2000 (7) TMI 974 - HC - Customs

Summary

Issues Involved:
1. Legality and validity of Circular No. 38/2000-Cus. dated 10th May, 2000.
2. Levy of additional duty of customs (CVD) on DTA sale of reprocessed plastic agglomerates/granules.
3. Applicability of exemption notifications under the Central Excise Act, 1944 and the Customs Tariff Act, 1975.

Summary:

Issue 1: Legality and Validity of Circular No. 38/2000-Cus. dated 10th May, 2000
The petitioners challenged the legality and validity of Circular No. 38/2000-Cus. dated 10th May, 2000, issued by the Government of India, which directed the recovery of short levy by reviewing DTA clearances made by plastic processors.

Issue 2: Levy of Additional Duty of Customs (CVD)
The Circular raised doubts regarding the levy of additional duty of customs (CVD) on DTA sales of reprocessed plastic agglomerates/granules by EOU/EPZ units. The petitioners argued that they were paying duties as per the EXIM Policy and the provisions of the Central Excise Act, 1944, and the Customs Act, 1962. The court noted that the goods manufactured in 100% EOUs or EPZs are liable to duties of excise equivalent to the aggregate of duties of customs as per Section 12 of the Customs Act, 1962.

Issue 3: Applicability of Exemption Notifications
The court examined the applicability of exemption notifications under Heading Nos. 39.01 to 39.14, which exempted plastic materials reprocessed in India from excise duty. The petitioners contended that they were exempt from excise duty under these notifications. The court referred to Section 3 of the Central Excise Act, 1944, and Section 3 of the Customs Tariff Act, 1975, which provide for the levy of additional duty equal to the excise duty on a like article if produced or manufactured in India.

The court held that Kandla Free Trade Zone and Export Processing Zones are within the territorial limits of India, and thus, the reprocessing done in these zones should be considered as done in India. The court quashed the Circular, stating that it was not in accordance with the law and that the Assessing Officers should not be directed to assess in a particular fashion based on the Circular.

Conclusion:
The court quashed Circular No. 38/2000-Cus. dated 10th May, 2000, and allowed the petitions, ruling that the Circular was not in accordance with the law and that the reprocessing done in Kandla Free Trade Zone and Export Processing Zones should be considered as done in India. The court emphasized that the goods manufactured in these zones are not liable to pay additional duty if a like article produced in India is exempt from excise duty.