2002 (8) TMI 228 - AT - Central Excise

Summary

Issues Involved:
1. Nature of duty payable by a 100% EOU on goods sold in DTA without permission.
2. Applicability of Central Excise Act vs. Customs Act.
3. Whether the activity of the company amounts to manufacture.
4. Validity of penalties imposed under various sections and rules.

Summary:

1. Nature of Duty Payable by a 100% EOU on Goods Sold in DTA Without Permission:
The primary issue was whether the duty payable by the assessee-company, a 100% EOU, on goods sold in the Domestic Tariff Area (DTA) without permission should be under the Central Excise Act or the Customs Act. The Tribunal concluded that the company is liable to pay excise duty under the main Section 3(1) of the Central Excise Act for having removed the goods in DTA without permission of the competent authority. The proviso to Section 3(1) of the Central Excise Act, which lays down the rate of duty for goods allowed to be sold in India, does not apply to goods sold without permission.

2. Applicability of Central Excise Act vs. Customs Act:
The Tribunal held that the main Section 3(1) of the Central Excise Act is applicable to goods removed by a 100% EOU without permission. The Commissioner (Appeals) had incorrectly concluded that duty was payable under the Customs Act based on the judgments in SIV Industries and Kuntal Granites. The Tribunal clarified that the nature of the duty is excise duty, not customs duty, even though the measure of the tax may refer to customs duties.

3. Whether the Activity of the Company Amounts to Manufacture:
The company argued that their activity of sawing and polishing granite blocks did not amount to manufacture, referencing the Apex Court's dismissal of a similar case. However, the Tribunal rejected this argument, noting that this plea was not raised before the adjudicating authority and could not be introduced at the appellate stage. The Tribunal also noted that polished granite slabs and tiles are distinct products in the commercial market.

4. Validity of Penalties Imposed:
The Tribunal restored the Joint Commissioner's order, which had imposed penalties under Section 11AC of the Central Excise Act and various rules of the Central Excise Rules, as well as under Section 112 of the Customs Act. The penalties were deemed valid as the company had admitted to removing goods without permission and without payment of duty. The Tribunal set aside the part of the Commissioner (Appeals) order that had dropped the duty, penalty, and interest against the company.

Conclusion:
The Tribunal accepted the appeals filed by the Revenue and set aside the impugned order of the Commissioner (Appeals) to the extent it was challenged. The appeal filed by the company challenging the penalty under Section 112 of the Customs Act was also allowed. All three appeals were disposed of accordingly, and the cross-objections filed by the company and its authorized signatory were also disposed of.