9911796707
TMI Blog2024 (11) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... . 01.03.2003 from time to time. During the period from 01.07.2006 to 28.02.2007, Appellant cleared their final products viz. HDPE/PP Ropes (CTH 56074900), Nylon Ropes (CTH 56075040), Polyester Ropes (CTH No. 56075090) etc. in DTA by paying concessional central excise duty by availing benefit under Sr. No. 4 of Table to N/N. 23/2003-CE dtd. 31.03.2003 by considering the same as having been wholly exempted from central excise duty portion under Notification No. 30/2004-CE dtd. 09.07.2004 and wholly manufactured from the raw materials manufactured or produced in India. We find that Notification No. 30/2004-CE dtd. 09.07.2004 exempted goods falling under heading No. 5607 from whole of the duties of excise if such goods were manufactured by a unit other than EOU and if no credit of duty paid on the inputs used in the manufacture of the same was taken. The condition provided in clause (iii) of condition No. 4 of Notification No. 23/2003-CE dtd. 31.03.2003 as mentioned above stand fulfilled. Further it is an undisputed fact that the Appellant have fulfilled condition No. 4(ii) of Notification No. 23/2003-CE. However as regard the condition No. 4 (i) the Ld. Commissioner held that appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C form. This does not means that the goods cleared without payment of sale tax by availing the concession under Section 8(5)(a) have become exempted from payment of sale tax. In fact, if the buyer who fails to produce the C Form, Central Sales Tax is payable on the goods sold to such buyer. In this matter the benefit cannot be denied to the entire quantity of goods cleared into DTA. The Ld. Commissioner in the impugned order has denied the benefit of Sr. No. 3 of the Notification No. 23/2003-CE for the entire qty. of goods cleared to DTA during the period 01.03.2007 to 06.07.2007. The documentary evidences produced by the appellant clearly show that there is very less quantity of the imported raw material as compared to the quantity of finished goods manufactured and exported - in the present matter the benefit of Sr. No. 3 of Notification No. 23/2003-CE was denied for the period 07.07.2007 to 29.02.2008 on the ground that the imported raw material has been used in the manufacture of export goods only and not in the manufacture of goods cleared to DTA. Further the goods procured from DTA on which DTA supplier has availed the deemed export benefit and goods procured from another EO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of limitation is not invokable in the facts of the present matter - the issue involved in this matter is purely involves interpretation of statutory provisions. Hence, invocation of extended period of limitation is incorrect. It is well settled that where the issue involved is purely legal in nature, extended period of limitation cannot be invoked. The impugned order is set aside - appeal allowed. - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. RAJU, MEMBER (TECHNICAL) Shri Anand Nainawati, advocate appeared for the Appellant Shri Mihir G Rayka, Additional Commissioner (AR) appeared for the Respondent ORDER Brief facts of the case are that the appellant are 100% EOU and are engaged in manufacture of HDPE/PP Ropes, Nylon Ropes, Polyester Rope, PP Multifilament Ropes falling under Chapter 56 and plastic waste scrap falling under Chapter 39 of the First Schedule to the Central Excise Tariff Act, 1985. The Appellant procured raw materials from domestic suppliers and also imported. The factory premises was visited by the officers and during the investigation it was observed that the Central Excise Duty equivalent to the aggregate of the Customs duties leviable on the like goods produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced in India. It was held that finished goods are chargeable to excise duty @8% in terms of Notification No.29/2004-CE. d) Wrong availment of benefit under Sl.No.3 and 4 on plastic waste scrap cleared in DTA. e) The Appellant have not maintained the separate accounts or records for consumption of raw materials imported and locally procured. Further, at production floor it was not possible to segregate physically the WIP or finished goods manufactured out of imported raw materials of locally procured raw materials. f) Finished goods are exempted from payment of VAT/Central Sales Tax in UT of Dadra and Nagar Haveli against C-form and therefore additional duty of customs under Section 3(5) is required to be added in aggregate duty of customs as per proviso to Section 3(1) of the Central Excise Act, 1944. g) The appellant suppressed the facts in as much as they did not inform the department that their final products were manufactured from both imported and indigenous raw materials and they willfully availed wrong benefit of Notification No. 23/2003-CE with an intent to evade payment of duty. The clearances were made by the appellant in DTA by contravening provisions of Rules 4, 8, 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed into DTA is unsubstantiated in the impugned Order. 