2015 (11) TMI 873 - AT - Central Excise

Waiver of pre deposit - Benefit of Customs Notification NO.21/2002-Cus dated 1.3.2002 read with Central Excise Notification No.23/03-CE dated 31.3.2003 - Held that - It is admitted fact that duty free raw material was imported by appellant in terms of Customs Notification above. Had the raw material not been imported, the appellant would have been at par with domestic players. Peculiarly appellant availed customs duty exemption at the cost of exchequer. Scrap was inbuilt in the duty free material imported. Ignorance of Customs duty forgone on the scrap aspect would place domestic players in disadvantageous position and shall run counter to the principle laid down in Hyderabad Asbestos Cement Products - 1999 (12) TMI 63 - SUPREME COURT OF INDIA . Therefore, as a course of equality before law, we direct the appellant to make deposit ₹ 40 lakhs within four weeks from today and make compliance on 26.02.2014 - Decided against assessee.

Summary

Issues:
1. Duty liability on scrap arising from imported raw materials used in manufacture when sold in Domestic Tariff Area (DTA).
2. Applicability of duty exemption on imported raw materials for Export Oriented Unit (EOU).
3. Compliance with duty payment requirements to ensure equality before the law.

Analysis:
1. The primary issue in this case revolves around the duty liability on scrap generated from imported raw materials when sold in the Domestic Tariff Area (DTA). The appellant, an Export Oriented Unit (EOU), argued that the scrap should only be subject to equivalent excise duty as paid by domestic players. The Tribunal acknowledged that the duty-free raw material was imported by the appellant under relevant Customs Notifications. However, it emphasized that ignoring the customs duty forgone on the scrap aspect would put domestic players at a disadvantage, contrary to the principle of equality before the law. Citing precedents, the Tribunal directed the appellant to deposit a specified amount within a deadline to ensure compliance with duty payment obligations.

2. The second issue pertains to the applicability of duty exemption on imported raw materials for an Export Oriented Unit (EOU). The appellant, relying on Customs and Central Excise Notifications, claimed entitlement to import raw materials duty-free. The Tribunal recognized the duty-free import but highlighted that availing customs duty exemption on raw materials with scrap included could create an unfair advantage over domestic players. The Tribunal's decision aimed to uphold equality before the law by directing the appellant to fulfill the specified deposit requirement within the stipulated timeline.

3. Lastly, the Tribunal addressed the compliance aspect to ensure equality before the law. The appellant's argument regarding the use of domestic raw materials in manufacturing was dismissed as both imported and domestic raw materials are taxed differently. The Tribunal's decision was guided by legal precedents to maintain consistency and fairness in applying duty payment obligations. By emphasizing compliance with the directed deposit, the Tribunal sought to uphold the principle of equality before the law and prevent any undue advantage resulting from duty exemptions on imported raw materials, including scrap.

In conclusion, the judgment delves into the duty liability on scrap from imported raw materials, the implications of duty exemptions for EOUs, and the necessity of compliance to ensure equality before the law. The Tribunal's decision underscores the importance of maintaining a level playing field in taxation matters and upholding legal principles to prevent unfair advantages in the business environment.