2018 (1) TMI 487 - AT - Central Excise

100% EOU - Non-fulfillment of export obligation - N/N. 13/81 dated 09.02.1981 - N/N. 57/94-CE dated 01.03.1994 - CBEC Circular 21/95-Cus dated 10.03.1995 - Held that - while remanding the matter in the earlier round of litigation it was held by this Tribunal that proceedings could be initiated against the appellant only after the recommendation of the Development Commissioner and the Development Commissioner has dropped the proceedings against the appellant. Moreover, as per the CBEC Circular No. 21/95-Cus dated 10.03.1995, the demand of duty is required to be confirmed only after definite conclusion arrived at by the Development Commissioner and the CBEC Circular is binding on the authorities below. Therefore, in the absence of a definite conclusion by the Development Commissioner, no proceedings can be initiated against the appellant. Admittedly, ld. Development Commissioner has dropped the proceedings against the appellant therefore, the proceedings initiated by the adjudicating authority in the impugned order are contrary to the order of this Tribunal dated 19.09.2001 and also against the spirit of the CBEC Circular No. 21/95-Cus dated 10.03.1995. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Demand of Customs Duty under Section 28 of the Customs Act, 1962.
2. Confiscation of imported capital goods and raw materials under Section 111(o) of the Customs Act, 1962.
3. Demand of Central Excise Duty under erstwhile Rule 196 and Rule 20 of the Central Excise Rules, 2002.
4. Confiscation of indigenously procured capital goods and raw materials under erstwhile Rule 173Q of the Central Excise Rules, 1944.
5. Imposition of penalties under Section 112 of the Customs Act, 1962 and Section 11AC of the Central Excise Act, 1944.
6. Enforcement of General bond executed on 21.06.1991.

Detailed Analysis:

1. Demand of Customs Duty:
The Tribunal confirmed the demand of Customs Duty amounting to ?2,76,20,813/- under Section 28 of the Customs Act, 1962, along with interest under Section 28AB and Section 28AA of the Customs Act, 1962. The appellant argued that the demand was premature and should only be initiated after the Development Commissioner's recommendations, as per CBEC Circular No. 21/95-Cus dated 10.03.1995. The Tribunal upheld this argument, noting that the Development Commissioner had dropped the charges in their adjudication.

2. Confiscation of Imported Capital Goods and Raw Materials:
The order included the confiscation of imported capital goods and raw materials valued at ?284.94 Lakhs under Section 111(o) of the Customs Act, 1962, with an option to redeem the same on payment of a fine of ?70,00,000/-. The Tribunal found that the confiscation was not sustainable as the Development Commissioner had already dropped the proceedings against the appellant, and no definite conclusion had been reached regarding the violation of export obligations.

3. Demand of Central Excise Duty:
The Tribunal confirmed the Central Excise Duty demand of ?3,72,715/- on indigenous capital goods and raw materials under erstwhile Rule 196 and Rule 20 of the Central Excise Rules, 2002, and ?1,01,398/- on the finished stock of canned mushrooms under erstwhile Rule 9(2) of the Central Excise Rules, 1944. The appellant's argument that the Development Commissioner's findings should be final was accepted, and thus, the Tribunal set aside the demand.

4. Confiscation of Indigenously Procured Capital Goods and Raw Materials:
The order also included the confiscation of indigenously procured capital goods and raw materials valued at ?19.50 Lakhs under erstwhile Rule 173Q of the Central Excise Rules, 1944, with an option to redeem the same on payment of a fine of ?4,00,000/-. The Tribunal found that this confiscation was also unsustainable due to the Development Commissioner's earlier decision to drop the charges.

5. Imposition of Penalties:
Penalties amounting to ?2,76,20,813/- under Section 112 of the Customs Act, 1962, and ?4,75,000/- under Section 11AC of the Central Excise Act, 1944, were imposed. The Tribunal set aside these penalties, citing the Development Commissioner's decision and the CBEC Circular, which required a definite conclusion by the Development Commissioner before any action could be taken.

6. Enforcement of General Bond:
The order for enforcement of the General bond executed on 21.06.1991 was also set aside. The Tribunal emphasized that the proceedings were contrary to the CBEC Circular and the Development Commissioner's findings, which had not been challenged and had attained finality.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The judgment emphasized the necessity of adhering to the CBEC Circular No. 21/95-Cus dated 10.03.1995 and the Development Commissioner’s recommendations before initiating any proceedings against the appellant. The Development Commissioner's decisions to drop the charges were pivotal in the Tribunal's ruling, rendering the demands and penalties imposed by the adjudicating authority unsustainable.