2009 (10) TMI 766 - AT - Central Excise

Summary

Issues:
1. Clearance of finished goods from DTA unit to 100% EOU.
2. Utilization of Modvat credit balance for discharging duty.
3. Differential duty demand on clearances from EOU.
4. Applicability of Circular No. 122/95 and limitation period.
5. Allegations of suppression of facts and re-determination of duty liabilities.

Issue 1: Clearance of finished goods from DTA unit to 100% EOU
The case involved the conversion of a unit into a 100% EOU and the subsequent clearance of finished goods into DTA. The department contended that finished goods from the stock at the time of conversion could not be cleared by debiting the input credit balance. The Commissioner upheld this view, stating that the unit could not function as both EOU and DTA without proper substantiation. The appellants argued that they followed lawful procedures and were allowed to operate in dual capacities under the Handbook of Procedures. The Tribunal found the appellants' actions in accordance with the law.

Issue 2: Utilization of Modvat credit balance for discharging duty
The appellants used Modvat credit balance for discharging duty on finished goods cleared during a specific period. The department issued show cause notices proposing demands based on PLA and denying Modvat credit utilization. However, previous orders and Circular No. 77/99 supported the appellants' actions. The Tribunal upheld the Commissioner's decision in favor of the appellants, confirming the utilization of Modvat credit.

Issue 3: Differential duty demand on clearances from EOU
The appellants faced demands for differential duty on clearances from EOU due to incorrect adoption of MRP under Section 4A of the Act. They voluntarily rectified the short payments, rendering the demand unsustainable. The Tribunal found that the demands on this ground could not be upheld.

Issue 4: Applicability of Circular No. 122/95 and limitation period
The appellants argued that the notice was not maintainable under res judicata as similar issues had already been adjudicated. They contended that the demand of further duty for the same period was incorrect. They also raised concerns about the incorrect computation of differential duty and the non-following of Circular No. 122/95. The Tribunal found the demand time-barred and void due to the lack of suppression of facts.

Issue 5: Allegations of suppression of facts and re-determination of duty liabilities
The appellants were accused of suppressing sales details against contracts and not following proper valuation procedures. The Commissioner alleged that sales proceeds should be inclusive of duty to determine value accurately. The Tribunal, however, found that the disputes related to clearances had been previously decided in favor of the appellant, making the demands invalid. The allegations of short payment were addressed by the appellants voluntarily rectifying the errors.

In conclusion, the Tribunal vacated the demands and penalties against the appellants, allowing the appeal based on the findings related to the various issues discussed and analyzed in the judgment.