2012 (11) TMI 686 - AT - Central Excise

Job work by EOU - Applicability of Notification 214/86 waiver of pre-deposit - Extended period of limitation - alleged that benefit of the said notification is not applicable to 100% EOU who are governed by the FTP policy and they are not entitled for carrying out any job work Held that - Question of invoking the longer period of limitation or not arises only in cases where there is violation of provisions of law and the demand is otherwise sustainable on merits - ER-2 Returns filed by the appellants (some samples) wherein the fact of doing the job work clearly reflected - appellants undertaking the job work was in the knowledge of Revenue - Revenue as well as the appellants were entertaining a belief that they are entitled to do the job work - appellants sister concern who received the goods from the appellants was utilizing the same for the manufacture of their final product on which duty was being paid by them. As such the duty even if paid by the appellants would have been available as Modvat credit to their sister concern who was in a position to use the same for payment of duty on their final product. As such the appellants were not benefited by this procedure being adopted by them - appellants have a good case on limitation as also on revenue-neutrality waiver of pre-deposit allowed.

Issues:
1. Confirmation of demand of duty against 100% EOU appellants for job work.
2. Violation of Foreign Trade Policy by 100% EOU appellants.
3. Invocation of extended period of limitation for duty recovery.
4. Verification of documents filed by the appellants.
5. Stay petition based on limitation and revenue neutrality.

Analysis:
1. The appellants, being 100% EOU, undertook job work for their sister unit using raw materials supplied by the sister concern. The Revenue contended that this violated EOU regulations, leading to duty demand confirmation and penalty imposition. The appellants argued that the duty demand was time-barred as no objection was raised earlier, and the job work was revenue-neutral as the duty paid could be utilized by the sister unit.

2. The Revenue invoked the extended period of limitation based on the violation of Foreign Trade Policy by the appellants. Citing precedents, the Revenue argued that EOU job work for sales in DTA breached policy conditions. The Commissioner held the appellants intentionally violated policy provisions to evade duty, justifying the extended limitation period for duty recovery.

3. The appellants' plea on limitation was not adequately considered by the Commissioner, who primarily focused on the policy violation. The appellants had reflected job work details in their ER-2 Returns, indicating Revenue's knowledge of the activities. The appellants' sister unit used the manufactured goods, ensuring revenue neutrality. The Tribunal found merit in the appellants' limitation argument and granted a stay without pre-deposit, acknowledging the potential for early appeal hearing due to the substantial duty amount.

4. The verification requirement under Rule 28 of CESTAT (Procedure) Rules, 1982 was analyzed. The Tribunal noted that the rule pertained to appeals, not every document filed, and found no reason to doubt the correctness of the appellants' documents. The Revenue's objections lacked substance, as the documents were referenced in the reply to the show cause notice, and their authenticity was not in question.

5. The Tribunal concluded that the appellants had a strong case on limitation and revenue neutrality, leading to the stay petition's approval without pre-deposit. The decision highlighted the appellants' compliance efforts, lack of intention to evade duty, and the procedural adherence in their job work activities. The Tribunal emphasized the importance of considering all aspects, including limitation and revenue impact, in such cases to ensure fair adjudication.

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