2005 (5) TMI 189 - AT - Central Excise

Appreciation of Evidence - EOU - Proof for Installation of Machinery - Exemption of full duty - duty demands - Penalty - HELD THAT - We find no material to confirm the allegation of no machinery installed in MD, in view of the documentary evidence, to the contrary which is based on contemporaneous verification and exchange of correspondence even before the search of MD took place. Sanjay G. Naik's statement informing the diversion to be at behest behalf of Shri K.K. Sharma has not even been put to Sharma. No efforts have been made to ascertain work in process. The loom production reports RG 1 figures and assumptions made thereafter cannot sustain the charges and quantification armed at. From loom production to RG 1 stage there are number of steps of verification i.e. in folding/packing departments, which have been ignored or not found fault with, as Commissioner has ignored the submissions of the appellants made as regards stocks in process. No correlation with raw materials received and consumed has been brought out to substantiate the quantity of production. Demands made on assumptions and presumptions as in this case cannot be upheld. No material on record in appeal filed has been shown to be in favour of Commissioner's view. Benefit under Notification 174/84-C.E. dtd. 26-5-84 granting exemption from Additional Duty of Excise (Goods of Special Importance) Act would be also available. Once goods cleared from MDL the EOU are found to be at NIL duty or fully exempt, the question of demand on MDL does not arise. It was submitted that there was no charge of processed Denim having been cleared without payment of duly, if not exported under EPCG obligations. Thus when no duty demands under the Central Excise Act are to be upheld/found there can be no case/cause for penalty. The duty demands, interest or/ penalties imposed are to be set aside. In view of the finding the appeals are allowed.

Summary

Issues: Alleged evasion of Central Excise Duty, confiscation of seized goods, denial of concessional rate of duty, violation of Central Excise Rules, imposition of penalties, machinery installation verification, diversion of production, quantification of charges, lifting of seizure, levy of duty on goods cleared from EOU to DTA, applicability of exemptions, interpretation of legal precedents.

The judgment dealt with multiple issues arising from the alleged evasion of Central Excise Duty by two units, one being a 100% EOU (MDL) and the other operating under the EPCG Scheme in the DTA (MD). The officers conducted a search based on intelligence and found discrepancies in production records, leading to the issuance of notices proposing confiscation of seized goods. The Commissioner confirmed duty demands and penalties, prompting appeals.

The Tribunal analyzed the evidence and found that the allegation of machinery not being installed at MD's premises was unfounded. Documentary evidence, including installation certificates and correspondence, contradicted the statements relied upon. The Tribunal emphasized the verification process and dismissed the allegations based on unverified statements.

Regarding the diversion of production, the Tribunal noted the lack of efforts to ascertain work in process and the absence of correlation with raw materials received and consumed to substantiate production quantities. Demands made on assumptions and presumptions were deemed unsustainable.

The Tribunal also addressed the lifting of seizure, emphasizing that the Commissioner's interpretation lacked supporting material on record. The judgment delved into the legal framework, citing Circulars and Notifications to determine the levy of duty on goods cleared from EOU to DTA and the applicability of exemptions.

Legal precedents were cited to support the Tribunal's decision on the levy of duty and exemptions. The Tribunal rejected the application of certain precedents cited by the Department's representatives, emphasizing the rate applicable under Section 3(1) of the Central Excise Act.

Ultimately, the Tribunal allowed the appeals, setting aside duty demands, interest, and penalties imposed, based on the findings and legal interpretations presented in the judgment.