TaxTMI 
TaxTMI 
TaxTMI 
2026 (3) TMI 148
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....ot in dispute that SKS Mills had exited from EOU status and became a Domestic Tariff Area (DTA) unit in October 2010 vide Final Exit Order issued by the Development Commissioner. 1.3 The Department formed a view that electricity generated out of duty-free furnace oil and supplied to a DTA unit would attract duty liability in terms of the third proviso to Para 7 of Notification No. 22/2003-CE read with Para 6.16 of the Hand Book of Procedures (HBP) and Appendix 14-I-C. 1.4 Accordingly, Show Cause Notice No. 20/2015 dated 06.11.2015 was issued proposing recovery of Rs.14,73,571/- being duty attributable to proportionate furnace oil used in electricity supplied to SKS Mills (DTA), along with interest and penalty under Section 11AC.The adjudicating authority confirmed the demand, interest and imposed equal penalty.And, the Commissioner (Appeals) upheld the same. 2. Aggrieved, the Appellant filed this present appeal before this Tribunal. 3. The Ld. Advocate Shri S. Durairaj, appeared on behalf of the Appellant and the Ld. Authorized Representative Ms. Rajni Menon, appeared for the Revenue. 4. The Learned Advocate for the Appellant submitted that: - 4.1 that Blue Mount ....
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....ied thereafter was liable to be treated as supply to a DTA unit, thereby attracting the third proviso to Paragraph 7 of the notification, which mandates payment of duty equivalent to the duty foregone on the raw materials used for generation of such power. It was contended that no fresh permission was obtained from the competent authorities after the recipient unit became a DTA unit and that continued supply of electricity without payment of duty constituted a clear violation of the exemption conditions. 5.2 The Ld. Authorized Representative further submitted that the decisions relied upon by the appellant, including CCE v. Biocon Ltd. and CCE v. Jindal Polyester, relate to eligibility of CENVAT credit and interpretation of the term "factory" under the credit scheme and are therefore distinguishable from the present case, which concerns breach of a conditional exemption under an EOU notification. It was argued that the fact of supply of electricity to a DTA unit and the consequent ineligibility to exemption was not disclosed to the Department and came to light only during audit, thereby justifying invocation of the extended period of limitation as well as imposition of penalty. ....
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....he duty foregone on raw materials used in the generation of power supplied to DTA. 10. We find that it is not in dispute that M/s SKS Mills, though originally functioning as an EOU, had exited the EOU scheme vide Final Exit Order dated 25.10.2010 and became a DTA unit with effect from October 2010. We observe that from that date onward, SKS Mills ceased to enjoy the status of an EOU and consequently any supply of electricity to it could not be treated as transfer between EOUs. We further find that the appellant continued to supply electricity generated from duty-free furnace oil to SKS Mills even after its conversion into a DTA unit and admittedly did not obtain fresh permission nor discharge duty attributable to the proportionate furnace oil consumed for such electricity. 11. We note the argument of the appellant that both units are divisions of the same company and that the production process is integrated, and therefore the supply of electricity cannot be treated as "sale" or "clearance" to a different entity. We observe that exemption notifications are to be interpreted strictly and the eligibility criteria must be fulfilled in letter and spirit. The Hon'ble Supreme Court....
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....that revenue neutrality or absence of revenue loss cannot validate non-compliance with mandatory conditions of an exemption notification. The Hon'ble Supreme Court has consistently held that conditional exemptions operate strictly within their statutory framework and cannot be extended on equitable considerations. We note that the exemption was granted for use within the EOU and transfer to another EOU without duty was specifically permitted. We find that once the recipient became a DTA unit, the legal consequences attached under the notification automatically came into operation. We observe that the corporate relationship between the two units is irrelevant for the purpose of conditional exemption compliance, since EOU status is granted unit-wise and not company-wise. We therefore find that the appellant cannot rely upon integrated manufacturing theory or export outcome to bypass explicit notification requirements. Thus, the issue No (i) is answered in favour of the Department and against the Appellant. 14.1 Next, we observe that the principal contention of the appellant is that the impugned transaction represents a mere internal job work arrangement within an integrated man....
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....oner of Customs v. Dilip Kumar & Company, 2018 (361) ELT 577 (SC), which mandate strict adherence to notification conditions and place the burden of proving eligibility squarely upon the assessee. We observe that once SKS Mills became a DTA unit, electricity generated out of duty-free furnace oil supplied to it could not be treated as captive use within the EOU framework, irrespective of whether the yarn produced was eventually used in export goods. We therefore conclude that the impugned supply was not a mere internal job work transfer in the legal sense contemplated under the EOU scheme but was a supply to a DTA unit attracting duty liability under the third proviso to paragraph 7 of Notification No. 22/2003-CE read with paragraph 6.16 of the Hand Book of Procedures. The second issue is answered in favour of the Department and against the Appellant. 16. We next consider the invocation of extended period under proviso to Section 11A(1) and Section 11A(4) of the Central Excise Act, 1944. We observe that the adjudicating authority recorded that the appellant did not disclose that electricity generated from duty-free furnace oil continued to be supplied to SKS Mills after its e....