2.2 He further submits that in any case, re-quantification of the demand by the Ld. Commissioner under Sl. No. 2 is incorrect in as much as CVD should be Nil instead of 8% plus education cess adopted by the Show Cause Notice and the impugned Order. In the present case, the like goods imported into India would be entitled to nil rate of CVD by virtue of Notification No. 30/2004-CE. Exemption under Notification No. 30/2004-CE cannot be denied on the ground the said Notification provides no cenvat credit of duty paid on inputs shall be availed and it was not possible to fulfill this condition in the case of import of any goods. He placed reliance on the decisions of SRF Ltd. Vs. CC 2015 (318) ELT 607 (S.C.). 2.3 He argued that reliance placed by the Ld. Commissioner in the impugned Order on the decision of Hanil Era Textiles Ltd. Vs. CCE 2014 (312) ELT 324 (T) is incorrect. Hanil Era Textiles Ltd. is no longer good law after the Supreme Court s judgment in case of SRF Ltd. Vs. CC. The Commissioner has erred in not considering as to how the said binding precedent of the Hon ble Supreme Court is not applicable. In view of the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o submits that denial of benefit of Sl. No.4 of Notification No.23/2003-CE for the period prior to 6.7.2007, on the ground that goods procured from domestic suppliers who had availed deemed export benefit on such supply, is incorrect. During the period from 28.4.2007 to 20.8.2009, the appellant received some supplies from Reliance Industries Ltd., EOU unit at Jamnagar (also referred as RIL EOU ) under CT-3 on which RIL EOU availed deemed export benefit. The appellant have treated this supply at par with imported raw materials and the same has therefore been used only for manufacture of finished goods which were exported by the appellant. The appellant have therefore complied with Explanation II to Notification No. 23/2003-CE. Further as stated in statement dated 21.6.2011 of Muneshwar Nath Modi, Director of the appellant recorded during the investigation, the appellant did not receive any supply from 100% EOU or SEZ till 27.4.2007. Therefore, the demand for the period prior to 28.4.2007 will not sustain in any case. Further, in any case, the demand for the period from 1.7.2006 to 5.7.2007 on this ground is not maintainable. Explanation II was inserted in Notification No. 23/2003-CE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the payment of sales tax or VAT when sold to a customer in the said Union Territory. 2.9 He argued that the goods were sold by the appellant into DTA during the course of inter-state sale against C Form, the goods were exempt from payment of Central Sales Tax and therefore as per the department the appellant were required to take into account 4% SAD element while calculating the aggregate of customs duty under Sl. No.2 of Notification No.23/2003-CE. Thus, the crux of the whole issue is whether the goods in question can be said to be exempt by the State Government/Union Territory from payment of sales tax or VAT when the appellant were availing concession under Section 8(5)(a) of the Central Sales Tax Act which was applicable only to certain type of industry and that too only when the buyer furnished C Form. When Condition No.1 of Notification No.23/2003-CE stipulates that the goods cleared to DTA are not exempt from payment of sales tax or VAT, it means that such goods as a class such goods should have been exempt. In other words, the expression the goods being cleared to DTA are not exempt from payment of sales tax or value added tax would not refer to the concession extended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Sl. No.4 of Notification No.23/2003-CE for the waste and scrap cleared by the appellant. Denial of benefit of Sl. No.4 of Notification No.23/2003-CE on the ground that imported raw material was used in manufacture of raw material is incorrect and without any basis. The entire raw material procured by the appellant was used in manufacture of finished goods only and no part of the raw material has been used in waste and scrap. It is well settled that when a by-product or waste arises in the manufacturing process, it cannot be said that the said by-product had been manufactured from the raw material procured by the appellant. Hence, the finding of Commissioner that imported raw material was used in the manufacture of waste and scrap is incorrect and without any basis. 2.13 For the period 01.03.2007 to 06.07.2007 he submits that the imported raw material has been used in the manufacture of exported goods only. No part of imported goods has been used in the manufacture of goods cleared into DTA. Denial of benefit of Sl.No.3 of Notification No.23/2003-CE for the period prior to 6.7.2007, on the ground that goods were procured from domestic suppliers who availed deemed export benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses is well within the limit. Thus, entire raw material procured by the appellant has been used in the manufacture of finished goods only and no part of the raw material has been used only in waste and scrap. It is well settled in light of the decision of the Hon ble Supreme Court in Swadeshi Polytex that the entire quantity of raw material has gone into the manufacturing of finished goods and no part of inputs is used to manufacture waste scrap more so, when emergence of waste scrap in the process is inevitable. Hence, the finding of Commissioner that imported raw material was used in the manufacture of waste and scrap is incorrect and without any basis. 