2017 (4) TMI 328 - AT - Central Excise

100% EOU - cotton waste cleared to DTA sales - The view of the Department is that sale value of cotton waste should be included in arriving at the eligible quantum of sale in DTA - Held that - Assistant Development Commissioner of NSEZ, Noida had clarified that as cotton waste is unconditionally exempted from duty, the same is not to be counted for DTA sales entitlement in terms of Para 6.8(e) of the Policy - reliance was placed in the case of M/s CT. COTTON YARN LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE 2013 (1) TMI 249 - CESTAT NEW DELHI , where it was held that obtaining soft cotton waste in the course of carding and combing, ginning cotton does not amount to manufacture and no new product with distinct name, usage and character emerges. We further note that cotton waste is exempted under N/N. 23/2003-C.E. without any condition. Even if the respondents have no permission for DTA sales in terms of Exim Policy, such waste cannot be subjected to any duty - appeal rejected - decided against Revenue.

Summary

Issues:
Treatment of cotton waste in DTA sales calculation.

Analysis:
The case involves three appeals by Revenue against an order of the Commissioner, Central Excise, Indore, concerning the treatment of cotton waste cleared to Domestic Tariff Area (DTA) sales. The dispute revolves around whether the sale value of cotton waste should be included in determining the eligible quantum of sales in DTA. The Department initiated proceedings to demand Central Excise duty on cotton yarn cleared to DTA, along with proposing penalties under various provisions of law. The original authority ruled in favor of the respondent, M/s. STI India Ltd., leading to the Revenue's appeal.

The main grounds of appeal by Revenue were centered on the contention that the sale of cotton waste should be added to calculate the entitled clearance of 50% of the Free on Board (FOB) value for DTA sales. Despite the exemption of cotton waste under Notification No. 23/2003-C.E., the Revenue argued that it should be considered in conjunction with other goods cleared to DTA. However, the Tribunal examined legal provisions, including the Exim Policy 1999-2002 and relevant notifications, and concluded that the cotton waste, being exempted without conditions, should not be subject to any duty. The Tribunal emphasized that the Revenue's argument conflicted with the Exim Policy, which was further supported by a clarification from the Assistant Development Commissioner of NSEZ, Noida, stating that exempted cotton waste should not be counted for DTA sales entitlement. Therefore, after a thorough analysis of the applicable provisions, the Tribunal rejected the appeals by Revenue, upholding the decision in favor of the respondent.

The judgment, delivered on 28-10-2016 by Member (T), provides a detailed and comprehensive analysis of the legal provisions, notifications, and policy considerations relevant to the treatment of cotton waste in DTA sales calculations. By interpreting the exemption provisions and policy guidelines, the Tribunal clarified that the exempted cotton waste should not be factored into the overall ceiling of FOB value for DTA sales entitlement. The decision highlights the importance of aligning revenue demands with the specific conditions and exemptions outlined in the regulatory framework, ensuring a fair and consistent application of tax laws in the context of export-oriented units.