2024 (9) TMI 1354 - AT - Central Excise

100% Export Oriented Unit (EOU) - Utilization of cenvat credit for payment of duty on goods cleared to domestic tariff area (DTA) by an Export Oriented Unit (EOU) - appellant discharged the said duty liability as per Notification 52/2003 but by utilizing the cenvat credit - HELD THAT - From the facts of the case, it is obvious that the amount to be paid at the time of clearance of imported goods to DTA in these circumstances is custom duty and therefore, any demand of duty in respect of such goods can only be customs duty. Customs duty cannot be discharged by utilizing cenvat credit as the cenvat credit rules do not prescribe such utilization. However in the instant case, no demand of custom duty has been made but demand of Central Excise duty has been made. From the decision in MATRIX LABORATORIES LTD AND MYLAN LABORATORIES LTD VERSUS COMMISSIONER OF CENTRAL TAX MEDCHAL - GST (VICE-VERSA) 2023 (6) TMI 458 - CESTAT HYDERABAD also it becomes clear that in respect of imported inputs cleared by EOU only demand of custom duty can be made under Section 28 of the Customs Act, 1962 in respect of inputs obtained duty free cleared to DTA by EOU, the same can be cleared on payment of Central Excise duty and in such cases, notice under Section 11A of the Central Excise Act, 1944 can be raised - In the instant case, the notice has been issued invoking Section 11A(5) of the Central Excise Act and same is not proper provision for demanding the Custom duty. In the instant case, no violation of provision of Notification 52/2003 has been cited for demanding the said duty. The provisions of Section 28 of the Customs Act have also not been invoked and consequently, the show cause notice issued under Section 11A(5) of the Central Excise Act, 1944 for recovery of custom duty is void ab initio. The proceedings initiated by said show cause notice cannot, therefore be sustained - The impugned order is set aside and appeal is allowed.

Summary

Issues:
1. Utilization of cenvat credit for payment of duty on goods cleared to domestic tariff area (DTA) by an Export Oriented Unit (EOU).
2. Dispute over whether duty payable on such clearance is central excise duty or customs duty.
3. Challenge to the show cause notice issued under Section 11A demanding payment of duty.
4. Interpretation of Notification 52/2003-Cus regarding duty liability on goods cleared to DTA.
5. Discrepancy between the order-in-original and the order-in-appeal.
6. Applicability of legal precedents in similar cases.

Analysis:
1. The appellant, an EOU, imported goods under Notification 52/2003-Cus and cleared some to DTA, paying duty by debiting cenvat credit account. Central Excise Revenue Audit objected, demanding cash payment instead of cenvat credit utilization.
2. The dispute centered on whether the duty payable was central excise duty or customs duty. The Commissioner (Appeals) held that only customs duty could be demanded for goods cleared in violation of the notification, not central excise duty as no manufacturing process was involved.
3. The show cause notice invoked Cenvat Credit Rules to demand cash payment of duty, leading to a challenge by the appellant. The Tribunal found that the notice demanding central excise duty was improper as the duty in question was customs duty, not covered by the invoked provisions.
4. Notification 52/2003-Cus required utilizing goods for manufacturing within the EOU, with customs duty liability if cleared to DTA. The Tribunal clarified that the duty payable on such clearance was customs duty, not central excise duty.
5. Discrepancies between the order-in-original and order-in-appeal were noted, with the latter focusing on customs duty while the former addressed central excise duty. The Tribunal found the show cause notice void ab initio due to improper invocation of Section 11A for demanding customs duty.
6. Legal precedents, including the Matrix Laboratories case, were cited to support the Tribunal's decision that only customs duty could be demanded for goods cleared to DTA by an EOU, not central excise duty. The appeal was allowed, and the impugned order was set aside.

This detailed analysis covers the issues raised in the judgment, addressing the utilization of cenvat credit, the distinction between central excise duty and customs duty, the validity of the show cause notice, interpretation of Notification 52/2003-Cus, discrepancies in orders, and the application of legal precedents to the case.