Reverse of duty

[VENKATESH KRISHNAMOORTHY]

My client has made supplies of steel coils slit to size to 100% EOU against CT3 certificate. Since slitting of steel is a process and not manufacturing process, department informed the assessee that CT3 should not have been issued by the department for this supply and hence the duty is payable by the 100% EOU. However the EOU claim that they are exempt from all duties and they will not pay. Now the department has asked the assessee to reverse the duty along with interest. Is the department right?

[Madhukar N Hiregange]

This case is a little difficult as the goods which are traded are not allowed to be supplied to the EOU only manufactured goods can be sent without processing. EOU may not pay at this point of time though they can avail the credit and take a refund of the central excise duty as well as the service tax paid. But refunds in India are a long drawn out process. There is possibility that there is a defense however it may entail litigation. You should contact a good consultant near you for assistance in this reagrd.

[RadheyShyam Mangal]

when slitting of steel is a process and not manufacturing process, the question of demanding excise duty is not tenable.

AI Summary

Reverse of duty: supplier asked to reverse excise on slit steel sent to 100% EOU amid dispute over processing versus manufacturing. Department seeks recovery of excise duty with interest from a supplier who sent slit-to-size steel coils to a 100% EOU under CT3, asserting slitting is a process not manufacturing and CT3 was improperly issued. The EOU claims exemption and will not pay. Advisories differ: one advises that traded goods are generally not eligible for duty-free supply to EOUs and suggests availment of credit and refund by the EOU or litigation by the supplier; another contends a duty demand is not tenable if slitting is merely a process.