2000 (4) TMI 400 - AT - Central Excise

Issues Involved:
1. Non-compliance with Condition No. (1) of Notification No. 49/94-CE dated 22-9-1994.
2. Legality of duty demand and penalties imposed on the appellants.

Issue-wise Detailed Analysis:

1. Non-compliance with Condition No. (1) of Notification No. 49/94-CE dated 22-9-1994:

The core issue revolves around whether appellants No. (2) and (3) complied with Condition No. (1) of Notification No. 49/94-CE dated 22-9-1994, which pertains to the removal of intermediate goods without payment of duty. The condition mandates that the manufacturer of intermediate goods should either hold an advance intermediate licence, have applied for such a licence and obtained an acknowledgment, or have been permitted by the licensing authority to manufacture and supply such goods to a manufacturer holding a Duty Exemption Entitlement Certificate and an Advance Licence under the Duty Exemption Scheme.

The appellants argued that they complied with the notification as appellant No. (1) held the necessary duty exemption certificates and advance licences. They also claimed that the names of appellants No. (2) and (3) were entered and endorsed in the DEEC Books by the DGFT, and they manufactured and supplied the intermediate goods with the knowledge and permission of the licensing and Excise authorities.

The Tribunal observed that appellant No. (1) held advance licences and obtained Central Excise registration under the relevant provisions. They informed the DGFT and Central Excise authorities about getting the intermediate goods manufactured from appellants No. (2) and (3). The DGFT endorsed the names of appellants No. (2) and (3) in the DEEC Books, and the Central Excise authorities issued CT-2 certificates to appellant No. (1) for the duty-free removal of intermediate goods.

The Tribunal concluded that appellants No. (2) and (3) manufactured the intermediate goods with the permission of the DGFT and supplied them to appellant No. (1) based on the CT-2 certificates, complying with the notification's conditions. Therefore, there was no breach or violation of Condition No. (1) of Notification No. 49/94-CE.

2. Legality of Duty Demand and Penalties Imposed on the Appellants:

The duty demand and penalties were imposed on the grounds that appellants No. (2) and (3) did not comply with Condition No. (1) of the notification, and appellant No. (1) abetted the evasion of Central Excise duty.

The Tribunal noted that the appellants reflected the removal of intermediate goods in their RT 12 Returns and sought permission from the DGFT and Excise authorities for duty-free removal. There were no allegations of misappropriation or clandestine removal of goods. Appellant No. (1) utilized the intermediate goods in manufacturing the final products and fulfilled their export obligations.

Given these facts, the Tribunal found that the duty demand and penalties were unjustified. The appellants complied with the notification's terms, and there was no legal basis for confirming the duty demand and penalties. The Tribunal referenced several legal precedents supporting this conclusion, including Synthetic Chemical v. CCE, Allahabad, Shriji Chemicals v. CCE, CCE, Mumbai v. Bhoruka Textiles, Brindavan Chemicals & Minerals (P) Ltd. v. CCE, Bangalore, and Formica India Division v. CCE.

Conclusion:

The Tribunal accepted the appeals, setting aside the Commissioner's order and providing consequential relief to the appellants. The judgment emphasized that the appellants complied with the notification's conditions, and the duty demand and penalties were not legally sustainable.

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