2010 (11) TMI 821 - AT - Central Excise

Waiver of pre-deposit and stay of recovery - 100% EOU - raw materials indigenously procured by them without payment of Central Excise duty - demand is based on the finding that the said raw materials were not used for the intended purpose of manufacture of goods for export in discharge of export obligation but, instead, diverted - condition attached to Notification No. 1/95-C.E. ibid was that the indigenously procured raw material be used in the manufacture of finished goods for export Held that - In the absence of the requisite certificates from the Development Commissioner, it cannot be said that M/s. Umaji Overseas complied with this condition. The EOU apparently failed to satisfy the other important condition of having to attain Net Foreign Exchange proportionate to the value of the raw materials procured from indigenous sources. When the two prime conditions of the Notification were not satisfied by the EOU, they were required to pay the duty of excise foregone in respect of the raw materials indigenously procured by them under the EOU scheme. Therefore, prima facie, M/s. Umaji Overseas are liable to make pre-deposit of the amount of duty demanded by the Commissioner, stay application filed by M/s. Umaji Overseas, there is an averment that their factory was closed in August, 2002 and that they are not in a position to pre-deposit any amount of duty. There is also a reference to balance sheet enclosed to this stay application but not found any. Apparently, the appellant has no financial hardships, assessee directed to pre-deposit Job work - Penalty - counsel for M/s. Enkay Texofood Industries Limited has submitted that no penalty was liable to be imposed on them under Rule 26 of the Central Excise Rules inasmuch as this company did not collude with M/s. Umaji Overseas (assessee). It is submitted that this company undertook job-work for M/s. Umaji Overseas by making use of a diesel-driven generating set in the absence of electricity connection to their premises Held that - No evidence in support of this submission. The DGCEI officials, who visited the premises of this company, did not find any DG sets. They found no manufacturing activity in the said premises, no prima facie case for the above job-worker company against the penalty imposed on them. The learned counsel for this job-worker has also pleaded financial hardships, in support of which she has submitted that BIFR proceedings are on against them, BIFR notice in this connection but no order of BIFR declaring this unit to be sick has been produced, only a nominal pre-deposit vis-a-vis the above amount of penalty of Rs. 25 lakhs imposed on them. M/s. Enkay Texofood Industries Limited should, therefore, pre-deposit an amount of Rs. 2 lakhs under Section 35F of the Central Excise Act within four weeks.

Issues Involved:
1. Waiver of pre-deposits and stay of recovery.
2. Demand of Central Excise duty and imposition of penalties.
3. Alleged diversion of raw materials.
4. Non-receipt of relied-upon documents.
5. Compliance with Notification No. 1/95-C.E.
6. Financial hardship claims.

Detailed Analysis:

1. Waiver of Pre-Deposits and Stay of Recovery:
The appellants sought waiver of pre-deposits and stay of recovery concerning the dues adjudged by the Commissioner of Central Excise, Thane-I. The Commissioner demanded over Rs. 37.42 crores from the appellant firm for raw materials procured without payment of duty, which were allegedly diverted instead of being used for manufacturing export goods. Penalties were also imposed on the firm's partners and another company involved.

2. Demand of Central Excise Duty and Imposition of Penalties:
The Commissioner demanded duty based on findings that the raw materials procured by the appellant firm were diverted and not used for the intended purpose. The firm deposited Rs. 13 lakhs towards this demand. Penalties were imposed under Rule 25 and Rule 26 of the Central Excise Rules, 2001/2002 on the firm, its partners, and another company.

3. Alleged Diversion of Raw Materials:
The demand was based on the allegation that the raw materials procured under CT-3 certificates were diverted instead of being used in manufacturing export goods. The firm did not submit the required periodical returns or obtain the export obligation discharge certificate, leading to the conclusion that they violated Notification No. 1/95-C.E. and were liable for the duty.

4. Non-Receipt of Relied-Upon Documents:
The appellants argued they had not received all relied-upon documents, hindering their defense. However, the Revenue produced acknowledgments showing receipt of the documents. The Tribunal found that the appellants had received the necessary documents, and the plea of negation of natural justice was not sustainable at this stage.

5. Compliance with Notification No. 1/95-C.E.:
The firm failed to obtain the export obligation discharge certificate and did not meet the conditions of the Notification, making them liable for the duty. The Tribunal noted that the firm did not establish a prima facie case on merits against the demand. The firm's failure to provide evidence of compliance with the Notification's conditions led to the conclusion that they were liable to pay the duty.

6. Financial Hardship Claims:
The firm claimed financial hardship, stating their factory was closed and they could not pre-deposit any amount. However, no balance sheet was provided to support this claim. The Tribunal directed the firm to pre-deposit Rs. 9.5 crores within four weeks, failing which there would be no waiver of pre-deposit and stay of recovery.

Additional Judgment for M/s. Enkay Texofood Industries Limited:
The job-worker company argued against the penalty, claiming no collusion with the appellant firm and citing financial hardship. The Tribunal found no evidence supporting their claims and noted that the DGCEI officials found no manufacturing activity at their premises. The company was directed to pre-deposit Rs. 2 lakhs within four weeks, with a waiver of the balance penalty upon compliance.

Conclusion:
The Tribunal directed the main appellant firm to pre-deposit Rs. 9.5 crores and the job-worker company to pre-deposit Rs. 2 lakhs within four weeks, with waivers of the remaining amounts contingent on compliance. The appellants' claims of non-receipt of documents and financial hardship were not substantiated to the Tribunal's satisfaction.

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