2011 (6) TMI 552 - AT - Central Excise

100% EOU - cleared goods to the Domestic Tariff Area (DTA) availing benefit of concessional rate of duty under Notification 2/95-CE dated 04/01/1995 - alleged in the show-cause notice that the appellants were liable to discharge duty liability @ 33.54% of the assessable value whereas they have discharged duty liability @ 31.37% of the assessable value and similarly for the period March 2001 they have short-paid duty to the extent of 1.99% (i.e. duty payable @ 31.43% minus duty actually paid @ 29.44%) - Held that - in the Indoworth (2004 - TMI - 48996 - CESTAT NORTHERN BENCH NEW DELHI - Central Excise) scope of method of duty calculation provided under Notification No. 2/95-CE cannot be enhanced or varied by issuing a circular without amending the Notification and such amendment came into force only on 01/03/2002. Therefore the method of calculation of duty as provided under Notification No. 2/95-CE would be applicable for the period prior to 01/03/2002 and has to be followed for computation of duty in respect of clearance made to DTA prior to 01/03/2002. The ratio of the judgment applies squarely to the facts of the present case. In the instant case period for which duty has been demanded pertains to April 2000 to March 2001 i.e. prior to amendment of Notification 2/95-CE dated 04/01/1995 vide Notification No. 11/02-CE dated 01/03/2002. Therefore the appellant was required to discharge duty liability only at the rate computed at 50% of each of the duties of customs leviable and not @ 50% of the aggregate duties of customs leviable. order set aside. appeal is allowed

Summary

Issues:
1. Interpretation of Notification No. 2/95-CE regarding duty calculation for clearances made to Domestic Tariff Area (DTA) by a 100% Export Oriented Unit (EOU).
2. Validity of duty demand and penalty imposed by the Assistant Commissioner and upheld by the Commissioner (Appeals).
3. Applicability of the decision of the Larger Bench of the Tribunal in a similar case.

Analysis:
1. The case involved a dispute regarding the duty calculation for clearances made to the DTA by a 100% EOU under Notification No. 2/95-CE. The appellant was issued a show-cause notice alleging short-payment of duty, which was confirmed by the Assistant Commissioner and upheld by the Commissioner (Appeals). The appellant contended that the duty exemption was available in excess of 50% of each of the duties of customs leviable on like goods imported into India, contrary to the Board's Circular. The Tribunal analyzed the Notification and relevant amendments, noting that the duty calculation method was amended only from 01/03/2002. Therefore, the duty liability had to be discharged at the rate computed at 50% of each of the duties of customs leviable for the period prior to the amendment, i.e., April 2000 to March 2001. The Tribunal held that the impugned order was incorrect in law and set it aside, allowing the appeal with consequential relief.

2. The Assistant Commissioner had confirmed the duty demand against the appellant and imposed a penalty, which was upheld by the Commissioner (Appeals). However, the Tribunal found that the duty demand was based on an incorrect interpretation of the duty calculation method under Notification No. 2/95-CE. As the duty liability was to be computed differently for the relevant period, the Tribunal set aside the impugned order, indicating that the duty demand and penalty were not valid in this case.

3. The Departmental Representative acknowledged that the issue was covered by a decision of the Larger Bench of the Tribunal in a similar case, providing a precedent for the interpretation of the relevant legal provisions. The Tribunal considered the decision and applied its ratio to the present case, finding that the method of duty calculation under Notification No. 2/95-CE had to be followed as per the law applicable for the period in question. By aligning with the precedent set by the Larger Bench, the Tribunal clarified the correct application of the legal provisions in this matter, leading to the allowance of the appeal and setting aside of the impugned order.