2011 (6) TMI 350 - AT - Central Excise

Clearances to DTA against foreign exchange - Export Oriented Unit - physical stock of imported viscose filament yarn weighing 21, 929.00 kgs lying in the factory premises - Held that - The unit cleared their finished product namely grey fabrics under EEFC account on payment of central excise duty @ 10% Adv - No proof that the consideration for the goods cleared were obtained in foreign exchange - Admittedly the clearance is against EEFC and as such the same have to be deemed as physical exports as held in the case of Maruti Cottex Ltd Vs. CCE Hyderabad 2004 (12) TMI 215 - CESTAT BANGALORE - Decided in favour of assessee.

Summary

Issues:
- Duty demand on clearances made to EEFC
- Differential duty on clearances of yarn waste

Analysis:

Issue 1: Duty demand on clearances made to EEFC
The case involved an appeal against the order passed by the Commissioner (Appeals) regarding duty demand on clearances made to EEFC. The appellant, a 100% EOU engaged in manufacturing twisted yarn and knotted grey fabrics, was found with physical stock of imported viscose filament yarn during a visit by Central Excise Officers. The unit had cleared finished products under EEFC account on payment of central excise duty at 10% Adv. The officers detained the stock of yarn and seized records, leading to a show cause notice for demanding duty. The case was adjudicated, confirming a duty demand of Rs.17,89,939/- under Central Excise Act, 1944. The appellant filed an appeal, resulting in the confirmation of duty on clearances made to EEFC being set aside by the Commissioner (Appeals). The Tribunal upheld the Commissioner's decision, citing the case of Maruti Cottex Ltd. where it was held that clearances to DTA against foreign exchange are eligible for exemption from central excise duty under Notification No. 125/84-C.E. The Tribunal rejected the Revenue's contention that there was no proof of consideration in foreign exchange for the goods cleared, stating that EEFC clearances must be deemed as physical exports.

Issue 2: Differential duty on clearances of yarn waste
Apart from the duty demand on EEFC clearances, the investigation also revealed that the unit had cleared yarn waste in excess of the permissible quantity under Exim Policy. The department contended that duty on such clearances should have been paid at a rate equivalent to the aggregate of all customs duties under Section 3(1) of Central Excise Act, 1944. The case adjudicated penalties on the unit, a partner, and individuals. The Commissioner (Appeals) upheld the confirmation of differential duty on clearances of yarn waste, which was not challenged further in the appeal.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) regarding the duty demand on clearances made to EEFC, citing relevant legal precedents and rejecting the Revenue's contentions. The confirmation of duty on clearances of yarn waste was also upheld. The appeal was rejected, and the original order stood affirmed.