2015 (2) TMI 1218 - AT - Central Excise

Whether the value of the DTA clearances made by a 100% EOU should be the transaction value at which the goods have been sold to domestic buyers or it has to be the FOB value at which the same goods had been exported out of India? Held that - as per the Board Circular No. 330/46/97-CX., dated 20-8-1997 in respect of DTA sale of a 100% EOU the transaction value can be accepted if it conforms to Rule 3(1) of Customs Valuation Rules, 1988 - In this case, the Department has not produced any evidence to show that the transaction value at which the goods were sold by the appellant to DTA buyers is much lower than the price at which contemporaneous imports of similar goods were made into India - the impugned order is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Determination of value for DTA clearances made by a 100% EOU.

Analysis:
The case involved a dispute regarding the determination of the value of Domestic Tariff Area (DTA) clearances made by a 100% Export-Oriented Unit (EOU). The appellant had cleared Caffeine Anhydrous USP (Natural) into DTA and paid duty based on the declared value. The Department contended that the value should have been based on the Free on Board (FOB) value at which the goods were exported out of India. The Joint Commissioner confirmed a duty demand against the appellant, which was upheld by the Commissioner (Appeals), leading to the filing of the appeal.

During the hearing, the main point of contention was whether the value of DTA clearances by a 100% EOU should be the transaction value with domestic buyers or the FOB value at which the goods were exported. The Department argued for the FOB value based on certain Tribunal judgments and circulars. However, the Tribunal referred to the case of Uniworth Textiles Ltd. v. CCE, Nagpur, which held that treating 100% EOU on par with foreign suppliers meant DTA sales could not be equated with export sales to other countries. Additionally, the Tribunal noted that the Board's Circular on determining DTA sale price based on export price was not in line with Customs Valuation Rules.

Considering the precedents and circulars, the Tribunal found that the Department failed to demonstrate that the transaction value for DTA sales was significantly lower than the price of contemporaneous imports of similar goods into India. Therefore, the Tribunal held that the duty demand and penalties imposed were not sustainable. Consequently, the impugned order was set aside, the appeal was allowed, and the miscellaneous application for restoration was disposed of. The judgment emphasized the importance of adhering to Customs Valuation Rules and treating 100% EOU sales to DTA differently from export sales to other countries.