2021 (4) TMI 72 - HC - Central Excise

100% EOU - Clandestine Removal - coconut shells procured and subjects the same through a heating process - contention is that the levy of excise duty can only be on the product actually manufactured which is removed from the factory premises - HELD THAT - While the respondents cannot be accused of any arbitrariness the question is whether they are justified in applying the norms laid down by the Coconut Development Board. The issue on hand is no longer res integra - The Division Bench of the Madras High Court in M/S. IOCEE EXPORTS LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE CHENNAI-II COMMISSIONERATE CHENNAI CUSTOMS EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH 2021 (3) TMI 276 - MADRAS HIGH COURT had also held that standard input and output norms cannot be the sole basis for giving a cause of action for issuing the show cause notice for determination of the wastage when there is no allegation of diversion made against the assessee. In the case on hand there is no allegation against the petitioner that they had indulged in clandestine removal. The matter is remitted to the file of the first respondent - petition allowed by way of remand.

Summary

Issues involved:
Levy of excise duty based on norms vs. actual production/removal

Analysis:
The petitioner, a manufacturer of Granulated Activated Carbon (GAC) and a 100% Export Oriented Unit, challenged show cause notices proposing excise duty equivalent to customs duty along with penalties. The High Court, in an earlier order, directed the petitioner to approach the assessing officer and reserved the right to invoke writ jurisdiction if needed. The proposed duty amount was reduced in the impugned order, with an additional penalty. The respondents argued that since the order is appealable, the writ petition should be dismissed. The petitioner contended that excise duty should be levied only on actual manufactured products removed from the factory premises, citing relevant legal provisions. The respondents justified their calculation method based on norms set by the Coconut Development Board. However, the Court referenced Supreme Court and previous High Court decisions emphasizing that output calculations should not be based on assumptions. Notably, there were no allegations of clandestine removal against the petitioner. Consequently, the Court set aside the impugned order, directing the assessing officer to determine duty based on actual production/removal, not the Board's formula. The writ petition was allowed with no costs, and the connected miscellaneous petition was closed.