Tribunal rejects Revenue appeal on grey cotton fabrics clearance, upholds exemption rate

The Tribunal rejected the Revenue's appeal regarding the clearance of grey cotton fabrics by a 100% Export Oriented Unit in the Domestic Tariff Area under Notification No. 4/97-CE u/s 5A of the Central Excise Act, 1944. Citing legal precedents and a Ministry of Finance clarification, it was held that the goods should be cleared at the effective rate under exemption Notifications, not the tariff rate, as argued by the Revenue. The Tribunal emphasized that the Revenue cannot challenge the Ministry's clarification, leading to the rejection of the appeal.

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Issues involved: Interpretation of Notification No. 4/97-CE u/s 5A of Central Excise Act, 1944 for clearance of grey cotton fabrics by a 100% Export Oriented Unit in Domestic Tariff Area.

Summary:
The appeal by the Revenue concerns the dispute over the clearance of grey cotton fabrics by a 100% Export Oriented Unit (EOU) in the Domestic Tariff Area under Notification No. 4/97-CE u/s 5A of the Central Excise Act, 1944. The Revenue argues that the benefit of the said Notification is not applicable to goods manufactured by a 100% EOU as it does not specifically provide for such exemption. They contend that the grey fabrics should be cleared at the tariff rate, not the effective rate. The issue has been previously addressed by the Hon'ble Gujarat High Court and the Tribunal in related cases.

The Hon'ble Gujarat High Court in the case of Lucky Star International vs. UOI and subsequent Supreme Court confirmation held that Notifications issued under Section 5A were not in accordance with the law. The Tribunal in the case of Ratangiri Textile Ltd. vs. CCE established that clearances by a 100% EOU to Domestic Tariff Area should be levied at the effective rate under exemption Notifications, not the tariff rate. Additionally, a clarification by the Ministry of Finance supported this position, stating that duty for clearances by a 100% EOU should be at the effective rate, allowing them to clear goods under Notification No. 8/97-CE read with Notification No. 4/97-CE. It is emphasized that Revenue cannot contest the clarification provided by the Board.

Therefore, considering the legal precedents and the clarification by the Ministry of Finance, the Tribunal found no merit in the Revenue's appeal and rejected the same.

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