FUTURA POLYMERS Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE appellants are a 100% Export -Oriented Unit (EOU, for short) and are engaged in the manufacture and export of Polyester chips. During July -August, 1996, they had cleared Polyester chips of Amorphous Grade to the Domestic Tariff Area (DTA, for short) by availing exemption under Notification No. 2/95 -CE dated 04.01.1995 (as amended). In a show -cause notice dated 24.04.2001, me Commissioner of Central Excise demanded duty of Rs. 81,90,568/ - from the appellants for the above period in respect of the chips of amorphous grade manufactured and cleared by them to DTA, by invoking the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, and also proposed penalties on the notice under Section 11AC of the Act and under Rule 173Q of the Central Excise Rules, 1944. The proposals in the show -cause notice were contested on merits as well as on the ground of limitation. In adjudication of the dispute, learned Commissioner of Customs (Imports) confirmed the above demand of duty against the party under Section 11A(2) of the Act and imposed on them a penalty of Rs. 72,00,000/ - under Rule 173Q ibid. The present appeal is directed against the decision of the Commissioner of Customs.

(2.) AFTER examining the records and hearing both sides, we note that the appellants had the permission of the Development Commissioner for export of Polyester chips (High Pressure Moulding Grade) and that they were exporting such goods and also Polyester chips (Amorphous Grade) on the strength of the Development Commissioner's permission. That they were exporting the Amorphous Grade also is evidenced by the Shipping Bills produced today by the appellant's counsel. It is also noticed that the appellants were clearing Polyester chips of Amorphous Grade to DTA on payment of duty in terms of Notification No. 2/95 -CE ibid.

(3.) THE case of the Revenue is that the appellants were not entitled to the benefit of the Notification in respect of the chips of Amorphous Grade, which, according to the Revenue, were not identical to the chips of High Pressure Moulding Grade and hence not covered by the Development Commissioner's permission. This case of the Revenue as made out in the show -cause notice has been sustained by the Commissioner in the impugned order on the strength of, inter alia. Boards Circular No. 85/95 -CE dated 26.07.1995, which clarified, in respect of 100% EOUs, that only goods which were similar to, or which belonged to the same class as, the goods of export were allowed to be sold in DTA and consequently the benefit of the above Notification was not admissible to it. Learned Counsel for the appellants has brought to our notice certain amendments to Notification No. 2/95 -CE. He has particularly emphasised the amendment brought to that Notification by Notification No. 7/96 -CE dated 01.07.1996, whereunder the text of the third proviso was amended. Prior to the amendment, the relevant part of the proviso was reading as under: