2014 (7) TMI 111 - AT - Central Excise

100% EOU - DTA clearance of cut flowers - Exemption under Notification 126/94-Cus dated 03/06/1994 - Held that - Notification 126/94 grants exemption to inputs imported for the production, manufacture or packaging of articles for export purposes. One of the conditions stipulated for availing the benefit of exemption is that if the articles which are manufactured/produced are not excisable and are not exported, then customs duty can be demanded on the imported inputs used for the purpose of production and manufacture of such articles in an amount equal to the customs duty leviable on such articles as if they are imported as such. In other words the duty demand is on the imported inputs and not on the articles which have been produced and such duty is demandable at the time of clearance of the non-excisable articles into DTA. Notification does not permit demand of duty on the articles manufactured/produced in Indian when cleared into DTA. In the present case, the show cause notice proposes to demand excise duty on cut-flowers which are not excisable. Therefore, the provisions of Notification 126/94 has no application - Decision in the of Cosco Blossoms Pvt. Ltd. vs. Commissioner of Customs 2003 (12) TMI 114 - CESTAT, NEW DELHI followed - goods produced in an EoU cannot be treated as imported goods and only excise duty under Section 3 of the Central Excise Act is payable and customs duty is not demandable - Decided against Revenue.

Summary

Issues:
- Duty exemption on specified goods for 100% EoUs under Notification 126/94-Cus
- Demand of duty on imported inputs used in production
- Excise duty demand on non-excisable articles like cut-flowers

Analysis:

Issue 1: Duty exemption under Notification 126/94-Cus
The Revenue appealed against dropping duty demands on M/s. Praj Agro Vision Ltd. for not discharging duty liability on cut-flowers as per Notification 126/94-Cus. The Additional Commissioner argued that duty should be levied on imported inputs used in production if the articles are not excisable. Citing tribunal decisions, he contended that the demands should be upheld.

Issue 2: Demand of duty on imported inputs
The respondent argued that they did not use imported inputs during the relevant period, making duty demand under Notification 126/94 irrelevant. They also highlighted that cut-flowers are not excisable, so no excise duty should be levied on them. The lower appellate authority's decision was supported, urging the impugned order to be upheld.

Issue 3: Excise duty demand on non-excisable articles
The Tribunal clarified that duty demand under Notification 126/94 is on imported inputs, not on the non-excisable articles produced. Referring to precedent, the Tribunal emphasized that excise duty on goods produced in EoUs is payable under the Central Excise Act, not customs duty. As the demands were not on imported inputs, the Tribunal dismissed the Revenue's appeals, finding them meritless.

In conclusion, the Tribunal upheld the lower appellate authority's decision, emphasizing the distinction between duty on imported inputs and excise duty on non-excisable articles. The demands on cut-flowers were deemed unsustainable under Notification 126/94, leading to the dismissal of the Revenue's appeals.