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2017 (10) TMI 441 - HC - Central ExciseIssuance of Writ of prohibition - 100% EOU - finished products produced in a 100% EOU, sold in India as the DTA sales - N/N. 2/95-CE dated 04.1.1995, as amended - it is submitted that the finished products produced in a 100% EOU, when sold in India as the DTA sales, the duty amount payable is 50% of the customs duty including other duties like SCD and ACD respectively. The petitioner is stated to have paid a total sum of ₹ 74,35,252/- in terms of N/N. 2/95. The petitioner would state that they are not liable to pay SCD and ACD, which amount to ₹ 41,58,997/- - the petitioner seeks a Writ of Prohibition. Essentially, the petitioner would contend that the impugned show cause notice cannot be allowed to be proceeded further and the difference of levy on goods manufactured in a case of 100% EOU and that of the levy of goods manufactured and cleared by any other unit is significant, as, in the case of 100% EOU, it is on the goods allowed to be cleared and sold in India whereas in other cases, the levy is on the goods manufactured and removed. Held that - The words allowed to be sold in Clause (ii) of Proviso to Section 3(1) of the Act are relevant in this regard. The petitioner paid appropriate duty on the DTA sales on the goods allowed to be sold and consequently, there cannot be a further levy. Therefore, if the show cause notice is allowed to be proceeded further, it would go contrary to the charging provision namely Section 3 of the Act as applicable to 100% EOU. Scope of SCN - the impugned SCN is sought to be challenged on technical grounds without meeting the allegation as pointed out in the impugned SCN - Held that - On a reading of the SCN dated 24.4.2002, this Court is of the view that such exercise cannot be done, as the legal position or for that matter the effect of Exemption Notification cannot be applied in the abstract, but are required to be applied to the facts and circumstances of each case. Therefore, however strong the case of the petitioner would be on legal grounds, while examining the applicability of the same, it is essential and necessary to go into the factual matrix. The allegation against the petitioner being one of irregularity in the availment of concession under the DTA sales furnishing inflated export sales, is purely a factual issue, which has to be agitated by the petitioner before the Adjudicating Authority. Whether or not there has been inflation and whether the respondent was justified in arriving at the actual NFEP at 3.95% is correct or otherwise, has to be thrashed out before the Adjudicating Authority. After the factual scenario becomes clear, then only a situation arises for applying the legal principle. Writ of Prohibition cannot be issued to prohibit the respondent from proceeding with the adjudication of the show cause notice dated 24.4.2002 - the writ petition is dismissed as not maintainable/ premature.
Issues Involved:
1. Entitlement to customs and excise duty exemption for 100% Export Oriented Units (EOUs). 2. Validity of the show cause notice issued by the respondent. 3. Applicability of Rule 173A(2) and Rule 9 of the Central Excise Rules. 4. Interpretation of Section 3(1) of the Central Excise and Salt Act, 1944. 5. Jurisdiction and maintainability of the writ petition against the show cause notice. 6. Allegation of mis-declaration and inflated export sales. 7. Applicability of the extended period of limitation. 8. Refund claim for Special Customs Duty (SCD) and Additional Customs Duty (ACD). 9. Relevance of past permissions and practices in the present case. 10. Applicability of legal precedents and CBEC circulars. Detailed Analysis: 1. Entitlement to Customs and Excise Duty Exemption for 100% EOUs: The petitioner, a 100% Export Oriented Unit (EOU), is engaged in manufacturing telephone cords and is entitled to procure raw materials by import or from the domestic market for availing customs and excise duty exemption. The manufacturing activities are under bond, and the receipt of raw materials and dispatch of finished products for export are under the control and supervision of the Excise and Customs Authorities. The petitioner can sell a percentage of the finished products in the Domestic Tariff Area (DTA) upon fulfilling the export obligation and with the permission of the Development Commissioner, Madras Export Processing Zone (MEPZ). 2. Validity of the Show Cause Notice Issued by the Respondent: The respondent issued a show cause notice alleging irregularity in the availment of concession under the DTA sales by furnishing inflated export sales. The petitioner did not submit objections/reply to the show cause notice but approached the court seeking a Writ of Prohibition to prohibit the respondent from proceeding with the show cause notice. The court noted that the show cause notice cannot be treated as wholly without jurisdiction and emphasized that factual issues should be agitated before the Adjudicating Authority. 3. Applicability of Rule 173A(2) and Rule 9 of the Central Excise Rules: The petitioner argued that Rules 173A to 173H are not applicable to a 100% EOU or to the goods removed from a 100% EOU. Therefore, Rule 9 of the Rules is not applicable to the petitioner’s case. The court did not find merit in this argument and held that the factual matrix needs to be examined by the Adjudicating Authority. 4. Interpretation of Section 3(1) of the Central Excise and Salt Act, 1944: The petitioner contended that the words "allowed to be sold" in Clause (ii) of Proviso to Section 3(1) are crucial and that they paid appropriate duty on the DTA sales on the goods allowed to be sold. Consequently, there cannot be a further levy. The court held that this interpretation should be examined in the factual context by the Adjudicating Authority. 5. Jurisdiction and Maintainability of the Writ Petition Against the Show Cause Notice: The court referred to the decisions of the Hon’ble Supreme Court, which held that writ petitions against show cause notices should not be entertained unless the notice is wholly without jurisdiction. The court emphasized that the petitioner should respond to the show cause notice and participate in the adjudication process. 6. Allegation of Mis-declaration and Inflated Export Sales: The show cause notice alleged that the petitioner furnished incorrect details to the Development Commissioner, MEPZ, and obtained approval for DTA clearance at a concessional rate by inflating export sales. The court held that these factual allegations need to be examined by the Adjudicating Authority. 7. Applicability of the Extended Period of Limitation: The petitioner argued that the extended period of limitation could not be invoked as the show cause notice proceeds merely on an interpretation of Notification with allegations of mis-declaration. The court did not find this argument sufficient to quash the show cause notice and held that the issue should be examined by the Adjudicating Authority. 8. Refund Claim for Special Customs Duty (SCD) and Additional Customs Duty (ACD): The petitioner claimed a refund of SCD and ACD paid, arguing that they are not liable to pay these duties. The court held that this claim should be examined in the context of the factual allegations and the applicable legal provisions by the Adjudicating Authority. 9. Relevance of Past Permissions and Practices in the Present Case: The petitioner argued that the Development Commissioner, MEPZ, had granted permissions in the past based on the same method of calculation, and no objections were raised. The court held that the past permissions and practices should be considered by the Adjudicating Authority in the context of the present allegations. 10. Applicability of Legal Precedents and CBEC Circulars: The petitioner relied on various decisions of the Hon’ble Supreme Court and a circular issued by the CBEC to support their case. The court noted that these decisions were rendered after exhausting all remedies available under the Act and held that the petitioner should first respond to the show cause notice and participate in the adjudication process. Conclusion: The writ petition was dismissed as not maintainable/premature with a direction to the petitioner to submit their reply to the show cause notice within 30 days. The respondent was directed to afford an opportunity of personal hearing and conclude the adjudication process expeditiously.
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