2018 (12) TMI 1175 - AT - Central Excise

Liability of excise duty - Goods removed by EOU to domestic tariff area without obtaining permission from the Development Commissioner - Held that - The duty liability for the period prior to the amendment of the section 3 of the Central Excise Act, 1944 with effect from 11/05/2001, the duty liability on goods not specifically allowed by the Development Commissioner to be cleared to the DTA, would arise under section 3(1) of the Central Excise Act, 1944 and not under the proviso to section 3(1) of the Central Excise Act, 1944 - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Duty liability on goods removed by 100% EOU to DTA without permission from the Development Commissioner.
2. Correct calculation of duty liability.
3. Applicability of the Proviso to Section 3(1) of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Duty Liability on Goods Removed by 100% EOU to DTA Without Permission:
The primary issue in the appeal was the duty liability on goods removed by a 100% Export-Oriented Unit (EOU) to the Domestic Tariff Area (DTA) without obtaining permission from the Development Commissioner. The Commissioner (Appeals) had partially allowed relief in duty liability and reduced the penalty under Section 11AC. The Revenue contended that the goods cleared by the EOU without permission should attract duty under the Proviso to Section 3(1) of the Central Excise Act, 1944, which equates the duty to the aggregate of customs duties on like goods imported into India.

2. Correct Calculation of Duty Liability:
The Commissioner (Appeals) had recalculated the duty liability based on specific principles:
- Duty is required on materials deemed to have been used in final goods removed without permission.
- If goods are indigenous and procured under CT-3, the duty would be Excise Duty equal to the aggregate duty of Customs; for imported materials, it would be Customs Duty.
- Once input duty is paid, only normal excise duty is payable on final goods removed without permission.
The duty liability was reduced to ?16,63,038 from the original ?48,34,138, and the penalty was accordingly reduced.

3. Applicability of the Proviso to Section 3(1) of the Central Excise Act, 1944:
The Revenue argued that the assessment should be under the Proviso to Section 3(1) of the Central Excise Act, 1944, as per the decision in Jaipur Golden Transport vs. Commissioner of C. Ex. The Tribunal referenced the Supreme Court's decision in M/s Sarla Performance Fibers Ltd., which clarified that for goods produced by a 100% EOU and cleared without permission, the duty liability should be under Section 3(1) of the Central Excise Act, 1944, and not under the Proviso to Section 3(1). The Court noted that the Proviso applies only to sales made up to 25% of production by 100% EOU in DTA with the Development Commissioner's permission.

Conclusion:
The Tribunal concluded that the duty liability for the period prior to the amendment of Section 3 of the Central Excise Act, 1944 (effective from 11/05/2001), on goods not specifically allowed by the Development Commissioner to be cleared to the DTA, would arise under Section 3(1) of the Central Excise Act, 1944, and not under the Proviso to Section 3(1). Therefore, the Revenue's appeal was dismissed.

Final Decision:
The appeal filed by the Revenue was dismissed, upholding the decision of the Commissioner (Appeals) regarding the recalculated duty liability and reduced penalty. The judgment was pronounced in the open court on 20/12/2018.