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2021 (11) TMI 654 - CESTAT MUMBAI100% EOU - Levy of Central Excise Duty - cotton waste generated in manufacturing of the finished products and cleared in the domestic tariff area - period 08.03.1999 to January 2011 - proviso to Section 3 (1) of Central Excise Act, 1944 - HELD THAT:- Bare reading of proviso indicates that it is applicable, only in respect of the excisable goods which are produced or manufactured in India. In our view if the goods fail to qualify the test of manufacture as per Section 2 (f) and the law as laid down by various courts, then the proviso to section 3 cannot be pressed in to service for the purpose of levy of duty of excise as equivalent to the Customs duty. Further by the amendment made in proviso, to section 3(1), whereby the phrase “allowed to be sold in India” was replaced by the phrase “brought to any other place in India”, very clear that in case of manufactured goods by an EOU, the proviso shall apply in all situations. Section 11A of the Central Excise Act, 1944 can be pressed into service for recovery of “duty of excise” and not for the recovery of any other tax or duty including the Customs Duty leviable under Customs Act, 1962. Hence there are no merits in the observations made by the Commissioner while distinguishing the decision of C T Cotton. The issue for consideration in the present case is demand of duty on the cotton waste arising during the course of manufacture of finished product exported by the appellants. Once it is held that the cotton waste is not a manufactured goods leviable to excise duty, all the subsequent arguments advanced by the Commissioner vis a vis contravention of the provisions of exemptions issued under Customs Act, 1962 and those of the Foreign Trade Policy, become irrelevant for these proceedings, initiated under provisions of Section 11A of the Central Excise Act, 1944. Commissioner have referred to the first two show cause notices, where in the demand has been made in respect of the “Cotton Waste” cleared clandestinely by the appellant, treating it as the goods produced by the EOU. In view of the decision of the tribunal in case of M/S CT. COTTON YARN LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE [2013 (1) TMI 249 - CESTAT NEW DELHI], we are not in position to agree with the said observations. Distinction made by the Commissioner, by stating that C T Cotton was a case in which the Cotton Waste aroused from the indigenous raw material, also lack merits as the source of raw material do not determine whether a process amounts to manufacture or not in terms of Section 2 (f) of the Central Excise Act, 1944. The demand of duty cannot survive in view of the decision in case of C T Cotton, for consideration of which the matter was earlier remanded back by the tribunal to original authority, we do not discuss the issue of limitation - Since we hold against the demand of duty, the demand for interest and penalty to is set aside. Appeal allowed - decided in favor of appellant.
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