2011 (7) TMI 926 - HC - Central Excise

Demand for duty of Central Excise to the extent of Rs. 37.42 crores - 100% EOU - Notification 1/95-C.E. - The allegation against the Appellant, found to have been established by the Commissioner, was that there was a breach of the conditions attached to the notification and that the raw material was diverted to the local market - Tribunal noted that the Appellant had pleaded that some of the raw materials procured indigenously were sent to job workers and the finished goods procured by the job workers were duly received in the EOU and were subsequently exported - Coupled with the finding of fact is a prima facie finding of the Tribunal that the Appellant did not obtain export obligation discharge certificates from the Development Commissioner and had failed to establish compliance with the primary requirement that indigenously procured raw material be used in the manufacture of the finished goods for export - Appeal is dismissed

Summary

Issues:
1. Whether the Appellant breached the conditions of Notification 1/95-C.E. by diverting raw material to the local market.
2. Whether the Appellant established that goods were cleared to a specific unit, Asharani Garments, for export.
3. Whether the Tribunal's finding that the Appellant failed to establish compliance with primary requirements is justified.

Analysis:

Issue 1:
The Commissioner of Central Excise demanded duty from the Appellant for breaching conditions of Notification 1/95-C.E. by diverting raw material to the local market. The Commissioner's order confirmed the demand of duty amounting to Rs. 37.42 crores based on investigations showing diversion of duty-free procurements. The Tribunal found that the Appellant did not establish that goods were cleared to Asharani Garments, and failed to obtain export obligation discharge certificates, leading to non-compliance with primary requirements.

Issue 2:
The Appellant contended that finished goods were supplied to Asharani Garments, an export-oriented unit in Hyderabad. However, the Tribunal found no prima facie evidence of goods being cleared to Asharani Garments. The Tribunal also noted that no manufacturing activities were found at the premises of job workers where raw materials were sent, casting doubt on the Appellant's compliance with using duty-free raw materials for export goods.

Issue 3:
The Respondent's counsel supported the Tribunal's findings and highlighted a letter from the Commissioner at Hyderabad stating that a show cause notice was issued to Asharani Garments for raw material received from sources other than the Appellant. The Court upheld the Tribunal's evaluation of facts, finding no substantial question of law or financial hardship raised in the Appeal. As a result, the Appeal was dismissed with no costs awarded.

In conclusion, the judgment focused on the Appellant's failure to prove compliance with duty-free raw material usage for export goods, specifically in relation to the alleged diversion of raw materials to the local market and the lack of evidence supporting the clearance of goods to Asharani Garments. The Tribunal's decision was upheld, emphasizing the importance of establishing compliance with legal requirements in such cases.