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TMI Blog2000 (3) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned therein shall not apply to excisable goods produced or manufactured by 100% Export Oriented Undertaking. Rule 57A relates to allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 as may be specified by the Central Government in the notification, paid on the goods used in or in relation to the manufacture of the final products and for utilizing the credit so allowed towards payment of duty of excise leviable on the final products. Thus considering the whole aspect of the matter the Tribunal was not right in holding that duty is to be leviable in terms of the proviso to Section 3(1) of the Central Excise Act, 1944. We, therefore, set aside the impugned judgment of the Tribunal and restore that of the Collector of Central Excise, dated October 11, 1994. The appeal is accordingly allowed. - 1787 of 1998 - - - Dated:- 10-3-2000 - D.P. Wadhwa and Ruma Pal, JJ. [Order per : D.P. Wadhwa, J.]. - This appeal is directed against the order dated November 5, 1997 of the Customs, Excise and Gold (Control) Appellate Tribunal (for short the 'Tribunal') allowing the appeal of the respondent and directing that duty of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries (Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act." 3. Under the relevant import policy the 100% Export Oriented Unit Scheme (EOU) envisages an industrial unit offering for export its entire production, excluding rejects or items otherwise specifically permitted to be supplied to the Domestic Tariff Area. Industrial units approved by the Board of Approvals (BOA) set up for this purpose alone are eligible for import of capital goods, raw materials, components and spares, etc. required by them for export production under the Scheme. Based on the approval granted by the Board of Approvals a 100% EOU is eligible to import, without payment of customs duty, capital goods, office equipment, proto-types and technical samples, generating sets, raw materials, components cosumables, intermediates, packing materials, material handling equipment like fork lifts, overhead cranes and spares under Open General Licence subject to certain conditions. Applications for approval as 100% Export Oriented Unit are to be submitted to the Secretariat for Industrial Approvals, Ministry of Industry. Such EOU under no circumstances can be allowed to dispose of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Board of Approvals (BOA) for 100% EOUs in its meeting and had been recommended for approval subject to normal conditions of debonding. It was stated that formal letter would be issued by SIA in due course. It was also pointed out that the letter was being issued to enable the appellant to work out various modalities with the Customs Authorities and start for switching over from 100% EOU to DTA and to enable it to obtain release/dispose of the stocks/inventories on payment of applicable duties. 8. By letter No. E.O.335(91)-IL/MRTP, dated November 3, 1993 from the Government of India in the Ministry of Industry, Department of Industrial Development, Secretariat for Industrial Approvals (SIA) to the appellant it was agreed in principle to allow the appellant to withdraw from 100% EOU Scheme subject to conditions mentioned in the annexure to the letter. It will be appropriate to set out this letter as well as the annexure thereto, containing the conditions governing withdrawal from 100% EOU Scheme :- "No.E.O. 335(91)-IL/MRTP Government of India Ministry of Industry Department of Industrial Development Secretariat for Industrial Approvals EOU SECTION ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is penalty shall be paid before the issue of final debonding letter. (3) In case the undertaking has availed of the facility of external commercial borrowings, the same shall be disinvested before the issue of final debonding letter. (4) The undertaking shall obtain a fresh approval under the current industrial Licensing Policy to undertake the proposal activity under domestic tariff area scheme. (5) The undertaking shall undertake an export obligation of 25% of the annual production for a period of 5 years or an amount equal to five times of the CIF value of imports whichever is higher. For this purpose it shall execute a Legal undertaking with the Import Licensing Authority concerned. (6) The undertaking shall also make such payment(s) as may be necessary for all other major benefits that it might have availed of under 100% Export Oriented Scheme. 