2009 (8) TMI 490 - AT - Customs

Stay/dispensation of pre-deposit- Notification No. 23/2003-C.E., dated 31-3-2003 read with Para 6.8 of the Foreign Trade Policy (2004-09)- The appellant/applicant herein is an 100% EOU. Two SCNs dated were issued to the appellant covering the period of demand from Dec., 2006 to Nov., 2007 and Dec., 2007 to 22-6-2008 respectively. These demand notices have been issued on the ground that the appellant has violated the conditions of the Notification No. 23/2003-C.E., dated 31-3-2003 read with Para 6.8 of the Foreign Trade Policy (2004-09). Further, the notices have alleged that they were also not preparing any central excise invoice as required under Rules 17(1) of CER for clearance of their final product in DTA and were also not showing the details of production and clearance in the monthly return (ER-2) in terms of Rule 17(3) of the Rules. In the present case, the appellant cleared fresh mushrooms falling under heading 0709 of the First Schedule to the CE Tariff valued at Rs.4,73,42,782/- and Rs.3,73,07,029/- into the DTA during the period from Dec, 2006 to Nov, 2007 and Dec, 2007 to 22-6-2008 respectively, without payment of duty. Held that- we find that the appellant has not made out any case for complete waiver of the pie-deposit of the duties demanded and the penalty imposed. As stated earlier, the financial hardship also has not been exhibited to our satisfaction, when we find that the appellant is still in business and there are huge sales revenue. We do not find a case of waiver of pre deposit on this count either. On the other hand, Revenue has made out a strong case for putting the appellant on the stricter terms, thus, direct the applicant/appellant to deposit the entire amount of duty demanded.

Summary

Issues Involved:
1. Excisability of goods with NIL duty rate.
2. Definition and application of "manufacture" under Central Excise Act.
3. Violation of conditions under Notification No. 23/2003-C.E. and EXIM Policy.
4. Financial hardship and waiver of pre-deposit.

Detailed Analysis:

1. Excisability of Goods with NIL Duty Rate:
The appellant argued that goods cleared in DTA are not excisable as they attract NIL duty under heading 0709 of the CE Tariff. The definition of "excisable goods" under Section 2(d) of the CE Act was cited, suggesting that goods must have a duty rate to be considered excisable. The SDR countered, referencing the Supreme Court's decision in Associated Cement Co. and Punjab & Haryana High Court's ruling in M/s. Hind Rubber Factory, affirming that goods specified in the CE Tariff are excisable regardless of the actual duty rate. The tribunal agreed with the SDR, holding that goods listed in the First Schedule or Second Schedule of the CE Tariff remain excisable even if the duty rate is NIL.

2. Definition and Application of "Manufacture" under Central Excise Act:
The appellant claimed that mushrooms are not liable to duty as they are cultivated, not manufactured, citing the Supreme Court's decision in CCE v. TISCO and various Board Circulars. The Commissioner, however, noted that the processes involved in mushroom production result in a new identifiable product, making it marketable. The tribunal clarified that for DTA clearances by an EOU, duty is charged under the deeming provision in the proviso to Section 3(1) of the CE Act, not under the main provision which requires "manufacture." Thus, the goods are subject to duty as per the proviso, regardless of the manufacturing process.

3. Violation of Conditions under Notification No. 23/2003-C.E. and EXIM Policy:
The appellant was found to have cleared goods in DTA exceeding the entitlement of 50% of FOB value of exports and failed to achieve positive NFE, violating Para 6.8(a) of the EXIM Policy. The tribunal reviewed the appellant's export performance and DTA sales, confirming that the DTA sales far exceeded the entitlement, and the NFE was negative for the relevant period. Consequently, the appellant was not eligible for concessional duty under Notification No. 23/2003-C.E., and the demand for full duty was upheld.

4. Financial Hardship and Waiver of Pre-deposit:
The appellant pleaded financial hardship, citing accumulated losses and submitted annual reports. However, the tribunal noted a significant net profit for the assessment year 2006-07 and ongoing business operations with substantial sales revenue. Citing the Supreme Court's guidelines in Ravi Gupta v. Commissioner Sales Tax, Delhi, and Manotosh Saha, the tribunal found no merit in the appellant's plea for complete waiver of pre-deposit. The tribunal directed the appellant to deposit the entire duty amount of Rs. 3,15,06,727/- within 12 weeks, with the pre-deposit of penalty and interest stayed pending appeal disposal.

Conclusion:
The tribunal concluded that the goods are excisable despite NIL duty, the appellant violated the conditions of Notification No. 23/2003-C.E. and EXIM Policy, and no sufficient financial hardship was demonstrated to waive the pre-deposit. The appellant was directed to comply with the pre-deposit requirement to proceed with the appeal.