2.16 As regard the disputed period 07.07.2007 to 29.02.2008 he submits that The imported raw material has been used in the manufacture of exported goods only and not in the manufacture of goods cleared to DTA. Further, the goods procured from DTA on which DTA supplier has availed deemed export benefit and goods procured from another EOU have also not been used in the manufacture of goods cleared to DTA. The appellant have maintained all the records from which it can be established that the imported raw material and material procur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod 1.3.2008 to 24.8.2009. In view of the above, addition towards SAD in aggregate duties of custom is not sustainable. In any case, Sl. No. 2 of Notification No. 23/2003-CE is beyond the scope of Section 3(5) of the Customs Tariff Act, 1975. By Notification No. 22/2006-CE, Sl. No. 2 of Notification No. 23/2003-CE was amended. The levy in terms of Sl. No.2 of Notification No.23/2003-CE as amended by Notification No.22/2006-CE is the amount equal to aggregate of duties of customs of like goods. If the case of the department is that the goods in question cleared by the appellant on inter-state basis were exempt from payment of sales tax, then on like goods imported, no SAD should be leviable since SAD is leviable under Section 3(5) of the Customs Tariff Act to counter balance the local taxes, VAT etc. leviable on like goods on its sales, purchase, transportation etc. in India. Therefore, for the purpose of computing the aggregate duties of customs, SAD itself cannot be taken into account. Further, amendment vide Notification No. 22/2006-CE made to Sl. No.2 to Notification No. 23/2003-CE is not in consonance with the provisions of Section 3(5) of the Customs Tariff Act. Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ister. Based on the records maintained by the appellant and which are not disputed by the department, it is quite possible to bifurcate finished goods manufactured out of indigenous raw material or imported raw material. Further, from the records, it can also be established that which goods have been exported or cleared into DTA.In view of the above, the imported goods have been used in the manufacture of exported goods only. No part of imported goods has been used in the manufacture of goods cleared into DTA. In the present case it has been established beyond doubt that goods cleared to DTA had been manufactured wholly out of raw materials manufactured in India based on separate records of receipt and consumption of raw materials maintained for said purpose. Therefore, the present case is not a doubtful case. Hence, despite the fact that export goods and DTA cleared goods were manufactured on common manufacturing lines and by using common inputs, benefit of Notification No. 8/1997-CE (at present 23/2003-CE) is available to the appellant. The above position has also been clarified by the Board through subsequent modification of Circular No. 85/2001 dated 21.12.2001. 2.22 He also su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Commissioner in the impugned Order is incorrect and liable to be set aside. Ld. Commissioner categorically ignored the fact that the Appellant are able to identify finished goods for DTA and export and packing is done accordingly. Impugned order has failed to consider submissions and evidence in proper perspective and on this ground also same is liable to be set aside. 2.24 He also submits that the entire quantity of imported raw material has been used in the manufacture of export goods. The department ought to have verified these details at the time of investigation based on input output ratio which would have conclusively proved that entire quantity of imported raw material has been used in manufacture of export goods. On this ground alone the finding of the Ld. Commissioner that imported raw material were used for manufacture of finished goods cleared in DTA is not sustainable. The Ld. Commissioner in the impugned Order has held that the appellant have maintained records for 2-3 months only and the same have been destroyed thereafter. Therefore, the Commissioner has held that since it was not possible to verify the said documents, it was to be presumed that separate reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period September 2009 to December 2009, the appellant have claimed benefit of Sl. No.2 of Notification No. 23/2003-CE for clearance of Nylon Rope and the same has not been disputed. The only dispute is with regards to demand of SAD for the period September 2009 to December 2009 for the clearance of Nylon Rope into DTA. The said demand is not sustainable. During the period September 2009 to December 2009, they availed benefit of Sl. No.2 of Notification No.23/2003-CE since the imported raw material and material procured from another EOU were in stock and used the same in manufacture of some quantity of Nylon Rope. The impugned Order has demanded SAD on said Nylon Rope cleared during the period September 2009 to December 2009 since the Nylon Rope was cleared without payment of Central Sales Tax. The reasoning to reject the contention of the Ld. Commissioner above is applicable to present period for the clearance of Nylon Ropes also. Hence, demand of SAD is incorrect and therefore, portion of impugned Order is liable to be set aside. For the same reasons, demand in respect of goods cleared during the period January 2010 to May 2010, (as referred to in Annexure A(viii) of the Show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibility of the appellant for concessional rate when cleared to DTA, we note that the exemption was denied on various grounds. We find that the multiple grounds have been disputed in the present matter. All these grounds are summarized as under : Period Issue Involved 01.07.2006 to 28.02.2007 (i) Wrong availment of Sr. No. 4 of Notification No. 23/2003-CE for clearances of finished goods. 