Excise duty on clearance of microscope parts by EOU to DTA, Central Excise

[Bhawna rakheja]

The unit is 100% EOU since 15 years. The auditors came for audit and conducted audit for the period 2015-16 to June 2017. The unit is clearing the microcopes (chapter sub-heading 90185090) as well microscope parts i.e Double iris (chapter subheading 90188099 )i.e. without filter etc for operating microscope in DTA. The Central Excise duty is being paid on microscope. But the central excise duty is not paid on microscope parts under Notification No. 12/2012 CE (Sr. No. 309). which may be read as under:

309 :9018 or 9019 or 9022 (i) Parts and accessories of goods of headings 9018 and 9019 :NIL

(ii) Parts and accessories of apparatus for medical, surgical, dental or veterinary use, falling under heading 9022 :NIL

The auditor has objected that parts and accessory has not been exclusively mentioned in the tariff heading 9018 and therefore parts and accessory are not covered under heading 90189099. they further informed that it is covered under chapter heading 90330000 (PARTS AND ACCESSORIES (NOT SPECIFIED OR INCLUDED ELSEWHERE IN THIS CHAPTER) FOR MACHINES, APPLIANCES, INSTRUMENTS OR APPARATUS OF CHAPTER 90). As separate entry has been made for parts and accessory and therefore the benefit of S.No. 309 is not available and pointed out to pay duty for the DTA clearance in respect of parts and accessory. They also took the view that at the time of import of parts of the microscope by the EOU the CVD (Excise duty) has been levied but foregone due to EOU. They further also informed that in Chapter 90 in all the sub-heading the separate entry for Parts and accessory has been made and in some sub heading it has not been mentioned and at the end under sub heading 90330000 the remaining has been covered. Please guide as there is approximately ₹ 1500000/-duty is involved.

Posts / Replies

[KASTURI SETHI]

Explain the function of Double Iris in detail.

[Bhawna rakheja]

Double iris is a part of ophthalmic microscope.

[KASTURI SETHI]

Part or accessory ? Pl.confirm. How .it helps to microscope ? Does it help in identifying the disease ? Pl.confirm.

[Bhawna rakheja]

In addition to above some more parts such as 6v-20W Halogen lamp for slit lamp, Double Beam Splitter, Adaptor for Endo camera, Hollow Tube Rod Derlin Beaning and Bay mount Nikon with Focusable Tube, Roto plate for operating microscope, objective lens 400mm, Nuvar lens with Mirror mount, iVu S5 Digital camera and DBSi etc are also cleared by EOU to DTA on payment of only Basic Customs Duty and NIL duty of Central Excise under Notification No. 12/2012 CE as amended.

[Bhawna rakheja]

It is further submitted that as per Notification No. 12/2012 CE both Parts and accessories of goods of headings 9018 and 9019 is on NIL duty. But when imported these type of parts/accessories the CVD @ 12 % was levied.

[KASTURI SETHI]

I have examined the issue thoroughly. The Department's objection is absolutely correct. No case-law or circular or notification is in your favour. Parts and accessories are always classified separately from the classification of the main product. If you peruse Chapter 90 minutely, you will find that there as so many main products and their parts & accessories are separately classified.For example; Compound optical microscope (Stereoscope microscopes) are classified under Chapter/Heading/Sub-heading No.9011 10 00 and their parts & accessories are classified under Sub-Heading No.9011 90 00. Similarly, Microscopes other than optical microscopes i.e. Electron microscopes are classified 9012 10 10 and their parts & accessories are classified under Sub-Heading No.9012 90 00. Similarly, Hearing Aid are classified under 9021 40 10 but their parts & accessories classified under 9021 90 10. Such like examples can be found in other Chapters 84,85 & 87 also. Therefore, the parts & accessories of your products are rightly classified under Sub-Heading No.9033 00 00 of Central Excise Tariff Act, 1985. (Sub-headings are latest)

So you are advised to deposit due Central Excise duty along with interest on your own i.e. without of SCN in your interest and save penalty-amount whatever possible as per Central Excise law.

[Bhawna rakheja]

Thanks Sethi Sir. But there is still one confusion that if I have to pay duty for microscope parts than what is the benefit of S.N. 309 of Notification No. 12/2012 Central Excise as amended which exempt parts and accessory of goods of heading 9018 and 9019. The parts cleared by me are the parts of the microsope of heading 9018 and 9019 and as per my understanding these parts are exempted under N.N.12/2012 CE. I am also of the view that any parts which belong to goods of chapter 9018 and 9019 are exempt from Central excise duty under n.n 12/2012. I am planning to deposit the duty, but I want confirmation/doubt clearance before deposit of duty as guided by you sir

[KASTURI SETHI]

I have perused your views. Some more information is required to convince you logically and legally.

(i) Whether Internal Audit Report has been issued by the Audit Wing of the Department

(ii) Whether the Department is asking for deposit of Central Excise duty verbally ?

(iii) Have you received any letter or Show Cause Notice ?

After receipt of the above information, I shall further express my views.

[KASTURI SETHI]

If you intend to contest, pay duty along with interest under protest.

[Bhawna rakheja]

Thanks for valuable advise. The IAR has not issued so far. They asked to deposit the duty alonwith interest voluntarily before IAR so that penalty could be waived.

[KASTURI SETHI]

Without any written communication from the department, ideposit of duty with interest under protest will not be valid. The phrases, 'Voluntary' and 'under protest' both convey opposite meanings. In other words, it will be self-contradictory.

[Bhawna rakheja]

Thanks Sethi Sir. Now the department issued a letter to deposit duty.whether It will be appropriate if I deposit the duty along with interest under protest .

[KASTURI SETHI]

Yes now it is most appropriate. After deposit of Central Excise duty demanded, write a letter to the Audit Officer (may be Deputy Commissioner/Asstt.Commissioner) with a copy to the jurisdictional Deputy Commissioner, GST Division and jurisdictional GST Range Officer. Copies of E-challan and audit letters are to be attached with the letter mentioning clearly therein that duty has been under protest as the company does not agree with the Audit objection raised by the Department. Ask for speaking order so that you may be able to file an appeal with the Commissioner (appeals).

Secondly, pl. note that the matter will travel up to Supreme Court and there is no hope for relief prior to that stage. It being classification dispute, after Tribunal the appeal is to be filed with Supreme Court and on such issue the Department is not going to surrender easily. Your main products and spare parts/accessories both fall in "Others" as detailed above and "Others" is an ocean and your issue is stuck up in whirlpool. Only an advocate who is well experienced and specialist in Central Excise matters can bring you out of the whirlpool.

Ponder over on all these aspects before arriving at any final decision.