2004 (12) TMI 132 - AT - Central Excise

Summary

Issues:
Suspension of duty free procurement facility for a 100% EOU by the Commissioner based on serious discrepancies and misuse of facilities.

Analysis:
The case involves an appeal by M/s. J.S. Gupta & Sons against the suspension of the duty free procurement facility of raw materials by the Commissioner. The appellant, a 100% Export Oriented Unit (EOU), operated under a Letter of Permission granted by the Development Commissioner and procured raw materials duty-free against CT-3/Procurement certificates. Following investigations and a demand for payment, the facility was suspended by the Commissioner based on serious discrepancies and misuse of facilities. The appellant argued that there was no legal provision empowering the Commissioner to suspend the duty-free procurement facility for a 100% EOU. The Customs Act and Central Excise Act provide provisions for penalizing EOUs misusing concessions, but the circular issued by the CBEC cannot replace the law. The power to suspend duty-free procurement is considered a penal action requiring specific legal authority, which was not cited in the case. The Tribunal held that without a legal basis, the facility cannot be suspended, especially when the EOU status of the appellant remains valid. Denying duty-free procurement would defeat the purpose of establishing a 100% EOU, forcing them to fulfill export obligations by paying duty, putting them at a disadvantage. Consequently, the Tribunal set aside the Commissioner's order and allowed the appeal, emphasizing the necessity of legal authority for such penal actions and the preservation of EOU benefits.

This judgment highlights the importance of legal provisions in taking penal actions against EOUs and the necessity of upholding the benefits and obligations associated with EOU status. The case underscores the need for clear legal authority before suspending facilities crucial for the functioning of EOUs and the potential adverse impact on EOU operations if such actions are taken without proper legal basis.