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2024 (11) TMI 466 - AT - Central Excise100% EOU - demand of differential duty on the goods cleared into DTA - denial of benefit of N/N. 30/2004-CE dtd. 09.07.2004 and benefit of Sr. No. 3 and Sr. 4 of the N/N. 23/2003-CE dtd. 31.02.2003 - non-inclusion of SAD under Sr. No. 2 of N/N. 23/2003-CE for clearances of final products - Extended period of limitation - HELD THAT - It is found that during the disputed period Appellant have imported certain quantities of raw materials viz. HDPE granules, PP granules, Nylon yarn etc. and also procured domestically. The finished goods were manufactured and cleared for export as well as in DTA. The present demand of differential duty pertains to clearance of finished goods namely HDPE/PP Ropes, Nylon Ropes, Polyester Rope in DTA by availing benefit of concessional rate of duty in terms of Notification No. 23/2003-CE dtd. 01.03.2003 from time to time. During the period from 01.07.2006 to 28.02.2007, Appellant cleared their final products viz. HDPE/PP Ropes (CTH 56074900), Nylon Ropes (CTH 56075040), Polyester Ropes (CTH No. 56075090) etc. in DTA by paying concessional central excise duty by availing benefit under Sr. No. 4 of Table to N/N. 23/2003-CE dtd. 31.03.2003 by considering the same as having been wholly exempted from central excise duty portion under Notification No. 30/2004-CE dtd. 09.07.2004 and wholly manufactured from the raw materials manufactured or produced in India. We find that Notification No. 30/2004-CE dtd. 09.07.2004 exempted goods falling under heading No. 5607 from whole of the duties of excise if such goods were manufactured by a unit other than EOU and if no credit of duty paid on the inputs used in the manufacture of the same was taken. The condition provided in clause (iii) of condition No. 4 of Notification No. 23/2003-CE dtd. 31.03.2003 as mentioned above stand fulfilled. Further it is an undisputed fact that the Appellant have fulfilled condition No. 4(ii) of Notification No. 23/2003-CE. However as regard the condition No. 4 (i) the Ld. Commissioner held that appellant have imported raw materials viz. Nylon yarn, Polyester yarn, lead wire, HDPE granules etc, without payment of customs duties and used the same along with other indigenously purchased raw materials for manufacture of final products - It is found that the Adjudicating authority has assumed that since the raw material was imported, the same would have been used in the manufacture of goods cleared into DTA. In this context it is found that neither show cause notice nor impugned order relied on any concrete evidence to established that the imported raw material was used in the manufacture of goods cleared into DTA. The submission of appellant agreed upon that no part of the goods manufactured from the imported raw material were cleared into DTA. Clearly, the denial of benefit under Sr. No. 4 of Notification No. 23/2003-CE is incorrect. It is found that all the condition of Sr. No. 4 are duly fulfilled by the appellant. In the present matter denial of benefit of Sr. No. 4 of Notification No. 23/2003-CE for the period prior to 06.07.2007, on the ground that goods procured from domestic suppliers who had availed the deemed export benefit in such supply, is also legally not sustainable - the appellant have complied with the Explanation II to Notification No. 23/2003-CE. Further we have also gone through the statement dtd. 21.06.2011 of Muneshwar Nath Modi, Director of Appellant wherein he stated that appellant did not receive any supply form 100% EOU or SEZ till 27.04.2007. Therefore demand for the period prior to 28.04.2007 will not sustain in this matter. The goods in question manufactured by the appellant did not find mention in any Schedule of the Dadra and Nagar Haveli VAT Regulation, 2005. Therefore, applicable VAT rate on goods manufactured by the appellant was 12.5% under Dadra and Nagar Haveli VAT Regulation, 2005. Therefore, the goods in question were not exempted from the payment of sales tax or VAT when sold to a customer in the said Union Territory. In this case it is not disputed that such goods when sold in DTA had not been exempted by the State Govt. by any Notification. Notifications issued under Rule 19(1) or Rule 19(2) is not an exemption from payment of duty even though it allows the goods to be removed without payment of duty. On the same analogy, Section 8(5)(a) of the Central Sales Tax Act subject to various conditions including production of C form. This does not means that the goods cleared without payment of sale tax by availing the concession under Section 8(5)(a) have become exempted from payment of sale tax. In fact, if the buyer who fails to produce the C Form, Central Sales Tax is payable on the goods sold to such buyer. In this matter the benefit cannot be denied to the entire quantity of goods cleared into DTA. The Ld. Commissioner in the impugned order has denied the benefit of Sr. No. 3 of the Notification No. 23/2003-CE for the entire qty. of goods cleared to DTA during the period 01.03.2007 to 06.07.2007. The documentary evidences produced by the appellant clearly show that there is very less quantity of the imported raw material as compared to the quantity of finished goods manufactured and exported - in the present matter the benefit of Sr. No. 3 of Notification No. 23/2003-CE was denied for the period 07.07.2007 to 29.02.2008 on the ground that the imported raw material has been used in the manufacture of export goods only and not in the manufacture of goods cleared to DTA. Further the goods procured from DTA on which DTA supplier has availed the deemed export benefit and goods procured from another EOU have also not been used in the manufacture of