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TMI Blog2018 (12) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1944 and; (iii) I impose penalty of Rs. 11,09,624/- (Rs. Eleven Lakhs Nine Thousand Six Hundred and Twenty Four only) under the provisions of Section 11-AC of the Central Excise Act, 1944. This order is issued without prejudice to any other action that might be taken against the assessee under any provisions of Central Excise Act/ Rule or any other Law for time being in force." Modifying the above order Commissioner (Appeal) held "The order in original is modified to the extent of setting aside the penalty. The demand of Rs. 11,09,624/- along with interest payable thereon is however confirmed." 2.1 Appellants are 100% Export Oriented Unit manufacturing Cotton Yarn. During the period 9.07.2004 to 07.02.2005, they cleared their final products in domestic tariff area, without payment of duty and availing the benefit under exemption notification No 30/2004-CE, dated 9.07.2004. The benefit of the said Notification was not admissible to them in view of proviso to sub-section 1 of Section 5A. Accordingly proceedings were initiated against them for recovery of the duty short paid by way of show cause notice dated 03.07.2009. Apart from demanding duty, show cause notice also pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides that exemption under said notification shall be available to the EOU, appellant have contravened the provisions of law, by clearing the goods without payment of duty to DTA. 4.1 On merits it is admitted that during the relevant period appellants have cleared the goods without payment of duty claiming exemption under the notification No 30/2004-CE. The EOU status of the unit at the relevant time also is admitted. 4.2 For proper appreciation of the controversy it is relevant to take note of the following provisions of Central Excise Act, 1944 Section 3. Duties specified in First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 to be levied. - (1) There shall be levied and collected in such manner as may be prescribed,- a. a duty of excise to be called the Central Value Added Tax (CENVAT)] on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); b. a special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 985, but is collected as an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 (52 of 1962) or any other law for the time being in force, on like goods produced or manufactured outside India if imported into India, and the value for determination of such duty is not the value as determined under Section 4 of the Central Excise Act but is the value determined under the provisions of Customs Act, 1962. 4.4 From the proviso to Section 5A(1), it is very clear that any exemption notification issued in terms of the said section 5A(1) shall not be applicable, in respect of the clearances made by the EOU unit to DTA, unless and until the notification specifically provides so. 4.5 Proviso to Section 5A(1) bar the applicability of exemption notification issued under the said section, for computing the additional duty (countervailing duty) leviable under the Section 3(1) of the Customs Tariff Act, 1962. Thus for calculating the duty leviable on goods cleared by EOU to DTA, for calculating the Countervailing duty component, effective rate of duty as applicable in respect of any like goods manufactured and cleared in India shall be appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hers v. UOI and others - 2000 (40) RLT 9 (Guj) and letter F. No. 305/113/94-FTT, dated 19th February, 1998 of the Central Board of Excise and Customs. 3. We observe that the issue raised before the Hon'ble Gujarat High Court also was the effect of the same proviso to Section 5A on the clearance of goods to DTA by an EOU. After considering the various provisions of the statute, the High Court held that additional duty of customs shall be reckoned on the effective rate and not tariff rate. During the hearing of the case, learned Counsels for the appellants placed before us a copy of the judgment of the Supreme Court dismissing the Special Leave Petition filed against the decision of the Gujarat High Court in the case of Lucky Star International and Others reported in 2001 (134) E.L.T. 26 (Gujrat). The judgement of the Gujrat High Court was common for Lucky Star International and Varsha Exports cases. Apart from this, is the Circular dated 19th February, 1998 of the Ministry. The Circular clarified as under: 2. Board have examined the issue carefully and find that the duty leviable under Section 3 of the Central Excise Act is to be calculated after giving effect to the exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under Section 5A(1) was not applicable to a 100% EOU unless specifically provided in such a notification under notification No 30/2004-CE dated 09.07.04 issued under Section 5A(1). However this notification did not contain any provisions regarding its applicability to 10% EOUs. It is very clear therefore that the exemption claimed by the appellants under this notification was totally incorrect. The notification applicable to the appellants was notification was notification No 23/2003-CE dated 31.03.2003. In terms of the said notification the rate of duty applicable to the goods cleared by them was 4% ad valorem+ education cess. It is on account of this duty liability that the appellants have given an undertaking on a stamp paper. The para relating to the payment of Rs. 11,09,624/- reads as under: "We further undertake and bind ourselves to pay Rs. 11,09,624/- with appropriate interest @ 13% which is appelable (should be applicable) mentioned in the letter F No MR-I/ Khanapur/ 100% EOU/05, Miraj, Range-I dated 06.12.2005 which is received from the office of the Superintendent, Central Excise, Miraj Range-I. We will pay this amount within six months after the date of final debond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EOU, was indulging in preparation of forged and fake re-warehousing certificate, in which case, the appellant cannot be doubted or penalized for placing the same before the authority. The Board's circular would definitely be applicable in as much as the same refers to non-receipt of re-warehousing certificate, but if the certificate issued by the above 100% EOU is found to be fake, the same would have more applicability. In any case, we find that the Tribunal in case of Santogen Textile Mill Ltd. v. CCE, Mumbai-II, 2007 (214) E.LT. 386 (Tri. - Mumbai), has held that in cases where the 100% EOU has diverted the duty free procured goods to the market, instead of bringing the same in his factory, the manufacturer cannot be fastened with any liability in as much as he looses control over the goods so as to ensure safe reach of the same with the consignee. It is the 100% EOU, who has entered into a bond with the Asstt. Commissioner for proper accountal of receipt, storage and utilization of such goods and to pay, on demand, an amount equal to the duty leviable on the goods, if the same are proved not to have been used in connection with the production of the goods for export purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t views on the issue. 8.0 As regards the merits of the case, I find that both the sides have relied upon the precedent decisions of the Tribunal, some of which are in favour of the assessee. If the Tribunal intends to follow the orders in favour of the Revenue, the matter should have been referred to larger Bench. As such I am of the view that the issue of merits is required to be referred larger Bench. 9.0 As regards limitation, I find that the Commissioner(Appeals) has already extended the benefit of penalty to the appellant by observing that as all the facts were always known to the department, the question of the appellant suppressing any fact or mis-declaring any information cannot arise. The appellate authority has also referred to ER-2 returns wherein all the facts stand declared by the appellant including the fact of availment of exemption Notification No.30/2004-CE dated 09.07.2004. The relevant paragraph from the Commissioner(Appeals)'s order already stands reproduced by my learned Brother. 10.0 The question, in this scenario, is as to whether the extended period would be available to the Revenue for raising the demand or not. The demand stands confirmed under prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bank guarantees can be encashed and such confirmation of demands has to be within the four corners of the act. In the absence of any criteria that giving of bank guarantee or undertaking during investigations automatically leads to invocation of longer period, having been provided in proviso to section 11A of the Act, I am of the view that the said fact itself is of no consequence. 12.0 Further reference by learned Brother to the Tribunal's decision in the case of Atlas Dye Chem Indus., according to me, is not appropriate inasmuch as in that case, the importers were required to give a bond as per the procedure envisaged under the law, inasmuch as the imports were relatable to the end use of the imported goods. Entering a bond and giving of a bank guarantee for the future use of the goods was a requirement of law and cannot be equated to the present scenario. Similarly the Tribunal decision in the case of Vikram Enterprises was in an altogether different set of facts and circumstances where there was a diversion of goods by the 100% EOU on the basis of a fake and forged CT-3 Certificate. Learned brother has observed in para 5.4 that by not honoring the undertaking given by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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