2009 (9) TMI 750 - AT - Central Excise

Summary

Issues:
Interpretation of the term 'manufacture' under the Central Excise Act for 100% EOU benefits, applicability of excise duty on goods cleared from 100% EOU to DTA, eligibility of cotton sliver as a manufactured product, compliance with Exim Policy for clearances from 100% EOU, justification of penalty imposition.

Analysis:
The case involved a 100% Export Oriented Unit (EOU) permitted to export yarn, which had cleared contamination-free cotton sliver into the Domestic Tariff Area (DTA). The original authority and the Commissioner (Appeals) held that the term 'manufacture' for extending benefits to 100% EOU should be construed liberally, requiring goods cleared from 100% EOU to DTA to pay excise duty equal to customs duty on imported goods. A demand of Rs. 12,48,480/- was confirmed along with penalties.

The Company Secretary argued that the cotton sliver cleared did not meet the definition of 'manufacture' under the Central Excise Act, thus excise duty should not apply. Alternatively, if duty was to be imposed, it should be 30% of the normal duty for such imported cotton sliver. Reference was made to a Tribunal decision stating that not all activities under EOU scheme amount to 'manufacture' as per Section 2(f) of the Central Excise Act.

The Senior Departmental Representative (SDR) contended that the EOU scheme extends benefits to activities not strictly considered 'manufacture' under Section 2(f), citing a Board Circular. It was argued that the cotton sliver was not an exported product, making clearances to DTA against the EOU scheme. The SDR sought pre-deposit of the amounts demanded.

The Tribunal noted that 100% EOU aims to provide benefits to manufacturers for export purposes. In this case, the cotton sliver was not intended for export as per the Letter of Permission (LOP) and had not been exported. Goods cleared from 100% EOU were deemed to discharge duty as if imported into India, subject to conditions under Notification No. 22/2003. It was found that the conditions for DTA clearances of cotton sliver were not met, justifying duty demand but not penalty imposition.

The Tribunal directed the applicant to deposit the duty amount within a specified timeframe, waiving pre-deposit of penalty and interest. The decision was based on prima facie views for the stay petition's disposal, emphasizing compliance with duty payment while considering penalty waiver.