Case on 100% EOUs' liability for CVD and exemption notifications referred to Larger Bench for review

The tribunal referred the case involving liability of 100% EOUs to pay additional customs duty (CVD) and the applicability of exemption notifications to a Larger Bench for further examination due to the complexity and significance of the issues, particularly regarding the retrospective amendment of Section 3(1) of the Central Excise Act and its impact on the exemption notifications. The registry was instructed to present the case before the Hon'ble President for the constitution of a Larger Bench to address these critical legal matters.

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Issues Involved:
1. Liability of 100% EOUs to pay additional customs duty (CVD) under Section 3 of the Customs Tariff Act.
2. Applicability of Exemption Notifications No. 101/93-C.E. and No. 2/95-C.E.
3. Inclusion of special customs duty in the demand.
4. Retrospective amendment of Section 3(1) of the Central Excise Act by the Finance Act, 2000.
5. Validity of the Commissioners' orders based on the Supreme Court's rulings.

Detailed Analysis:

1. Liability of 100% EOUs to Pay Additional Customs Duty (CVD):
The appellants, M/s. Fabworth (India) Limited and M/s. Woolworth (India) Limited, contested the demand for additional customs duty (CVD) under Section 3 of the Customs Tariff Act. They argued that CVD was not envisaged under Section 12 of the Customs Act and that they had paid only the basic customs duty as per Section 3 of the Central Excise Act, availing exemptions under Notification No. 101/93-C.E. and No. 2/95-C.E. The department, however, issued show cause notices alleging short-payment of duty, asserting that the appellants should have also paid CVD equal to the sum of 50% each of the basic excise duty and additional excise duties.

2. Applicability of Exemption Notifications No. 101/93-C.E. and No. 2/95-C.E.:
The appellants had availed exemptions under Notification No. 101/93-C.E. and No. 2/95-C.E., which exempted them from paying duty in excess of 50% of the basic customs duty. The department contended that these notifications also required the payment of 50% of the CVD. The appellants argued that the notifications did not mention CVD and that the retrospective amendment to Section 3(1) of the Central Excise Act by the Finance Act, 2000, did not affect the applicability of these notifications for the disputed period.

3. Inclusion of Special Customs Duty in the Demand:
The appellants challenged the inclusion of special customs duty in the demand confirmed by the Commissioner, arguing that there was no mention of such duty in the relevant show cause notices. The department did not provide a clear stance on this issue, leaving it to the tribunal's discretion.

4. Retrospective Amendment of Section 3(1) of the Central Excise Act by the Finance Act, 2000:
The retrospective amendment to Section 3(1) of the Central Excise Act, effective from 11-5-1982, included "any other law for the time being in force," thereby bringing the Customs Tariff Act within its ambit. This amendment aimed to include CVD in the computation of excise duty for products cleared by 100% EOUs to the Domestic Tariff Area (DTA). The appellants argued that this amendment did not affect the applicability of the exemption notifications for the disputed period, as the notifications were not similarly amended to be retrospective.

5. Validity of the Commissioners' Orders Based on the Supreme Court's Rulings:
The Commissioners relied on the Supreme Court's ruling in Khandelwal Metal & Engineering Works v. Union of India to demand CVD. However, the appellants cited the Constitution Bench's ruling in Hyderabad Industries Limited v. Union of India, which overruled Khandelwal and held that CVD leviable under Section 3 of the Customs Tariff Act was independent of the customs duty under Section 12 of the Customs Act. The tribunal noted that the retrospective amendment of Section 3(1) of the Central Excise Act validated the inclusion of CVD but also acknowledged the need for a Larger Bench to resolve the issue of applying the exemption notifications to the pre-16-9-99 period.

Conclusion:
The tribunal recognized the complexity and significance of the issues, particularly the retrospective amendment and its impact on the exemption notifications. It decided to refer the matter to a Larger Bench for a comprehensive examination. The registry was directed to place the papers before the Hon'ble President for constituting a Larger Bench to address these critical issues.

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