EOU entitled to nil duty rate on spent sulphuric acid clearance to fertilizer companies under Section 3(1)(b)(ii)

CESTAT Kolkata allowed the appeal filed by a 100% EOU regarding clearance of spent sulphuric acid to fertilizer companies in DTA. The tribunal held that under Section 3(1)(b)(ii) of Central Excise Act, 1944, duty on DTA clearance from 100% EOU should equal customs duty on similar imported goods. Following precedent in Satya Metals case, the appellant was entitled to benefit of Notification No.2/2008-CE and Notification No.4/2006-CE for nil rate of duty on clearance of Linear Alkyl Benzene Sulphuric Acid and Spent Sulphuric Acid to fertilizer companies respectively. The impugned orders were set aside.

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Issues Involved:
1. Eligibility of 100% Export Oriented Unit (EOU) for exemption under specific Notifications.
2. Applicability of Central Excise Duty and Customs Duty provisions.
3. Interpretation of Section 5A of the Central Excise Act, 1944.

Summary:

Issue 1: Eligibility of 100% Export Oriented Unit (EOU) for exemption under specific Notifications

The appellant, a 100% EOU, was manufacturing Linear Alkyl Benzene Sulphuric Acid (LABSA) and Spent Sulphuric Acid, and was paying 14% duty as per Notification No.2/2008 dated 01.03.2008. They cleared Spent Sulphuric Acid to fertilizer companies, which were exempt from duty under Notification No.4/2006-CE dated 01.03.2006. The Revenue contended that these exemptions did not apply to goods produced by a 100% EOU and brought to any place in India, as per the proviso to Section 5A(1) of the Central Excise Act, 1944. Show-cause notices were issued to demand differential duty, interest, and penalties.

Issue 2: Applicability of Central Excise Duty and Customs Duty provisions

The appellant argued that the duty payable by a 100% EOU is governed by Section 3(1)(b)(ii) of the Central Excise Act, 1944, which equates the duty to the customs duty payable if the goods were imported into India. They cited Notification No.23/2003-CE, which provides for exemption from duty in excess of the aggregate of customs duties. The appellant also referenced a Circular No.4/2008-09 and a letter from the Chief Commissioner of Central Excise, clarifying that the exemptions under Notification No.2/2008-CE and Notification No.4/2006-CE were applicable.

Issue 3: Interpretation of Section 5A of the Central Excise Act, 1944

The Tribunal referred to the Himachal Pradesh High Court's decision in Satya Metals Vs. Union of India, which clarified that the proviso to Section 5A does not bar the calculation of Additional Duty of Customs (CVD) for 100% EOUs. The effective rate of duty applicable to domestic units should be considered for computing CVD. The Tribunal concluded that the duty payable by a 100% EOU should be equivalent to the aggregate of customs duties as if the goods were imported into India.

Conclusion:

The Tribunal held that the appellant is entitled to the benefits of Notification No.2/2008-CE and Notification No.04/2006-CE. The impugned orders were set aside, and both appeals were allowed with consequential relief.

Result:

Both appeals were allowed, and the impugned orders were set aside.

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