2008 (9) TMI 266 - AT - Central Excise

Leviability to Additional Duty of Customs in respect of the goods cleared by EOU to domestic area - impugned items are entitled for the exemption under Central Excise Notifications No. 3/2001-C.E. and vide Notification No. 14/2002-C.E. - held that in such cases the rate of duty should be the effective rate of duty as fixed under Exemption Notification and not tariff rate - In other words if there is an exemption from Central Excise duty then consequently Additional Duty of Customs will also not be leviable which is equal to Central Excise duty

Summary

Issues:
- Interpretation of Central Excise Notifications regarding exemption from Additional Duty of Customs.
- Applicability of proviso to Section 5A of the Central Excise Act on exemption of excisable goods.
- Challenge to the Commissioner's order based on relevant case laws.
- Dispute over the levy of Additional Duty of Customs on goods cleared to domestic tariff area by a 100% EOU.

Analysis:
1. The appeal involved a dispute regarding the exemption of excisable goods from Additional Duty of Customs under Central Excise Notifications. The appellant, a 100% EOU manufacturing grey fabrics, cleared goods under the DFRC Scheme without paying additional customs duty equal to Basic Excise Duty, leading to duty demand and penalties imposed by the revenue.

2. The main contention was whether the exemption notifications covered Additional Duty of Customs as per Section 5A of the Central Excise Act. The lower authority upheld the duty demand, citing that the exemption did not extend to Additional Duty equal to Excise Duty under Section 3 of the Customs Tariff Act.

3. The Commissioner (A) relied on Supreme Court decisions in CCE v. J.K. Synthetics and Union of India v. Plastic Processors to support the non-leviability of Additional Duty of Customs on goods exempt from Excise Duty. The revenue challenged this decision, arguing that the Commissioner erred in interpreting the proviso to Section 5A and the scope of Notification No. 28/2001-C.E.

4. The Tribunal analyzed various judicial precedents, including the J.K. Synthetics case and decisions by the Delhi Bench and Gujarat High Court, which established that if goods are exempt from Central Excise duty, Additional Duty of Customs is not applicable. The Tribunal upheld the Commissioner's order, emphasizing that the effective rate of Excise Duty should apply to goods cleared to the domestic tariff area by a 100% EOU.

5. Considering the consistent legal interpretation across multiple cases, the Tribunal concluded that the Commissioner's reasoning aligned with established judicial pronouncements. Therefore, the Tribunal upheld the impugned order, rejecting the revenue's appeal against the duty demand and penalties imposed on the appellant.

This detailed analysis of the judgment highlights the key legal issues, interpretations of relevant provisions, and the application of precedents that influenced the Tribunal's decision in this case.