2020 (9) TMI 448 - AT - Customs

100% EOU - clearance of cotton waste to domestic tariff area - Benefit of N/N. 1/95-CE dated 4th January 1995 and N/N. 22/03-CE dated 31st March 2003 pertaining to domestic procurement of raw materials and consumables - Benefit of N/N. 53/97-Cus dated 3rd June 1997 and no. 52/03-Cus dated 31st March 2003 - whether payment of excise duty at nil rate on clearance of cotton waste to domestic tariff area (DTA) in manner as prescribed by EXIM Policy, would be covered by the phrase on payment of appropriate duty of excise used in these exemption notifications, making appellants entitled to the benefit of these exemption notifications or otherwise? HELD THAT - Admittedly revenue had earlier issued a Circular in 1995 clarifying that appropriate rate of duty will include the nil rate of duty. Hence the view was that though Supreme Court had decided the issue, holding that appropriate rate of duty will not include the case of payment of duty at nil rate, but in view of Circular/ clarification issued, the interpretation made in circular will be binding on the revenue authorities. However this view was not concurred by the Hon ble Supreme Court and in case of Kalyani Packaging 2004 (5) TMI 78 - SUPREME COURT , Hon ble Supreme Court held that cases where benefits has been granted, cases should not be reopened. Otherwise Courts/Tribunals can not ignore a judgment of this Court and follow circulars of the Board - The decision of Kalyani Packaging was affirmed by the five member bench of Hon ble Supreme Court in case of Rattan Wire and Melting 2008 (10) TMI 5 - SUPREME COURT . Five Member bench of Hon ble Supreme Court has in case Dilip Kumar Co 2018 (7) TMI 1826 - SUPREME COURT settled the law in favour of strict interpretation of exemption notification and resolution of ambiguity in the interpretation of notification if any in favour of revenue. Thus, we are not in position to agree with the decision rendered by the Mumbai Bench of CESTAT, in case of M/S. TECHNOCRAFT INDUSTRIES (I) LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE I 2019 (8) TMI 719 - CESTAT MUMBAI , relied upon by the counsels for Appellant - In view of the decision of Hon ble Apex Court in case of Sant Lal Gupta Ors. 2010 (10) TMI 194 - SUPREME COURT and Hon ble Bombay High Court in case of Mercedes Benz India (P) Ltd. v. UOI, 2010 (3) TMI 300 - BOMBAY HIGH COURT the matter needs to be referred to the President for constitution of a larger Bench for consideration of the issue. The matter is referred to Learned President, for being placed before Larger Bench of Tribunal the following questions for consideration a. Whether the term appropriate rate of duty used in the exemption notifications 1/95-CE dated 4th January 1995 and no. 22/03-CE dated 31st March 2003 pertaining to domestic procurement of raw materials and consumables and notification no. 53/97-Cus dated 3rd June 1997 and no. 52/03-Cus dated 31st March 2003, will cover the case where the finished goods are cleared on payment of duty at nil rate? b. Whether the CESTAT Mumbai in case of Technocraft Industries, was correct in holding that the benefit of these exemption notifications shall be admissible even when the finished goods are cleared on payment of duty at nil rate?

Issues Involved:
1. Demand and confirmation of duty under Section 28(2) of the Customs Act, 1962.
2. Payment of statutory interest under Section 28AB of the Customs Act, 1962.
3. Imposition of penalty under Section 114A of the Customs Act, 1962.
4. Interpretation of the phrase "appropriate rate of duty" in exemption notifications.
5. Application of the decision in Technocraft Industries and whether it should be referred to a larger bench.

Detailed Analysis:

1. Demand and Confirmation of Duty:
The Commissioner of Central Excise & Service Tax, Kolhapur, confirmed a demand of ?65,53,984/- under Section 28(2) of the Customs Act, 1962, against the appellant, an Export Oriented Unit (EOU) engaged in manufacturing and exporting Cotton Yarn. The appellant procured raw materials and consumables without payment of duty under specific exemption notifications and cleared "Cotton Waste" to the Domestic Tariff Area (DTA) at a nil rate of duty. Proceedings were initiated to recover duty on these inputs, leading to the issuance of a show cause notice and subsequent adjudication by the Commissioner.

2. Payment of Statutory Interest:
The Commissioner ordered the appellant to pay statutory interest at appropriate rates under Section 28AB of the Customs Act, 1962, on the confirmed duty amount of ?65,53,984/-.

3. Imposition of Penalty:
A penalty equal to the confirmed demand plus the amount of interest was imposed on the appellant under Section 114A of the Customs Act, 1962. The appellant was given the option to pay 25% of the penalty if the entire amount of the confirmed demand, appropriate interest, and penalty were paid within 30 days from the receipt of the order.

4. Interpretation of "Appropriate Rate of Duty":
The central issue was whether the phrase "appropriate rate of duty" in the exemption notifications would include cases where the finished goods are cleared at a nil rate of duty. The appellant argued that the issue was already settled in favor of the appellant by the CESTAT in the case of Technocraft Industries. The revenue, however, contended that the Technocraft decision needed reconsideration in light of the Supreme Court's decisions in Dhiren Chemicals and Dilip Kumar and Company.

5. Application of Technocraft Industries Decision:
The Tribunal noted that the Technocraft decision was based on previous tribunal decisions which did not consider the Supreme Court's interpretation of "appropriate rate of duty" in Dhiren Chemicals. The Tribunal found it difficult to agree with the Technocraft decision and thus referred the matter to the President for the constitution of a larger bench to reconsider the issue.

Referral to Larger Bench:
The Tribunal framed two specific questions for the larger bench:
a. Whether the term "appropriate rate of duty" in the exemption notifications covers cases where the finished goods are cleared at a nil rate of duty.
b. Whether the CESTAT Mumbai in Technocraft Industries was correct in holding that the benefit of these exemption notifications is admissible even when the finished goods are cleared at a nil rate of duty.

Conclusion:
The Tribunal, unable to agree with the Technocraft decision, referred the matter to the President for the constitution of a larger bench to resolve the interpretation of "appropriate rate of duty" and its application to the exemption notifications in question. The order was pronounced in the open court.

← Previous Next →