2019 (12) TMI 1058 - AT - Central Excise

100% EOU - insecticide procured by the appellant was sent to farmers and the produce viz. gherkins were brought back to the EOU and later exported after undertaking further processing - applicability of N/N. 22/2003-CE dated 01.03.2003 - HELD THAT - It is not disputed that the appellant was a 100% EOU engaged in the manufacture and export of gherkins (vegetables). The said item in question viz. Neemazol TS 1% was procured without payment of duty in terms of Notification 22/2003 which is covered in Sl. No. 26 of Annexure I of the said Notification. Further as per Clause (a) of the Notification, items falling under Sl. No. 14 to 26 of Annexure-I were permitted to be taken out of EOU to fields and farms of contract farmers of the EOU for production and bring back the produce to the unit for export subject to fulfillment of certain conditions - Further, in the present case, the insecticides procured by the appellant was sent to the farmers and the produce viz. gherkins were brought back to the EOU and later exported after undertaking further processing. The Commissioner (Appeals) has wrongly held that the appellant is required to take the permission of the Development Commissioner for procurement of the item in question. During the relevant period duty free goods from local manufacturers could be procured only against CT-3 certificate issued by the Range Officer having jurisdiction over the EOU and in the present case also the appellants have procured the insecticide against CT-3 certificate issued by the jurisdictional Range Officer. Further, we find that the original authority has rightly held that the items procured by the appellant were covered by Sl. No. 26 appearing in Annexure-I to Notification No. 22/2003-CE dated 01.03.2003 read with Clause (a) (i) read with Clause 5 of the said Notification - Further, the item procured by the appellant in terms of the Notification was ultimately used for export of goods and therefore the appellants are clearly entitled to the exemption. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against duty demand under Notification No. 22/2003-CE dated 01.03.2003 for procurement of insecticide without payment of duty by 100% EOU for manufacturing and exporting fruit and vegetables.

Analysis:
1. Facts and Background:
The appellant, a 100% EOU engaged in manufacturing and exporting fruit and vegetables, procured insecticide 'Neemazol TS 1%' under Chapter Heading 3808.10 without duty payment as per Notification No. 22/2003-CE dated 01.03.2003. The Department later issued a show-cause notice demanding duty of ?3,90,873 along with interest, claiming the appellant was not entitled to the exemption.

2. Appellant's Arguments:
The appellant contended that the impugned order was unsustainable as it did not properly consider the facts and law related to the notification. They argued that the item was procured against a CT-3 certificate without needing prior approval from the Development Commissioner. The Deputy Commissioner had dropped the demand, stating the item was covered by the notification and ultimately used for export, hence exempt from duty.

3. Department's Defense:
The learned AR defended the impugned order, supporting the Revenue's appeal allowed by the Commissioner.

4. Tribunal's Findings:
After hearing both sides and examining the records, the Tribunal found that the appellant, as a 100% EOU, procured the insecticide as per the relevant notification. The insecticide was sent to farmers, and the produce was brought back for further processing and export, fulfilling the conditions of the notification.

5. Deputy Commissioner's Observations:
The Deputy Commissioner's detailed findings highlighted the appellant's compliance with the requirements of the EOU scheme and the notification. The insecticide was used on gherkins by farmers for further processing and export, justifying the duty exemption.

6. Conclusion:
The Tribunal held that the impugned order was unsustainable in law. It set aside the Commissioner's decision, allowing the appellant's appeal against the duty demand under Notification No. 22/2003-CE dated 01.03.2003 for procuring the insecticide without payment of duty, as the item was ultimately used for export, entitling the appellant to exemption.

This detailed analysis highlights the key arguments, findings, and conclusions of the Tribunal in the case concerning duty demand under the specified notification for the procurement of insecticide by a 100% EOU engaged in manufacturing and exporting fruit and vegetables.