2013 (2) TMI 416 - AT - Central Excise

Waiver of pre-deposit Stay Petition - Demand - DTA clearance by 100% EOU - Calculation of Duty payable in respect of DTA clearances - proviso to Section 3 (1) of the Central Excise Act, 1944 - Whether on the aggregate of the duties of customs (basic customs duty cess Additional customs duty cess) which is the excise duty payable on the DTA clearances, the education cess would be chargeable again Held that - Since the issue still pending with Larger Bench, it can be said that the appellant have an arguable case Classification of the Coin Blanks Appellant classify under Heading No.74.09 - Department classify articles of copper under sub-heading no.74.19 on the basis of Section Note 6 to Section Note XVI Held that - Section Note VI to XVI is in respect of the machinery items, it would not be correct to apply the same to the products of Chapter Note 74 falling under Section XV. Moreover, coin blanks which are used for manufacture of coins have not attained the shape or character of an article and as such, the same cannot be said to be articles of Copper or Copper Alloys. Therefore, of prima facie view that in terms of Chapter Note 1 (g) to Chapter 74, the Copper Alloys Coin Blanks would be correctly classifiable under Heading no.7409 Entitlement of DTA clearances 100% EOU manufactures two or more products for export Department claimed that DTA entitlement of each product would be limited to 50% of the FOB value of its exports Assessee claimed that he can sell any product into DTA upto 90% of the FOB value of its clearances - Held that - Since the items exported by the appellant the 'Copper Alloys Coin Blanks and Copper Zinc Nickel Strips' are the similar products, both falling Under Heading no.7409 and since their DTA clearances are within the overall entitlement of 50% the FOB value of the exports. As per the provisions of para 6.8 (a) of the Foreign Trade Policy, the DTA clearances of any one of these products can be made upto 90% of the FOB value of its export. DTA sales of Copper alloy coin blanks are well within 90% of their clearances. Therefore, does not appear to be sustainable Stay granted

Summary

Issues:
1. Calculation of education cess and higher education cess on DTA clearances.
2. Classification of coin blanks under Heading No.74.09 or as "articles of copper" under sub-heading no.74.19.
3. Entitlement of DTA clearances for products manufactured by a 100% EOU.

Analysis:

Issue 1: Calculation of education cess on DTA clearances
The appellant, a 100% EOU, contested the demand of about Rs.39 lakhs based on the dispute over the calculation of education cess on the aggregate of duties of customs for DTA clearances. The appellant argued that the education cess should not be chargeable again on the excise duty payable on DTA clearances. The Tribunal referred this issue to a Larger Bench, indicating an arguable case for the appellant.

Issue 2: Classification of coin blanks
The dispute arose regarding the classification of coin blanks under Heading No.74.09 or as "articles of copper" under sub-heading no.74.19. The appellant argued that coin blanks should be classified under Heading No.74.09 based on Chapter Note 1 (g) of Chapter 74, as they are flat surface products and do not assume the character of articles of other headings. The Tribunal agreed with the appellant, holding that coin blanks are correctly classifiable under Heading No.74.09, not as articles of copper under Heading No.74.19. This prima facie case favored the appellant in the duty demand linked to this issue.

Issue 3: Entitlement of DTA clearances
Regarding the entitlement of DTA clearances for products manufactured by a 100% EOU, the appellant argued that under the Foreign Trade Policy, they could sell any product into DTA up to 90% of the FOB value of its clearances, as long as the total value of DTA clearances did not exceed the overall entitlement of 50% of the FOB value of exports. The Tribunal agreed with the appellant, stating that the DTA clearances of any one product could be made up to 90% of the FOB value of its export, given that the products were similar and within the overall entitlement limit. This finding rendered the duty demand of Rs.83,23,000 unsustainable.

In conclusion, the Tribunal found in favor of the appellant on all three points of dispute. The requirement of pre-deposit of duty demand, interest, and penalty was waived, and recovery was stayed until the appeal's disposal. The stay application was allowed, and the appeal was scheduled for further proceedings.