2026 (3) TMI 196 - AT - Central Excise

Customs Valuation rules govern EOU DTA clearances, excluding MIP absent evidence; concessional benefit denied for unmet advance-sale conditions.

Value of granite slabs and tiles cleared into DTA by a 100% EOU must be determined under Section 14 of the Customs Act, 1962 and the Customs Valuation ... Transaction value under customs valuation - Minimum import price - concessional duty benefit - differential duty bond - Applicability of Notification No.23/2003-CE concessional benefit to advance DTA sales under FTP para 6.8(k) - Whether value of granite slabs and tiles cleared by the appellant (a 100% EOU) in DTA sales will be governed by DGFT notification fixing Minimum Import Price (MIP) or under Section 14 of the Customs Act, 1962? Value of goods cleared by 100% EOU in DTA to be determined under Section 14 of the Customs Act, 1962 - HELD THAT:- The Tribunal held that the proviso to Section 3(1) of the Central Excise Act makes the value of goods brought into DTA by a 100% EOU subject to determination under Section 14 of the Customs Act and the Customs Valuation Rules. The adjudicating authority had enhanced transaction value solely by applying the DGFT notification fixing a Minimum Import Price (MIP) without any independent evidence of manipulation of the transaction value. Reliance on the CESTAT Mumbai decision in Crystal Granite and Marble Pvt. Ltd. [2017 (3) TMI 1144 - CESTAT MUMBAI] supported the conclusion that MIP fixed for imports cannot automatically be treated as the cost of imported raw material or used to reject the declared transaction value where the sale was to unrelated buyers and price was the sole consideration. In absence of cogent evidence to reject the transaction value, enhancement based only on the DGFT MIP was unsustainable. [Paras 5] The demand founded on enhancement by applying DGFT MIP is set aside and the differential duty of Rs.3,33,83,762/- founded on that enhancement is deleted. Applicability of Notification No.23/2003-CE concessional benefit to advance DTA sales under FTP para 6.8(k) - HELD THAT:- Notification No.23/2003-CE conditions the concessional benefit to clearances made in accordance with sub-paragraphs (a), (d), (e) and (g) of FTP para 6.8. Advance DTA sales permitted under para 6.8(k) therefore do not fall within the benefit. Further, the Development Commissioner's permission was subject to specific conditions including execution of a differential duty bond and monitoring; the appellant did not execute the bond and did not disclose the correct FTP sub paragraph in ER-2 returns. The Tribunal relied on the CESTAT Delhi precedent in Bony Polymers that non-fulfillment of conditions disentitles the assessee to the Notification benefit and permits invocation of the extended period. Although the demand for the relevant period is confirmed, the Tribunal found no mens rea to sustain equal penalty and accordingly declined to impose penalty under Section 11AC. [Paras 5] Benefit of Notification No.23/2003-CE is not available for the advance DTA sales; demand of Rs.28,59,386/- for 2014-15 is confirmed with applicable interest, but penalty under Section 11AC is not imposed. Final Conclusion: The appeal is partly allowed: the large valuation-based duty demand founded on DGFT's MIP is set aside, while the smaller duty demand relating to advance DTA sales for 2014-15 is upheld with interest; penalty is not imposed. Issues: (i) Whether value of granite slabs and tiles cleared by a 100% EOU into DTA is to be determined by reference to the DGFT minimum import price (MIP) or under Section 14 of the Customs Act, 1962; (ii) Whether the benefit of Notification No.23/2003-CE dated 31.03.2003 is available to the appellant for advance DTA sales permitted under para 6.8(k) of the Foreign Trade Policy.Issue (i): Whether value of granite slabs and tiles cleared by the appellant (a 100% EOU) in DTA sales will be governed by DGFT notification fixing Minimum Import Price (MIP) or under Section 14 of the Customs Act, 1962.Analysis: The proviso to Section 3(1) of the Central Excise Act, 1944 directs that duties on excisable goods produced by a 100% EOU and brought to any other place in India shall be an amount equal to customs duties leviable on like imported goods and that where customs duties are chargeable by reference to value the value of such excisable goods shall be determined in accordance with the Customs Act, 1962 and the Customs Tariff Act, 1975. There was no independent evidence of manipulation of transaction value or of payment equal to MIP; the department enhanced assessable value solely by applying DGFT MIP notification. The Tribunal has precedent authority (Crystal Granite and Marble Pvt. Ltd.) holding that MIP fixed by DGFT for imports cannot automatically supplant transactional value determined under customs valuation rules where no special circumstances justify rejection of transaction value.Conclusion: In favour of the assessee. The value of the goods cleared into DTA by the 100% EOU must be determined under Section 14 of the Customs Act, 1962 read with Customs Valuation Rules, 2007; the departmental enhancement based solely on DGFT MIP is set aside and the demand of Rs.3,33,83,762/- is annulled.Issue (ii): Whether benefit of Notification No.23/2003-CE dated 31.03.2003 is available to the appellant on advance DTA sales made by it.Analysis: The conditions of Notification No.23/2003-CE require that concessional duty apply only to DTA clearances made in accordance with specified sub-paragraphs (a), (d), (e) and (g) of para 6.8 of the Foreign Trade Policy. Advance DTA sales permitted to the appellant were governed by para 6.8(k). The permission letter contained conditions including execution of a differential duty bond and monitoring requirements; the permission was operable only upon fulfillment of those conditions. The record shows non-execution of the differential duty bond and ER-2 returns that did not disclose the specific para 6.8(k) basis, supporting the department's invocation of extended limitation. Relevant tribunal and court precedents uphold denial of Notification No.23/2003-CE benefit for advance DTA sales under para 6.8(k) where conditions are not satisfied.Conclusion: In favour of the revenue. Benefit of Notification No.23/2003-CE is not available for the appellant's advance DTA sales under para 6.8(k); the demand of Rs.28,59,386/- along with interest is confirmed, but penalty under Section 11AC is not imposed.Final Conclusion: The appeal is partly allowed - valuation-based demand founded solely on DGFT MIP is quashed while the demand relating to non-entitlement to concessional Notification No.23/2003-CE for advance DTA sales is upheld; consequential interest is sustained and penalty is remitted.Ratio Decidendi: Where duties on goods manufactured by a 100% EOU and cleared into DTA are chargeable by reference to value, the value must be determined under Section 14 of the Customs Act, 1962 and the Customs Valuation Rules, 2007; a DGFT minimum import price cannot by itself displace transaction value absent cogent evidence justifying rejection of transaction value.