2013 (11) TMI 1207 - AT - Central Excise

Assessee availed exemption under Notification No.52/03 - Indigenous goods procured for use in their EOU Restriction of 5% on the value of spares imported - Revenue found that they had imported more than 5% of the value of equipment during four different periods Held that - The core issue in dispute is whether the restriction of 5% is to be enforced at the time of import into the bonded warehouse of EOU or at the clearance from EOU for use in quarry - The factual issue to be decided is whether more than 5% has been actually issued to quarry - Annexure-B of the Show Cause Notice is in respect of spares issued to the quarry exceeding 5% and Annexure-B1 is in respect of spares issued to quarries as well as EOU - there is a question of fact which was under dispute and not settled by the adjudicating authority in clear terms - The legal issue also needs to be determined - the unit is facing acute financial crisis and they have filed applications for producing additional evidence to demonstrate their financial hardship - Pre-deposit of Rupees thirty lakhs to be deposited upon such submission rest of the duty to be submitted till the disposal Partial stay granted.

Issues:
1. Interpretation of exemption notifications for import of goods by 100% EOU manufacturing granite slabs.
2. Whether the restriction of 5% on value of spares under Annexure-V applies at the time of import into the bonded warehouse or at clearance for use in quarry.
3. Financial hardship faced by the unit and application for producing additional evidence.

Analysis:

1. The applicants, a 100% EOU manufacturing granite slabs, availed exemptions under specific notifications for import of goods and indigenous goods. The notifications provided exemptions for goods intended for export and capital goods/spares. Revenue found excess imports of spares over 5% of equipment value during certain periods, leading to show cause notices and subsequent confirmation of duties, interest, and penalties.

2. The Senior counsel argued that the 5% restriction under Annexure-V applies only to removal of spares to quarry sites, not on the quantum of imports kept in the warehouse. Referring to official clarifications, he contended that spares can be procured beyond 5%. He highlighted common items in Annexures I and V, stating that exceeding 5% for common equipment spares should not incur duty demands.

3. The Revenue argued that the 5% restriction on spares for quarrying equipment in Annexure-V must be enforced at procurement due to the exemption clause. They maintained that the demand was based on excess procurement of spares beyond the 5% limit for quarrying machinery.

4. The Tribunal considered both arguments and the show cause notice. The legal issue was whether the 5% restriction applies at import or at clearance for use in quarry. The factual issue was whether more than 5% of spares were actually issued to the quarry, which remained disputed. The Tribunal noted the financial crisis faced by the unit and their application for additional evidence to demonstrate hardship.

5. After evaluating submissions and records, the Tribunal ordered a pre-deposit of Rs.30,00,000 within 8 weeks, with compliance to be reported by a specified date. Pending appeals, the pre-deposit of balance dues was waived, and collection stayed.

This detailed analysis covers the interpretation of exemption notifications, the application of the 5% restriction on spares, and the financial challenges faced by the unit, as addressed in the judgment by the Appellate Tribunal CESTAT CHENNAI.

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