2018 (11) TMI 354 - AT - Central Excise

Eligibility of the exemption N/N. 23/03-CE dated 31.03.03 - exemption to the clearance of goods by EOU to holders of advance license - denial of exemption on the ground that permission of Development Commissioner was not taken by the appellant for effecting the supplies to holders of advance license - it was also alleged that the values of said supplies made to the holders of advance license exhausted the limit of 50% of the FOB Value of export prescribed under para 6.8 (a) of FTP for making DTA sales - time limitation. Held that - As per the condition 11 of the Notification no any requirement of permission of Development Commissioner exist, therefore as per the plain reading of the Notification together with the condition, exemption is not based on any permission to be obtained from the Development Commissioner, therefore, the contention of the Revenue that the permission of Development Commissioner was not obtained in order to avail the exemption Notification No. 23/2003-CE is patently incorrect and without any basis. Even for the purpose of 50% sealing of DTA export of FOB value of exports, the issue have been settled that for calculating the 50% not only the physical exports but also the deemed exports should also be considered. Time Limitation - Held that - Since the appellant have been supplying the goods to advance license holder by intimating to the department and the departmental officer was debiting the advacne license/ advance release order the entire facts was well within the knowledge of the Department, therefore, there is no iota of suppression or mis-declaration on the part of appellant hence, the demand for the extended period issued in the SCN dated 05.05.2009 is clearly time barred. Whether for removal of scrap in DTA for computing the 50% of FOB value of export, whether the export includes deemed exports or otherwise? - Held that - This issue has been considered time and again in the case of Nandan Synthetics P. Ltd. vs CCE 2014 (6) TMI 128 - CESTAT AHMEDABAD , where it was held that the assessee is eligible to clear goods to Domestic Tariff Area by taking 50% of the deemed exports value as their eligibility. Appeal allowed - decided in favor of appellant.

Issues Involved:

1. Denial of exemption due to lack of permission from the Development Commissioner for supplies to advance license holders.
2. Whether the value of supplies to advance license holders exhausted the 50% limit of FOB value of exports for DTA sales.
3. Entitlement to clear waste and scrap under exemption notifications and whether deemed exports should be included in the 50% FOB value of exports for DTA sales.
4. Applicability of extended period of limitation for the demands raised.

Detailed Analysis:

Issue 1: Denial of Exemption Due to Lack of Permission from Development Commissioner

The appellant, a 100% EOU, supplied goods to advance license holders under Notification No. 23/2003-CE. The Revenue denied the exemption on the grounds that the appellant did not obtain permission from the Development Commissioner. However, the appellant argued that there is no such condition stipulated in the exemption notification. The tribunal agreed with the appellant, stating that the plain reading of the notification does not require permission from the Development Commissioner. The tribunal cited the case of Inter Continental India vs UOI, upheld by the Supreme Court, which established that conditions not explicitly mentioned in the notification cannot be imposed. The tribunal concluded that the lower authority wrongly denied the exemption based on an unwarranted condition.

Issue 2: Exhaustion of 50% Limit of FOB Value of Exports for DTA Sales

The Revenue contended that the supplies to advance license holders exceeded the 50% limit of FOB value of exports prescribed under para 6.8(a) of the FTP for DTA sales. The appellant countered that supplies to advance license holders are deemed exports and should not be equated with DTA sales. The tribunal supported the appellant's view, noting that deemed exports are treated as physical exports under para 6.9(a) of FTP 2004-09. The tribunal referenced several judgments, including CCE vs NBM and Nandan Synthetics P. Ltd. vs CCE, which held that deemed exports are on par with physical exports. Consequently, the restriction of 50% of FOB value of exports for DTA sales does not apply to supplies made to advance license holders.

Issue 3: Entitlement to Clear Waste and Scrap Under Exemption Notifications

The appellant argued that deemed exports should be included in the 50% FOB value of exports for DTA sales. The tribunal agreed, citing the case of Gandhi Fibers, which established that deemed exports should be considered for computing the 50% limit. The tribunal noted that several decisions, including those by the Hon'ble Gujarat High Court and the Supreme Court, supported this view. The tribunal concluded that the demand raised by the department on this ground is not sustainable.

Issue 4: Applicability of Extended Period of Limitation

The appellant contended that the demands raised were time-barred as the clearances were made by producing advance licenses before the Central Excise Authorities, who made debit entries. The tribunal found that the appellant had no wilful misstatement or suppression of facts, as all clearances were made transparently and reported to the Development Commissioner. The tribunal cited several judgments, including CCE vs MQ Electricals Ltd. and Madhu Silica vs CCE, which supported the appellant's claim that the extended period of limitation was inapplicable. Therefore, the tribunal held that the demands for the extended period were time-barred.

Conclusion:

The tribunal set aside the impugned orders and allowed the appeals, concluding that the demands were not sustainable on merit and were also time-barred. The tribunal emphasized that deemed exports should be treated as physical exports for all relevant purposes, including the computation of the 50% FOB value of exports for DTA sales.

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