2016 (10) TMI 608 - AT - Central Excise

100% EOU - denial of eligibility for concession - demand of duty - imposition of penalties appellant and three officers - cotton yarn and blended yarn - N/N. 8/97-CE date 01/3/97 - goods should have been cleared from raw materials produced or manufactured in India - whether appellant is eligible for concessional rate of duty and does the appellant has fulfilled the conditions for availing concession? - Held that - all details were maintained by the assessee in computerised form. The elaborate computerized documentation maintained by the assesse during the relevant time has not been examined in correct prospective by the Adjudicating authority before confirming the demand. Commissioner failed to appreciate that they are using domestic cotton also for manufacture and export of yarn. The reliance placed by the Commissioner on the E-mails without any corroboration is not sustainable. Even after recording that these evidences do not necessarily mean that all other domestic clearances were also made from imported cotton, it was not established by any record that all raw materials were not of Indian origin. The impugned order are arbitrary and without sound legal basis - appellant eligible to claim exemption - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility for concessional rate of duty under Notification 8/97-CE
- Failure to maintain separate accounts for imported and indigenous raw materials
- Verification of documents by the Commissioner
- Reliance on evidence and findings by the Original Authority

Analysis:
The main issue in this case revolves around the eligibility of the appellant for the concessional rate of duty under Notification 8/97-CE. The Revenue alleged that the appellant availed the concessional rate without fulfilling the condition of using raw materials produced or manufactured in India. The Original Authority confirmed a demand of &8377; 5,59,93,309/- and imposed penalties on the appellant and three officers. The appellant argued that they maintained separate accounts for imported and indigenous raw materials, supported by detailed documentation illustrating the composition of yarn manufactured and cleared. The Adjudicating authority failed to correctly examine the elaborate computerized documentation presented by the appellant, leading to the confirmation of the demand.

Another crucial aspect was the failure to maintain separate records for imported and indigenous raw materials. The Commissioner ordered a verification of the appellant's documents, which revealed discrepancies in the accounts maintained by the officers. The appellant provided evidence through lot numbers and various reports to demonstrate the non-use of imported raw materials in goods cleared domestically. The Commissioner's reliance on circumstantial evidence and two E-mails to allege diversion of imported fiber was strongly contested by the appellant, highlighting the use of domestic cotton for manufacturing and export. The findings based on these grounds were deemed arbitrary and lacking a sound legal basis.

Furthermore, the analysis highlighted the lack of follow-up verification by the Revenue from 2003 to 2008, raising doubts about the real-time nature of records. The Commissioner's reliance on reports and E-mails without proper corroboration was deemed unsustainable. Ultimately, the impugned order was set aside, and the appeals were allowed based on the detailed analysis and discussion presented by the appellant to refute the allegations and establish compliance with the conditions for concessional rate of duty under Notification 8/97-CE.