2017 (10) TMI 1031 - AT - Central Excise

100% EOU - de-bonding of unit - Revenue entertained a view that the appellant/assessee did not discharge the full duty liability in respect of goods lying in stock as well as work in progress stock as on the date of de-bonding - N/N. 23/2003-CE - Held that - though excise duty is liable on the goods manufactured or produced in India, the payment of such duty is mandated only at the time of their clearance from the factory. We do not find any justification, with legal basis, to confirm and demand Central Excise duty on any goods which are yet to reach a finished stage for entry in the RG-1 or before their actual clearance from the manufacturing unit. We could not get any legal basis for such confirmation of duty in the impugned order. The appellant/assessee categorically asserted that the work in progress stock has been manufactured using indigenous cotton on which no excise duty or any other duty benefit has been availed. No other imported or indigenous consumables were used in the manufacture, on which custom or excise duty is forgone. On this factual basis, we find no justification to confirm any duty liability on work in progress stock in terms of Section 3 (1) or the proviso of the said section of the Act. Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Exemption under Notification 23/2003-CE.
2. Duty liability under proviso to Section 3(1) and Section 3(1) of the Central Excise Act, 1944.

Exemption under Notification 23/2003-CE:
The case involved an appeal by both the assessee and the Revenue against the order of the Commissioner of Central Excise, Jaipur - II. The appellant/assessee, engaged in manufacturing cotton yarn and knitted fabrics, applied for de-bonding a 100% EOU. The Revenue contended that the appellant did not fulfill the duty liability on goods in stock during de-bonding. The Original Authority found the appellant eligible for exemption under Sl. No. 3 of Notification No. 23/2003-CE. The Revenue appealed, arguing that the appellant's drawback claims and repayments did not qualify for exemption. However, the Tribunal cited a previous case where the appellant's eligibility for exemption was upheld due to their bonafide actions, leading to the dismissal of the Revenue's appeal.

Duty liability under proviso to Section 3(1) and Section 3(1) of the Central Excise Act, 1944:
The appellant/assessee contested duty liabilities under Section 3(1) for items in various processing stages during de-bonding. The appellant argued that duty cannot be demanded on work in progress stock and that duty was paid upon clearance of finished goods. The Original Authority classified items under different headings and confirmed duty under Section 3(1). However, the Tribunal found no legal basis to demand excise duty on goods not at a finished stage for clearance. The appellant had surrendered all benefits upon de-bonding, making the goods equivalent to those in a normal DTA unit. As the duty is payable upon clearance, confirming duty on goods not yet cleared lacked legal justification. The Tribunal dismissed the Revenue's appeal and allowed the appellant's appeal based on the factual basis that no duty benefit was availed on the work in progress stock.

In conclusion, the Tribunal dismissed the Revenue's appeal regarding exemption under Notification 23/2003-CE and allowed the appellant's appeal regarding duty liabilities under Section 3(1) and the proviso of the Central Excise Act, 1944.