2012 (10) TMI 923 - AT - Central Excise

Assessee Acquired free of Central Excise duty certain capital goods in terms of exemption Notification No. 22/2003-C.E., dated 31-3-2003 - Goods transferred to other EOU - Held that - Though in terms of notification No. 22/2003-C.E. the capital goods manufactured in India can be received by 100% EOU free of duty; the capital goods are required to be installed within one year and this period can be extended by the jurisdictional Assistant Commissioner on sufficient cause being shown, in this case it is not denied that though the capital goods had been sent to another 100% unit, the same had been received back and were installed in the factory within the stipulated period and thereafter the same were used for intended purpose. Therefore, prima facie we are of the view that impugned order confirming duty demand and imposing penalty does not appear to be correct. Thus the appellant have a prima facie case in their favour. The condition of pre-deposit of duty demand, interest and penalty is, therefore, waived for hearing of the appeal and recovery thereof stayed till the disposal of the appeal - Stay granted.

Issues:
1. Entitlement to duty-free capital goods under exemption Notification No. 22/2003-C.E.
2. Compliance with installation period requirement for duty-free capital goods.
3. Adjudication of duty demand, interest, and penalty by the Commissioner.
4. Stay application for pre-deposit of duty demand, interest, and penalty pending appeal.

Entitlement to Duty-Free Capital Goods:
The appellant, a 100% EOU, acquired duty-free capital goods in October 2009 under exemption Notification No. 22/2003-C.E. The capital goods were transferred to another 100% EOU and then received back in September 2010. The Department contended that the appellant were not entitled to receive duty-free capital goods in their factory as they were not installed within the stipulated one-year period. The Commissioner held that the condition of the exemption notification was contravened and imposed duty demand, interest, and penalty. The appellant argued that the goods were installed within the required period, fulfilling the notification's condition, and that the duty-free goods were received and installed as per the stipulated period. The Tribunal found that the capital goods were indeed installed within the specified period, thus indicating the appellant's entitlement to duty-free capital goods.

Compliance with Installation Period Requirement:
The notification allowed duty-free receipt of capital goods by 100% EOU, with a requirement for installation within one year, extendable on cause shown. Despite the goods being transferred to another unit, they were received back and installed within the stipulated period for use in the factory. The Tribunal noted that the goods were utilized for the intended purpose after installation within the prescribed time frame. Consequently, the Tribunal found that the order confirming duty demand and penalty by the Commissioner seemed incorrect, as the appellant had complied with the installation period requirement, establishing a prima facie case in their favor.

Adjudication by the Commissioner:
The Commissioner adjudicated the show cause notice, holding that the appellant contravened the exemption notification's condition and confirming the duty demand of Rs. 80,340 along with interest. Additionally, an equal penalty was imposed. The appellant challenged this order through an appeal along with a stay application, arguing that the duty-free goods were received and installed within the stipulated period, which the Commissioner allegedly overlooked. The Tribunal, after considering submissions from both sides and reviewing the records, concluded that the Commissioner's decision did not appear to be correct, leading to the waiver of pre-deposit of duty demand, interest, and penalty for the appeal's hearing, with recovery stayed pending appeal disposal.

Stay Application for Pre-Deposit:
During the hearing of the stay application, the appellant's counsel contended that the duty demand, interest, and penalty pre-deposit requirements should be waived due to a strong prima facie case in their favor. The respondent opposed the stay application, reiterating the Commissioner's findings. The Tribunal, after evaluating the arguments from both parties and examining the records, agreed that the appellant had a prima facie case supporting their entitlement to duty-free capital goods and subsequently waived the pre-deposit requirements, staying the recovery until the appeal's final disposal. The appeal was scheduled to be listed in due course for further proceedings.

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