2025 (3) TMI 1059 - AT - Central Excise

100% EOU - duty not paid properly on DTA clearances - it is alleged that the appellant needs to pay CVD on Tariff Rate and not on Effective Rate as per Notification No.01/2011 dated 01.03.2011 - liability to pay interest and penalty thereon - HELD THAT - A 100% EOU must meet the following conditions (i) that the unit must be a 100% EOU as defined under Chapter 6 of the Foreign Trade Policy (FTP); (ii) the unit must have obtained the necessary permissions and approvals from the relevant authorities. In this regard Notification No. 52/2003-Central Excise (NT) outlines the concessional Excise Duty rates applicable to EOUs. Further clearance of goods into Domestic Tariff Area under Paragraph 6.8 of the Export and Import Policy shall be allowed only when the unit has achieved positive Net Foreign Exchange Earning. Further the DTA clearances of finished goods covered under GST EOUs are required to pay CGST/SGST/UTGST/ IGST as the case may be besides payment of whole of the Duty of Customs specified under the First Schedule to the Customs Tariff Act 1975 (BCD) availed as exemptions on inputs used in manufacture of such finished goods. In respect of DTA clearances of finished goods covered under Fourth Schedule of the Central Excise Act 1944 the EOUs would be required to pay Central Excise Duty equal to the aggregate of Duties of Customs in terms of proviso to Section 3(1) of the Central Excise Act the effective rate of such duties being covered by Notification No. 23/2003 CE which has also been amended by Notification No.16/2017 CE dated 30.06.2017. In other words the excisable goods are liable to effective excise duty as it existed before GST. It is clear that the EOUs are generally eligible for a concessional rate of excise duty on goods cleared to the DTA with rates determined based on the effective rate of CVD applicable to similar imports. Conclusion - The appellants were entitled to discharge CVD on the effective rate of duty as envisaged under N/N.01/2011-CE dated 01.03.2011. Appeal allowed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal were:

Whether the appellant, a 100% Export Oriented Unit (EOU), is liable to pay Additional Duty of Customs (CVD) at the tariff rate or the effective rate for Domestic Tariff Area (DTA) clearances.
Whether there is any liability to pay interest and penalty on the duties assessed.

ISSUE-WISE DETAILED ANALYSIS

1. Liability to Pay CVD at Tariff Rate or Effective Rate

Relevant Legal Framework and Precedents: The case revolves around the interpretation of Notification No. 23/2003-CE and Notification No. 01/2011-CE, which govern the concessional rates applicable for EOUs. The Customs Tariff Act, 1975, particularly Section 3, is central to determining the applicable CVD rate. Precedents such as Commissioner of C.Ex., Jaipur Vs Vanasthali Textiles Industries Ltd. and Commissioner of C.Ex. Hyderabad-IV Vs Shanta Biotechnics Ltd. were considered.
Court's Interpretation and Reasoning: The Tribunal observed that the notifications in question are intended to provide EOUs with a concessional rate of duty, aligning the excise duty rate for DTA clearances with the effective CVD rate applicable to similar imports. The Tribunal emphasized that the absence of explicit provisions in the notification requiring the tariff rate for EOUs implies eligibility for the effective rate.
Key Evidence and Findings: The Tribunal noted that the appellant did not avail Cenvat input credits, which is a condition for availing the benefits of the notification. The permissions and approvals from the Jurisdictional Development Commissioners further supported the appellant's position.
Application of Law to Facts: The Tribunal applied the legal framework to the appellant's situation, concluding that the effective rate should apply as the appellant fulfilled the conditions outlined in the relevant notifications.
Treatment of Competing Arguments: The Tribunal dismissed the Revenue's argument that the tariff rate should apply, as the notifications did not explicitly mandate such a rate for EOUs. The Tribunal's reliance on judicial precedents further undermined the Revenue's position.
Conclusions: The Tribunal concluded that the appellant was entitled to discharge CVD at the effective rate as per Notification No. 01/2011-CE.

2. Liability to Pay Interest and Penalty

Relevant Legal Framework and Precedents: The imposition of interest and penalties is governed by the Central Excise Act, 1944, and the Central Excise Rules, 2002.
Court's Interpretation and Reasoning: The Tribunal did not find sufficient grounds to uphold the penalties imposed by the lower authorities, particularly given the appellant's compliance with the conditions of the relevant notifications.
Key Evidence and Findings: The Tribunal took into account the appellant's adherence to the conditions for concessional rates and the absence of any explicit contravention of the notification terms.
Application of Law to Facts: The Tribunal applied the principles of fairness and compliance, determining that the penalties were unwarranted.
Treatment of Competing Arguments: The Tribunal found the Revenue's insistence on penalties to be without merit, given the appellant's adherence to the notification conditions.
Conclusions: The Tribunal set aside the penalties imposed by the lower authorities.

SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The case of the Revenue that the appellant is not eligible for effective rate of duty as provided in Notification No. 01/2011 supra is therefore without merit inasmuch as the Notification does not contain any specific or explicit provision/s that the same would not apply to 100% EOUs."
Core Principles Established: EOUs are generally eligible for concessional rates of excise duty on DTA clearances, aligning with the effective CVD rate for similar imports. Notifications must explicitly state any exceptions to this rule.
Final Determinations on Each Issue: The Tribunal allowed the appeals, determining that the appellant was entitled to discharge CVD at the effective rate and setting aside the penalties imposed by the lower authorities.