Legal principle

DTA sales by a 100% EOU, whether or not made with the Development Commissioner's permission, are assessable to duty under the proviso to Section 3(1) of the Central Excise Act, 1944, and the benefit of exemption under Notification 125/84-CE is not available (Jaipur Golden Transport, T-LB).

Court decision

The Tribunal rejected the appeals of M/s Swagat Synthetics, Shri M.J. Jain and Shri S.S. Bhomia, upholding the finding of clandestine removal and their liability to penalty. It allowed the Revenue's appeal, set aside the Commissioner (Appeals)'s reduction of duty, and restored the Assistant Commissioner's order confirming duty of Rs.13,99,386 with an equal penalty and confirmation of interest, in favour of the Revenue.

Facts

M/s Swagat Synthetics, a 100% EOU manufacturing processed man-made fabrics, was visited by Central Excise officers on 7/8.5.03, and stock verification revealed that physical stock differed from recorded stock in quantity, weight and quality. The authorised signatory, Shri Bhomia, admitted in his statement of 8.5.03 that grey fabric received under CT-3 procedure had been illicitly cleared in the open market against cash and substituted with inferior processed fabrics from three units, a statement corroborated by partner Shri M.J. Jain. The Chemical Examiner reported the seized fabric at 43.6–62.7 GSM against the 70–200 GSM fabric procured under CT-3 certificate. On this basis, the Assistant Commissioner confirmed duty of Rs.13,99,386 under Section 72 read with Section 28(1) of the Customs Act, 1962 and Section 11A(1) of CEA, 1944, with interest under Section 28B/11AB, penalties under Sections 114A and 112(a)/(b) Customs Act and Rules 25/26 CER 2002, and a fine of Rs.1 lakh in lieu of confiscation; Commissioner (Appeals) partly reduced the duty and penalties.

Key provisions

• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 72, Customs Act, 1962 — Goods improperly removed from warehouse, etc
• Section 28B, Customs Act, 1962 — Duties collected from the buyer to be deposited with the Central Government
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 28(1), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded