TaxTMI 
TaxTMI 
2000 (8) TMI 111
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....provides the effective rate of duty of excise on goods manufactured in a 100% E.O.U. and cleared to the Domestic Tariff Area (D.T.A.). According to Notification the duty payable under Section 3 of the Central Excise Act will be 50% of each of the duties of Customs leviable under Section 12 of the Customs Act read with any other notification for the time being in force provided that the amount of duty payable shall not be less than the duty of excise leviable on the like goods manufactured by a manufacturer in DTA. In case of procuring of Pellets from 100% E.O.U., the quantum of Modvat credit is determined in terms of Notification No. 5/94. 2.2According to the Department, duty paid under Notification No. 2/95 comprises of two elements-basic customs duty and Additional duty of Customs - and the entitlement for Modvat credit is required to be restricted to the component of additional duty of customs. On the other hand, the contention of the Appellants is that the 100% E.O.U.s pay duty of excise under Central Excise Act and Notification No. 2/95-C.E. only determines the quantum of such excise duty required to be paid; that the entitlement has to be seen in the light of Notification ....
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....anufactured outside the 100% E.O.U.; that since excise is leviable @ 10% ad valorem when like goods are produced in India, the effective rate of excise duty leviable on these goods when cleared from 100% E.O.U. would also be 10% ad valorem; that by this Proviso, the Central Government has put 100% E.O.U. at par with a domestic manufacturer in so far as payment of excise duty is concerned; that while the proviso ensures that a 100% E.O.U. shall not pay less than the duty payable by a manufacturer in DTA, it provides for levy of a higher rate of duty on the goods in cases where the rate of customs duty happens to be higher. 3.2The learned Counsel, further, submitted that under the Modvat Scheme, a recepient manufacturer is entitled to the credit of duty paid by manufacturer of inputs; that when goods are received from 100% E.O.U., there is a restrictive clause in Notification No. 5/94-C.E. (N.T.) which provides as under :- "Credit of specified duty in respect of any inputs produced or manufactured - …………..(a) by a hundred percent export oriented(b) undertaking...........and used in the manufacture of final products in any place in India, shall be restricted to the....
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.... have to forget that the goods are imported, imagine that the importer had manufactured the goods in India and determine the amount of excise duty that he would have been called upon to pay in that event." He also relied upon the decision in Hyderabad Industries v. U.O.I., - 1999 (108) E.L.T. 321 (S.C.). 5.Shri Lodha, learned Advocate, said that likewise, proviso to Notification No. 5/94 has to be interpreted; that it has to be ascertained as to what is the extent of additional duty of customs leviable and paid on like goods when imported into India and restrict the modvat credit to that extent; that in other words, it is to be imagined that like goods are being imported and ascertain the extent of additional duty of customs which will be required to be paid on such goods and restrict the credit to that extent; that proviso to Notification 5/94-C.E. (N.T.) uses the expressions 'leviable' and 'paid'; that this is so because what is leviable need not required to be paid. He relied upon the decision in the case of Modi Rubber Ltd. v. U.O.I., - 1996 (84) E.L.T. 173 (S.C.) wherein it was held that "where Section 4(4)(d)(ii) lays down that 'value' does not include the amount of duty o....
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....ounsel also mentioned that in First Weston case, additional duty was fully exempted which is not so in the present case as the goods in question are liable to additional duty at the time of its import. Shri V. Sridharan, learned Advocate for M/s. Kundalia Industries, submitted, in addition to the submissions made by Shri C.S. Lodha, that Notification No. 5/94-C.E. (N.T.) is a self contained or integrated code in itself for determining the amount of Modvat credit available and Modvat credit has to be allowed in terms of the said Notification; that three steps to be adopted for determining the amount of Modvat credit available to a unit purchasing inputs from an E.O.U. in terms of Notification 5/94 or 177/86, would be as under : Take a notional import from abroad of the very goods made by(a) a 100% E.O.U.; work out the additional duty of customs payable on such import. Take the total amount of excise duty actually paid by the(b) 100% E.O.U. under Section 3(1) of the Central Excise Act read with any applicable exemption notification. If excise duty paid as per (b) above is more than the(c) additional duty of customs payable as per (a) above, credit would be restricted to (....
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....uty of custom is levied under Section 3 of the Customs Tariff Act which shall be equal to the excise duty for the time being leviable on a like article if manufactured in India; that as per Explanation to Section 3 of C.T.A., the expression "the excise duty leviable" means the excise duty for the time being in force which would be leviable on a like article; that leviable duty means the effective duty. He relied upon the decision in the case of Motiram Tolaram v. U.O.I., - 1999 (112) E.L.T. 749 (S.C.) wherein it was held that on the correct interpretation of Section 3 of the Customs Tariff Act, the rate of duty would be only that which an Indian Manufacturer would pay under the Excise Act on a like article. The learned D.R. then mentioned that it is thus appearant that the expressions 'leviable' and 'payable' mean the same thing. Learned JDR explained that 100% E.O.Us are being promoted for increasing the export of the Indian goods; that these units are like Islands created in the country; that according to para 106 of the Import Export Policy, 1992-97 supplies from DTA to E.O.Us. is regarded as deemed exports and will be eligible for the refund of excise duty, CST and duty draw ba....
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....ing components of duty paid and if the appellants have availed of the Modvat credit of the entire duty paid by 100% E.O.U. it means that they are availing of the Modvat credit of the basic customs duty which is not permissible under the Modvat credit- Scheme. Modvat credit availment is to be restricted to the actual payment of additional customs duty paid on the inputs. 9.Refering to decision in Weston cases, the learned D.R. submitted that the facts in both Weston cases are similar; that the department's view was that since no countervailing duty was paid by 100% E.O.U. no credit should be available to the units in DTA; that in first Weston case, the Appellate Tribunal held that notification No. 97/91-C.E. was relevant for interpreting application of notification No. 177/86-C.E.; that similarly in the present matters Notification No. 2/95-C.E. is relevant for interpreting and application of notification No. 5/94; that secondly it is mandatory for the purpose of availing of Modvat credit that the duty is paid on inputs; if no duty is paid, the question of availing of any Modvat credit cannot arise under Rule 57A; that thirdly even the Bench, which referred the case of Vikram Isp....
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....ing the quantum of credit available in respect of goods received from 100% E.O.U.; that one has to ascertain the extent of additional customs duty leviable on like goods, if imported under Section 3 of the Customs Tariff Act and to that extent Modvat credit will be available to a unit in DTA, on receipt of goods from 100% E.O.U; that this additional customs duty payable satisfy the phrase "paid on such inputs". He also mentioned that the clearances from 100% E.O.U. to DTA cannot be termed as deemed export as nowhere any such fiction has been provided in any law. The learned Advocate explained his submissions by giving various examples. Two such examples are as under :- Example I A. Rate of Duty (a) Exise duty 10% (b) Customs duty 5% (c) Add. Customs duty 10% B.Excise Duty Payable by 100% E.O.U. for clearance (a) Get exemption to the extent of 50%....
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....ied upon the decision in the case of D.G. Gouse & Co. Pvt. Ltd. v. State of Kerala supra, wherein it was held that a tax has two elements: subject of a tax and the measure of a tax and decided cases establish a clear distinction between the subject matter of a tax and the standard by which the tax is measured. In this case a tax imposed by State Government on buildings on the basis of capital value of the Assets was held to be valid by the Supreme Court holding that for the purpose of levying tax under Entry No. 49, List II of the Seventh Schedule to the Constitution, the State Legislature may adopt annual or capital value of the building and this will not make it a tax falling within the scope of Entry 86 of List I of the Seventh Schedule. Similar views were held by the Supreme Court in the case of Hingir - Rampur Coal Co. Ltd. v. State of Orissa, AIR 1961 SC 459 wherein it was held that the method in which the fee is recovered is a matter of convenience and by itself it cannot fix upon the levy the character of the duty of excise. In this case a fee was levied by the State of Orissa on the basis of 5% of the value of the minerals at the pits mouth. It was challenged that the CESS....
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....(Department of Revenue) No. 177/86-Central Excise, dated the 1st March, 1986, the Central Government hereby specifies the final products described in column (3) of the Table hereto annexed and in respect of which, - (i) the duty of excise under the Central Excise and Salt Act, 1944 (1 of 1944); (ii) the additional duty of excise under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978); and (iii) the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975), equivalent to, the duty of excise specified under (1) above; and the duty of excise specified under (ii) above, (hereinafter referred to as 'specified duty') paid on inputs, described in the corresponding entry in column (2) of the said Table, shall be allowed as credit when used in or in relation to the manufacture of the said final products and the credit of duty so allowed shall be utilised for payment of duty leviable on the said final products, or as the case may be, on such inputs, if such inputs have been permitte....
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....qual to the additional duty leviable on like goods under section 3 of the C.T.A, 1975. Now the issue which needs clarification is whether the credit amount should be arrived at after aportioning the quantum of duty on different components namely, basic excise duty, auxilliary duty and additional duty. We observe that the notification is very clear; that we will have to find out the components of additional duty presuming that the goods were imported.........We have before us only the central excise duty so in that duty we have to find out as to what should be the quantum of presumed additional duty in the total quantum of central excise duty paid by a 100% E.O.U. Once it is known, we have to allow credit to the extent of additional duty leviable on the goods. The department has mixed up the two issues. They have contended that as no additional duty of customs equivalent to duty has been paid by the manufacturer, the Assessee will not be entitled to any Modvat credit. On careful reading of two notifications referred to above and Section 3 of the Central Excise Act, 1944, we find that credit of additional duty of customs has been permitted only for the purpose of bringing in equity i....
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....sale therefrom within India is akin to import into India. We do not find any substance in this view of the Revenue. The clearance of the goods by 100% E.O.U. are not import in the terms in which it has been defined under Section 2 (23) of the Customs Act, according to which import, with its gramatical and cognet expression means bringing into India from a place outside India. This is also apparant from the fact that when the goods are cleared from 100% E.O.U. to any place in India, central excise duty under Section 3(1) of the Central Excise Act is levied and not the customs duty under the Customs Act. If it is to be regarded as import, then the duty has to be charged under Section 12 of the Customs Act, read with Section 3 of the Customs Tariff Act. The Revenue, it seems is confusing the measure of the tax with the nature of the tax. The nature of the duty levied on the goods from 100% E.O.U. is excise duty and nothing else, whereas for determining the quantum of duty the measure adopted is duty leviable under Customs Act as held by the Supreme Court in many cases referred to above. The method adopted by the law makers in recovering the tax cannot alter its character. Once it is h....