2012 (2) TMI 437 - AT - Central Excise

Rate of duty - Debonding of duty - Held that - appellant, a 100% EOU, had, at the time of debonding, achieved positive NFE and were eligible for migration to EPCG Scheme in terms of the provisions of Condition No. 8 of the Notification No. 22/2003-C.E. issued under Section 5A of Central Excise Act, 1944, and Condition No. 8 of Notification No. 52/2003-Cus. issued under Section 25(1) of Customs Act, 1962. In terms of the provisions of these Notifications, at the time of debonding the duty on the capital goods is payable on the depreciated value and at the rate in force on the date of clearance on debonding - a 100% EOU at the time of debonding can be allowed to migrate to EPCG Scheme provided it has positive NFE. However, while the rate of Customs duty chargeable on the capital goods imported under EPCG scheme has been prescribed under Notification No. 64/2008-Cus. issued under Section 25(1) of Customs Act, 1962 and the same along with the education cess is 3.09%, on Central Excise side, there is no such parallel notification issued under Section 5A of Central Excise Act, 1944, prescribing a similar concessional rate of duty in respect of capital goods supply under EPCG scheme. Prima facie in absence of such an Excise Exemption Notification, the EPCG rate prescribed under Customs Notification No. 64/2008-Cus. dated 9-5-2008 cannot be treated as concessional rate of Excise duty chargeable on indigenously manufactured goods at the time of their debonding by a 100% EOU migrating to EPCG Scheme, as this is an omission on the part of the Government, which cannot be remedied by the Courts or the Tribunal. In view of this, we are of view that this is not the case for total waiver - Conditional stay granted.

Summary

Issues involved:
1. Dispute regarding payment of Central Excise duty on capital goods at the time of debonding for a 100% EOU migrating to EPCG Scheme.
2. Dispute over Central Excise duty payable on spare parts and accessories at the time of debonding.
3. Differential Excise and Customs duty demanded on spare parts and accessories not specified in the EPCG license.
4. Confirmation of duty demand by the Commissioner and subsequent appeal along with stay application.

Issue 1: Dispute regarding payment of Central Excise duty on capital goods at the time of debonding for a 100% EOU migrating to EPCG Scheme:
The appellant, a 100% EOU, had fulfilled positive NFE criteria and was eligible to migrate to EPCG Scheme at the time of debonding. The dispute arose concerning the rate of duty payable on indigenous capital goods procured duty-free. While the appellant paid duty @ 3.09% under EPCG Scheme, the Department demanded duty @ 14.42% on the depreciated value. The Tribunal noted that there was no specific Central Excise exemption prescribing a concessional rate of duty like in the Customs Notification. The Tribunal held that the absence of such an Excise Exemption Notification meant that the EPCG rate prescribed under Customs Notification could not be considered a concessional rate of Excise duty for indigenously manufactured goods. The appellant was directed to deposit Rs. 2,00,00,000 within eight weeks, with the balance amount waived pending appeal.

Issue 2: Dispute over Central Excise duty payable on spare parts and accessories at the time of debonding:
A smaller dispute arose regarding Central Excise duty payable on spare parts and accessories at the time of debonding. The appellant had paid duty on the depreciated value, but the Department contended that these were not capital goods and no depreciation should apply. Consequently, a differential duty of Rs. 20,73,953 was demanded, leading to a secondary aspect of the overall case.

Issue 3: Differential Excise and Customs duty demanded on spare parts and accessories not specified in the EPCG license:
Another aspect involved a demand for a differential Excise duty of Rs. 1,58,193 and Customs duty of Rs. 22,26,129 on indigenous and imported spare parts and accessories payable at the time of debonding. The basis for this demand was that these items were not specified in the EPCG license granted to the appellant, leading to a further financial claim by the Department.

Issue 4: Confirmation of duty demand by the Commissioner and subsequent appeal along with stay application:
The Commissioner confirmed a duty demand of Rs. 6,63,54,420, comprising various components of duty on capital goods, spare parts, and accessories. The appellant filed an appeal against this order, along with a stay application. The Tribunal heard arguments from both sides, considered the submissions, and directed the appellant to deposit a specified amount pending the appeal process, providing relief on the balance amount subject to compliance.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's decision on each aspect of the case, ensuring a detailed understanding of the legal complexities involved.