2018 (5) TMI 387 - AT - Central Excise

100% EOU - N/N. 22/2003-CE - inputs procured by them for manufacture of the impugned Diesel Generator sets - appellants had cleared the goods at nil rate of duty by availing exemption under N/N. 12/2012-Cus., and hence denied benefit of N/N. 22/2003 - CBEC Circular No. 268/01/2016-CX dated 16/09/2016. Held that - CBEC vide a Circular No. 268/01/2016-CX dated 16/09/2016 has clarified that the second proviso to para 6 of the N/N. 22/2003-CE dated 31.03.2003 and the proviso to para 3 of N/N. 52/2003-Cus dated 31.03.2003 would not be applicable, in case of supply of manufactured goods by EOU to Advance Licence/Authorisation holder in DTA, without payment of Central Excise duty. This CBEC Circular will apply mutatis mutandis to supply of deemed exports covered by the category (f) of para-8.2 of FTP which covers supply of goods to a project of purpose for which the MoF, by a notification, permits import of such goods at zero customs duty - It is also clarified in para-8.2 that benefit of deemed export shall be available under para 8.2 (f) only if the supply is made under the procedure of International Competitive Bidding. The benefit of deemed export will be available to the supply of one Diesel Generator set made by the appellant to ONGC under Project Authority Certificate issued by the competent authority - appeal allowed - decided in favor of appellant.

Issues:
1. Interpretation of Notification No. 22/2003-CE and Notification No. 12/2012-Cus.
2. Eligibility for exemption on inputs procured for manufacturing Diesel Generator sets.
3. Consideration of Project Authority Certificate (PAC) provisions.
4. Application of deemed export benefits.
5. Comparative disadvantage faced by DTA units.

Analysis:

Issue 1: Interpretation of Notification No. 22/2003-CE and Notification No. 12/2012-Cus.
The case involved a dispute regarding the eligibility of an appellant, a manufacturer of Diesel Generator sets, to avail benefits under Notification No. 22/2003-CE for inputs procured for manufacturing goods cleared at a nil rate of duty under Notification No. 12/2012-Cus. The department contended that since the goods were cleared at nil duty under one notification, the appellant was not entitled to exemption under another notification. The Tribunal analyzed the provisions of both notifications and relevant case law to determine the applicability of exemptions.

Issue 2: Eligibility for exemption on inputs procured for manufacturing Diesel Generator sets.
The appellant argued that as per the Project Authority Certificate (PAC) provisions, they were entitled to exemption from duty on goods procured for manufacturing in India. The Tribunal examined the PAC clauses cited by the appellant, emphasizing the conditions for claiming exemptions on inputs and the relevance of deemed exports. The Tribunal considered the appellant's submissions regarding the clearance of goods under specific notifications and the impact on duty exemption for inputs procured.

Issue 3: Consideration of Project Authority Certificate (PAC) provisions.
The Tribunal reviewed the PAC provisions highlighted by the appellant, focusing on the deemed export benefits and exemptions related to supplies made against International Competitive Bidding. The analysis included a detailed assessment of the PAC issued by the ONGC and its alignment with the FTP provisions, emphasizing the importance of fulfilling specified criteria to claim benefits under the PAC.

Issue 4: Application of deemed export benefits.
The Tribunal deliberated on the concept of deemed exports and its relevance to the case, particularly in the context of supplying Diesel Generator sets against International Competitive Bidding. The Tribunal referred to relevant Circulars and Notifications to clarify the applicability of deemed export benefits in situations where goods are supplied to specific projects or purposes permitted under relevant notifications, emphasizing the objective of promoting Indian manufacturing and saving foreign exchange.

Issue 5: Comparative disadvantage faced by DTA units.
The Tribunal considered the argument presented by the department regarding the comparative disadvantage faced by DTA units manufacturing similar goods vis-à-vis EOU units enjoying duty-free inputs. The Tribunal analyzed Circulars and Notifications to address the concerns raised about duty foregone on inputs utilized for production and the implications for EOU units supplying to Advance Licence/Authorisation holders in DTA.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeal and granting consequential benefits in accordance with the law, based on the interpretation of relevant notifications, PAC provisions, and deemed export benefits.

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