01.03.2007 to 29.02.2008 Wrong availment of Sr. No. 3 of Notification No. 23/2003-CE (for clearance of final products as well as plastic waste scrap) 01.03.2008 to 24.08.2009 (i) Non-inclusion of SAD under Sr. No. 2 of Notification No. 23/2003-CE (for clearances of final products) (ii) Wrong availment of Sr. No. 3 of Notification No. 23/2003-CE (for clearances of plastics waste scrap) 25.08.2009 to 31.05.2011 Wrong availment of Sr. No. 3 of Notification No. 23/2003-CE (For clearance final products as well as plastic waste scrap) Sept. 2009 to Dec. 2009 Non-inclusion of SAD under Sr. No. 2 of Notification No. 23/2003-CE (For clearance of final products viz., Nylon Ropes) 01.06.2011 to 30.11.2015 Non inclusion of SAD under Sr. No. 2 of Notification No. 23/2003-CE for clearances of goods in DTA. 01.06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lumn (3) of the Table below and falling within the chapter, heading No. or sub-heading No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), specified in the corresponding entry in column (2) of the said Table, from whole of the duty of excise leviable thereon under the said Central Excise Act : Provided that nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2002. TABLE S. No. Chapter or heading No. or sub-heading No. Description of goods (1) (2) (3) 11 56 (except 5601.10, 5607.10, All goods 4.3 We observed that the finished goods manufactured by the appellant namely HDPE/ PP Rope, Nylon Rope, Polyester Rope and PP Multifilament Rope undisputedly fall under Tariff heading No. 5607 49 00, 5607 50 40, 5607 50 90 and 5607 90 90 respectively. Clearly, the goods manufactured by the appellant are not covered by any of tariff subheading Nos. 5601.10, 5607.10 and 5608.11. Therefore, if the goods manufactured by the appellant, were manufactured by a unit other than EOU, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit under Sr. No. 4 of Notification No. 23/2003-CE is incorrect. We find that all the condition of Sr. No. 4 are duly fulfilled by the appellant. 4.5 Without prejudice, we also find that the Ld. Adjudicating authority has denied benefit of Sr. No. 4 of Notification No. 23/2003-CE to the entire quantity of goods cleared into DTA during the period 01.07.2006 to 28.02.2007. However, the benefit of Sr. No. 4 of the notification can be denied to the extent of the value of finished goods cleared into DTA which could have been manufactured from the imported raw materials. The denial of benefit of Sr. No. 4 to the entire quantity of goods cleared into DTA is incorrect and not justifiable. 4.6 We also find that in the present matter denial of benefit of Sr. No. 4 of Notification No. 23/2003-CE for the period prior to 06.07.2007, on the ground that goods procured from domestic suppliers who had availed the deemed export benefit in such supply, is also legally not sustainable. We noticed that the show cause notice dtd. 02.08.2011 alleged that in terms of Explanation II to the Notification No. 23/2003-CE, the goods supplied to EOU under the claim of deemed export benefits were to be treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect. 4.7 We further find that the case of the revenue in the present matter is also that appellant have cleared their final products in DTA by paying concessional central excise duty by availing benefit of Sr. No. 2 of Table to Notification No. 23/2003-CE dtd. 31.03.2003. The Appellant, for purpose of paying the central excise duty on the finished goods have calculated the central excise duty in the manner as laid down under proviso to Section 3(1) of Central Excise Act, 1944 which is equivalent to the aggregate of the customs duties leviable on the like goods is imported from out of India but they have not included the additional duty of customs leviable under Section 3(5) of Customs Tariff Act 1975 in the aggregate duties despite the facts that above said products are exempted from payment of VAT/Central Sales Tax in the Union Territory of Dadra and Nagar Haveli against C form. Whereas appellant contended that re-quantification of demand under Sr. No. 2 was not correct. For the ease of reference column No. 4 against the Sr. No. 2 of Table of Notification No. 23/2003-CE dtd. 31.03.2003 is reproduced herein below. In excess of the amount equal to the aggregate of duties of Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question were not exempted from the payment of sales tax or VAT when sold to a customer in the said Union Territory. In this case it is not disputed that such goods when sold in DTA had not been exempted by the State Govt. by any Notification. We are unable to accept the contentions raised by the revenue and the findings recorded by the adjudicating authority for the reason that , it is the fact that the clearance of disputed finished goods from EOU to DTA are not exempted from payment of sales tax by the State Government by any notification and revenue is unable to bring on record any notifications issued by the State Government or otherwise to indicate that finished goods cleared by appellant to DTA are exempted. We also noticed that the case of the revenue is based on the ground that when goods