2016 (9) TMI 482 - AT - Central Excise

100% EOU - Recovery of duty alongwith interest and penalty attributable to inputs - input, i.e., paper procured without payment of duty, used for manufacture of finished product i.e. printed books, sold in the DTA and not exported - pursuant to investigation, appellant deposited central excise duty attributable to inputs - Held that - in absence of export of printed books, the duty foregone on procurement of the input, namely paper, shall not be eligible for the exemption contained in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. Thus, duty demand confirmed by the authorities below, is in conformity with the statutory provisions. It is found that the amount deposited by the appellant before adjudication of the matter, was appropriated in the adjudication order towards duty liability. Since interest in the present case has not been deposited by the appellant, we are of the view that the interest for delayed payment of Central Excise duty has to be paid by the appellant. With regard to imposition of penalty, it is found that the issue involved in the case relates to interpretation of the Notification No. 22/2003 dated 31st March, 2003 and in an identical case, this Tribunal in the case of the appellant itself reported in 2010 (4) TMI 954 - CESTAT NEW DELHI has set aside the penalty imposed on the appellant. Therefore, the penalty cannot be imposed on the appellant in the given circumstances of the case. - Decided partly in favour of appellant

Summary

Issues:
Recovery of Central Excise Duty on inputs used for domestic sales by a 100% Export Oriented Undertaking (EOU); liability of duty on the appellant for using duty-free inputs; imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:
The case involved an appeal against an order passed by the Commissioner (Appeals), Customs and Central Excise, New Delhi, concerning the recovery of Central Excise Duty on inputs used by a 100% Export Oriented Undertaking (EOU) for domestic sales. The appellant, engaged in manufacturing printed books, had sold finished products in the Domestic Tariff Area (DTA) without exporting them, leading to the initiation of proceedings for recovery of duty on the inputs used. The appellant had already deposited the duty attributable to the inputs, which was confirmed in the adjudication order along with a penalty equal to the duty amount. The appellant contended that the duty liability should be on the input supplier, not them, and even if liable, they should be exempt under Rule 6 of the Central Excise Rules as the inputs were used for their intended purpose without any intent to evade duty.

During the proceedings, the appellant's advocate argued that the duty liability should be on the input supplier, and even if on the appellant, they should be exempt under Rule 6 of the Central Excise Rules as the inputs were used for their intended purpose without any intent to evade duty. The Revenue representative reiterated the findings of the impugned order. The Tribunal considered the arguments and facts presented. It was noted that since the inputs procured were not exported, the duty exemption under the Central Excise Rules did not apply. The duty demand was found to be in line with statutory provisions, and the interest for delayed payment was deemed payable by the appellant. Regarding the penalty under Section 11AC, the Tribunal referred to a previous order in the appellant's case where a similar penalty was set aside, leading to the current penalty being dismissed.

In conclusion, the Tribunal partly allowed the appeal by setting aside the penalty imposed under Section 11AC of the Central Excise Act, 1944. However, the duty liability along with interest was confirmed, resulting in the dismissal of the appeal to that extent. The judgment was dictated and pronounced in open court, disposing of the appeal accordingly.