9. When the appellant received letter, dated October 18, 1993 from the Ministry of Commerce it approached the Assistant Collector of Central Excise for valuing the goods and the duties of customs and central excise payable. Appellant was informed by the Assistant Collector of Central Excise by his letter No. C.No. VIII/48/3/92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m was issued to the show cause notice by the Assistant Collector of Central Excise on February 21, 1994. By his order, dated March 31, 1994 Assistant Collector of Central Excise passed his order in original in which he agreed with the appellant to the extent that the date of debonding should be taken as November 15, 1993 when the appellant paid the applicable duties and not February 2, 1994 when formal letter of debonding was issued by the Ministry of Textiles. However, in respect of applicability of proviso to Section 3(1) of the Act Assistant Collector of Central Excise decided the issue against the appellant and accordingly confirmed the duty demanded. Aggrieved appellant filed an appeal before the Collector of Central Excise (Appeals) under Section 35 of the Act. Collector of Central Excise (Appeals) agreed with the appellant and decided the issue in its favour thus allowing the appeal. Now it was the Revenue which felt aggrieved. Collector of Central Excise filed appeal before the Appellate Tribunal against the order of the Collector of Central Excise (Appeals) under Section 35B of the Act. By order, dated November 5, 1997 which is impugned, Tribunal allowed the appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to units in Kandla Free Trade Zone and Santa Cruz Electronics Export Processing Zone allowing them to sell their goods not exceeding 25% of the production in DTA on payment of excise duty equal to the duties of customs leviable on like goods imported from abroad. Clearance to the DTA was to be allowed only after necessary permission had been obtained by the unit from the Development Commissioner/Administrator in-charge of the Free Trade Zone (FTZ). The circular pointed out that in order to levy excise duty equal to the duties of customs leviable on the like goods imported from abroad, a proviso had already been inserted in Section 3(1) of the Act. In 1984 there was further amendment to proviso to Section 3(1) of the Act by Act 21 of 1984. The effect of the amendment was that the facility of sale in DTA was now extended to 100% EOUs as well. 16. On May 29, 1984 Central Government issued a circular explaining further amendment to proviso to Section 3(1) of the Act. It said that the Central Government had decided to allow 100% EOU which had been approved by the Board of Approvals (BOA) to sell their goods not exceeding 25% of their exportable production in the Domestic Tariff Area ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of Approvals and the Development Commissioner are two different authorities constituted for two different purposes. Permission to debond is a statutory function exercised by one statutory authority. On the other hand permission to sell in India is to be exercised by different statutory authority. If reference is made to para 102 of the relevant import export policy permission of the Development Commissioner is required for selling the goods in India up to limit of 25% by 100% EOU. Para 117 of the policy deals with debonding of 100% EOU. Thus it is apparent that debonding and permission to sell in India are two different things having no connection with each other. It also becomes apparent that in view of the EOU Scheme as modified from time to time and corresponding amendments to Section 3 of the Act the expression "allowed to be sold in India" in proviso to Section 3(1) of the Act is applicable only to sales made up to 25% of production by 100% EOU in DTA and with permission of the Development Commissioner. No permission is required to sell goods manufactured by 100% EOU lying with it at the time approval is granted to debond. 19. Revenue has proceeded on the assumption that b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt applied for debonding of the unit, which was accepted in October 1993. The Department issued show cause notices demanding duty on the stock of finished goods lying on the date of debonding, which is equal to customs duty leviable under Section 12 of the Customs Act, 1962 as per proviso to Section 3(1) of the Act which provides for charging duty on 25% of goods sold by an EOU in DTA. It will thus be seen that it is the stand of the Revenue itself that proviso to Section 3(1) of the Act is applicable to 25% of goods sold by an EOU in DTA. 23. Concept of bonding or debonding is well understood both under the Act and the Customs Act, 1962. The entire operations of an EOU are to be in customs bonded factory, unless otherwise specifically exempted from physical bonding. The approved unit is required to execute a bond/legal undertaking with the Development Commissioner concerned in the form prescribed. Under the conditions laid for EOU, bonding period for units under the EOU Scheme is ten years. This period may be reduced to five years by the Board of Approvals in case of products liable to rapid technological change. On completion of the bonding period it shall be open to the unit t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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