2010 (2) TMI 260 - HC - Central Excise

100% EOU DTA clearance use of material for manufacture of goods cleared for DTA, whether imported or indigenous additional grounds before commissioner (appeals) - revenue alleged that in the absence of separate records, benefit of notification no. 8/97 C.E dated 1-3-1997 is not available Held that the issue of additional ground was not argued before the Appellate Tribunal, hence not acceptable - , the Commissioner (Appeals) as well the Appellate Tribunal have both returned categorical finding of fact that the respondent had maintained separate accounts regarding the goods manufactured out of imported raw material and the goods produced from the indigenous raw material. There was also no evidence on record to show that the respondent had utilized any part of the imported raw material and had got them cleared in the DTA. Thus, in the absence of any proof on part of the Revenue that goods for sale in DTA were manufactured out of the imported raw material, the respondent cannot be held liable to pay duty in terms of Notification No. 2/95

Summary

Issues:
1. Impugned order by the Customs, Excise and Service Tax Appellate Tribunal
2. Alleged contravention of provisions of Central Excise Act and Customs Act
3. Appeal filed by the Revenue against the order in favor of the respondent
4. Questions of law raised by the Revenue

Analysis:
1. The respondent, a 100% Export Oriented Unit (EOU) engaged in manufacturing cotton yarn, was observed by the Revenue to have cleared cotton yarn in the Domestic Tariff Area (DTA) without paying the proper duty and without maintaining separate records. The Additional Commissioner confirmed the demands raised in three show cause notices. The Commissioner (Appeals) later allowed the appeal, stating that the manufacturer maintained separate accounts for imported and indigenous yarn, with only a small quantity manufactured from imported raw material. The duty liability was determined under a specific notification.

2. The Revenue appealed this decision to the Appellate Tribunal, which upheld the order in favor of the respondent. The Revenue claimed that the Commissioner (Appeals) admitted additional evidence without following proper procedures and that there was no conclusive proof that goods sold in DTA were entirely manufactured from indigenous raw materials. The Tribunal found that the respondent had maintained separate accounts and no evidence showed the use of imported raw material in DTA goods. Thus, the duty liability under a specific notification was not applicable.

3. The High Court found that the first question raised by the Revenue was not argued before the Appellate Tribunal, and evidence presented by the respondent supported the limited use of imported raw material. The second question was also dismissed as both the Commissioner (Appeals) and the Tribunal had found in favor of the respondent, noting the absence of evidence showing the use of imported raw material in DTA goods. Consequently, the appeal by the Revenue was dismissed.

4. The judgment concluded that there was no merit in the Revenue's appeal, as both questions of law were answered against them. The High Court upheld the decision of the Appellate Tribunal, thereby dismissing the appeal filed by the Revenue.