2024 (4) TMI 224 - AT - Central Excise

100% EOU - Valuation of goods - clearance under domestic tariff area i.e. within the territory of India - manufacture of P P medicaments falling under Chapter 30 of First Schedule to Central Excise Tariff Act 1985 - to be covered under notification issued under Section 4A of Central Excise Act 1944 or not - HELD THAT - For arriving at total central excise duty payable on the goods manufactured by 100% EOU and allowed to be cleared in domestic tariff area the customs duty leviable under Customs Act 1962 if the same is charged at ad valorem rate then the value of the goods has necessarily to be arrived at in accordance with the provisions of Section 14 of Customs Act 1962. The said provision of the Act has been made very clear by Hon ble Supreme Court in the case of COMMNR. OF CENTRAL EXCISE VERSUS MORARJEE BREMBANA LTD. 2015 (4) TMI 354 - SUPREME COURT where it was held that As is clear from the bare reading of the aforesaid proviso in those cases where excisable goods are produced or manufactured by hundred per cent export oriented undertaking are allowed to be sold in India the duty of excise has to be the amount equal to the aggregate of the duties of customs which would be leviable under Section 12 of the Customs Act on like goods produced or manufactured outside India if imported into India and where the said duties of custom are chargeable by reference to their value the value of such excisable goods shall be determined in accordance with the provisions of the Customs Act and Customs Tariff Act 1975. It is therefore very clear that basic customs duty is to be ascertained taking the value into consideration where the value is determined in accordance with the provisions of Section 14 of Customs Act 1962. On perusal of the show cause notice it is noted that for the purpose of demanding differential duty basic customs duty was calculated by Revenue on the basis of MRP value minus abatement - under Section 14 of Customs Act 1962 there is no provision for arriving at value on the basis of the provisions of Section 4A of Central Excise Act 1944 such as MRP minus abatement as adopted by Revenue. The impugned order set aside - appeal allowed.

Summary

Issues involved:
The issues involved in this case are related to the determination of central excise duty on goods manufactured by a 100% Export Oriented Unit (EOU) and cleared in the domestic tariff area. The main contention revolves around the calculation of basic customs duty based on the value of goods as per the provisions of the Customs Act, 1962 and the Central Excise Act, 1944.

Comprehensive details of the judgment for each issue involved:

1. Issue 1: Determination of central excise duty for goods cleared in the domestic tariff area

The appellant, a 100% EOU engaged in manufacturing medicaments, cleared goods in the domestic tariff area during the period from January 2013 to December 2013. The Revenue contended that the goods should be assessed for basic customs duty based on the MRP minus abatement, as per a notification under Section 4A of the Central Excise Act, 1944. The appellant challenged this assessment, arguing that basic customs duty should be determined as per the provisions of the Customs Act, 1962. The Tribunal noted that for goods manufactured by a 100% EOU and cleared in the domestic tariff area, the value for central excise duty must be determined in accordance with Section 14 of the Customs Act, 1962. The Tribunal referred to a ruling by the Supreme Court which emphasized that the value for charging basic customs duty should be determined based on the provisions of the Customs Act, 1962. As the Revenue had calculated basic customs duty using the MRP minus abatement formula, which was not in line with the provisions of the Customs Act, 1962, the Tribunal held the show cause notice demanding differential central excise duty to be unsustainable.

2. Issue 2: Interpretation of charging provisions under the Central Excise Act, 1944

The Tribunal examined the relevant provisions of Section 3 of the Central Excise Act, 1944, which specify the duties levied on excisable goods produced or manufactured by a 100% EOU and brought to any other place in India. The provision mandates that the value of such goods must be determined in accordance with the Customs Act, 1962 and the Customs Tariff Act, 1975. By analyzing the charging section and a Supreme Court ruling, the Tribunal reiterated that the basic customs duty for goods manufactured by a 100% EOU and cleared in the domestic tariff area should be calculated based on the value determined under Section 14 of the Customs Act, 1962. The Tribunal emphasized that the Revenue's calculation of basic customs duty using the MRP minus abatement formula was not supported by the legal framework, leading to the setting aside of the impugned order and allowing the appeal.

This summary provides a detailed overview of the judgment, highlighting the key legal interpretations and conclusions reached by the Tribunal regarding the issues presented in the case.