2002 (12) TMI 399 - Commissioner - Central Excise

Summary

Issues:
1. Liability of excise duty on goods produced in a 100% EOU and cleared to DTA.
2. Interpretation of Notification 55/91-C.E. dated 25-7-91 exempting additional excise duty for goods manufactured in a 100% EOU.
3. Applicability of Customs Act provisions on goods produced in a 100% EOU and cleared to DTA.
4. Correct measure of tax for goods produced in a 100% EOU and sold in DTA.

Analysis:
1. The appeal involved the liability of excise duty on goods produced in a 100% EOU and cleared to DTA. The appellants, manufacturers of cotton yarn and gray fabrics, contested a demand for duty, penalty, and interest imposed by the Dy. Commissioner of Central Excise. The dispute arose from the clearance of cotton yarn to DTA without payment of AED (T and TA), leading to a demand for duty, penalty, and interest under relevant sections.

2. The interpretation of Notification 55/91-C.E. dated 25-7-91, which exempts additional excise duty for goods manufactured in a 100% EOU, was crucial. The lower authority had relied on this notification along with the proviso to section 3 of the Central Excise Act, 1944, to confirm the demand. However, the appellants argued that the notification unconditionally exempted excisable goods from additional excise duty, eliminating the liability for such duty.

3. The judgment delved into the applicability of Customs Act provisions on goods produced in a 100% EOU and cleared to DTA. It was clarified that the measure of tax for such goods is based on customs duties under the Customs Act, 1962, when sold in DTA. The nature of the levy remains excise duty, with the measure of tax determined by customs law provisions, not additional excise duty under the AED (T & TA) Act, 1978.

4. The correct measure of tax for goods produced in a 100% EOU and sold in DTA was a key aspect of the judgment. The Commissioner highlighted that the liability for additional excise duty under the AED (T & TA) Act, 1978, was extinguished by Notification 55/91-C.E., dated 25-7-91, for goods manufactured in a 100% EOU. Therefore, the lower authority's reliance on circulars and notifications unrelated to additional excise duty was deemed erroneous, leading to the appeal being allowed and the lower authority's order set aside.