1997 (12) TMI 394 - AT - Customs

Summary

Issues:
- Whether duty of excise is chargeable on imports made by a 100% Export Oriented Unit (EOU) for domestic consumption.
- Interpretation of Notification No. 13/81-Cus. and Notification No. 249/85-Cus. regarding duty exemption for goods used by 100% EOU.
- Applicability of Section 68 of the Customs Act to imported inputs used in the manufacture of finished articles by a 100% EOU.

Analysis:
1. The case involved a challenge to an order reversing the duty chargeable on imports by a 100% EOU for domestic consumption. The Assistant Collector initially held duty was chargeable, but the Collector (Appeals) reversed this decision, leading to the Department's appeal.

2. The Appellants, a 100% EOU, were permitted to sell 25% of their production in the Domestic Trade Area (D.T.A.) subject to conditions. The dispute arose regarding the levy of duty under Section 3 of the Central Excises and Salt Act, 1944 on goods not exported but sold in India. The Collector (Appeals) reversed the Assistant Collector's order based on an exemption under Notification No. 249/85-Cus.

3. The Respondent argued that as producers of non-excisable goods (champagne), no duty could be demanded. The Collector (Appeals) held that the exemption under Notification No. 249/85-Cus. applied to goods used by a 100% EOU even if not exported, allowing sale in India under certain conditions.

4. The Department contended that imported goods used by a 100% EOU for finished articles cleared for home consumption were subject to duty under Section 68 of the Customs Act. The Departmental Representative argued that the exemption under Notification No. 13/81-Cus. was specific to encourage export and that duty under Section 3 was a prerequisite for the exemption.

5. The Tribunal observed that the exemption under Notification No. 13/81-Cus. applied to goods used by a 100% EOU for manufacturing articles, even if sold in India, subject to payment of duty under Section 3. The Tribunal held that while champagne was not chargeable to excise duty, imported inputs used in its manufacture were subject to duty under Section 68 of the Customs Act.

6. Consequently, the Tribunal set aside the Collector (Appeals) order and allowed the Department's appeal, affirming the duty chargeable on imported inputs used by the 100% EOU for manufacturing finished articles for domestic consumption.