2017 (1) TMI 546 - AT - Central Excise

100% EOU - short-payment of duty - an export oriented unit was required, under section 3 of Central Excise Act, 1994, to discharge duty on domestic clearances by payment of duty at a rate equivalent to that charged on like goods when imported into India. The adjudicating authority, however, took note of the exemption in N/N. 23/2003-CE dated 31st March 2003, which replaced N/N. 2/95-CE dated 4th January 1995, permitting clearance at half the duty to be so levied and, as the conditions stipulated therein had been complied with, allowed the benefit of that exemption - Held that - On the issue of levy of special excise duty, we observe that there is no exemption granted in so far as this element of tax is concerned. Undoubtedly, this is a countervailing measure and is refunded to traders who are subject to sales tax upon sale of imported goods. The intent of the notification is to place the domestic procuring entity at par with supplier of imported goods. The levy of duty under section 3 of Central Excise Act, 1944 on clearances effected domestically includes all duties leviable under all the statutes relevant to imported goods and, hence, domestic area clearance cannot be excused from leviability. It may also be noted that the exemption to imported goods is administered though a refund mechanism with sanction accorded by customs authorities of place of import. A parallel provision does not exist for export oriented units whose domestic clearances are not within the jurisdiction of Customs Houses which administer the refund mechanism. The availment of extended period of limitation and imposition of penalty under section 11AC of Central Excise Act, 1944 cannot be faulted - appeal rejected - decided against appellant.

Summary

Issues:
1. Interpretation of notifications related to central excise duty on clearances by an Export Oriented Unit (EOU).
2. Eligibility criteria for duty concessions on clearances of goods into the Domestic Tariff Area (DTA).
3. Inclusion of special additional duty (SAD) in the computed liability.
4. Consideration of evidence of using domestically procured raw materials for manufacturing.
5. Imposition of penalty under section 11AC of Central Excise Act, 1944.

Analysis:
1. The judgment involved the interpretation of notifications related to central excise duty on clearances by an Export Oriented Unit (EOU). The appellant, an EOU, contended that the clearances of goods were at the applicable rate of duty of Central Excise, thus denying any short-payment. However, the adjudicating authority disagreed, citing specific notifications that predicated eligibility for clearance at the rates of central excise duty only upon clearances manufactured from domestically procured raw materials. The appellant was held ineligible due to the absence of evidence supporting the use of domestically procured raw materials.

2. The issue of eligibility criteria for duty concessions on clearances of goods into the Domestic Tariff Area (DTA) was addressed in the judgment. The adjudicating authority confirmed duty liability on the appellant, citing specific notifications that permitted clearance at half the duty under certain conditions. The authority imposed penalties under section 11AC of the Central Excise Act, 1944, based on non-compliance with the eligibility criteria for duty concessions.

3. The judgment also discussed the inclusion of special additional duty (SAD) in the computed liability. The appellant argued that the inclusion of SAD was not in accordance with the law. However, the tribunal observed that there was no exemption granted for SAD, as it is a countervailing measure aimed at placing the domestic procuring entity at par with the supplier of imported goods. The tribunal held that the levy of duty under the Central Excise Act on clearances effected domestically includes all duties leviable on imported goods.

4. The consideration of evidence of using domestically procured raw materials for manufacturing was a crucial aspect of the judgment. The appellant claimed to have convincing proofs of domestic procurement of raw materials. However, the tribunal noted that mere procurement of raw materials did not automatically entitle the appellant to eligibility for duty concessions without evidence of using these materials for manufacturing. The lack of proof regarding the procurement of all raw materials from domestic sources led the tribunal to uphold the duties as applicable to goods imported into India.

5. Lastly, the judgment addressed the imposition of penalties under section 11AC of the Central Excise Act, 1944. The tribunal found that the appellant failed to establish eligibility for clearance at the rates of duty applicable to local manufacture. The tribunal upheld the imposition of penalties, citing the appellant's choice to pay duties under a notification for which they were not eligible, despite obtaining clearances from the Development Commissioner as mandated. The tribunal concluded that the imposition of penalties and the denial of the appeal were justified based on the appellant's actions.