2018 (5) TMI 466 - AT - Central Excise

Tribunal rules in favor of 100% EOU on Central Excise duty, deeming demands unsustainable

The Tribunal ruled in favor of the appellant, a 100% EOU, in a case involving differential Central Excise duty on goods not yet manufactured or removed. ... 100% EOU - debonding of unit - demand of of ₹ 3,37,48,484/- on the goods which were within the factory premises or that of job workers and which were not cleared and also on the goods which were under the process of manufacture or manufacture had not been completed - Held that: - demand not sustainable for the reasons that the differential duty was demanded on the goods which had not came into existence and on the goods which were not removed from the factory of manufacture of appellant or their job workers - the confirmation of demand of ₹ 3,37,48,484/-, interest thereon and equal penalty are not sustainable. Demand of of duty on Remnants of ₹ 8,12,05,337/- - Held that: - the confirmation of demand of under valuation on Remnants is not sustainable because the same was confirmed by relying on CBEC Circular dated 29/09/1994, which is rescinded through Circular dated 16/08/2010 - the demand of differential Central Excise duty of ₹ 8,12,05,337/-, interest thereon and equal penalty are not sustainable. Demand of ₹ 9,64,168/- - depreciation denied on the ground that they were not capital goods since they were not put to use - Held that: - demand not sustainable as catalyst on first charge were treated as capital goods and that there was no such allegation in the Show Cause Notice and therefore, the adjudication proceedings travelled beyond the Show Cause Notice and therefore confirmation of demand is not sustainable. Appeal allowed - decided in favor of appellant. Issues:1. Differential Central Excise duty on goods not yet manufactured or removed.2. Demand of Central Excise duty on Remnants and under-valuation.3. Denial of benefit of depreciation on imported capital goods.Analysis:Issue 1: Differential Central Excise duty on goods not yet manufactured or removedThe appellant, a 100% EOU, sought to exit the EOU scheme and paid the Customs & Central Excise duties for the exit. The Department issued a Show Cause Notice alleging under-valuation and demanded differential Central Excise duty. The Tribunal held that the demand of &8377; 3,37,48,484/- was unsustainable as it was imposed on goods not yet in existence or removed from the factory premises. Duty is only due upon completion of manufacture and removal of goods, which had not occurred in this case. The confirmation of demand, interest, and penalty were deemed unsustainable.Issue 2: Demand of Central Excise duty on Remnants and under-valuationRegarding the demand of &8377; 8,12,05,337/- on Remnants and under-valuation, the Tribunal found the demand unsustainable. The rate of duty issue had been decided in a previous proceeding initiated by a Show Cause Notice dated 17/03/2008, making the current demand time-barred. Additionally, the confirmation of under-valuation was based on a rescinded CBEC Circular, rendering it unsustainable. The demand, interest, and penalty were set aside.Issue 3: Denial of benefit of depreciation on imported capital goodsThe Tribunal addressed the denial of benefit of depreciation on imported capital goods amounting to &8377; 9,64,168/-. The Original Authority claimed the goods were not capital goods as they were not put to use. However, the Tribunal found this ground unsustainable as catalyst on first charge were treated as capital goods, and this allegation was not mentioned in the Show Cause Notice. The confirmation of the demand was deemed unsustainable as the adjudication proceedings exceeded the scope of the Show Cause Notice.In conclusion, the Tribunal set aside the impugned Order-in-Original, allowing the appeal and granting the appellant consequential benefits as per law.