2024 (4) TMI 1011 - AT - Central Excise

100% EOU liable for excise duty on wastages during loading and transportation despite lack of fixed norms

M/s. Deccan Mining Syndicate Pvt. Ltd. Versus Commissioner of Central Excise and Customs, Belgaum

CESTAT Bangalore held that a 100% EOU was liable to pay excise duty on wastages/shortages of manufactured goods that occurred during loading or ... 100% EOU - Levy of Excise Duty on wastages - shortages are to be considered as handling loss as claimed by the appellant - extension of benefit of no duty or liable to pay duty on these admitted losses/shortages - Time Limitation - HELD THAT:- From the N/N. 23/2003-CE dated 31.3.2003 and the provisions at para 6.8 of the Foreign Trade Policy clearly mentions that the DTA clearances include Scrap/waste/remnants arising out of production process or in connection therewith may be sold in DTA, as per SION notified under Duty Exemption Scheme, on payment of concessional duties as applicable, within overall ceiling of 50% of FOB value of exports. In respect of items not covered by norms, DC may fix ad-hoc norms for a period of six months and within this period, norms should be fixed by Norms Committee. Ad-hoc norms will continue till such time norms are fixed by Norms Committee. Sale of waste / scrap / remnants by units not entitled to DTA sale, or sales beyond DTA sale entitlement, shall be on payment of full duties. Scrap / waste / remnants may also be exported. In the present case, it is an admitted fact that the goods were manufactured and cleared but were found short either while loading or transportation or for various other reasons which have not been explained or have any norms in the industry that envisages such shortages/losses etc; the fact that they have approached the Development Commissioner/DGFT substantiates the Revenue’s argument that there was no concept of wastages or losses allowed to the Appellant. Since it is an admitted fact that neither the Development Commissioner nor the DGFT have fixed any norms in spite of their repeated representations, the question of allowing these wastages as ‘handling losses’ is not within the purview of the Department. Therefore, the appellant is liable to pay duty on these wastages/losses. The eligibility of concessional duty is available, provided the DTA clearances are within 50% of overall ceiling of the FOB value of exports. The appellant claims that their clearances are within this 50% limit and if so, they are eligible for the benefit of the concessional rate of duty. Notification No.4/2006 dated 01.03.2006 is not relevant for 100% EOU. Time Limitation - HELD THAT:- It is an admitted fact that the shortage was detected by the Department only on 25.08.2011 and the show-cause notice was issued on 29.01.2014 which is within 5 years of the date of knowledge. In fact, no return was filed explaining the shortages and it was noticed only after visiting the unit and the return was filed at a later date. The Hon’ble Supreme Court in the case of THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. MEHTA & CO. [2011 (2) TMI 2 - SUPREME COURT] held that A bare perusal of the records shows that the aforesaid reply was sent by the respondent on receipt of a letter issued by the Commissioner of Central Excise on 27-2-1997. If the period of limitation of five years is computed from the aforesaid date, the show cause notice having been issued on 15-5-2000, the demand made was clearly within the period of limitation as prescribed, which is five years. Based on the above the demand is within 5 years from the date of knowledge and therefore the claim of the appellant that it is time barred is unacceptable. The demand of duty upheld but the benefit of the Notification No.23/2003-CE dated 31.03.2003 extended, without extending the benefit of SAD since the appellant has not proved that VAT has been discharged on these shortages. The matter stands remanded for redetermination of duty after extending the benefit of Notification 23/2003-CE dated 31.03.2003. The appeal is allowed by way of remand. Issues Involved:1. Liability of duty on handling loss of iron ore.2. Eligibility for concessional duty under Notification No. 23/2003.3. Invocation of extended period of limitation for issuing the show-cause notice.Summary of Judgment:1. Liability of duty on handling loss of iron ore:The appellant, a 100% EOU engaged in the manufacture and export of iron ore, claimed handling losses of 2,20,685 metric tons during transportation. The Tribunal noted that the appellant admitted to these losses, which were reflected in their Annual Report for 2010-2011. The Tribunal observed that the Foreign Trade Policy (FTP) and Notification No. 23/2003-CE dated 31.03.2003 allow for the sale of scrap/waste/remnants in the Domestic Tariff Area (DTA) on payment of concessional duties within the overall ceiling of 50% of FOB value of exports. However, the appellant did not have norms fixed by the Development Commissioner or DGFT for such handling losses, making them liable to pay duty on these shortages.2. Eligibility for concessional duty under Notification No. 23/2003:The Tribunal upheld the demand for duty but allowed the benefit of concessional duty under Notification No. 23/2003-CE dated 31.03.2003, as the appellant's DTA clearances were within the 50% entitlement. The Tribunal clarified that the benefit of Special Additional Duty (SAD) was not extended since the appellant failed to prove that VAT had been discharged on these shortages.3. Invocation of extended period of limitation for issuing the show-cause notice:The Tribunal addressed the issue of limitation, noting that the shortage was detected by the Department on 25.08.2011, and the show-cause notice was issued on 29.01.2014, within the extended period of five years. The Tribunal cited the Supreme Court's decision in the Mehta & Co. case, which held that the date of knowledge of the offending transaction by the Department is relevant for reckoning the limitation period. Therefore, the demand was not time-barred.Conclusion:The Tribunal upheld the demand for duty while extending the benefit of Notification No. 23/2003-CE dated 31.03.2003, excluding the benefit of SAD. The matter was remanded for redetermination of duty. The appeal was allowed by way of remand.