AI Drafter 
TaxTMI 
TaxTMI 
2024 (11) TMI 466
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....ike goods produced or manufactured outside India if imported into India, is leviable on the goods cleared by the assessee in the DTA under para 6.8(a) of Foreign Trade Policy in view of proviso to Section 3(1) of Central Excise Act, 1944 read with Sr. No. 2 of Table to Notification No. 23/2003-CE dtd. 31.02.2003. Thus the appellant, by wrong availment of benefit under Sr. No. 3 of Table to Notification No. 23/2003 -CE dtd. 31.03.2003, have paid the lower rate of central excise duty than the applicable rate of duty as prescribed under Sr. No. 2 of Table to Notification No. 23/2003-CE dtd. 31.03.2003 and as a result, they have short paid Central Excise Duty. Accordingly, as details show cause notice dtd. 02.08.2011 proposing differential duty on the goods cleared into DTA during the period 01.07.2006 to 31.05.2011 by denying the benefit of Notification No. 30/2004-CE dtd. 09.07.2004 and benefit of Sr. No. 3 and Sr. 4 of the Notification No. 23/2003-CE dtd. 31.02.2003. Appellant were also issued with periodical show cause notices by the department. In Adjudication, Ld. Commissioner vide impugned Order-In-Original No. DMN-EXCUS-000-COM-045-054-20-21 dtd. 12.11.2020 confirmed the ....
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....to evade payment of duty. The clearances were made by the appellant in DTA by contravening provisions of Rules 4, 8, 10, 12 and 17 of Central Excise Rules, 2002, provisions of FTP 2004-09, conditions of Notification No. 23/2003-CE and terms and conditions of B-17 Bond executed by the appellant. Therefore, differential duty was recoverable by invoking extended period of limitation. h) Even though the said goods were not physically available for confiscation, redemption fine in lieu of confiscation was imposable under Section 34 of the Central Excise Act, 1944 in view of the B-17 Bond executed by the appellant. i) Penalty has been imposed and demand of interest has been confirmed. Aggrieved by the impugned order, the appellant have filed the present appeal. 2. Shri Anand Nainawati, learned counsel appearing for the appellant submits that during the period 01.07.2006 to 28.02.2007 appellant have correctly taken into account Notification No.30/2004-CE for the purpose of clause (iii) of Condition No. 4 of Notification No.23/2003-CE to avail Sl. No.4 of Notification No.23/2003-CE. Ld. Commissioner in the impugned Order has held that the effective rate ....
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....r the Supreme Court's judgment in case of SRF Ltd. Vs. CC. The Commissioner has erred in not considering as to how the said binding precedent of the Hon'ble Supreme Court is not applicable. In view of the decision of SRF cited supra, the condition not capable of being fulfilled must be treated as fulfilled. Further, subsequent availment of benefit under Sl. No. 3 for the same goods will not make any difference. The Appellant were well within their right to seek correct quantification of demand under Sl. No. 2 of Notification No. 23/2003-CE by considering nil CVD in terms of Notification No. 30/2004-CE. 2.4 Further he submits that demand confirmed in the impugned Order is not maintainable as the same is based on assumptions and presumptions only and there is absolutely no evidence whatsoever for confirming the demand of differential duty. The Commissioner in the impugned order has assumed that since the raw material was imported, the same would have been used in the manufacture of goods cleared into DTA. Neither the Show Cause Notice dated 2.8.2011 nor the impugned Order relies on any concrete evidences to establish that imported raw material was used in the man....
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....7.4.2007. Therefore, the demand for the period prior to 28.4.2007 will not sustain in any case. Further, in any case, the demand for the period from 1.7.2006 to 5.7.2007 on this ground is not maintainable. Explanation II was inserted in Notification No. 23/2003-CE with effect from 6.7.2007. Such amendment made in the notification is prospective and cannot have retrospective effect. 2.7 As regards the allegation that the appellant procured raw material from another 100% EOU and in terms of Explanation II to Notification No.23/2003-CE, the said goods should be treated as imported goods he submits that the appellant have not procured raw material from another EOU during the period 1.7.2006 to 28.2.2007. In fact, Mr. Muneshwar Nath Modi, Director of the appellant vide statement dated 21.6.2011 recorded during the investigation stated that the appellant did not receive any supply from 100% EOU or SEZ till 27.4.2007. 2.8 He also submits that the goods in question cleared by the appellant into DTA were not exempted from sales tax / VAT. Hence, Sl. No.1 of Notification No.23/2003-CE was applicable. The goods in question cleared by the appellant into DTA were not lia....
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....oods cleared to DTA are not exempt from payment of sales tax or VAT, it means that such goods as a class such goods should have been exempt. In other words, the expression "the goods being cleared to DTA are not exempt from payment of sales tax or value added tax" would not refer to the concession extended to specified industry by notification issued by State Government under Section 8(5)(a) of the Central Sales Tax Act. 2.10 He also argued that section 5A(1) of the Central Excise Act empowers the Central Government to exempt any goods from payment of excise duty subject to such conditions as it may deem necessary. In fact, in a series of decisions it has been held that the goods cleared for export or the goods procured without payment of duty for use in the manufacture of export product, are not goods which are exempted from excise duty. He placed reliance on the decisions of following judgments. (i) Hindustan Zinc Limited Vs. CCE - 2008 (223) ELT 149 (Raj.). (ii) Perfect Synthetics - 2008 (3) tmi 454 (sc) 2.11 He also submits that the re-quantification of demand under Sl. No. 2 was not correct in as muc....
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....he period 01.03.2007 to 06.07.2007 he submits that the imported raw material has been used in the manufacture of exported goods only. No part of imported goods has been used in the manufacture of goods cleared into DTA. Denial of benefit of Sl.No.3 of Notification No.23/2003-CE for the period prior to 6.7.2007, on the ground that goods were procured from domestic suppliers who availed deemed export benefit on such supply, is incorrect. Denial of benefit of Sl.No.3 of Notification No.23/2003-CE for the period prior to 6.7.2007, on the ground that goods were procured from domestic suppliers who in turn availed deemed export benefit on such supply is incorrect. Explanation II was inserted in the Notification only with effect from 6.7.2007 and has prospective effect. Hence, denial of benefit of Sl. No.3 for the period prior to 6.7.2007 is incorrect. 2.14 He also submits that the Ld. Commissioner in the impugned Order has denied benefit of Sl. No.3 of the Notification No.23/2003-CE for the entire quantity of goods cleared to DTA during the period 1.3.2007 to 6.7.2007. The benefit cannot be denied to the entire quantity of goods cleared into DTA. In the worst-case sc....
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....008 he submits that The imported raw material has been used in the manufacture of exported goods only and not in the manufacture of goods cleared to DTA. Further, the goods procured from DTA on which DTA supplier has availed deemed export benefit and goods procured from another EOU have also not been used in the manufacture of goods cleared to DTA. The appellant have maintained all the records from which it can be established that the imported raw material and material procured from 100% EOU and DTA unit on which DTA unit availed deemed export benefit, have not been used in the manufacture of goods cleared in to DTA. 2.17 He also submits that Ld. Commissioner has denied benefit of Sl. No.3 of the Notification No.23/2003-CE for the entire quantity of goods cleared to DTA during the period 7.7.2007 to 29.2.2008. The benefit cannot be denied to the entire quantity of goods cleared into DTA. In the worst-case scenario, benefit of Sl. No.3 can be denied to the extent of the value of finished goods cleared in DTA which could have been manufactured from the imported raw material and raw material procured from another EOU or DTA unit which availed deemed export b....
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....ted, no SAD should be leviable since SAD is leviable under Section 3(5) of the Customs Tariff Act to counter balance the local taxes, VAT etc. leviable on like goods on its sales, purchase, transportation etc. in India. Therefore, for the purpose of computing the aggregate duties of customs, SAD itself cannot be taken into account. Further, amendment vide Notification No. 22/2006-CE made to Sl. No.2 to Notification No. 23/2003-CE is not in consonance with the provisions of Section 3(5) of the Customs Tariff Act. Notification No.23/2003-CE dated should be read as a whole and should be read in the light of the purpose of levying SAD under Section 3(5) of the Customs Tariff Act, which is to counter balance the local taxes, VAT leviable on like goods on its sale, purchase etc. If the like goods are exempt from payment of sales tax or VAT, then on the like goods imported into India, levy of SAD itself is not warranted and in fact there cannot be any levy of SAD on such goods imported into India. Hence, when the goods are manufactured and cleared to DTA, no SAD is leviable. In fact, when SAD was introduced in the year 1998, the finance minister in his budget speech, had speci....
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.... present case it has been established beyond doubt that goods cleared to DTA had been manufactured wholly out of raw materials manufactured in India based on separate records of receipt and consumption of raw materials maintained for said purpose. Therefore, the present case is not a doubtful case. Hence, despite the fact that export goods and DTA cleared goods were manufactured on common manufacturing lines and by using common inputs, benefit of Notification No. 8/1997-CE (at present 23/2003-CE) is available to the appellant. The above position has also been clarified by the Board through subsequent modification of Circular No. 85/2001 dated 21.12.2001. 2.22 He also submits that the Board's Circular No. 85/2001 clarified that it was not the intention of the Board vide Circular No. 442/8/99 dated 4.3.1999 that benefit of Notification 8/1997-CE should be denied to those assessees who manufacture export goods and goods cleared into DTA by using common inputs, common machinery, common godowns and common manufacturing process (which would amount to establishing a separate factory within the factory). Therefore, the finding in the impugned Order that benefit of Noti....
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....acture of export goods. The department ought to have verified these details at the time of investigation based on input output ratio which would have conclusively proved that entire quantity of imported raw material has been used in manufacture of export goods. On this ground alone the finding of the Ld. Commissioner that imported raw material were used for manufacture of finished goods cleared in DTA is not sustainable. The Ld. Commissioner in the impugned Order has held that the appellant have maintained records for 2-3 months only and the same have been destroyed thereafter. Therefore, the Commissioner has held that since it was not possible to verify the said documents, it was to be presumed that separate records were kept only from February 2011 and not prior to that. Firstly, show cause notice read with statement of Mr. Modi itself suggest that prior in time i.e. w.e.f. 20.8.2009 the Appellant are maintaining separate accounts. This fact is not in dispute. Therefore, the finding of the Ld. Commissioner is contrary to facts on record. 2.25 He also submits that as a matter of practice, the appellant have always processed each customer's order separately by runnin....
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.... Sl. No.2 of Notification No.23/2003-CE since the imported raw material and material procured from another EOU were in stock and used the same in manufacture of some quantity of Nylon Rope. The impugned Order has demanded SAD on said Nylon Rope cleared during the period September 2009 to December 2009 since the Nylon Rope was cleared without payment of Central Sales Tax. The reasoning to reject the contention of the Ld. Commissioner above is applicable to present period for the clearance of Nylon Ropes also. Hence, demand of SAD is incorrect and therefore, portion of impugned Order is liable to be set aside. For the same reasons, demand in respect of goods cleared during the period January 2010 to May 2010, (as referred to in Annexure A(viii) of the Show Cause Notice) by availing benefit of Sl. No. 2 of Notification No.23/2003 is not sustainable. 2.28 He also argued that during the period from 1.6.2011 to 30.11.2015 and from 1.4.2016 to 28.2.2017, the appellant availed benefit of Sl. No. 3 of Notification No. 23/2003-CE and discharged excise duty of 8% / 12% plus education cess on clearance of finished goods into DTA. The Commissioner in the impugned Order has denied the b....
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....arances of finished goods. 01.03.2007 to 29.02.2008 Wrong availment of Sr. No. 3 of Notification No. 23/2003-CE (for clearance of final products as well as plastic waste & scrap) 01.03.2008 to 24.08.2009 (i) Non-inclusion of SAD under Sr. No. 2 of Notification No. 23/2003-CE (for clearances of final products) (ii) Wrong availment of Sr. No. 3 of Notification No. 23/2003-CE (for clearances of plastics waste & scrap) 25.08.2009 to 31.05.2011 Wrong availment of Sr. No. 3 of Notification No. 23/2003-CE (For clearance final products as well as plastic waste & scrap) Sept. 2009 to Dec. 2009 Non-inclusion of SAD under Sr. No. 2 of Notification No. 23/2003-CE (For clearance of final products viz., Nylon Ropes) 01.06.2011 to 30.11.2015 Non -inclusion of SAD under Sr. No. 2 of Notification No. 23/2003-CE for clearances of goods in DTA. 01.06.2011 to 30.11.2015 01.04.2016 to 28.02.2017 Wrong availment of Sr. No. 3 of Notification No. 23/2003-CE for finished goods and waste & scrap 4.1 We find that the benefit under Sr. No. 4 of Notification No. 23/2003-CE ....
