Appellate tribunal rules on excise duty liability for EOUs under Notification No. 2/95-C.E.

The appellate tribunal ruled in favor of the appellants in a case concerning the entitlement to the benefit of Notification No. 2/95-C.E. and liability for excise duty payment. It was clarified that EOUs not permitted to sell in India are liable to pay central excise duty under the Central Excise Tariff, rather than an amount equal to customs duty. The tribunal set aside the duty demand and penalty imposed, emphasizing compliance with regulations governing EOUs' sales in DTA and the application of relevant legal provisions.

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Issues:
1. Entitlement to benefit of Notification No. 2/95-C.E.
2. Liability to pay excise duty under excise tariff or an amount equal to customs duty.

Entitlement to benefit of Notification No. 2/95-C.E.:
The appellants, a 100% EOU manufacturing printed circuit boards (PCB), filed an appeal against an adjudication order for clearing goods in DTA exceeding Rs. 50 lakh, leading to a demand for duty and penalty. The contention was that they were not entitled to the benefit of Notification No. 2/95-C.E. for goods sold in DTA without permission. The appellant argued that they had paid central excise duty equivalent to 50% of customs duties leviable on imported goods, citing a Supreme Court decision and a Ministry of Finance circular. The revenue contended that EOUs are liable for duty equal to customs duties under the Central Excise Act. The issue revolved around whether the appellants were liable for central excise duty or customs duty.

Liability to pay excise duty under excise tariff or an amount equal to customs duty:
The Ministry of Finance circular clarified that prior to 11-5-2001, clearances from EOUs not allowed to be sold in India were chargeable to duty under Section 3(1) of the Central Excise Act. The circular emphasized that the Act applies to all goods manufactured in India, including those by EOUs. As per the circular, EOUs not allowed to sell in India were to pay central excise duty as per the Central Excise Tariff. Consequently, the appellate tribunal set aside the demand for duty equal to customs duty, ruling in favor of the appellants and allowing the appeal while also canceling the penalty imposed.

This judgment clarifies the entitlement of EOUs to the benefit of Notification No. 2/95-C.E. and the liability for payment of excise duty under the Central Excise Act. It highlights the importance of compliance with regulations regarding the sale of goods in DTA by EOUs and the interpretation of relevant legal provisions. The decision provides guidance on the application of excise duty in cases where goods are not allowed to be sold in India, emphasizing the legal framework governing EOUs' operations and duty obligations.

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