2007 (9) TMI 103 - AT - Central Excise

Clearance to DTA by EOU under Not. 2/95 Both the grades of polyester chips can be cleared to DTA So benefit of Not. 2/95 cannot be denied to Amorphous Grade Authorities were aware of clearance to DTA so larger period cannot be invoked on account of suppression Penalty not imposable u/r 173Q

Summary

Issues:
1. Demand of duty under Notification No. 2/95-CE for clearance of Polyester chips of Amorphous Grade to DTA.
2. Interpretation of the amendment to Notification No. 2/95-CE dated 1-7-1996.
3. Challenge to the demand on the ground of time-bar.
4. Validity of penalty imposed under Rule 173Q.

Analysis:

1. Demand of Duty under Notification No. 2/95-CE:
The case involved a dispute regarding the demand of duty against a 100% Export-Oriented Unit (EOU) for clearing Polyester chips of Amorphous Grade to the Domestic Tariff Area (DTA) under Notification No. 2/95-CE. The Revenue contended that the goods were not entitled to the benefit of the Notification as they were not identical to the goods exported under the Development Commissioner's permission. However, it was argued by the appellants that the goods were commercially interchangeable and had like characteristics, citing relevant amendments to the Notification. The Tribunal noted that the goods were indeed commercially interchangeable, and the demand of duty was not sustainable.

2. Interpretation of the Amendment to Notification No. 2/95-CE:
The Tribunal examined the relevant amendment to Notification No. 2/95-CE dated 1-7-1996, which stated that goods need not be identical in all respects but should have like characteristics to be eligible for clearance to DTA. The appellants successfully argued that the goods in question met this criterion, as supported by expert opinions and certifications. The Tribunal found that the adjudicating authority had overlooked the impact of the amendment, and the benefit of the Notification applied to the goods cleared by the EOU.

3. Challenge on the Ground of Time-Bar:
The appellants challenged the demand on the ground of time-bar, arguing that there was no suppression of material facts as the Customs authorities were aware of the exports of both grades of Polyester chips under the Development Commissioner's permission. The Tribunal agreed that there was no suppression, as the Shipping Bills disclosed the relevant facts, and thus, the extended period of limitation was not applicable in this case.

4. Validity of Penalty Imposed under Rule 173Q:
The appellants also contested the penalty imposed under Rule 173Q, stating that EOUs were not subject to this rule as their removals of excisable goods for home consumption were covered under a different chapter. Citing legal precedents, the Tribunal upheld this contention and ruled in favor of the appellants, allowing the appeal and setting aside the penalty.

In conclusion, the Tribunal found in favor of the appellants on all issues, ruling that the demand of duty was not sustainable, the extended period of limitation was not applicable, and the penalty imposed under Rule 173Q was invalid based on the legal position applicable to EOUs.