2012 (11) TMI 1016 - AT - Central Excise

Duty demand - Whether, in relation to clearances of goods to SEZ units without payment of duty during the period from June 2008 to June 2009, they should pay the duty determined by the original authority and the penalty imposed by it - Held that - The SEZ units were admittedly entitled to procure their inputs without payment of duty from DTA units like the appellant. It is not in dispute that the inputs supplied by the appellant were duly received by the SEZ units. These supplies were exports for purposes of the SEZ Act. These supplies were effected under cover of proper invoices and ARE-1s. The Customs Officer posted at the SEZ verified these documents and made necessary endorsements therein. It is not in dispute that, had the appellant paid duty on the above clearances, they could have claimed rebate under the relevant provisions of the Central Excise Rules 2002 read with the relevant provisions of the SEZ Act/Rules. In such a revenue-neutral situation, no intent to evade payment of duty can be attributed to the appellant. The show-cause notice in this case alleged that the appellant indulged in wilful misstatement of facts with intent to evade payment of duty. This allegation is baseless inasmuch as every clearance to the SEZ units was promptly intimated to the Central Excise Range Officer. In the letter of intimation, the appellant had clearly stated that they had cleared the goods against exemption certificates issued by the SEZ Units. Clearance of goods, without payment of duty, to the SEZ units by the appellant was clearly within the knowledge of the department during the period of dispute. Hence there was no wilful misstatement of any fact, let alone with intent to evade payment of duty. The show-cause notice issued in March 2010 to recover duty on goods cleared in 2008 & 2009 is clearly barred by limitation. Non-execution of bond and non-mention of LUT particulars in ARE-1s are cited as serious lapses of the appellant. Execution of bond or, alternatively, mention of LUT particulars in ARE-1 is a procedure prescribed for ensuring that the goods cleared by the DTA unit are received by the SEZ unit. In the present case, receipt of the goods cleared by the appellant, by the SEZ units is an admitted fact. If that be so, the proceedings have to be set aside by condonation of procedural lapses - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant should pay duty and penalty for clearances of goods to SEZ units without payment of duty.

Analysis:

Issue 1: Duty and Penalty for Clearances to SEZ Units

The primary issue in this appeal was whether the appellant should pay duty and penalty for clearances of goods to SEZ units without payment of duty. The goods were cleared under proper invoices and ARE-1s, but the appellant failed to execute a bond or mention LUT particulars in the ARE-1s. The demand of duty was based on this procedural lapse. The appellant argued that the duty paid could be claimed as a rebate and that the Customs Officer at the SEZ should have noted the lapse. The appellant promptly informed the Central Excise Range Officer about the clearances with exemption certificates. The appellant contended that the demand of duty was barred by limitation and that there was no intent to evade payment of duty in a revenue-neutral situation. The Tribunal found merit in the appellant's case, noting that the SEZ units received the goods, the clearances were under proper documentation, and the appellant could have claimed rebate if duty was paid. The show-cause notice alleging wilful misstatement was deemed baseless as the appellant had promptly informed the Range Officer about the clearances.

Issue 2: Procedural Lapses and Case Law

The appellant cited case law to support their argument that procedural lapses such as non-execution of a bond or mentioning LUT particulars in ARE-1s should be condoned if the goods were received by the SEZ units, as was the case here. The Tribunal agreed that the procedural lapses should be set aside in such circumstances. The cited case law highlighted that demands of duty based on procedural lapses were set aside in similar situations. In this case, the non-execution of a bond and failure to mention LUT particulars were considered serious lapses, but the Tribunal emphasized that the goods were received by the SEZ units, rendering the procedural lapses inconsequential. Therefore, the impugned order demanding duty and penalty was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand for duty and penalty for clearances of goods to SEZ units without payment of duty based on procedural lapses. The Tribunal found that the appellant had promptly informed the authorities about the clearances, and in a revenue-neutral situation, there was no intent to evade payment of duty. The case law cited by the appellant supported the argument that procedural lapses should be condoned when the goods are received by the intended recipients, as was the case here.