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TMI Blog2004 (12) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... olished granite slabs to regular sizes up to an annual capacity of 36,000 sq. mts. As per the conditions of the scheme, the applicant was expected to export the entire production, excluding rejects not exceeding 5%, for a period of 10 years. (ii) Based on information that the applicant was clearing the goods manufactured by them into the Domestic Tariff Area (DTA) without payment of duty due thereon, the officers of Central Excise (Anti-evasion), Head Quarters Office, Hyderabad searched the office and factory premises of the applicant simultaneously on 8-4-92. The officers seized certain records and documents from the factory and the Registered Office on the said date. As a result of conducting further investigation, a SCN bearing OR No. 129/93-ADJN., dated 22-9-93 was issued by the Collector-II in the office of the Collector of Customs & CE, Hyderabad alleging that the applicant had cleared a quantity of 2,20,638.289 sq. ft. valued at Rs. 1,89,15,926/- of the polished granite slabs into the DTA without payment of duty due thereon. An amount of Rs. 3,18,89,891/- has been demanded as duty in terms of Rule 9(2) of the erstwhile CER, 1944 read with Sec. 3 of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id. The Commissioner vide his report dated 21-10-2004 submitted a report on the specified points. The said report was communicated both to the Revenue as well as the applicant. 2. The matter was heard on 7-12-2004 when Shri Laxmi Narain Goel, Consultant appeared for the applicants while Shri S. Thulasi Ram, AC and Shri B. Ramachandra Rao, Superintendent, Hyderabad I Commissionerate appeared for the Revenue. The applicant's Consultant stated inter alia during the hearing as well as written submissions filed as under : (i) He will not press the point that inspection reports should not be considered for working out the clearances as Revenue has conceded this point. (ii) With reference to Board's Circular No. 618/9/92-02, dated 13-2-2002 and as per the Commissioner (Investigation)'s report the total duty payable comes to Rs. 38,89,604/-. He referred to exemption notification No. 169/90/CE, dated 18-12-90 applicable to goods allowed to be sold in India by 100% EOU. To this, the Revenue representative responded that the applicant has been given the benefit of all the available exemption notifications during the relevant period. (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arances for the relevant period arriving at a total of 2,20,638 sq. ft. valued at Rs. 1,89,15,926/-. The duty on the permitted clearance of 5% of authorised production was demanded under proviso to Section 3(1). The said quantity worked to 59,474 sq. ft. and the value comes to Rs. 48,69,860. (Annexure XXVIII). The duty payable on the quantities beyond the permissible limit i.e., for 1,61,164 sq. ft. is Rs. 1,40,46,066, as per Annexure XXIX of the SCN and that while calculating 5% of rejects only authorised production was taken into account. (iv) In view of the Board's circular No. 618/9/92-02, dated 13-2-2002, the duty on clandestine clearances is to be calculated under main Section 3 of the Central Excise Act, 1944 and referred to page 13 of his written submission for calculation, according to which, the duty on clandestine clearances comes to Rs. 25,52,299/-. In respect of 5% authorised production treated as permitted clearances towards rejects, the duty quantification of Rs. 24,30,120/- done by Commissioner (Inv.) is not contested. The Revenue also conceded to give the benefit of cum-duty value and thus revised the duty liability to Rs. 49,82,419/- (Rs. 25,52,299 + ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exported) 84,388 s.ft Remaining Quantity of goods (unaccounted) 2,22,970 s.ft Total clandestine clearances 2,20,289 s.ft Thus, the allegation of clandestine clearances of 2,20,289 sq. ft appears to be justified inasmuch as the Revenue has given the deduction of 10% towards wastage of the material cut and had excluded the goods exported as per statutory records. However revenue was also fair enough to concede the quantity of goods alleged to have been removed based only on the basis of inspected/selection records. Revenue also is fair enough to re-work the duty liability on clandestine clearances charging duty under main Section 3 of Central Excise Act instead of proviso thereto based on Board's circular referred to earlier. We find that the revenue was also liberal in allowing the maximum permitted quantity of rejects with reference to authorised production as per condition No. 6 contained in Annexure to the letter dated 16-4-87 of the Secretariat of Industrial Approval which reads as under "The undertaking may be permitted to sell in the domestic tariff area a percentage of rejects which may not exceed 5%. (or such percentage as may be fixed by the Board) of authorized produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral excise duty in terms of aforesaid proviso to Section 3(1) of the Central Excise Act, 1944. Therefore, the 5% of the so called permitted clearances towards rejects, have to pay the aggregate of duties of customs namely basic duty, CVD, Auxiliary duty, etc. referred to earlier in terms of the above proviso to Section 3(1). However certain exemption notifications were also issued from time to time reducing the said aggregate of customs duty and department had rightly applied such exemption notifications while calculating the duty on the 5% of permitted clearances to domestic tariff area under the rejection quota. (b) The Hon'ble Supreme Court of India (Constitutional Bench) in Hyderabad Industries v. UOI (decided on 11-5-99) vide 99 (108) E.L.T. 321 (S.C.) held inter alia, that customs duty is the duty u/s 12 of the Customs Act, 1962 read with Section 2 of the Customs Tariff Act, 1975. It was further held that charging section for the levy of additional duty (CVD) is not Section 12 of the Customs Act but Section 3 of the Customs Tariff Act, 1975. This decision was with reference to proviso to Section 3(1)A of Central Excise Act, 1944 as it was at that tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms (CVD), stating that it was not a duty envisaged u/s 12 of the Customs Act and that the duty payable u/s 3 of the Central Excise Act read with exemption notification u/s 5A of the Act was only the Basic Customs Duty u/s 12 of the Customs Act, 1962. This contention is similar to the one raised by the applicant's consultant. The Hon'ble Bench of the Tribunal while discussing the various facets of the case, no where stated that the applicant was liable to pay only the Basic Customs Duty with reference to the proviso to Sec. 3(1) of the Central Excise Act, 1944. On the other hand, it was held, inter alia, that by the amendment to the proviso u/s 3(1) of the Central Excise Act, EOUs on clearance to DTA are required to pay Basic Customs Duty u/s 12 of the Customs Act, 1962 and Additional duty of Customs u/s 3 of the Customs Tariff Act, 1975. While the amendment to proviso to Section 3(1) of the Central Excise Act was retrospective increasing the duty liability, the nature and quantum of exemption granted under relevant notifications continued to be the same as it was obtained before amendment to Section 3(1). Accordingly, it was held that the demand raised for the period prior to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Power to grant exemption from duty of excise - (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon : Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured - (i) in a free trade zone and brought to any other place in India; or (ii) by a hundred per cent export oriented undertaking and allowed to be sold in India. Explanation. - In this proviso, "free trade zone" and "hundred per cent export oriented undertaking" shall have the same meanings as in Explanation 2 to sub-section (1) of Section 3...." The Consultant could not mention which notifications issued under Section 5A were applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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