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TMI Blog2015 (11) TMI 1471X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in accordance with the restrictions in the Exim Policy, as the restriction on the import of certain items in the Foreign Trade Policy cannot be treated as restrictions on the DTA clearances of the same items manufactured by a 100% EOU. The duty demand is prima facie not sustainable either on merits or not on limitation and as such - Stay granted. - Excise Stay No.52452 of 2014 in Appeal No. E/51960/2014-EX(DB) - Stay Order No.50356/2015 - Dated:- 5-1-2015 - Shri Rakesh Kumar, Member (Technical) And Shri S.K. Mohanty, Member (Judicial) For the Petitioner : Shri Davender Sharma, Co. Rep. For the Respondent : Shri Pramod Kumar, DR ORDER Per Rakesh Kumar: The facts leading to filing of this appeal and stay application are, in brief, as under:- 1.1 The appellant during the period of dispute i.e. during the period from 1.4.2007 to 31.03.2011, were a 100% EOU approved by the Development Commissioner, Noida Special Economic Zone, Ministry of Commerce and Industry, New Delhi vide LOP/LOI NO.589/2006-100% EOU a 100% EOU dated 19.04.2006. They manufactured Pyridine, Beta Picoline (3- methyl Pyridine), 3 Cyano Pyridine, 5 Chloro 2-3 Difluoro Pyridine (CDFP) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise authorities and the date of the issue of final deponding order by the Development Commissioner, the EOU can export the finished goods and no excise duty can be charged in respect of such finished goods as the same had not been cleared into DTA allowed the appeal. The Commissioner accordingly permitted the refund claim in terms of the Tribunal s Final Order dated 5.9.2013. 1.3. However, in the meantime, the Commissioner took the view that in respect of the stock of finished goods on the date of in principle approval, the appellant would be liable to pay central excise duty, in terms of the proviso to Section 3(1) of the Central Excise Act, 1944 and would not be eligible for exemption under notification no.23/03-CE and for this purpose, the quantity of work in progress was also to be treated as finished goods. The duty demand of ₹ 3,37,48,484/- is on this basis. According to the department, the concessional rate of duty under notification no.23/03-CE in respect of the stock of finished goods on the date of in principle approval for debonding would not be applicable, as the concessional rate under notification no.23/03-CE is not applicable to the stock of finished goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty free imported catylist for initial charge and after use for some time, they cleared the same into DTA with the Assistant Commissioner s approval on payment of duty at the depreciated value. The departments view is that the definition of Catylist in para 9.12 of the Foreign Trade Policy is only for EPCG scheme and is not applicable for 100% EOU. Therefore, according to the department, at the time of clearances of the Catylist, full duty was required to be paid. The duty demand of ₹ 9,64,168/- is on this basis. 1.6. It is in view of the above, that after the issue of show cause notice, the Commissioner vide order dated 4.12.2014, confirmed the duty demands of ₹ 3,37,48,484/-, ₹ 8,12,05,337/- and ₹ 9,64,168/- (totalling ₹ 11,59,17,989/-) against the appellant along with interest thereon under Section 11 AB and besides this, imposed penalty of equal amount on them under Section 11 AC. Against this order of the Commissioner, this appeal has been filed along with stay application. 2. Heard both the sides. 3. Shri Davinder Sharma, Consultant, ld. Counsel for the appellant, pleaded that duty demand of ₹ 3,37,48,484/- is on the stock of fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a show cause notice dated 17.07.2008 had been issued, that para 2.5 of the show cause notice mentions that while there was short payment of duty to the extent of ₹ 72,70,713/- the same has been paid by the party vide debit entry dated 29.01.2007 in their cenvat credit account and the show cause sought recovery only of the interest, that at that time, the issue regarding classification of the Lutadine Isomers (Pyridine residue ) under Heading No.38 and non-availability of the exemption under notification 23/03-CE or the issue of valuation was not raised, that the duty demand of ₹ 8,12,95,337/- is time barred, that in any case, the import restrictions in respect of the import of the residue of chemical industry cannot be applied to the DTA clearances of the same goods and thus, the denial of exemption notification no.23/03-CE on this basis is totally wrong , that the valuation of the goods had been revised in the light of the Board s Circular which had been issued on the basis of the Tribunal s judgement in the case of Uniworth Textiles Ltd. reported in 2009 (244) ELT 401 (Tribunal-Delhi) and that in view of the duty demand of ₹ 8,12,05,337/- is without any basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period from 12.04.2011 to 14.04.2011. This duty demand is on the basis that on the date of in principle approval, there was certain stock of the finished goods and work in progress material, which had also been treated as finished goods. According to the department, the stock of finished goods including work in progress on the date of in principle approval has to be treated as cleared into DTA and duty on the same would be chargeable under proviso to Section 3(1) of the Central Excise Act, 1944 without benefit of the exemption under notification no.23/03-CE. However, there was no dispute that on the date of final debonding order of the Development Commissioner on 10.06.2011, there was no stock of finished goods, as the same had been exported out of India. According to the appellant, in respect of the stock of finished goods and work in progress on the date of in principle debonding approval, the duty can be demanded only in the inputs contained in the finished goods/ work in progress and they are not required to pay duty on the finished goods at the rate prescribed under proviso to Section 3(1) of the Central Excise Act, 1944 as the finished goods had been exported out of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e unit is also allowed to dispose of the raw materials, components, consumables, etc against duty free licence and can also export the capital goods, raw materials/components, etc. In this case, before final debonding, there was stock of finished goods involving duty of ₹ 29,17,195/- and all these finished goods had been exported out of India prior to the final debonding order. The export was under claim for advance authorization. According to the department after in-principle approval for debonding but before the final debonding order, the stock of finished goods would be deemed to have been cleared into DTA and would be liable to duty in terms of proviso to Section 3(1) of the Central Excise Act. However, on the other hand, the appellant s plea is that there was no clearance of the goods and unless and until the goods are cleared no duty can be charged. 7. Ongoing through the provisions of Appendix 14-I-L, we find that in terms of Note-(ii) to this Appendix, a 100% EOU must be continued to be treated as EOU/EHTP/STP unit till the date of final exit order. Based on this note, the Tribunal in the cases of Solitaire Machine Tools Pvt. Ltd. (supra) and Bajaj Foods Ltd. (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,37,48,484/- along with interest thereon under Section 11AB and imposing penalty of equal amount under Section 11AC is prima facie not sustainable and on this point, the appellant have a strong prima facie case in their favour. 7. The second component of the duty demand is ₹ 9,64,168/- on the Catylist, which had been imported free of customs duty and had been used as first charge. The allegation made in the show cause notice is that Catylist cannot be treated as capital goods as the definition of capital goods given in para 9.12 of the Foreign Trade Policy is applicable only for EPCG Scheme is not applicable to 100% EOU. In our view, there is nothing in para 9.12 of the Foreign Trade Policy containing the definition of capital goods and according to which, the capital goods include Catylist for initial charge, from which it can be concluded that this definition is only for EPCG Scheme and not for 100% EOU. We find that the Commissioner in the impugned order has not confirmed the demand on the basis mentioned in the show cause notice but has confirmed the demand on the basis that the imported Catylist had not been used as first charge and had been illicitly diverted and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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