2012 (11) TMI 585 - AT - Central Excise

Cut flowers cleared to DTA - flowers grown by 100% EOU - Held that - From reading of para 3(a) of the Notification No. 126/94-CUS. as existed during the period of dispute it is clear that the notification contained a machinery provision for determining, the Custom Duty chargeable on the inputs used in the production of non-excisable goods cleared to DTA and as per this machinery provision, the duty was to be in an amount equal to the Custom Duty chargeable on the finished goods, as if imported, as such. However, after the amendment of this Notification w.e.f. 18-5-01, the duty on the inputs used in the production of non-excisable goods cleared to the DTA was to be calculated on actual basis. The amendment to the Notification No. 126/94-CUS. w.e.f. 18-5-01 by the Notification No. 56/01 can have only prospective effect and it cannot be given retrospective effect. In view of this, during the period of dispute, Customs duty on the inputs used in the production of cut-flowers cleared to DTA has to be calculated as per the provisions of the Notification, as it existed during that period. Thus the Custom Duty has been correctly charged in respect of DTA clearances of the cut-flowers - against assessee.

Summary

Issues:
1. Whether cut flowers grown by a 100% Export-Oriented Unit (EOU) and cleared to Domestic Tariff Area (DTA) are liable to duty.
2. Interpretation of Notification No. 126/94-Cus regarding the duty payable on inputs used in the production of non-excisable goods cleared to DTA.

Analysis:
1. The respondent, a 100% EOU, cleared cut flowers to DTA without duty payment. The adjudicating authority demanded duty, but the Commissioner (Appeals) set aside the demand, relying on a Tribunal decision stating cut flowers are non-excisable. The Revenue challenged this, citing another Tribunal decision that EOU cut flowers cleared to DTA are duty liable. The core issue was whether such cut flowers attract duty. The Tribunal held that only the duty on inputs used in production is payable, not on the cut flowers themselves, as per Notification No. 126/94-Cus. The Tribunal emphasized the machinery provision for determining the duty on inputs, clarifying the calculation method pre and post an amendment to the notification. The judgment differentiated between the duty on cut flowers and the duty on inputs used in their production, maintaining the distinction in the interpretation of the notification.

2. The Tribunal rejected the application of certain judgments to the case, highlighting the specific wording of the notification and the need to avoid interpretations that render parts of a statute redundant. The decision affirmed that duty on inputs for non-excisable goods cleared to DTA should be calculated based on the notification's provisions at the relevant time. The Tribunal concluded that the duty charged on the cut flowers' DTA clearances was correct and upheld the impugned order, dismissing the appeal. The settled issue that EOU cut flowers cleared to DTA are duty liable led to allowing the Revenue's appeals and restoring the adjudicating authority's orders. This comprehensive analysis resolved the dispute regarding duty liability for EOU cut flowers cleared to DTA, interpreting the relevant notification and upholding the duty on inputs used in production, not on the cut flowers themselves.