2003 (4) TMI 117 - HC - Central Excise

Issues Involved:
1. Liability of countervailing duty (CVD) on plastic granules/agglomerates manufactured in an Export Processing Zone (EPZ) and sold in the Domestic Tariff Area (DTA).
2. Validity and applicability of Notification No. 48/2001-Central Excise, dated 10th October, 2001.
3. Interpretation of Section 3 of the Customs Tariff Act, 1975 concerning CVD.
4. Relevance of previous judgments and notifications on the issue of CVD.

Detailed Analysis:

1. Liability of Countervailing Duty (CVD):
The petitioners sought a declaration that no CVD is payable on plastic granules/agglomerates manufactured in their EPZ unit at Falta and sold in the DTA, based on Notification No. 48/2001-Central Excise. They also requested a refund of Rs. 155.64 lacs collected as CVD. The petitioners argued that their products, being reprocessed plastic granules, are exempt from excise duty under previous notifications (No. 5/98-C.E., 5/99-C.E., and 6/2000-C.E.), and thus, CVD should not be applicable.

2. Validity and Applicability of Notification No. 48/2001-Central Excise:
The respondents argued that the notification dated 10th October 2001 clarified that exemptions do not apply to plastic materials reprocessed in a free trade zone and brought to any other place in India. The petitioners contended that this notification could not override the earlier court decision which held that no CVD was payable. However, the court found that the notification was a valid exercise of power under Section 5A of the Central Excise Act, 1944, and clarified the exemption's scope.

3. Interpretation of Section 3 of the Customs Tariff Act, 1975:
The court examined the decision in Hyderabad Industries Limited v. Union of India, which clarified that additional duty under Section 3(1) of the Customs Tariff Act is independent of customs duty and is levied to counterbalance excise duty. The court concluded that since the plastic granules/agglomerates undergo manufacturing in the EPZ, they are liable for CVD when sold in the DTA, as the exemption does not apply to goods reprocessed in a free trade zone.

4. Relevance of Previous Judgments and Notifications:
The petitioners relied on previous judgments, including those from the Delhi High Court and Gujarat High Court, which quashed similar demands for CVD based on an earlier circular dated 10th May 2000. However, the court noted that these judgments did not consider the subsequent notification dated 10th October 2001, which explicitly clarified the non-applicability of exemptions to goods reprocessed in a free trade zone. The court upheld the validity of the notification and dismissed the petitioners' reliance on prior decisions.

Conclusion:
The court dismissed the writ applications, holding that the petitioners are liable to pay CVD on the sale of plastic granules/agglomerates manufactured in their EPZ unit and sold in the DTA. The notification dated 10th October 2001 was found to be a valid exercise of power, clarifying that exemptions do not apply to goods reprocessed in a free trade zone and brought to other parts of India. The petitioners failed to demonstrate any infringement of their legal or fundamental rights.

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