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2013 (10) TMI 351 - AT - Central Excise100% EOU - Duty on Clearance of Reject fabrics to DTA – Duty of needles found short which was imported free of duty / procured duty free - Revenue was of the view that the appellant cleared goods of good quality in the guise of rejects – Held that- Appellant has explained how the defects can arise in major part of a roll due to thickness or thinness of yarn rather than for bits - It is quite possible that the appellant had not accounted defective goods as rejects separately till they got permissions to sell such goods in DTA at concessional rate of duty because such separate accounting would not have served any purpose - Revenues argument that some of the buyers who bought the rejects did not get the full quantity billed in their name can only create a doubt but cannot prove that the goods were not actually rejects - This is especially so because the goods were sold through brokers who were not examined to find out their version. Revenues argument that in the past the appellant had been exporting defective goods and hence appellant should have exported the impugned rejects also is not an acceptable argument because possibility of such export depends on the market conditions and it is for the manufacturer to decide the quality of the goods to be exported without affecting his reputation - Revenues interest is safeguarded through the maximum permissible limits for rejects and net foreign exchange to be earned - These safeguards were not contravened - So the arguments advanced by Revenue to say that the goods were of good quality and its value was suppressed are not acceptable in the absence of positive evidence. Regarding Exemption Notification No.13/98 – Held that:- The condition that fabrics should have been stamped as Rejects is plain and simple to understand - If the appellants did not stamp it so it can be only due to the fact that it will affect the price it can fetch in domestic market at different levels - So it cannot be taken as an innocent mistake - The whole matter came to light only due to detailed investigation. Extended period of limitation - Held that:- The plea of the appellant that Revenue was aware of the issue is not acceptable because there is nothing on record to show that the appellant had informed Revenue that the fabrics are not being stamped as Rejects while claiming exemption under notification of the type 13/98-CE - The show cause notice issued was for the reason that they were seen to be using imported needles obtained from another manufacturer and claiming said exemption meant for goods manufactured solely from indigenous goods - When a new fact which has been suppressed from Revenue came to light Revenue was justified in issuing Show Cause Notice invoking extended period of time. A demand based on value at which the goods were cleared to DTA as evidenced from the records of the appellant but without extending the benefit of exemption in notifications of the type will survive. Regarding duty on needles found short - Held that:- The inputs cleared as such by the appellants to 100% EOUs cannot be deemed to have been manufactured by the appellants - the supplies (which are deemed exports) cannot be treated on par with export under bond for the purpose of Rule 57F - The appellants are not entitled to remove the inputs without reversal of the credit or payment of equivalent amount of duty. - There is no warrant or justification to extend the instructions dated 31.12.1996 issued by the Ministry/Board to cover supplies to 100% EOU which are treated as deemed exports for certain purposes under EXIM Policy - Decided partly in favour of Assessee.
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