2000 (7) TMI 964 - HC - Central Excise

Summary

Issues Involved:
1. Legality and validity of Circular No. 38/2000-Cus, dated 10th May, 2000.
2. Levy of additional duty of customs (CVD) on DTA sale of reprocessed plastic agglomerates/granules.
3. Applicability of exemption notifications to plastic materials reprocessed in India.
4. Jurisdictional status of Kandla Free Trade Zone (KFTZ) and Export Processing Zone (EPZ) within India.

Summary:

1. Legality and Validity of Circular No. 38/2000-Cus, dated 10th May, 2000:
The petitioners challenged the legality and validity of Circular No. 38/2000-Cus, dated 10th May, 2000, issued by the Government of India. The Circular directed the Commissioners of Customs to recover short levy by reviewing the DTA clearance made by plastic processors like the petitioners.

2. Levy of Additional Duty of Customs (CVD) on DTA Sale of Reprocessed Plastic Agglomerates/Granules:
The Circular raised doubts regarding the levy of additional duty of customs (CVD) on DTA sale of reprocessed plastic agglomerates/granules. The petitioners argued that they were already paying duties in respect of goods sold in the Domestic Tariff Area (DTA) and additional duty (CVD) u/s 3 of the Customs Tariff Act, 1975. The Court noted that the goods manufactured in KFTZ or EPZ are liable to duties of excise equivalent to the aggregate of duties of customs u/s 12 of the Customs Act, 1962.

3. Applicability of Exemption Notifications to Plastic Materials Reprocessed in India:
The Circular pointed out that the exemption notifications (Nos. 5/98-C.E., 5/99-C.E., and 6/2000-C.E.) required fulfillment of two conditions: reprocessing of plastic scrap material should be done in India, and the plastic scrap or waste should fall within specified chapters of the Customs Tariff. The Court held that the petitioners were entitled to the exemption as the goods were reprocessed in India and fell within the specified chapters.

4. Jurisdictional Status of Kandla Free Trade Zone (KFTZ) and Export Processing Zone (EPZ) within India:
The respondents argued that KFTZ and EPZ are not parts of India for legal purposes. However, the Court clarified that KFTZ and EPZ are within the territorial limits of India, and the Central Excise Act, 1944, extends to the whole of India. The Court emphasized that the reprocessing done in KFTZ or EPZ should be considered as done in India.

Conclusion:
The Court quashed the impugned Circular No. 38/2000-Cus, dated 10th May, 2000, stating that it was not in accordance with law. The Court held that the petitioners were not liable to pay countervailing duty (CVD) as the goods manufactured in India were exempt from excise duty. The petitions were allowed, and the rule was made absolute with no order as to costs.