2006 (3) TMI 489 - AT - Central Excise

Summary

Issues:
- Interpretation of Rule 19 of the Central Excise Rules, 2002 regarding duty-free removal of goods by manufacturing units.
- Applicability of duty-free clearance to 100% Export Oriented Units (EOUs).
- Conflict between provisions of the Exim Policy and Central Excise Rules.
- Whether 100% EOUs can make duty-free clearance of goods to Domestic Tariff Area (DTA) for export purposes.

Analysis:
The judgment by the Appellate Tribunal CESTAT, CHENNAI, involved a dispute where the lower appellate authority demanded duty from the appellants, who were 100% EOUs, for goods cleared to DTA during a specific period. The issue revolved around the interpretation of Rule 19 of the Central Excise Rules, 2002, which allowed duty-free removal of goods by manufacturing units under the ordinary scheme. The Tribunal found that the appellants had cleared goods to a manufacturer-exporter for use in the manufacture of final products meant for export, similar to the provisions of Rule 19. The key question was whether 100% EOUs like the appellants were eligible for the benefit of duty-free clearance under this rule.

Upon examination of the records and arguments from both sides, the Tribunal noted that Rule 19 did not expressly prohibit 100% EOUs from making duty-free clearance of goods to DTA for export. The lower appellate authority had relied on provisions of the Exim Policy to assert that 100% EOUs were required to pay duty on goods cleared to DTA as directed by the Development Commissioner. However, the Tribunal opined that a demand for duty should be based on statutory provisions rather than the Exim Policy. The Tribunal observed that Rule 17 of the Central Excise Rules, 2002, allowed 100% EOUs to make DTA clearance against payment of duty but was silent on goods cleared to buyers for export purposes, as envisaged under Rule 19.

Consequently, the Tribunal concluded that the appellants were entitled to clear goods to DTA for export purposes without payment of duty, based on a prima facie analysis. Therefore, the Tribunal ordered a waiver of pre-deposit and stay of recovery concerning the duty amount demanded by the lower appellate authority. This decision clarified the applicability of duty-free clearance provisions to 100% EOUs and highlighted the importance of statutory rules over policy directives in determining duty obligations for such units.