2019 (4) TMI 1683 - AT - Central Excise

EPCG Scheme - Debonding of EOU - whether the appellant is entitled for the benefit of EPCG scheme at the time of debonding of their unit while exiting from 100% EOU scheme? HELD THAT - The appellant has applied for opting out of 100% EOU scheme with the Jurisdictional Development Commissioner i.e. NSEZ, Noida in terms of para 6.18 of the Foreign Trade Policy on the payment of duty @ 3.09% in terms of EPCG scheme as notified under Notification No. 64/2008-Cus. dated 9.5.2008. The appellant has obtained necessary permission and No Objection Certificate from the Development Commissioner to that effect. In furtherance of their claim, the appellant has also produced two EPCG licence dated 21.2.2012 and 21.3.2012 in furthering of the Act. Similar issue has come up for consideration before this Tribunal in the case of M/S NITIN SPINNERS LIMITED VERSUS CCE, JAIPUR-II AND (VICE-VERSA) 2017 (7) TMI 394 - CESTAT NEW DELHI , wherein it is held that the benefit of Notification No. 64/2008-Cus. is also available to the EOU at the time of their debonding in terms of para 8.1 of the said notification. Appeal dismissed - decided against appellant.

Summary

Issues:
- Appeal against rejection of refund claim for differential duty paid under Notification No. 22/2003-CE.
- Entitlement of appellant to benefit of EPCG scheme at the time of debonding from 100% EOU scheme.
- Interpretation of relevant notifications and provisions under Central Excise Act.
- Revenue neutrality and applicability in the present case.

Analysis:

Issue 1: Appeal against rejection of refund claim
The appellant, a Central Excise registrant engaged in manufacturing Sand Stone Tiles and Slate Tiles, filed a refund claim of &8377; 11,78,430/- for differential duty paid under Notification No. 22/2003-CE. The claim was rejected by the competent authority while debonding the goods, leading to the rejection of the refund application. The appellant argued that they procured capital goods duty-free under Notification No. 23/2003 and paid the differential duty upon debonding as per the EPCG Scheme for DTA units. The appellant's claim was based on the permission granted by the Development Commissioner, Noida, and the submission of relevant EPCG licenses. The appellant contended that the duty paid should be eligible for Cenvat credit, making the exercise revenue neutral.

Issue 2: Entitlement to EPCG scheme benefit
The main issue revolved around the appellant's entitlement to the benefit of the EPCG scheme upon debonding from the 100% EOU scheme. The appellant applied for debonding with the Development Commissioner, Noida, under the EPCG scheme as per the Foreign Trade Policy, supported by necessary permissions and NOC. The Tribunal referred to a similar case where it was held that the benefit of the EPCG scheme is available to EOUs at the time of debonding. However, the Tribunal found that the appellant failed to cite any specific exemption notification supporting their claim for exemption from Central Excise duty, leading to the rejection of their claim.

Issue 3: Interpretation of relevant notifications and provisions
The Tribunal analyzed the provisions of Notification No. 24/2008-CE and Notification No. 64/2008-Cus. to determine the applicability of the EPCG scheme to the appellant's situation. It was highlighted that the absence of a specific exemption notification for capital goods being debonded under the EPCG scheme led to the rejection of the appellant's claim for exemption from Central Excise duty. The Tribunal emphasized the necessity of clear legislative provisions or supporting exemption notifications for duty rates on goods.

Issue 4: Revenue neutrality and its applicability
The concept of revenue neutrality was discussed concerning the appellant's argument for the tax dues being revenue neutral, thus not adding to the government revenue. The Tribunal clarified that revenue neutrality cannot be a reason to avoid tax payment, emphasizing that tax liability should be discharged as per applicable provisions. The argument for revenue neutrality was deemed insufficient to contest the duty liability, especially considering the conditions under the Cenvat Credit Rules. The Tribunal upheld the order rejecting the appeal, citing no infirmity in the decision passed by the Commissioner (Appeals).

In conclusion, the Tribunal upheld the rejection of the refund claim, emphasizing the necessity of specific exemption notifications and adherence to legislative provisions in claiming duty exemptions under the EPCG scheme. The concept of revenue neutrality was deemed insufficient to contest tax liability, highlighting the importance of complying with applicable provisions and regulations.