1996 (4) TMI 221 - AT - Central Excise

Summary

Issues:
1. Duty chargeable in respect of goods manufactured in a 100% Export Oriented Unit (EOU) and cleared in the domestic consumption area.

Analysis:

1. The appeal concerns the duty to be charged for goods manufactured in the appellants' unit set up as a 100% EOU. The appellants imported capital goods under the EOU scheme free of duty but were found to have cleared goods in the domestic area without exporting them as required. The lower authority held the appellants liable for duty under the Central Excises and Salt Act for violating EOU provisions and not paying duty. The authority emphasized the purpose of EOUs to earn foreign exchange and compete internationally, imposing restrictions on clearances to the domestic area. The lower authority's decision was based on the violation of EOU provisions and the duty demand in the show cause notice, holding the appellants liable for duty.

2. The appellants argued that they were unable to export due to market conditions but obtained orders in foreign exchange. They contended that their unit could not function as an EOU, as they were denied permission to obtain duty-free indigenous goods. The appellants were granted a license by the Central Excise authorities, and they questioned the maintainability of the duty demand under the Central Excises Act. They argued that duty, if chargeable, should be under a specific section and not as held by the lower authority. The appellants also highlighted the bonding facility under Section 65 of the Customs Act, asserting that they should not be treated as a 100% EOU.

3. The Department's representative supported the lower authority's duty demand, stating that the appellants' commitment as a 100% EOU remained despite their inability to operate under the scheme. The Department argued that the appellants were at fault for not obtaining duty-free goods for manufacturing under the EOU scheme.

4. The Tribunal observed the correspondence between the appellants and the excise authorities regarding EOU operations. The appellants were allowed to manufacture goods under bond under Section 65 of the Customs Act, even though they had not imported raw materials under the EOU scheme. The Tribunal found discrepancies in allowing manufacturing under Section 65 without imported raw materials. It concluded that the lower authority did not consider all circumstances and correspondence, remanding the matter for a fresh adjudication. The Tribunal set aside the lower authority's order, emphasizing the need for a comprehensive assessment and giving the appellants an opportunity for a fair hearing.

This detailed analysis of the judgment highlights the key arguments presented by both parties and the Tribunal's decision to remand the matter for further consideration, ensuring a fair evaluation of the circumstances surrounding the duty charge for goods manufactured in a 100% EOU.