2004 (12) TMI 202 - AT - Central Excise

100% EOU - Imports duty free goods - Demand and penalty - aquaculture products - Shrimp Seeds - Suppression of facts - classification of goods - distinction between goods produced and goods cleared on job work basis - HELD THAT - It is on record that for clearing the Shrimp Seeds no permission was taken from the Development Commissioner. When the goods are cleared with the permission of the Development Commissioner then only proviso to Section 3(1) of the CE Act would be applicable. In Sam Spintex Ltd. v. CCE 2003 (10) TMI 138 - CESTAT NEW DELHI it has been held that when there is a removal to DTA without permission of the Competent Authority duty is leviable under main Section 3 of the CE Act 1944 and not its proviso. While arriving at the above decision the Hon ble Tribunal relied on the decision in the case of CCE v. Pratap Singh 2002 (8) TMI 228 - CEGAT NEW DELHI which has been affirmed by the Apex Court vide its order 2002 (12) TMI 637 - SC ORDER . Thus even if the Commissioner s finding on the classification of Shrimp Seeds is upheld the duty would be NIL. In that case the classification issue becomes academic. However after going through the HSN Explanatory Notes we are convinced that Chapter 3 would not cover items unfit for human consumption. In the present case the Shrimp Seeds are undoubtedly not fit for human consumption in that stage. Therefore it would not be excisable at all. In view of this finding the demand of duty on the Shrimp Seeds cleared would be not sustainable. Goods cleared on job work basis they cannot be equated with the goods produced by the appellant and cleared to DTA. Since the goods produced on job work basis were cleared to other exporters there is no duty liability. Even otherwise since the permission of the Competent Authority was not taken while clearing the above goods the above mentioned ruling of Tribunal in Sam Spintex case would be squarely applicable. Moreover the demand itself is time barred as there is no convincing evidence for suppression of facts. Thus the OIO is liable to be set aside.

Summary

Issues involved:
The appeal involves the classification of goods, duty liability on goods cleared without permission, applicability of penalty and interest, and the distinction between goods produced and goods cleared on job work basis.

Party's appeal:
The appellant, a 100% EOU, imported goods for an Aquaculture Project under specific conditions. The Revenue alleged that the appellant sold goods in the DTA without permission, proper invoicing, or paying Central Excise Duty. The Commissioner demanded duty, interest, and imposed penalties. The appellant argued that the goods were not excisable, there was no suppression of facts, and the demand was time-barred. They also contended that goods cleared on job work basis should not incur duty liability.

The appellant's advocate argued that Shrimp Seeds should not be classified under Chapter 3 as they are not fit for human consumption. The Commissioner's classification was challenged based on the nature of the goods. The appellant claimed there was no intention to evade duty and highlighted difficulties faced by the unit. The Tribunal found that the duty demand on Shrimp Seeds was not sustainable as they were not fit for human consumption, thus not excisable. The clearance of goods on job work basis was distinguished from goods produced by the appellant, leading to the setting aside of the OIO.

Revenue's appeal:
The Revenue's appeal raised issues regarding valuation and the levy of penalty and interest. However, since the Party's appeal was allowed, the discussion on the Revenue's appeal was deemed irrelevant, resulting in the dismissal of the Revenue's appeal.