2016 (1) TMI 264 - AT - Central Excise

100% EOU - DTA sale of textile articles - exemption from payment of CVD under Notification No. 30/04 dated 9.7.2004 issued under Section 5A(1) of the Central Excise Act - whether the proviso to Section 5A(1) will be applicable in the present case while considering application of Notifications 29/2004 and 30/2004 - Held that - There has been total mis-appreciation of this provision of law. Section 5A(1) only grants power to exempt excise duty leviable under Section 3(1) of the Central Excise Act. The proviso to section 5A(1) is only to state that even if there is exemption from Central Excise duty under section 3(1) on any goods produced in India, it will not imply that the exemption from Central Excise duty will also be automatically available on goods produced and cleared by a 100% EOU. It is quite obvious from this proviso that, by virtue of exemption under Section 5A(1), goods produced by a 100% EOU do not get automatically exempted. This is so because the duty payable by a 100% EOU is equal to the aggregate of customs duties. - The duty payable on goods produced and cleared by a 100% EOU is to be seen in terms of provisions of Section 3(1) and while calculating this duty, the CVD component is to be calculated on the basis of excise duty payable on such products produced in India. And if such duty payable is a concessional rate of duty in terms of a Notification, the same notification will apply for calculating CVD on goods produced and cleared by a 100% EOU. The findings of the Commissioner (Appeals) on this issue are not very clear. However, in view of our analysis, we agree with his conclusion that the proviso to section 5A(1) of the Central Excise Act is only applicable to the implementation of main Section 3(1). In the case of goods imported by a 100% EOU, the condition cannot be applied nor can it be enforced. The Revenue s appeal itself says that this condition is for indigenous manufacturer. This condition is obviously not applicable to goods imported. Therefore, we see no reason to deny the benefit of this notification. Reliance is placed on Hon ble Supreme Court judgment in the case of SRF Ltd. v. CC 2015 (4) TMI 561 - SUPREME COURT . In a similar situation and in the context of similar circumstances of Notification No. 6/2002, the Apex Court held that the assessee were entitled to the exemption from payment of CVD in terms of Notification No. 6/2002 as no credit could be availed nor was availed in respect of the imported goods. - Decided against Revenue.

Summary

Issues:
- Applicability of exemption under Section 5A(1) of the Central Excise Act to a 100% EOU for payment of duty on clearances in DTA.
- Interpretation of Notifications No. 29/2004 and 30/2004 in relation to excisable goods produced by a 100% EOU.

Analysis:

Issue 1: Applicability of exemption under Section 5A(1)
The case involved a 100% EOU manufacturing textile and textile articles seeking exemption from payment of CVD under Notification No. 30/04. The department argued that the exemption under Section 5A(1) was not applicable due to the proviso to Section 5A(1). The Commissioner (Appeals) held that the appellants were entitled to avail the exemption under Notification No. 29/2004 instead of Notification No. 30/2004. The central issue was whether the proviso to Section 5A(1) applied to the case. The Tribunal analyzed the provisions and concluded that the proviso to Section 5A(1) did not automatically exempt goods produced by a 100% EOU. The duty payable by a 100% EOU is equal to the aggregate of customs duties, and even if excise duty is Nil on a product, it does not imply Nil excise duty for a product manufactured by a 100% EOU. The Tribunal referred to relevant case laws to support its interpretation and held that the proviso to Section 5A(1) was only applicable to the implementation of the main Section 3(1).

Issue 2: Interpretation of Notifications No. 29/2004 and 30/2004
The Revenue contended that the benefit of Notifications No. 29/2004 and 30/2004 was not admissible to excisable goods produced by a 100% EOU. The Tribunal examined the conditions of Notification No. 30/2004 and found that the condition of not taking credit of duty on inputs or capital goods was not applicable to goods imported by a 100% EOU. Relying on a Supreme Court judgment, the Tribunal held that the benefit of Notification No. 30/2004 should not be denied in such cases. The Tribunal dismissed the Revenue's appeals, set aside the impugned orders, and held that the benefit of the exemptions was admissible to the appellants.

In conclusion, the Tribunal clarified the applicability of exemptions under Section 5A(1) and the interpretation of Notifications No. 29/2004 and 30/2004 in the context of excisable goods produced by a 100% EOU. The judgment provided a detailed analysis of the legal provisions, case laws, and conditions for availing exemptions, ultimately ruling in favor of the appellants and dismissing the Revenue's appeals.