2019 (8) TMI 1501 - AT - Central Excise

100% EOU - by-product cleared by EOU to DTA unit by availing exemption provided under Notification no. 23/2003-CE dated 31.03.2003 - HELD THAT - In the instant case, the final de-bonding has been made on 31.03.2015 which is on record and not in dispute. We have also perused letter dated 14.02.2012 whereby the Development Commissioner duly accepted the request of the appellant to withdraw the application for exit from EOU and specifically allowed to continue as EOU - the clearance of goods (by-products) during the impugned period cannot be said to be in the course of exit from EOU scheme as per para 6.18 of FTP - the appellant is duly entitled to avail the exemption benefit under Notf. 23/2003 (serial no. 3). In the case of POOJA CREATIONS LTD. VERSUS COMMISSIONER OF CUSTOMS, BANGALORE 2007 (1) TMI 44 - CESTAT, BANGALORE wherein the Tribunal has held that a unit goes out of EOU only when final exit order is given by the Development Commissioner after obtaining final no-objection letter. In that case also, the assessee applied for exit from the EOU scheme and they paid applicable duty on goods. Since the market conditions improved, the appellant continued to function as EOU and the in-principle approval issued for de-bonding lapsed since they did not complete the exit formalities. The assessee claimed refund of duty paid on the ground that they did not finally exitfrom EOU. The refund was allowed by lower authority. In the appeal filed by the Revenue against the said refund order, the Appellate Commissioner allowed the appeal while noting that there is no provision for re-bonding. Time Limitation - HELD THAT - The entire facts were known to the Department. Moreover, the Ld. Commissioner in impugned order para 5.3 has recorded the fact of disclosures made in ER-2 return filed for September 2011, disclosing the clearance of by-products by claiming exemption - since adequate disclosures were duly made in the ER-2 returns, there cannot be any case of suppression and therefore, the SCN issued in April 2016 for raising demand of duty on DTA clearances made by appellant in September 2011 is wholly barred by limitation of time. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Entitlement to exemption under Notification No. 23/2003-CE for clearance of by-products by an EOU to a DTA unit.
2. Applicability of para 6.8(g) versus para 6.18 of the Foreign Trade Policy (FTP) in the context of the appellant's exit from the EOU scheme.
3. Allegation of suppression of facts and the applicability of the extended period of limitation for issuing the Show Cause Notice (SCN).

Detailed Analysis:

1. Entitlement to Exemption under Notification No. 23/2003-CE:
The primary issue was whether the appellant, an EOU unit, was entitled to the exemption provided under Notification No. 23/2003-CE for the clearance of by-products to its DTA unit in September 2011. The appellant argued that they were still an EOU during the period of clearance as their application to exit the EOU scheme was withdrawn and accepted by the Development Commissioner on 14.02.2012. The tribunal noted that as per Note (ii) of Appendix 14-I-L of the Hand Book of Procedures (HBP) under the FTP, an EOU unit remains an EOU until the final exit order is issued. The final de-bonding order was issued on 31.03.2015, and thus, the appellant was still an EOU during the period in question. The tribunal relied on the decision in Pooja Creations Ltd. v. Commissioner of Customs, Bangalore, which held that a unit remains an EOU until the final exit order is given by the Development Commissioner.

2. Applicability of Para 6.8(g) versus Para 6.18 of FTP:
The department contended that the appellant was in the process of exiting the EOU scheme and hence the clearance should be governed by para 6.18 of the FTP, which deals with exit provisions. The appellant argued that the clearance was under para 6.8(g) of the FTP, which allows for the sale of by-products to DTA units. The tribunal found that the clearance of by-products during the impugned period could not be considered as part of the exit process under para 6.18 of the FTP. Furthermore, the tribunal noted that Notification No. 23/2003-CE was amended by Notification No. 46/2004-CE to include para 6.8(g) of the FTP, thereby providing exemption for the clearance of by-products to DTA units. The tribunal concluded that the appellant was entitled to the exemption under Notification No. 23/2003-CE.

3. Allegation of Suppression of Facts and Extended Period of Limitation:
The appellant contested the demand on the grounds of time bar, arguing that they had consistently informed the department about their intention to clear by-products to the DTA under para 6.8 of the FTP. The tribunal noted that the appellant had disclosed the clearance of by-products and claimed the exemption in their ER-2 returns, which were acknowledged by the department. The tribunal referred to the decisions of the Hon’ble Gujarat High Court in Meghmani Dyes & Intermediates Ltd. and the Hon’ble Bombay High Court in CCE Pune v. Emcure Pharmaceuticals Ltd., which held that adequate disclosures in ER-2 returns negate the allegation of suppression of facts. The tribunal concluded that the SCN issued on 01.04.2016 for clearances made in September 2011 was barred by limitation.

Conclusion:
The tribunal set aside the impugned order, allowing the appeal both on merits and on the grounds of limitation. The appellant was found entitled to the exemption under Notification No. 23/2003-CE for the clearance of by-products to its DTA unit, and the SCN was deemed time-barred due to adequate disclosures made in the ER-2 returns.