2015 (11) TMI 325 - SC - Central Excise

Denial of concessional rate of duty - whether the clearances made by 100% EOUs are entitled to concessional rate of Customs duty provided under EPCG Schemes - Clearances made by 100% EOU - Held that - concessional rate of duty shall be leviable in respect of clearances effected by 100% EOUs to EPCG units and even the condition of import through specific ports has been clarified to be inapplicable as clearance by 100% EOUs have been considered as clearance from any port in India including the specified port. We, therefore, hold that the concessional rate of duty has been rightly availed of by the appellants and there is no case for further demand of duty. Since there has been no evasion of duty the question of imposition of any penalty on any of the appellants does not arise. No infirmity in the findings of the Tribunal 2006 (12) TMI 296 - CESTAT, AHMEDABAD - Decided against Revenue.

Summary

Issues:
1. Interpretation of Section 3 of the Central Excise Act, 1944 regarding the levy of excise duty on clearances made by 100% Export Oriented Units (EOUs) to EPCG license holders.
2. Applicability of exemption notifications under the Customs Act to 100% EOUs for DTA clearances.
3. Validity of penalties imposed by the Commissioner on the appellants.

Detailed Analysis:
1. The judgment addressed the interpretation of Section 3 of the Central Excise Act, 1944 concerning the levy of excise duty on clearances made by 100% EOUs to EPCG license holders. The Tribunal emphasized that clearances by 100% EOUs are treated as imports, and the duty payable is equivalent to the customs duty on similar goods if imported. The Tribunal clarified that the duty to be paid is customs duty, not central excise duty, due to a legal fiction created by Section 3. The Commissioner's misunderstanding of circulars led to incorrect application of exemption notifications, as the duty calculation should be based on customs duty, not central excise duty.

2. The issue of the applicability of exemption notifications under the Customs Act to 100% EOUs for DTA clearances was extensively discussed. The Tribunal highlighted that the duty payable by 100% EOUs is akin to customs duty, and therefore, exemption notifications under the Customs Act should apply. Circulars issued by the Board further supported the applicability of concessional rates of duty to clearances by 100% EOUs to EPCG units. The Tribunal concluded that the exemption notifications under the Central Excise Act do not automatically apply to 100% EOUs unless explicitly provided, unlike notifications under the Customs Act, which are applicable.

3. Lastly, the judgment scrutinized the validity of penalties imposed by the Commissioner on the appellants. Since the Tribunal found no evasion of duty and upheld the correct application of concessional rates of duty to 100% EOUs, it deemed the penalties unjustified. Consequently, the Tribunal set aside all three orders-in-original and allowed the appeals of the appellants. The Supreme Court affirmed the Tribunal's findings, dismissing the appeals and upholding the decision.

In conclusion, the judgment clarified the legal fiction created by Section 3 of the Central Excise Act, emphasized the applicability of customs duty exemptions to 100% EOUs, and invalidated the penalties imposed by the Commissioner due to the correct application of duty rates.