were sold by the appellant into DTA during the curse of inter-state sale against C form, the goods were exempted from payment of Central Sales Tax and therefore appellant were required to take into account 4% SAD element while calculating the aggregate of customs duty under Sr. No. 2 of Notification No. 23/2003-CE. We do not agree with the argument of the revenue when the condition stipul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cleared into DTA are exempt from payment of excise duty equivalent to Special Additional Duty under Section 3(5) of the Customs Tariff Act, leviable in such goods only if such goods are not exempted by the state Government from payment of Sale tax or VAT. We already discussed in above para that the finished goods cleared by the appellant in questions were not exempted from payment of sales tax or VAT when sold to a customer in the Union Territory. Hence, the condition No. 1 of Notification No. 23/2003-CE was fulfilled by the appellant in the present case. Accordingly they correctly did not include the element of 4% SAD leviable under Section 3(5) of the Custom Tariff Act while calculating the excise duty payable by them. 4.12 We also find that in the present matter duty demand is also based on the denial of benefit of Sr. No. 3 of Notification No. 23/2023-CE for the period prior to 06.07.2007 on the ground that the goods were procured from domestic suppliers who availed the deemed exports benefit on such supply. In this context we already observed in above para that Explanation II was inserted in the Notification only with effect from 06.07.2007 and has prospective effect. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the total production during disputed period and clearance of finished goods into DTA and exports, the product-wise standard input output ratio, details of maximum possible production from the imported raw materials by applying input output ratio. From the said details we find that the goods manufactured from imported raw materials and raw material procured from another EOU to DTA unit which availed deemed export benefit were very less as compared to the goods exported. Therefore we find that the entire finished goods manufactured out of imported raw material and raw material procured form EOU were exported. In view of above details we agree with the submission of appellant that no part of the goods manufactured from the imported raw material and material procured from EOU were cleared into DTA. Clearly, the denial of benefit under Sr. No. 3 of Notification No. 23/2003-CE by the Ld. Commissioner is legally not correct. 4.16 We also find that the during the period 01.03.2008 to 24.08.2009 the appellant have claimed benefit of Sr. No. 2 of Notification No. 23/2003-CE. The only dispute is with respect to demand of SAD for the period 01.03.2008 to 24.08.2009. The said demand is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inery, separate godowns and separate branches of manufacturing process (which would amount to establishing a separate factory within the factory) before extending the benefit of the above-said Circular. The Board vide above circular clarified that it was not the intention of the Board that benefit of Notification should be denied to those assessee who manufacture export goods and goods cleared into DTA by using common inputs, common machinery, common godowns and common manufacturing process. Therefore, we find that the finding in the impugned order that benefit of Notification No. 23/2003-CE was not available to the appellant since export goods and goods cleared into DTA were manufactured on common manufacturing lines and using common input which were stored commonly is not correct and against the true spirit of above exemption notification. 4.18 We also find that in the present matter Appellant produced the issue slips indicating use of goods for exports or DTA. If, the raw material issue slips pertains to DTA, then it means that the appellant have consumed indigenously procured raw materials. Further Appellant produced the evidences that entire quantity of imported raw material h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and quantum of evasion on account of violation of the conditions of the Notification. Therefore, extended period of limitation under proviso to Section 11A(1) was invokable as there was clear suppression of fact and wilful mis-statement on part of the appellant as well as contravention of the provisions of the Central Excise Act and Rules made thereunder with intent to evade payment of duty. However we find that the appellant were regularly filing their ER-2 returns. The appellant filed all the particulars mentioned in the ER-2 returns. The appellant have disclosed the fact that the goods were cleared into DTA also. The department also carried out various audits from time to time during which the appellant have disclosed all the details asked for. Thus, all the required facts were in the knowledge of the department. It is well settled that when facts are known to the department there cannot be suppression of facts on the part of the appellant. We also noticed that the appellant have categorically informed the Superintendent of Central Excise vide letter dated 8.12.2008 regarding computation of excise duty. The appellant have submitted computation of duty vide their letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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