2003 (6) TMI 271 - AT - Central Excise

Issues Involved:
1. Applicability of Notification No. 125/84-C.E. to goods cleared under DFRC.
2. Interpretation of "allowed to be sold in India" under EXIM Policy.
3. Classification of clearances under DFRC as DTA sales.
4. Levy of Central Excise duty versus Customs duty on goods cleared from 100% EOU.
5. Conflicting grounds presented by Revenue for stay application.

Detailed Analysis:

1. Applicability of Notification No. 125/84-C.E. to Goods Cleared under DFRC:
The respondents, a 100% Export Oriented Unit (EOU), were engaged in manufacturing Grey Fabrics and were permitted to perform job work. They cleared their production to the Domestic Tariff Area (DTA) under the Duty Free Replenishment Certificate (DFRC). The Central Excise officers detained the goods for clarification. The Deputy Commissioner informed the respondents that Notification No. 125/84-C.E., dated 26-5-1984, was not applicable to goods cleared in India. The Commissioner (Appeals) overturned this decision, stating that the benefit of Notification No. 125/84-C.E. should be extended to the respondents as per Notification No. 28/2001-C.E., dated 16-5-2001, since the clearances were not "allowed to be sold in India" as per the Supreme Court's interpretation in the case of M/s. SIV Industries.

2. Interpretation of "Allowed to be Sold in India" under EXIM Policy:
The Commissioner (Appeals) found that the clearances by the respondents were not permitted to be sold in India by the Development Commissioner and were not DTA sales. Therefore, the exemption under Notification No. 125/84-C.E. was applicable. The interpretation provided by the Deputy Commissioner that sales under Para 9.10 of the EXIM Policy were DTA sales was contrary to the Supreme Court's interpretation in M/s. SIV Industries, which stated that the term "allowed to be sold in India" applies only to sales up to 25% of production by a 100% EOU in DTA with the Development Commissioner's permission.

3. Classification of Clearances under DFRC as DTA Sales:
The Revenue argued that goods cleared under DFRC should be treated as DTA sales and therefore not eligible for exemption under Notification No. 125/84-C.E. However, the Commissioner (Appeals) and the Tribunal found that clearances under DFRC are not covered by the relevant EXIM Policy provisions applicable to DTA sales. The Tribunal noted that DFRC removals are not within the 25% quota allowed for DTA sales and should not be equated with them.

4. Levy of Central Excise Duty versus Customs Duty on Goods Cleared from 100% EOU:
The Revenue contended that goods manufactured in a 100% EOU and cleared to DTA should be treated as imports and subject to Customs duty. However, the Tribunal referred to the Larger Bench decision in Vikram Ispat v. C.C.E., which clarified that the duty levied on goods cleared from a 100% EOU is Central Excise duty, not Customs duty. The Tribunal emphasized that the nature of the duty is excise duty, and the measure adopted for determining the quantum of duty cannot alter its character.

5. Conflicting Grounds Presented by Revenue for Stay Application:
The Tribunal found that the Revenue's stay application was based on conflicting grounds. While arguing that Notification No. 125/84-C.E. was not applicable in some grounds, the Revenue also admitted that goods manufactured in a 100% EOU appeared to be exempted under the same notification. The Tribunal concluded that such conflicting grounds could not be accepted and rejected the stay application.

Conclusion:
The Tribunal rejected the Revenue's stay application, finding no prima facie reason to stay the Commissioner (Appeals)'s order. The Tribunal upheld that the benefit of Notification No. 125/84-C.E. was applicable to the respondents' clearances under DFRC, as these were not "allowed to be sold in India" per the Supreme Court's interpretation. The Tribunal also clarified that the duty levied on goods cleared from a 100% EOU is Central Excise duty, not Customs duty, and that the Revenue's conflicting grounds for the stay application were not sustainable.

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