2007 (9) TMI 369 - AT - Central Excise

100% EOU - DTA clearance - determination of FOB value of export to arrive at the quantum of eligible domestic clearances - deemed export - Held that - If deemed exports are held to be not included, then the quantum of clearances permitted in DTA will be accordingly reduced - it can not be said that the raw materials have not been used for the intended purpose. Even if there was clearances in excess of permissible limit it may amount to be case of diversion of finished goods, the duty shall be payable in respect of finished goods and no duty become demandable on the raw material used in the manufacture of such diverted goods - appeal dismissed.

Summary

Issues:
Department's appeal against duty demand on finished goods, wastes, and rejects cleared by 100% EOU into DTA. Whether duty on raw materials should be demanded when used in finished products cleared to DTA in contravention of law. Whether FOB value of export for domestic clearances should include deemed exports.

Analysis:
The department appealed against the order confirming duty demand on finished goods, wastes, and rejects cleared by a 100% EOU into DTA. The Commissioner did not demand duty on raw materials used in manufacturing these goods, citing that only Central Excise duty can be recovered for 100% EOUs. The department contended that non-duty paid raw materials were used in finished products cleared to DTA, violating the law. The department argued that duty should have been paid on raw materials imported under a customs notification.

The main issue revolved around determining the FOB value of export to calculate eligible domestic clearances and whether this value should include deemed exports. The Tribunal had previously ruled in favor of including deemed exports in the FOB value based on precedent decisions. However, in this case, the assessee did not appeal. The duty on finished goods was demanded by the department, claiming it exceeded the permissible limit for DTA clearance. The department argued that duty on imported raw materials should be demanded as they were not used for their intended purpose. The Tribunal disagreed, stating that even if there were excess clearances, it did not mean the raw materials were not used as intended. Therefore, duty was payable only on finished goods exceeding the limit, not on the raw materials used in their manufacture.

Ultimately, the Tribunal rejected the department's appeal, emphasizing that duty on raw materials should not be demanded when finished goods are diverted in excess of the permissible limit for DTA clearance. The judgment highlighted the importance of assessing duty based on the actual usage of raw materials in manufacturing finished goods, rather than penalizing for excess clearances.