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2021 (5) TMI 665 - AT - Central Excise100% EOU - DTA sales limit - concessional duties of Central excise - Allegation is that goods cleared in DTA, in excess of the permitted 90% of the FOB value of the exports, in contravention of Para 6.8 a of the Foreign Trade Policy and condition 2 of the notification number 23/2003-CE dated 31-03-2003 - appellants have based their submissions mainly contending that the items manufactured, exported and cleared in DTA by them are similar; the department has misread the provisions of Policy in finding that DTA sales limit of 90% would apply to each product separately, whereas the word used is products. HELD THAT - The appellants have based their submissions mainly contending that the items manufactured, exported and cleared in DTA by them are similar; the department has misread the provisions of Policy in finding that DTA sales limit of 90% would apply to each product separately, whereas the word used is products. EOUs are given a facility to clear the goods in DTA, as a reward for the exports made by them subject to the fulfilment of positive NFE. It may so happen that EOU unit manufacturing more than one product may not be able to export all the products in the same proportion; the overseas market may not have demand for all the products manufactured by them. Understandably, EOU cannot be expected to throw away or destroy the product or sell in DTA at a higher rate of duty resulting in financial loss - as the EOU scheme is based on value of clearances, once export obligation is fulfilled, the manufacturer cannot be constrained to clear particular products in DTA in proportion to the export of the specific product - the goods cleared in DTA are to be held to be similar to those exported and that the 90% entitlement should be seen from the value of exported specific products and not a single product. Time Limitation - HELD THAT - Development Commissioner has given permission or has been regularly intimated about the DTA clearances; similar intimations and returns have also been submitted to the jurisdiction Custom/CE authorities. The clearances in DTA were going on from 2009 onwards. CERA audit of the unit has taken place and note was issued on 21.05.2013 - As the appellants were regularly submitting intimations to the Development Commissioner and Jurisdictional Central Excise authorities, it is not open to the department to invoke the extended period of limitation. Revenue sought to enforce the conditions of B-17 Bond. However, the Bond is given in respect of imports or duty free DTA procurements by the appellants. It would no way cover the duty liability if any on the DTA clearances. It is not the case of the department that the demand is of duty of Customs or duty of excise foregone on the raw material imported/procured by the appellants. It can be seen that in the instant case, DTA clearances of Bearing Housing Machined were 280035% of the FOB value. Even then Tribunal held that the clearances are in order in view of the provisions of FTP. In the instant case during the period 2009-10 to 2013-14 (up to December 2013), exports of twisted yarn were ₹ 66, 68,303/- and DTA clearances were of value ₹ 470, 37, 94,080/- thus DTA clearances were 70,205% of the same - the issue doesn t pertain to interpretation of a Notification but interpretation of Provisions of the Policy. In the instant case there is no allegation that export obligation has not been fulfilled and positive NFE was not achieved. A close look at the scheme of the EOU, gives an understanding that the scheme places on reliance of the value of exports and not the quantities. Therefore, positive NFE being achieved, the appellants are within their rights to avail the facility of DTA clearance in terms of Para 6.8 of FTP. Appeal allowed.
Issues Involved:
1. Whether the appellant violated the provisions of the Foreign Trade Policy (FTP) 2009-14, specifically paragraph 6.8, thus making them ineligible for the concessional rate of duty under Notification No. 23/2003-CE dated 31.03.2003. 2. Whether the department is justified in invoking the extended period for the duty demand. Issue-wise Detailed Analysis: 1. Violation of Provisions of Foreign Trade Policy 2009-14: The appellants, M/s Axiom Cordages Limited, are manufacturers and exporters of HDPE/LDPE/PP Ropes and Yarn. The department alleged that the appellants availed concessional duties of Central Excise on goods cleared in the Domestic Tariff Area (DTA) in excess of the permitted 90% of the FOB value of the exports, in contravention of Para 6.8[a] of the FTP and condition [2] of Notification No. 23/2003-CE dated 31-03-2003. The appellants argued that Twisted Yarn and Rope are similar goods and that the FOB value of Ropes exported should be counted for the DTA entitlement of Ropes or Yarns. The Tribunal found that both products manufactured and exported by the appellants are made from HDPE/LDPE/PPE granules, have the same characteristics, and are placed under the same product group "textile products" as per standard input-output norms (SION). The Tribunal concluded that twisted yarn and rope fall under the same category of goods, thereby accepting the appellant's contention that the goods are similar. Consequently, the demands raised by the revenue were not sustainable and were set aside. 2. Invocation of Extended Period for Duty Demand: The appellants contended that they had regularly submitted all details to the Development Commissioner and no objections were raised. The Tribunal noted that the Development Commissioner had given permission for DTA clearances and similar intimations and returns had been submitted to the jurisdictional Customs/Central Excise authorities. The Tribunal found that the authorities had never raised any red flags about the entitlement of DTA clearances by the appellants before the audit. Therefore, it was held that the appellants had not suppressed any facts, and the extended period of limitation could not be invoked. The Tribunal also noted that the Bond executed by the appellants was in respect of imports or duty-free DTA procurements and did not cover the duty liability on the DTA clearances. Conclusion: The Tribunal ruled in favor of the appellants, holding that the goods cleared in DTA were similar to those exported, and the 90% entitlement should be seen from the value of exported specific products and not a single product. The appeals were allowed with consequential relief, and the demands raised by the revenue were set aside.
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