EOU duty calculation based on circular date; retrospective application not allowed

The Tribunal held that the appellants, a 100% Export-Oriented Undertaking (EOU), should calculate the concessional duty of excise for goods cleared to the Domestic Tariff Area (DTA) as per the method outlined in the Board's circular dated 18-5-94, rejecting the Department's higher duty calculation based on a later circular. The Tribunal emphasized that the circular in force during the relevant period should apply and that retrospective application of the revised method was not permissible. Consequently, the Tribunal set aside the demand for a differential duty, allowing the appeal in favor of the appellants.

---

---

Issues Involved:
1. Retrospective application of Board Circular No. 7/2001-Cus., dated 6-2-2001.
2. Correct method of calculation of duty of excise for 100% EOU on goods cleared to DTA.
3. Consistency of Board Circulars with statutory provisions and notifications.

Summary:

1. Retrospective Application of Board Circular No. 7/2001-Cus., dated 6-2-2001:
The appellants, a 100% Export-Oriented Undertaking (EOU), contested the Department's demand for a differential duty of Rs. 1,20,51,806/- for goods cleared to the Domestic Tariff Area (DTA) during February 2000 to January 2001. The Department based its demand on Circular No. 7/2001-Cus., dated 6-2-2001. The appellants argued that this circular had no retrospective effect. The Original Authority and the lower appellate authority upheld the demand, giving retrospective effect to the circular.

2. Correct Method of Calculation of Duty of Excise for 100% EOU on Goods Cleared to DTA:
The appellants calculated the duty based on Notification No. 2/95-C.E., dated 4-1-1995, and Circular F. No. 512/91/93-Cus.VI, dated 18-5-94. The Department's method, based on Circular No. 7/2001-Cus., dated 6-2-2001, resulted in a higher duty. The Tribunal examined Notification No. 2/95-C.E. and the relevant circulars. It was noted that the notification exempted goods from so much of the duty of excise as was in excess of 50% of each of the duties of customs. The Tribunal found that the method prescribed in the circular dated 18-5-94 was consistent with the notification in force during the period of demand.

3. Consistency of Board Circulars with Statutory Provisions and Notifications:
The Tribunal referred to the Supreme Court's decision in Paper Products Ltd. v. CCE [1999 (112) E.L.T. 765 (S.C.)], which held that Board circulars are binding on the Department. The Tribunal noted that the circular dated 18-5-94, although inconsistent with the proviso to Section 3(1) of the Central Excise Act, matched the terms of Notification No. 2/95-C.E. The Tribunal also cited decisions in Bajaj Auto Ltd. v. CCE [1996 (88) E.L.T. 355] and CCE v. Pep Infotech Ltd. [2001 (127) E.L.T. 149], which supported the view that the circular in force during the period of demand should be applied.

Conclusion:
The Tribunal held that the concessional duty of excise payable by the appellants for the period February 2000 to January 2001 should be calculated as per the method provided in the Board's circular dated 18-5-94. The revised method in the circular dated 6-2-2001 could not be applied retrospectively. The impugned order was set aside, and the appeal was allowed.

---