2011 (4) TMI 369 - AT - Central Excise

Debonding of 100% EOU - Payment of duty on the raw materials, consumables, capital goods, waste and finished goods - Held that - at the stage of debonding and provisions of the scheme and in particular clause 6.18 of Chapter 6 of the Foreign Trade Policy as was in force at the relevant time, sub-clause (e) specifically provided that Units proposing to exit from EOU scheme should obtain permission for in principle approval and submit details of imports and exports made to the Central Excise/Customs Authority . Commissioner (Appeals) was justified in observing that the concessional duty under the said exemption Notification would apply only in a situation where the goods are brought to DTA under specified paragraphs (a), (d), (e) and (g) of the Foreign Trade Policy which is not the case when the unit exits from EOU scheme to DTA unit. The benefit under the said Notification is restricted to the sale allowed to be sold from EOU to DTA and not in relation to the goods at the time of debonding. - Decided against the assessee.

Issues Involved:
1. Applicability of Notification No. 23/2003-C.E. for duty calculation at the time of debonding from 100% EOU to DTA unit.
2. Interpretation of Section 3(1) of the Central Excise Act, 1944 in relation to debonding.
3. Applicability of the decision in Siv Industries Ltd. v. CCE and Customs.
4. Bar of limitation in raising the issue of duty calculation.

Detailed Analysis:

1. Applicability of Notification No. 23/2003-C.E. for duty calculation at the time of debonding from 100% EOU to DTA unit:
The appellants argued that they calculated the duty on finished goods at the rate applicable to a normal DTA unit, relying on Notification No. 23/2003-C.E. They contended that since they ceased to be an EOU at the time of clearance, they were entitled to the benefits of this notification. However, the tribunal found that the duty liability arose at the time of debonding, and the benefits of Notification No. 23/2003-C.E. were not applicable for debonding purposes. The tribunal emphasized that the duty payable at the time of debonding should be calculated as per the provisions applicable to EOUs, not as a normal DTA unit.

2. Interpretation of Section 3(1) of the Central Excise Act, 1944 in relation to debonding:
The appellants claimed that the proviso to Section 3(1) of the Central Excise Act, 1944, which applies to EOUs, was not applicable once they ceased to be an EOU. They argued that duty should be calculated based on the rate applicable to DTA units. The tribunal rejected this argument, stating that the duty liability at the time of debonding must be assessed according to the provisions applicable to EOUs. The tribunal referred to the Foreign Trade Policy, which mandates that EOUs pay excise and customs duties at the time of debonding, and the duty should be calculated as if the unit were still an EOU.

3. Applicability of the decision in Siv Industries Ltd. v. CCE and Customs:
The appellants cited the Supreme Court's decision in Siv Industries Ltd. v. CCE and Customs to support their argument. However, the tribunal distinguished this case, noting that the Siv Industries decision dealt with duty liability after debonding, not at the time of debonding. The tribunal pointed out that the issue in Siv Industries was the rate of duty applicable to goods cleared after debonding, whereas the present case concerned the duty payable at the time of debonding.

4. Bar of limitation in raising the issue of duty calculation:
The appellants argued that the extended period of limitation was not invokable as there was no suppression of facts. The tribunal observed that the issue of limitation was not raised before the adjudicating authority. It held that the question of limitation is a mixed question of law and facts that must be raised at the first available opportunity. Since the appellants did not raise this issue earlier, the tribunal found it inappropriate to consider it at the appellate stage.

Conclusion:
The tribunal upheld the decision of the lower authorities, confirming the demand for duty and penalty against the appellants. It concluded that the appellants were not entitled to the benefits of Notification No. 23/2003-C.E. at the time of debonding and that the duty liability should be assessed based on the provisions applicable to EOUs. The tribunal also rejected the appellants' arguments regarding the applicability of the Siv Industries decision and the bar of limitation. The appeal was dismissed, affirming the duty demand and penalty imposed by the adjudicating authority.

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