Deposition of duty amount

[pradeep kataria]

Co. X manufactures Guar Gum Powder from Refined Split. During Manufacturing process 16% of Split got wasted. Since Co. X is an 100% EOU, it applied for fixation of SION by claming 16% input base loss or 19% output base loss. The Adhoc Norms was also fixed considering process waste of 16% of Input but the Norms committee while admitting application, has fixed SION considering waste at 16% on output basis resulting in fixing of loss lower by 2.79% app. of input. It has been directed by Development Commissioner to deposit the custom/excise duty applicable on excess wastage cleared. Now the question arise at what value the duty is to be deposited & how much is to be deposited particularly when - 1.out of the 16% Input loss only 1% is visible & recoverable and rest is invisible and thus non recoverable. Further waste is also exempted by virtue of Notification. 2. Raw Material i.e. refined split is also exempted from excise duty by virtue of Notification.

[Mukesh Kumar]

Various things to be examined. Did you received the inputs free of customs duty (BCD)? If this is not the case, a general view can be framed that since the waste is exempt from duty, refined split (raw material) is exempt from duty, you need not to pay anything on the excess wastage. But, again a question arises, if all these conditions were existing, what was the need to get the SION norms fixed. What is the use of producing goods under EOU scheme. There must be something more which may be the guiding factor to decide the whole issue at once.

[pradeep kataria]

Dear Mukesh, First of all Thanks for reply.Here is reply of your queries:- 1. All inputs are indegenious and hence suffered no BCD. 2. The SION got fixed as someone told us that it is required to be fixed if your wastage is more than 2%. 3. There is income tax benefit in EOU and hence goods are produced in EOU. Further please note that all Raw Materials are being sourced from India only.

[RadheyShyam Mangal]

Remedy No. 1 :- You can take the benefit of Ntfn. No. 24/2003 CE for invisible waste. Remedy No. - 2:- The question of diffrential duty on waste beyond sion will arise from may, 2008 as amendement in relevant Notification of CE/CUS were made in may, 2008.

AI Summary

Duty on excess wastage may be mitigated where inputs and waste are exempt; SION and notification remedies guide deposit obligations. Duty liability on excess wastage for an EOU depends on the fixed SION, whether waste is visible/recoverable or invisible/non recoverable, and whether inputs and waste are exempt. If inputs are indigenous and both raw material and waste are exempt, claimants may contend no duty is payable on excess invisible waste; however, the Development Commissioner's directive to deposit duty reflects the SION based shortfall and amendments to notifications can change when differential duty arises, so factual and temporal verification of exemptions and notification applicability is required.