2011 (3) TMI 29 - AT - Central Excise

Rate of basic customs duty - The case of Commissioner of Central Excise Vs Ambika Silk Mills, the Tribunal has held that the value of cut pieces or sub-standard goods has to be lower than the value of standard goods As per Notification No.2/95-CE dt. 4.1.95, the effective rate of duty is 15% ad valorem or Rs.15 per sq. mtr whichever is higher - The assessees adopted the rate of basic customs duty as 17.5% which, they submit, is higher than Rs.15 per sq.mtr - Allowed the appeals in favour of assessee.

Summary

Issues Involved:
1. Incorrect rate of basic customs duty for computing duty of excise on ECRU fabrics, fents, and rags to Domestic Tariff Area (DTA).
2. Confirmation of demand for duty and imposition of penalty by the Commissioner (Appeals).

Analysis:

Issue 1: Incorrect rate of basic customs duty for computing duty of excise on ECRU fabrics, fents, and rags to DTA
The appellants, a 100% EOU holding Customs Bonded Warehouse Licence for manufacturing denim fabrics, faced a dispute regarding the rate of basic customs duty for calculating excise duty on ECRU fabrics, fents, and rags sent to the Domestic Tariff Area (DTA). The department alleged that the appellants used an incorrect duty rate, leading to a demand for duty recovery and penalty imposition. The Tribunal clarified that fents are cut pieces of cloth from fabric manufacturing, and rags are leftover waste cloth after garment cutting. Notably, the quality and pricing of fents and rags differ from standard fabrics due to variations in width. Referring to a precedent case, the Tribunal emphasized that the value of sub-standard goods should be lower than standard goods. Moreover, a specific notification reduced the duty rate, and the appellants argued that their adopted rate of 17.5% exceeded the prescribed limit of Rs.15 per sq.mtr. Applying the legal principle from the cited case, the Tribunal ruled in favor of the appellants, absolving them from paying the differential duty.

Issue 2: Confirmation of demand for duty and penalty imposition by the Commissioner (Appeals)
The Commissioner (Appeals) had confirmed a significant portion of the duty demand but set aside the penalty in the case. Subsequently, the appeals were brought before the Tribunal for review. After hearing arguments from both parties, the Tribunal analyzed the nature of the goods involved, the applicable duty rates, and the legal precedent related to valuation of sub-standard goods. Ultimately, the Tribunal overturned the Commissioner's decision, holding that the appellants were not liable for the differential duty. Consequently, the impugned order was set aside, and the appeals were allowed in favor of the appellants.

In conclusion, the Tribunal's judgment addressed the issues of incorrect duty rate calculation for specific goods sent to the DTA and the confirmation of duty demand and penalty by the Commissioner (Appeals). By providing a detailed analysis and applying legal principles, the Tribunal ruled in favor of the appellants, emphasizing the proper valuation of goods and adherence to prescribed duty rates.