2004 (3) TMI 252 - AT - Central Excise

Summary

Issues Involved:
1. Pre-deposit of duty and penalty.
2. Eligibility for exemption under Notification No. 2/95-C.E., 39/96-Cus., and 51/96-Cus.
3. Applicability of the principle of res judicata.
4. Determination of duty liability under Section 3(1) of the C.E. Act, 1944.

Issue-wise Detailed Analysis:

1. Pre-deposit of Duty and Penalty:
The applicants were required to pre-deposit a duty amount of Rs. 1,51,13,735/- and a penalty of Rs. 15,00,000/- as demanded in the impugned Order-in-Original No. 10/2003, dated 20-6-2003 passed by the Commissioner.

2. Eligibility for Exemption under Notification No. 2/95-C.E., 39/96-Cus., and 51/96-Cus.:
- Allegations: The applicants were alleged to have exceeded the permissible DTA clearances, and the clearances made to DRDO, Thermal Power Corporation, District Forest, Erode, and Public Funded Research Institutions were claimed to be ineligible for exemptions under Notification No. 39/96-Cus. and 51/96-Cus. respectively.
- Applicant's Argument: The appellants, being a 100% EOU, claimed eligibility for exemptions under Notification No. 51/96-Cus. and 2/95-C.E. They argued that the Development Commissioner had permitted the clearances and that exemptions are available under two different Notifications.
- Revenue's Argument: The Revenue contended that the appellants were not eligible for the benefits under the said Notifications as they did not fall under the specified categories and had not opted for the benefits under Notification No. 2/95-C.E.
- Tribunal's Observations: The Tribunal noted that the Ministry of Finance's Circular No. 27/2003-Cus. clarified that the benefit of concessional duty under Notification No. 51/96-Cus. applies even if the imports are made by entities other than the specified institutions, provided they are for delivery to such institutions. The Tribunal found that the appellants had a prima facie case for the benefits under Notifications No. 39/96-Cus. and 51/96-Cus.

3. Applicability of the Principle of Res Judicata:
- Applicant's Argument: The appellants argued that similar demands for an earlier period were dropped by the Department vide Order-in-Original No. 6/2001, dated 25-7-2001, which was not contested by the Department and thus attained finality.
- Revenue's Argument: The Revenue cited the Supreme Court judgment in Faridabad CT Scan Centre v. DG Health Services, arguing that the benefit of exemption cannot be extended based on wrong orders issued earlier.
- Tribunal's Observations: The Tribunal observed that the earlier decision in favor of the appellants had attained finality and that the principle of res judicata prima facie applied. The Revenue could not now argue that the earlier order was wrong without having appealed against it.

4. Determination of Duty Liability under Section 3(1) of the C.E. Act, 1944:
- Applicant's Argument: The appellants contended that as a 100% EOU, their clearances to DTA are liable to duty as per the proviso to Section 3(1) of the C.E. Act, which is the aggregate of customs duty leviable on similar goods when imported into India. They argued that if the goods are chargeable to nil rate of duty under Section 12 of the Customs Act, the first proviso to Notification No. 2/95-C.E. does not apply.
- Tribunal's Observations: The Tribunal agreed with the appellants, noting that the second proviso to Notification No. 2/95-C.E. exempts goods chargeable to nil rate of duty under Section 12 of the Customs Act. The Tribunal found that the appellants had made out a good case for waiver of pre-deposit of duty and penalty.

Conclusion:
The Tribunal granted waiver of pre-deposit of the entire duty and penalty until the final disposal of the appeal, recognizing the strong prima facie case made by the appellants and the high revenue involved. The appeal was to be listed for final hearing on a priority basis.