2015 (10) TMI 912 - AT - Central Excise

Debonding of EOU - The precise contention of the appellant is that the finished goods and inputs lying in stock at the time of de-bonding have suffered CVD for which the finished goods shall not be dutiable further - Adjustment of CVD - extended period of limitation - Held that - When the goods were finished goods and that suffered duty on debonding and when the appellant discharged excise duty liability on clearance of those finished goods claim of set off of additional duty of customs paid upon debonding does not appear to be unreasonable since such additional duty of customs was not refunded to the appellant in terms of section 3 of Customs Tariff Act, 1975. No doubt, the finished goods were not inputs, but in absence of refund of additional duty of customs to the appellant, adjusting that against ultimate excise duty liability would not defeat the spirit of law since no set off would result in abnormal and excessive taxation which is not permitted by law - when all the details were furnished to the Department, there was no case under the proviso to section 11A of the Central Excise Act, 1944 and proceeding was time barred. This ground also appears to be sound as verifiable from record to set aside the proceeding holding that the proviso to section 11A of the Central Excise Act, 1944 is not applicable in absence of intention to cause evasion - Decided in favour of assessee.

Issues:
1. Set off of CVD against duty liability on finished goods upon de-bonding.
2. Claim of set off of additional duty of customs paid upon de-bonding.
3. Applicability of proviso to section 11A of the Central Excise Act, 1944.

Analysis:
1. The appellant contended that finished goods and inputs in stock at de-bonding had already suffered CVD, making the finished goods non-dutiable further. They argued that CVD paid on finished goods should be set off against the ultimate duty liability upon clearance. The Revenue disagreed, stating that CVD on finished goods post de-bonding cannot be set off like input credit, leading to the dispute. The Tribunal noted that goods should not be doubly dutiable, and when an EOU de-bonds goods, the forgone additional duty of customs on export is recovered. In this case, the finished goods had already incurred duty on de-bonding, and the appellant had paid excise duty on clearance. The Tribunal found that adjusting the additional duty of customs against excise duty was reasonable since it was not refunded to the appellant, preventing abnormal taxation, which is impermissible by law.

2. The Tribunal examined the claim of set off of additional duty of customs paid upon de-bonding. It observed that although finished goods were not inputs, the absence of a refund of additional duty of customs justified adjusting it against the ultimate excise duty liability. The Tribunal emphasized that denying the set off would result in excessive taxation, contrary to legal principles. The appellant's argument was supported by the fact that the additional duty of customs was not refunded under the Customs Tariff Act, 1975. Therefore, the Tribunal held that the claim for set off was valid and aligned with the legal framework.

3. The Tribunal addressed the applicability of the proviso to section 11A of the Central Excise Act, 1944. The appellant argued that the proceeding was time-barred as all necessary details were provided to the Department, and there was no intention to cause evasion. The Tribunal examined the correspondences between the Department and the assessee, finding no case under the proviso to section 11A. It noted that the proceeding lacked the intention to cause evasion, rendering the proviso inapplicable. Consequently, the Tribunal set aside the proceeding, ruling in favor of the appellant based on the absence of grounds for invoking the proviso to section 11A of the Central Excise Act, 1944.

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