2010 (11) TMI 1066 - AT - Central Excise

Summary

Issues involved:
The issues involved in the judgment are related to the violation of bond conditions, demand of duty, imposition of penalties, and interest on amounts forgone by the Revenue by an appellant who is a 100% E.O.U. engaged in the manufacture of formulations under Chapter Heading 30 of CETA, 1985.

Violation of Bond Conditions:
The appellant, a 100% E.O.U., cleared certain raw materials procured duty-free to the original suppliers without waiting for the approval of the Proper Officer, leading to the issuance of show-cause notices alleging violation of the bond executed and relevant regulations. The adjudicating authority confirmed the demand, sought interest, and imposed penalties based on non-compliance with bond conditions and Notification No. 22/2003-CE dated 31.3.2003.

Interpretation of Regulations:
The appellant contended that the goods cleared were defective/rejected and were returned to the original supplier for replacement, citing Para 6.17 of the Foreign Trade Policy. The appellant's representatives argued that the goods were cleared under AR 3A documents as rejected goods, and the suppliers received them back, emphasizing that duty liability does not arise in such cases.

Adjudication and Decision:
The Tribunal observed that the adjudicating authority failed to consider the appellant's claim that the goods were returned to the suppliers under proper documentation. It was noted that the authority focused on non-compliance with Notification No. 22/03-CE, emphasizing the failure to use the goods for production in the user industry and obtain permission for removal. The Tribunal found merit in the appellant's submissions, citing provisions of the Foreign Trade Policy and a previous order involving a similar issue.

Final Decision and Remand:
Based on the evidence presented and the precedent set in a previous case, the Tribunal held that the appellant was not liable to discharge duty as the defective inputs were returned to the original supplier. However, the matter was remanded to the adjudicating authority to verify if the supplier had added the goods to their non-duty paid stock. The impugned order was set aside, and the appeal was disposed of accordingly.

*(Operative portion of the order was pronounced in the court on conclusion of hearing on 9/11/2010)*