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2019 (8) TMI 719 - AT - CustomsViolation of import conditions - Benefit of exemption notification -EOU - export of cotton waste generated in manufacturing of cotton yarn - diversion of imported raw materials in the making of goods ‘cotton waste,’ cleared to the ‘domestic tariff area’ at ‘nil’ rate of duty - HELD THAT:- There could be no doubt that no manufacturer sets out to produce waste which is only incidentally generated in the process of manufacture of finished goods. Appellant is required to take approval of the competent authority for manufacture of identified goods and the scheme itself acknowledges that any waste and rejects arising therefrom would be treated akin to approved finished goods. Therefore, there is no requirement to export such goods for entitlement to the benefit of the exemption notification under Central Excise Act, 1944 and Customs Act, 1962. Clearances from export oriented unit into the domestic tariff area are subject to duties of central excise even though the rate and the value applicable are derived from the provisions of Customs Act, 1962 and the Customs Tariff Act, 1975. There is no dispute that the impugned goods are a waste product and have been subject to the process of assessment as decreed by law. There is also no dispute that the impugned goods have materially altered from the raw materials utilised for manufacture and were not the duty free goods removed as such. The only issue that arises is the discharge of duty liability and the dispute is limited to the non-payment of duty arising from non-dutiability. The scheme of ‘export oriented unit’ is intended to provide special facilities to units that are engaged in export and even in the matter of clearance of domestic tariff area are subject to higher duties than a corresponding domestic unit is. The policy prescription also includes a ceiling on the quantity of goods that may be sold in the domestic market. A unit operating outside the scheme is subject only to the duties of excise on their finished products and there is no limit on the clearance that may be effected from the factory. The scheme of conditions in the exemption notifications under the Central Excise Act, 1944 and Customs Act, 1962 are intended to ensure that a unit operating under the scheme does not derive any unintended advantage vis-à-vis a unit operating outside by utilisation of exempted raw material and consumables. It cannot have been the conception behind the scheme to subject the waste generated by such units to a levy that is not less than that devolving outside the scheme; more so, as the cost of production of the finished goods invariably subsume the value of the materials that are embedded in the waste. Hence such value have already been either included in the obligation for export or subject to rate of duty not less than that suffered by a domestic unit and does not confer any unwarranted advantage to the appellant. Appeal allowed - decided in favor of appellant.
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