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....Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), specified in the corresponding entry in column (2) of the said Table, from whole of the duty of excise leviable thereon under the said Central Excise Act : Provided that nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2002. - TABLE S. No. Chapter or heading No. or sub-heading No. Description of goods (1) (2) (3) 11 56 (except 5601.10, 5607.10, All goods 4.3 We observed that the finished goods manufactured by the appellant namely HDPE/ PP Rope, Nylon Rope, Polyester Rope and PP Multifilament Rope undisputedly fall under Tariff heading No. 5607 49 00, 5607 50 40, 5607 50 90 and 5607 90 90 respectively. Clearly, the goods manufactured by the appellant are not covered by any of tariff subheading Nos. 5601.10, 5607.10 and 5608.11. Therefore, if the goods manufactured by the appellant, were manufactured by a unit other than EOU, then such goods were undisputedly covered by Notification No. 30/20....
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....n No. 23/2003-CE is incorrect. We find that all the condition of Sr. No. 4 are duly fulfilled by the appellant. 4.5 Without prejudice, we also find that the Ld. Adjudicating authority has denied benefit of Sr. No. 4 of Notification No. 23/2003-CE to the entire quantity of goods cleared into DTA during the period 01.07.2006 to 28.02.2007. However, the benefit of Sr. No. 4 of the notification can be denied to the extent of the value of finished goods cleared into DTA which could have been manufactured from the imported raw materials. The denial of benefit of Sr. No. 4 to the entire quantity of goods cleared into DTA is incorrect and not justifiable. 4.6 We also find that in the present matter denial of benefit of Sr. No. 4 of Notification No. 23/2003-CE for the period prior to 06.07.2007, on the ground that goods procured from domestic suppliers who had availed the deemed export benefit in such supply, is also legally not sustainable. We noticed that the show cause notice dtd. 02.08.2011 alleged that in terms of Explanation II to the Notification No. 23/2003-CE, the goods supplied to EOU under the claim of deemed export benefits were to be treated as imported ....
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....ent made in the Notification No. 23/2003-CE cannot have retrospective effect. 4.7 We further find that the case of the revenue in the present matter is also that appellant have cleared their final products in DTA by paying concessional central excise duty by availing benefit of Sr. No. 2 of Table to Notification No. 23/2003-CE dtd. 31.03.2003. The Appellant, for purpose of paying the central excise duty on the finished goods have calculated the central excise duty in the manner as laid down under proviso to Section 3(1) of Central Excise Act, 1944 which is equivalent to the aggregate of the customs duties leviable on the like goods is imported from out of India but they have not included the additional duty of customs leviable under Section 3(5) of Customs Tariff Act 1975 in the aggregate duties despite the facts that above said products are exempted from payment of VAT/Central Sales Tax in the Union Territory of Dadra and Nagar Haveli against C form. Whereas appellant contended that re-quantification of demand under Sr. No. 2 was not correct. For the ease of reference column No. 4 against the Sr. No. 2 of Table of Notification No. 23/2003-CE dtd. 31.03.2003 is....
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....ind mention in any Schedule of the Dadra and Nagar Haveli VAT Regulation, 2005. Therefore, applicable VAT rate on goods manufactured by the appellant was 12.5% under Dadra and Nagar Haveli VAT Regulation, 2005. Therefore, the goods in question were not exempted from the payment of sales tax or VAT when sold to a customer in the said Union Territory. In this case it is not disputed that such goods when sold in DTA had not been exempted by the State Govt. by any Notification. We are unable to accept the contentions raised by the revenue and the findings recorded by the adjudicating authority for the reason that , it is the fact that the clearance of disputed finished goods from EOU to DTA are not exempted from payment of sales tax by the State Government by any notification and revenue is unable to bring on record any notifications issued by the State Government or otherwise to indicate that finished goods cleared by appellant to DTA are exempted. We also noticed that the case of the revenue is based on the ground that when goods were sold by the appellant into DTA during the curse of inter-state sale against 'C' form, the goods were exempted from payment of Central Sales Tax a....