goods cleared to DTA. As regard the demand for the period 25.08.2009 to 31.05.2011 we find that after 20.08.2009 the department in the present matter accepted the fact that the appellant were maintaining records by which it can be easily established that finished goods manufactured were from imported raw material or from indigenous raw materials. Further it is also found that the benefit of notification No. 8/1997-CE (at present 23/2003-CE) also cannot be denied on the ground that export goods and DTA cleared goods were manufactured on common manufacturing lines and by using common inputs. In this context it is found that the said position has also been clarified by the Board through circular No. 85/2001 dtd. 21.12.2001. The impugned order demanded SAD for the period September 2009 to December 2009 with respect to Nylon rope cleared to DTA by the appellant on the ground that the Nylon rope was cleared without payment of Central Sale Tax. It is found that during the disputed period Appellant have claimed benefit of Sr. No. 2 of Notification No, 23/2003-CE. In this context it is already discussed, that the goods in question were not exempted from sales tax/VAT. Hence, demand of SAD in the present matter is not correct. The appellant have substantiated that separate records were maintained, it was ensured that domestic raw materials alone were consumed for manufacture of finished goods cleared into DTA . Therefore denial of benefit of Sr. No. 3 by the Ld. Commissioner in the present matter is also not correct - the appellant is entitled for benefit of exemption Notification No. 23/2003-CE. Time Limitation - HELD THAT - The Show Cause Notice dated 2.8.2011 fails to prove that the appellant have acted with any malafide intent. Even the Show Cause Notice does not give any evidence to show that the appellant have acted with malafide intent. There is nothing on record to show the existence of fraud, collusion or suppression of materials facts or information. There is no iota of evidence on record to prove that the appellant have wrongly availed the exemption benefit under Sl. Nos. 3 and 4 of Notification No. 23/2003-CE specifically with intent to evade payment of duty. Therefore, as the ingredients of proviso to Section 11A(1) of the Central Excise Act, 1944 are not present in the present matter, hence the larger period of limitation is not invokable in the facts of the present matter - the issue involved in this matter is purely involves interpretation of statutory provisions. Hence, invocation of extended period of limitation is incorrect. It is well settled that where the issue involved is purely legal in nature, extended period of limitation cannot be invoked. The impugned order is set aside - appeal allowed.
Issues Involved:
1. Wrong availment of Sr. No. 4 of Notification No. 23/2003-CE for clearances of finished goods. 2. Wrong availment of Sr. No. 3 of Notification No. 23/2003-CE for clearance of final products and plastic waste & scrap. 3. Non-inclusion of SAD under Sr. No. 2 of Notification No. 23/2003-CE for clearances of final products. 4. Limitation and invocation of extended period of limitation. Issue-wise Detailed Analysis: 1. Wrong Availment of Sr. No. 4 of Notification No. 23/2003-CE: - The appellant claimed the benefit under Sr. No. 4 of Notification No. 23/2003-CE by considering their goods as wholly exempt from central excise duty under Notification No. 30/2004-CE. The condition for availing this benefit was that the goods should be manufactured wholly from raw materials produced in India. The Commissioner assumed that since the raw materials were imported, they were used in the manufacture of goods cleared into DTA. However, the appellant provided evidence that the goods manufactured from imported raw materials were exported, and no part was cleared into DTA. The tribunal found that the conditions of Sr. No. 4 were fulfilled, and the denial of the benefit was incorrect. 2. Wrong Availment of Sr. No. 3 of Notification No. 23/2003-CE: - The appellant availed benefits under Sr. No. 3 for goods cleared into DTA. The Commissioner denied this benefit, alleging that imported raw materials were used. The tribunal found that the appellant maintained records showing that finished goods manufactured from imported raw materials were exported, not cleared into DTA. The denial of the benefit under Sr. No. 3 was found to be legally incorrect. 3. Non-inclusion of SAD under Sr. No. 2 of Notification No. 23/2003-CE: - The department argued that the appellant should have included SAD in the aggregate duties of customs. The tribunal found that the goods in question were not exempted from sales tax or VAT, and hence, the condition for including SAD was not met. The tribunal held that the appellant correctly did not include SAD in their duty calculations. 4. Limitation and Invocation of Extended Period of Limitation: - The demand for the period 1.7.2006 to 31.7.2010 was beyond the normal period of limitation. The Commissioner invoked the extended period of limitation, citing suppression of facts. However, the tribunal found that the appellant regularly filed ER-2 returns and disclosed all relevant facts to the department. The tribunal held that there was no suppression of facts, and the extended period could not be invoked. The demand for the extended period was not sustainable. Conclusion: The tribunal set aside the impugned order, allowing the appeals with consequential relief, as the appellant was entitled to the benefits of the exemption Notification No. 23/2003-CE. The tribunal found that the denial of benefits under Sr. Nos. 3 and 4 was incorrect and that the extended period of limitation was not applicable.
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