ORDER
Moheb Ali M., Member (T)
1. These applications for waiver of pre-deposit of duty of Rs. 1,50,61,343/- and penalty of equal amount imposed on the applicant company and penalties of Rs. 25 lakhs each imposed on its chairman and deputy manager, arise out of the order of the Commissioner of Central Excise, Pune-II.
2. Briefly the facts are that the applicant company is a 100% export oriented undertaking engaged in the manufacture and export of cotton yarn falling under Chapter 52 of the Central Excise Tariff Act, 1985. The applicants are entitled to clear 50% of FOB value of export goods into Domestic Tariff Area (DTA) as provided in para 9.9 of the Exim Policy 1997-2002 and para 6.8 of the Exim Policy 2002-2007. During the relevant period the applicants availed of the provision under the said paras. Along with the cotton yarn sold into DTA, the applicants were selling cotton waste which arose out of the manufacture of cotton yarn into domestic market. Cotton waste is exempt from payment of central excise duty. The department’s contention is that the applicants have failed to include the value of cotton waste while computing the value of cotton yarn cleared into DTA. In other words, the contention is that while computing the 50% eligibility for domestic clearances, the applicants should have taken into consideration the value of cotton waste as well. In not doing so, they have exceeded the limit of 50% and, therefore, to that extent duty on cotton yam should be discharged in accordance with the provisions contained in the proviso to Section 3(1) of the Central Excise Act. Further, the department contends that cotton waste has been removed in DTA without the permission of the Development Commissioner, in violation of the policy provisions.
3. Heard both sides.
4. Learned advocate contended that the department while demanding duty on the alleged excess clearance of cotton yam into DTA, invoked the proviso to Section 11A of the Central Excise Act. In fact the applicants have been, through their periodical returns as well as the documents under which the cotton waste was cleaved at nil rate of duty, informing the jurisdictional central excise officers that they were clearing cotton waste along with cotton yarn from time to time. The fact that the value of cotton waste was not taken into consideration while computing the 50% eligibility limit is known to the department right from the beginning. The department has not raised any objection nor raised any query during the relevant period as to whether the value of cotton waste was taken into consideration while computing the 50% eligibility limit. It is argued that the department cannot now turn round and accuse the applicants of suppressing the facts with an intent to evade payment of duty. In regard to the department’s contention that no permission was obtained from the Development Commissioner to remove cotton waste into DTA, it is argued that no such permission is necessary as the Policy itself provides for clearance of waste into DTA under para 9.20 of the Policy. Clearances of cotton waste into DTA was accounted for in private register and was also reflected in monthly returns in Form RT-13. Thus, the learned advocate argued that the applicants have a strong prima facie case in their favour in regard to limitation as well as on merits.
5. The learned DR on the other hand contended that the fact that excess DTA clearances were made without the permission accorded by the Development Commissioner is established. He argued that the applicants had not taken permission to clear cotton waste into DTA. He pleaded that the total value of clearances into DTA has to be computed taking into consideration the value of all goods allowed to be sold in India.
6. We observe that on limitation prima facie the applicants have made out a strong case in their favour. The merits could be gone into at a later stage when the appeal is taken up for disposal. We, therefore, hold that this is a fit case for dispensing with the pre-deposit of duty and penalties and stay recovery thereof during the pendency of these appeals. We order accordingly.
(Operative part pronounced in court)