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.... Central Excise Act, 1944. 1 The aforesaid exemption is subject to the condition stipulated in Condition No. 1 which reads as under: Sr. No. Conditions 1. If the goods being cleared into Domestic Tariff Area are not exempted by the State Government from payment of sales tax. 4.11 We find that as per the Sr. No. 1 of Notification No. 23/2003-CE the goods manufactured by 100% EOU and cleared into DTA are exempt from payment of excise duty equivalent to Special Additional Duty under Section 3(5) of the Customs Tariff Act, leviable in such goods only if such goods are not exempted by the state Government from payment of Sale tax or VAT. We already discussed in above para that the finished goods cleared by the appellant in questions were not exempted from payment of sales tax or VAT when sold to a customer in the Union Territory. Hence, the condition No. 1 of Notification No. 23/2003-CE was fulfilled by the appellant in the present case. Accordingly they correctly did not include the element of 4% SAD leviable under Section 3(5) of the Custom Tariff Act while calculating the excise duty payable by them. 4.12 We also find that in the p....
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....duced or manufactured wholly from the raw materials produced or manufactured in India; (ii) such finished goods are cleared into Domestic Tariff Area in accordance with sub-paragraphs (a), (b), (d) and (h) of Paragraph 6.8 of the Export and Import Policy; and (iii) the goods, if manufactured and cleared by the unit other than export oriented undertaking are wholly exempt from duties of Excise or are chargeable to "NIL" rate of duty. 4.15 We find that the appellant produced before us the details regarding the total production during disputed period and clearance of finished goods into DTA and exports, the product-wise standard input output ratio, details of maximum possible production from the imported raw materials by applying input output ratio. From the said details we find that the goods manufactured from imported raw materials and raw material procured from another EOU to DTA unit which availed deemed export benefit were very less as compared to the goods exported. Therefore we find that the entire finished goods manufactured out of imported raw material and raw material procured form EOU were exported. In view of above details....
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....ls, batch-wise production and dispatch registers in respect of the quantity manufactured and sold in DTA etc. The jurisdictional officers would thus need to satisfy themselves that the goods under DTA sale have been manufactured wholly out of indigenous raw materials. The Circular referred to above even enjoins the jurisdictional officers to get the input-output norm fixed by the Cost Account so as to ensure that imported inputs, if common, are not used in the manufacture of the final products to be cleared in DTA. But the intention is certainly not to insist upon separate machinery, separate godowns and separate branches of manufacturing process (which would amount to establishing a separate factory within the factory) before extending the benefit of the above-said Circular." The Board vide above circular clarified that it was not the intention of the Board that benefit of Notification should be denied to those assessee who manufacture export goods and goods cleared into DTA by using common inputs, common machinery, common godowns and common manufacturing process. Therefore, we find that the finding in the impugned order that benefit of Notification No. 23/2003-CE was not avail....
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....2006 to 31.5.2011. The said Show Cause Notice was issued on 2.8.2011. Therefore, the demand for the period 1.7.2006 to 31.7.2010 is beyond the normal period of limitation of one year. The Ld. Commissioner has held that the violation/contravention of the Notification by the appellant came to the notice of department only during the course of investigation by the Preventive wing of the Commissionerate. The violation/contravention of the Notification by the appellant could not have come to the notice in the normal course unless all relevant details were furnished by the appellant, it was not possible for the department to visualize the manner and quantum of evasion on account of violation of the conditions of the Notification. Therefore, extended period of limitation under proviso to Section 11A(1) was invokable as there was clear suppression of fact and wilful mis-statement on part of the appellant as well as contravention of the provisions of the Central Excise Act and Rules made thereunder with intent to evade payment of duty. However we find that the appellant were regularly filing their ER-2 returns. The appellant filed all the particulars mentioned in the ER-2 returns. The....