2007 (11) TMI 201 - AT - Central Excise

As per circular 21/95, where dept. finds a case of failure to discharge export obligation, the authorities should consult the jurisdictional Development Comm. before issuing SCN to EOU - Even though the circular refers to liability of the EOU in relation to imported goods, we find that the instructions apply equally to the indigenous goods - demand of duty should be confirmed only after a definite conclusion has been arrived at by the Development Commissioner

Summary

Issues:
- Duty demand on certain machinery
- Interest and penalty imposed on the appellants
- Applicability of duty rate on the date of issue of AR3A
- Imposition of penalty under Rule 173Q

Analysis:
1. The impugned order upheld a duty demand, interest, and penalty on the appellants, who were an EOU availing exemption under Notification No. 123/81-C.E. The appellants failed to meet the conditions for duty exemption as specified in the notification, particularly regarding manufacturing and exporting articles within a set timeframe. They also allowed another party to operate the machinery for production processes after vacating the premises where the machinery was installed.

2. The appellants argued that the duty rate should have been based on the date of issue of AR3A for movement of goods to the EOU, not the date of the show cause notice. Additionally, they contended that the penalty under Rule 173Q was unjustified. The appellants cited CBEC Circular No. 21/95-Cus., stating that the department should consult the Development Commissioner before issuing a show cause notice for failure to fulfill export obligations.

3. The Tribunal acknowledged the appellants' argument regarding the CBEC Circular, which emphasized consulting the Development Commissioner before confirming duty demands on EOUs. The Circular highlighted the conditions under which duty liabilities arise for EOUs and stressed the need for consensus between authorities before issuing show cause notices. The Tribunal concluded that the department must adhere to the Circular's instructions, even though it primarily addressed imported goods, and remanded the matter for reassessment following the Circular's guidelines.

This detailed analysis of the judgment showcases the issues raised, the arguments presented by the appellants, and the Tribunal's decision based on legal principles and relevant circulars.