened the policy, leading to duty recovery and penalties. However, the respondent contended that since M/s. Kapoor Industries could claim rebate or duty exemption, the revenue effect was absent, supporting the Commissioner's decision in favor of the respondent.

4. The Tribunal analyzed the breach of conditions under the Exim Policy and Circular, emphasizing the requirement for direct export by the EOU undertaking job work. The respondent's failure to export the goods directly and sending them back to the DTA unit violated policy provisions, leading to duty liability on previously avoided inputs. The Tribunal set aside the Commissioner's order, reinstating duty imposition and penalties, except for the reduced penalty under Section 117 of the Customs Act.

5. The Tribunal highlighted the significance of fulfilling conditions under the Exim Policy and Notification No. 22/2003-C.E. for duty exemption. The failure to comply with export obligations and procedural requirements resulted in the liability for duty payment and penalties. The Tribunal concluded that the respondent's actions constituted substantial breaches, justifying duty recovery and penalty imposition as per the adjudicating authority's decision.

This detailed analysis of the judgment provides insights into the legal complexities surrounding the recovery of Central Excise duty, job work permissions, Exim Policy compliance, and duty exemption conditions, emphasizing the importance of adhering to regulatory frameworks in commercial activities.

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