Appellants win duty exemption appeal under Central Excise Act

The Tribunal held that the appellants were not entitled to exemption under Notification No. 108/95-C.E. due to the proviso to Section 5A of the Central Excise Act. However, the duty was calculated as per Notification No. 84/97-Cus., resulting in nil duty for goods supplied to projects financed by the World Bank or Asian Development Bank. The appeal was allowed, and the duty demand of Rs. 2,78,21,483/- was set aside.

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Issues Involved:
1. Liability of excise duty for goods cleared by a 100% Export Oriented Unit (EOU) into the Domestic Tariff Area (DTA).
2. Applicability of Notification No. 108/95-C.E. for exemption from duty of excise.
3. Interpretation of Section 5A of the Central Excise Act concerning exemptions for 100% EOUs.
4. Applicability of Notification No. 84/97-Cus. for concessional duty rates.

Issue-wise Detailed Analysis:

1. Liability of Excise Duty for Goods Cleared by a 100% Export Oriented Unit (EOU) into the Domestic Tariff Area (DTA):
The Commissioner of Central Excise, Hyderabad, confirmed duty demands under Section 11A of the Act amounting to Rs. 2,78,21,483/- for excise duty not paid by the appellants on goods cleared between June 01 to January 02. The appellants, a 100% EOU, argued that they had obtained permission from the Development Commissioner to clear the goods to specified projects financed by international organizations. The duty should be determined as per the Proviso to Section 3(1) of the Central Excise Act, which links the duty payable to the customs duty leviable on like goods imported into India.

2. Applicability of Notification No. 108/95-C.E. for Exemption from Duty of Excise:
The appellants claimed exemption under Notification No. 108/95-C.E., which exempts goods supplied to the United Nations or specified international organizations for their official use or projects approved by the Government of India. The Commissioner, however, held that the notification does not apply to 100% EOUs due to the proviso to Section 5A of the Central Excise Act, which explicitly excludes 100% EOUs from such exemptions unless specifically provided in the notification.

3. Interpretation of Section 5A of the Central Excise Act Concerning Exemptions for 100% EOUs:
Section 5A(1) of the Central Excise Act allows the Central Government to exempt excisable goods from duty, but the proviso to Section 5A(1) states that no exemption shall apply to goods produced or manufactured in a 100% EOU unless specifically provided. The Tribunal agreed with the Commissioner that Notification No. 108/95-C.E. does not specifically provide such an exemption for 100% EOUs, thereby making the appellants liable to pay excise duty.

4. Applicability of Notification No. 84/97-Cus. for Concessional Duty Rates:
The appellants argued that if the benefit of Notification No. 108/95-C.E. is not available, the duty should be calculated as per Notification No. 84/97-Cus., which exempts goods imported into India and supplied to projects financed by the World Bank or Asian Development Bank from customs duty. The Tribunal noted that the Board's Circular No. 7/01 dated 6-2-01 clarifies that the duty leviable on goods cleared into DTA by a 100% EOU should be 50% of the customs duty calculated on like goods. Since Notification No. 84/97-Cus. exempts such goods from customs duty, the excise duty for the appellants' goods should be nil.

Conclusion:
The Tribunal concluded that the appellants are not entitled to the exemption under Notification No. 108/95-C.E. due to the proviso to Section 5A of the Central Excise Act. However, the duty should be calculated as per Notification No. 84/97-Cus., resulting in nil duty for the goods supplied to projects financed by the World Bank or Asian Development Bank. The appeal was allowed, and the duty demand was set aside.

Pronounced in open Court on 8-4-2005.

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