2023 (6) TMI 587 - AT - Central Excise

100% EOU - Classification of goods - GSM band - to be classified under Central Excise Tariff Heading 90304000 of the First Schedule to the CEETA, 1985 or under CETH 85279990? - eligibility for benefit of exemption under Notification 10/1997-CE dated 1.3.1997 - scope of SCN - HELD THAT - There is no allegation in the Show Cause Notice with regard to classification adopted by the appellant or a proposal for redetermination of classification. By redetermining the classification, indeed the adjudicating authority has travelled beyond the Show Cause Notice and hence the classification redetermined and adopted for raising the demand cannot sustain. Exemption Notification No. 10/1997 dated 1.3.1997 - HELD THAT - It is clarified by the Board circular F.No.DGEP/EOU/03/2007/879 dated 2.4.2008 that wherein CVD is paid equal to excise duty as applicable, exemption of central excise notification shall also be applicable to EOU for computation of duty on DTA clearance. The circular clarifies that there is no bar under proviso to section 5A of Central Excise Act, 1944 to consider the exemption while calculating the additional customs duty payable b y an EOU on DTA clearance. The issue whether a 100% EOU is eligible to avail the benefit of exemption notification is no longer res integra and is squarely covered by the decision of the Tribunal in the case of COMMISSIONER OF C. EX., HYDERABAD-IV VERSUS SHANTA BIOTECHNICS LTD. 2010 (7) TMI 334 - CESTAT, BANGALORE has held that There is no dispute that the goods, which are manufactured and cleared by the assessee, are exempt from payment of Central Excise Duty under Notification 4/2006-C.E. After appreciating the facts, applying the Board circular as well as the decision of the Tribunal, it is opined that the demand cannot sustain and requires to be set aside. The appeal succeeds on merits. Appeal allowed.

Summary

Issues Involved:

1. Eligibility of 100% EOU to claim exemption under Notification No. 10/97-CE.
2. Classification of the GSM band equipment.
3. Demand for excise duty, interest, and penalty.
4. Applicability of the extended period for issuing Show Cause Notice.

Summary:

1. Eligibility of 100% EOU to claim exemption under Notification No. 10/97-CE:
The appellant, a 100% Export-Oriented Unit (EOU), supplied Special Test Equipment in GSM Bands to the Defence Electronic Research Laboratory (DERL) without paying excise duty, claiming exemption under Notification No. 10/97-CE. The department contested this, arguing that the exemption does not extend to 100% EOUs as per the proviso to Section 5A of the Central Excise Act, 1944. The Tribunal, however, found that the appellant is eligible for the exemption, supported by various judicial precedents and a CBEC circular clarifying that such exemptions apply to EOUs for computing Countervailing Duty (CVD) on Domestic Tariff Area (DTA) clearances.

2. Classification of the GSM band equipment:
The department reclassified the equipment under CETH 85279990, attracting a 5% basic customs duty (BCD), contrary to the appellant's classification under CETH 90304000, which is duty-free. The Tribunal held that the adjudicating authority had overstepped by reclassifying the goods, as the Show Cause Notice did not dispute the original classification. Thus, the reclassification was deemed unsustainable.

3. Demand for excise duty, interest, and penalty:
The original authority confirmed a demand of Rs. 62,81,173/- along with interest and an equal penalty. The Tribunal set aside this demand, noting that the appellant correctly claimed the exemption under Notification No. 10/97-CE. The Tribunal emphasized that the duty payable by an EOU should be determined as if the goods were imported, and since the BCD on the equipment was free, no excise duty was payable.

4. Applicability of the extended period for issuing Show Cause Notice:
The appellant argued that there was no suppression of facts, as they had informed the Range Officer about the transaction. The Tribunal, having found the demand unsustainable on merits, did not find it necessary to address the issue of limitation.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order and the demand for duty, interest, and penalty. The appeal succeeded on merits, granting consequential relief to the appellant.