2014 (1) TMI 1668 - HC - Central Excise

Confiscation of goods - Violation of Notification 13/81-Cus. dated 9-2-1981 - Held that - The Assessee was 100% EOU and was granted exemption from excise duty under Notification 13/81-Cus. dated 9-2-1981. The Tribunal allowed the appeal of the Assessee on the ground that there is no allegation of violation of conditions of the notification. - Neither the notification has been produced before us nor it has been pointed out that which condition of the notification has been violated. - Decided against Revenue.

Summary

Issues:
Appeal against Customs Tribunal's order allowing Assessee's appeal, Confiscation of unexplained stock of Poly Wool Yarn, Reduction of penalty on Assessee, Interpretation of Customs Act regarding confiscation of excess goods in EOU.

Analysis:
The case involves an appeal against the Customs, Excise & Service Tax Appellate Tribunal's decision dated 13-11-2006, which allowed the appeal of the Assessee, a 100% Export Oriented Unit (EOU) involved in manufacturing woollen fabrics from polymer yarn. The dispute arose when an unexplained stock of 793.520 kgs of Poly Wool Yarn worth Rs. 3,17,000 was found during a search on the Assessee's premises. A show cause notice was issued, leading to the confiscation of the stock and imposition of a penalty of Rs. 2,00,000 on the Assessee by the adjudicating officer. Subsequent appeals resulted in the penalty being reduced to Rs. 50,000, prompting the Assessee to appeal to the Tribunal, which overturned the decision, leading to the present appeal by the Department.

Upon hearing the parties, the High Court admitted the appeal based on the substantial question of law regarding the legality of confiscating the excess goods under Section 111(o) of the Customs Act, 1962, considering the unexplained excess of Poly Wool Yarn found at the Assessee's premises. The Tribunal's decision in favor of the Assessee was based on the absence of any allegation of violation of conditions of the exemption notification granted to the 100% EOU. The High Court noted that neither the exemption notification nor any specific violation of its conditions was presented during the proceedings. Consequently, the Court found that the Tribunal's decision was not illegal based on this aspect, ruling against the Department and in favor of the Assessee.

Ultimately, the High Court concluded that the tax case lacked merit and dismissed it, upholding the Tribunal's decision in favor of the Assessee. The judgment highlighted the importance of establishing violations of specific conditions when dealing with cases involving exemptions granted to Export Oriented Units under the Customs Act, emphasizing the need for clear evidence and legal basis for confiscation and penalties in such matters.