2003 (2) TMI 100 - AT - Central Excise

Valuation (Central Excise) - Fabric - Additional duty - Countervailing duty - Computation of - Special Additional duty

Issues Involved:
1. Applicability of Notification No. 8/97 and Notification No. 2/95.
2. Valuation of goods cleared into Domestic Tariff Area (DTA).
3. Levy of Countervailing Duty (CVD).
4. Inclusion of Additional Duties of Excise in CVD computation.
5. Effective rate of duty versus tariff rate for CVD calculation.
6. Levy of Special Additional Duty.
7. Inclusion of Cess in CVD.
8. Imposition of Penalty.

Issue-wise Detailed Analysis:

1. Applicability of Notification No. 8/97 and Notification No. 2/95:
The appellants, an EOU, cleared cotton fabrics into the DTA at a concessional rate under Notification No. 8/97, which applies to goods manufactured using raw materials produced in India. The assessees used both indigenous and imported inputs, leading to a dispute. The Commissioner held that the materials used were 'raw materials' and not 'consumables,' denying the benefit of Notification No. 8/97 and applying Notification No. 2/95 instead.

2. Valuation of Goods Cleared into DTA:
The valuation of goods was contested, with the appellants arguing for valuation under Section 14 of the Customs Act and Section 4 of the Central Excise Act, 1944, utilizing Rule 7 of the Customs Valuation Rules. The Tribunal allowed this plea, recognizing the need for deductions from the hypothetical price to determine the assessable value. The appellants' method of computation under Rule 7 was accepted, excluding the additional duty under the Textiles and Textile Articles Act.

3. Levy of Countervailing Duty (CVD):
The demand for CVD was contested, particularly for the period before the amendment of Notification No. 2/95-C.E. The Tribunal set aside the demand for the period prior to the amendment, following the Larger Bench decision in Fabworth (India) Ltd. The Tribunal also noted that the additional duty under the Textiles and Textile Articles Act should not be included in CVD computation.

4. Inclusion of Additional Duties of Excise in CVD Computation:
The Tribunal held that the additional duty under the Textiles and Textile Articles Act, exempted under Notification No. 18/96-C.E., should not be included in CVD computation. The CVD should be equivalent to the duty payable by domestic manufacturers, excluding the additional duty under the Textiles and Textile Articles Act.

5. Effective Rate of Duty versus Tariff Rate for CVD Calculation:
The Tribunal clarified that only the effective rate of duty, not the tariff rate, should be added to the assessable value for CVD computation. The Commissioner's method of using the full tariff rate was incorrect. The Tribunal emphasized that the effective duty rate after applying Notification No. 2/95 should be used.

6. Levy of Special Additional Duty:
The Tribunal accepted the appellants' contention that Special Additional Duty was not leviable on goods cleared by EOU to DTA prior to 16-9-99 under Notification No. 2/95. The Tribunal noted that the duty under the Additional Duties of Excise (Goods of Special Importance) Act was applicable, thus exempting the Special Additional Duty.

7. Inclusion of Cess in CVD:
The Tribunal upheld the inclusion of Cess under the Textile Committee Act, 1963, in the CVD. The Cess, being a duty of excise, was rightly included as a component of CVD, aligning with the provisions of Section 5A of the Textile Committee Act.

8. Imposition of Penalty:
The Tribunal set aside the penalty, noting that the appellants had a bona fide belief in their entitlement to Notification No. 8/97 benefits, supported by earlier orders and the interpretation of the notification. The Tribunal cited precedents where penalties were not imposed due to interpretation disputes.

Conclusion:
The Tribunal remanded the matter to the adjudicating authority for re-determination of the duty payable, extending the benefits as per the Tribunal's guidelines. The re-calculation should exclude the additional duty under the Textiles and Textile Articles Act and apply the effective duty rates for CVD computation. The penalty was set aside due to the bona fide belief and interpretation issues.

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