2012 (2) TMI 414 - AT - Central Excise

Waiver of pre deposit - Penalty u/s 114A - Held that - whole case is built on the premise that raw material i.e. chemicals and yarn are not sent for job work and in fact are sold to the so called job worker by the applicant and the fabrics which is used by the so called job worker is not brought to the unit of the applicant. However prima facie there is no case of the department that raw materials imported are diverted or substituted or not accounted for or final product not exported. The 100% EOU is eligible for procuring raw material and goods locally without payment of duty besides importing raw material and chemicals without payment of duty. Movement of locally procured goods in this case have been under ARE-3. In these circumstances, we find that applicants have been able to make out a prima facie case in their favour and since the unit is 100% EOU, the balance of convenience is in their favour - Stay granted.

Summary

Issues:
Waiver of pre-deposit of duty and penalty under Section 114A of Customs Act, 1962 for a 100% EOU importing raw materials for industrial safety garments.

Analysis:
The applicant, a 100% EOU, imported raw materials without paying duty for manufacturing industrial safety garments. They sent the imported yarn and chemicals to a job worker for making Flame Retardant Fabrics. The issue was whether the raw materials were actually sent for job work or sold to the job worker, violating EOU regulations. The department alleged that the applicant was selling goods instead of following the EOU scheme. However, there was no evidence of diversion or substitution of imported goods.

The Tribunal found that the case revolved around whether the raw materials were sent for job work or sold to the job worker. While the department claimed it was a scheme violation, there was no proof of diversion or non-accounting of goods. As a 100% EOU, the applicant was allowed to procure raw materials locally or import them duty-free. The movement of locally procured goods was under ARE-3, supporting the applicant's case. Thus, the Tribunal concluded that the applicant had a prima facie case in their favor, and the balance of convenience favored them as a 100% EOU.

In light of the circumstances, the Tribunal waived the pre-deposit requirement and stayed the recovery of dues during the appeal process. This decision was made to support the 100% EOU status and the lack of evidence showing any violation of regulations regarding the import and processing of raw materials for manufacturing industrial safety garments.