2024 (11) TMI 1338 - AT - Central Excise

Levy of central excise duty - debonding of a 100% EOU unit to DTA, on finished and semi-finished goods, which are either exported on bond or cleared in domestic market on payment of excise duty, during 18.12.2012 (cutoff date) to 15.02.2013 (final exit order) - HELD THAT - The issue of non-payment of central excise duty on final goods on debonding is settled in favour of appellant. Also, prima facie, the other issue that no duty is payable on semi-finished goods is settled in favour of appellant in terms of decisions relied upon in paragraph 2 above. However, it is seen that although the Learned Commissioner took verification report dated 20.01.2017 from jurisdictional office, the same was not furnished to the appellant. The Hon ble Supreme Court in KOTHARI FILAMENTS ANR. VERSUS COMMISSIONER OF CUSTOMS (PORT) KOLKATA ORS. 2008 (12) TMI 28 - SUPREME COURT has held that documents relied upon in the adjudication order are required to be supplied to the appellant in terms of principles of natural justice. There are considerable force in appellant s submission that question of demand of excise duty does not arise if goods are exported which fact can be verified from the CA certificate dated 15.11.2016 which was submitted before the Learned Commissioner, however, the same was not considered. The same needs to be considered. The matter needs to be reconsidered by the Learned Commissioner/ adjudicating authority by (i) providing the letter dated 20.01.2017 issued by the jurisdictional Assistant Commissioner to the appellant; and (ii) considering the CA certificate dated 15.11.2016 to ascertain claim of export of goods, along with other evidence which may be put on record by the appellant. The impugned order is set aside and the appeal allowed by way of remand to the adjudicating authority for passing a fresh order.

Summary

Issues:
1. Whether central excise demand on debonding of a 100% EOU unit to DTA on finished and semi-finished goods is valid.
2. Whether duty on finished goods is payable on debonding or clearance.
3. Whether duty is payable on semi-finished goods on debonding.
4. Whether principles of natural justice were followed in the adjudication process.
5. Calculation error in demanding duty and imposition of penalty under Section 11AC.

Analysis:
1. The appeal was filed against an Order-in-Original confirming central excise demand on debonding of a 100% EOU unit to DTA. The appellant argued that duty on finished goods is payable only upon clearance, not debonding, citing relevant case laws. They also contended that semi-finished goods are not subject to duty on debonding, supported by legal precedents. The appellant presented a CA certificate showing export or domestic clearance of goods, which the department did not dispute. The Learned Commissioner's reliance on a letter not provided to the appellant was deemed contrary to natural justice principles.

2. The Tribunal found in favor of the appellant on the issue of duty payment on finished and semi-finished goods. The matter was remanded to the adjudicating authority for reconsideration, directing them to provide the appellant with the jurisdictional Assistant Commissioner's letter and consider the CA certificate submitted by the appellant. The Tribunal emphasized the need to follow natural justice principles and consider all evidence before passing a reasoned order.

3. The appellant's argument that duty on finished goods is payable upon clearance, not debonding, was supported by legal precedents. The Tribunal noted that the issue of non-payment of central excise duty on final goods on debonding favored the appellant. The matter was remanded for a fresh order, emphasizing the importance of considering all evidence and legal decisions in the adjudication process.

4. The Tribunal highlighted the appellant's submission that no duty is payable on semi-finished goods on debonding, citing relevant legal decisions. The Tribunal directed the adjudicating authority to reconsider the matter, ensuring the appellant's right to be provided with all relevant documents and evidence, as per principles of natural justice.

5. The Tribunal addressed the calculation error in demanding duty and the imposition of penalty under Section 11AC, noting that the penalty was wrongly imposed as the appellant had not contravened any provision. The matter was remanded for a fresh order, emphasizing the need for a thorough review of all aspects before making a decision.