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2017 (1) TMI 132 - AT - Customs100% EOU - taxability - Waste/ scrap - dross - demand of duty and penalty - Held that - The excisability of dross is now set to rest by the Hon ble Apex court and other appellate forums in a number of decisions. The adjudicating authority has correctly placed reliance on the ratio of the judgment of Apex Court in the case of CCE Vs. Indian Aluminium Co. Ltd. 2006 (9) TMI 6 - SUPREME COURT OF INDIA where it has been unequivocally held that dross and skimming are not excisable to duty - In the event, condition No.3 of Notification No.52/03-cus referred to above will definitely impact the appellant and they will have to necessarily pay Customs duty equal to amount that leviable on proportionate Aluminium ingots obtained under that Notification - applicable customs duty will have to be paid on the inputs contained in the dross/slag. Being an interpretational issue and also taking note of the fact that the appellant was paying duty on clearances of dross and slag even before issue of show-cause notice, we are of the considered opinion that the penalty of ₹ 15 lakhs imposed under Section 112 of the Customs Act is not sustainable. Appeal disposed off - decided partly in favor of assessee.
Issues:
1. Liability to pay customs duty on imported inputs used for manufacturing non-excisable goods like dross. 2. Applicability of Notification No.52/03-Cus regarding payment of customs duty on proportionate inputs. 3. Imposition of penalty under Section 112 of the Customs Act. Analysis: 1. The issue revolved around the liability of the appellant to pay customs duty on imported inputs used for manufacturing non-excisable goods like dross. The Department contended that duty foregone on the inputs imported and used for dross must be paid at the time of clearance. The Tribunal noted that dross and skimming are not excisable goods, as established by previous judgments, including the case of CCE Vs. Indian Aluminium Co. Ltd. The Tribunal upheld the demand of customs duty foregone amounting to &8377; 84,09,465 based on the Input-Output ratio. 2. The Tribunal considered the applicability of Notification No.52/03-Cus, which mandates payment of customs duty equal to the amount leviable on inputs obtained under the notification for articles removed outside the zone if they are not excisable. Given the non-excisability of dross, the Tribunal affirmed that the appellant must pay customs duty on the inputs contained in the dross/slag. The Tribunal found no reason to interfere with the demand of customs duty foregone. 3. Regarding the imposition of a penalty of &8377; 15 lakhs under Section 112 of the Customs Act, the Tribunal held that since the issue was interpretational and considering that the appellant was already paying duty on clearances of dross and slag, the penalty was deemed unsustainable. Citing the decision of the Larger Bench in the case of Green Brilliance Energy Pvt. Ltd. Vs. CCE&ST, Vadodara-I, the Tribunal emphasized that the confusion surrounding the matter justified setting aside the penalty. Consequently, the Tribunal set aside the penalty and partly allowed the appeal with consequential reliefs. In conclusion, the Tribunal upheld the liability to pay customs duty on inputs used for manufacturing non-excisable goods, affirmed the demand of customs duty foregone, and set aside the penalty imposed under Section 112 of the Customs Act, providing relief to the appellant.
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