2018 (11) TMI 456 - AT - Central Excise

100% EOU - Valuation - deemed exports or not - inclusion of sales tax, insurance and freight in assessable value - benefit of N/N. 2/95-CE dated 04.01.1995 - Held that - The facts are not in dispute; the appellant is a 100% EOU and excise duty is chargeable on products manufactured in 100% EOU in terms of proviso to Sec. 3 (1) of the Central Excise Act at the rates equal to custom duties leviable on similar products if they are imported into India. However, when the goods manufactured by them are exported, Exemption Notification No. 125/84 fully exempts the goods from payment of excise duty. The clearances in question are under this Para being supplies effected in DTA against payment in foreign exchange. It is also not in dispute that the appellant had obtained necessary permission for such clearances. These clearances are, however, not covered by either notification. As a creation of law, the Tribunal cannot go beyond the scope of the law itself nor modify it. Exemption under N/N. 2/95-CE - Held that - Hon ble Supreme Court of India has in the case of Virlon Textile Mills Ltd 2007 (4) TMI 6 - SUPREME COURT OF INDIA held that this exemption notification will be applicable even when the goods are exported against foreign exchange to DTA - the appellant is entitled to the benefit of Exemption Notification No. 2/95-CE dated 04.01.1995. Appeal disposed off.

Summary

Issues:
1. Whether goods cleared by a 100% EOU under Para 9.10(b) of the EXIM Policy should be considered exports and not leviable to Central Excise Duty.
2. Whether such clearances can be treated as deemed exports and at par with physical exports.
3. Whether the clearances can be considered as goods cleared to DTA and entitled to the benefit of Exemption Notification No. 2/95-CE.

Analysis:

Issue 1:
The appellant argued that clearances to DTA should be treated as deemed exports and not liable to duty. The Commissioner argued that clearances under Para 9.10(b) are not covered as deemed exports. The Tribunal noted the duty exemption under Notification No. 125/84 for 100% EOUs but found it inapplicable if goods are sold in India. The Tribunal held that clearances under Para 9.10(b) are not covered by any exemption notification, and the Tribunal cannot go beyond the law's scope.

Issue 2:
The appellant contended that if not deemed exports, clearances should be considered as DTA sales for the benefit of Exemption Notification No. 2/95-CE. The Commissioner highlighted that neither Notification No. 125/84 nor No. 2/95-CE applied to clearances under Para 9.10(b). The Tribunal referred to the judgment in Virlon Textile Mills Ltd, where the Supreme Court held that DTA sales against foreign exchange are covered by the proviso to Section 3(1), entitling them to the benefits of Notification No. 2/95-CE.

Issue 3:
The Tribunal analyzed the judgment in Virlon Textile Mills Ltd, concluding that the benefit of Notification No. 2/95-CE should extend to clearances under Para 9.10(b). The Tribunal modified the impugned order, granting the appellant the benefit of Exemption Notification No. 2/95-CE. The appeal was disposed of accordingly.

In summary, the Tribunal held that clearances under Para 9.10(b) are entitled to the benefit of Exemption Notification No. 2/95-CE, aligning with the interpretation in the Virlon Textile Mills Ltd case. The judgment clarified the applicability of duty exemptions to goods cleared by 100% EOUs, emphasizing the strict interpretation of exemption notifications within the legal framework.