TMI Blog2004 (12) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Excises and Salt Act, 1944. Proviso to Section 11A(1) of the above said Act has also been invoked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (iii) In terms of Hyderabad Industries Ltd. 1999 (108) E.L.T. 321 (S.C.), and Government s circular F. No. 345/12/99-TRU, dated 24-9-99 only the basic customs duty is leviable u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue 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 + Rs. 24,30,120). It was further pleaded that for the clearances beyond permitted limit, the duty is calculated under main Section 3(1) of the Central Excise Act, the notifications applicable to the relevant tariff items were not considered as the exemption notification under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue 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 production under this scheme... Thus we are not able to appreciate the Consultant s plea that the 5% of rejects should be calculated on actual production, since the actual production has not been recorded in any of the books of account truthf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms 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 time, which is as under:- Provided that the duties of excise which shall be levied and collected on any 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 he sold in India, shall be an amount equal to the aggregate of the duties of Customs which would be leviable under Section 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 16-9-2000 based on amendment to notification No. 2/95 vide Notification No. 38/99, dated 16-9-99 is not sustainable. The Hon ble Tribunal also observed that circular dated 24-9-2000 issued by the CBEC has clarified that notification No. 38/99, amending notification No. 2/95 etc. will take effect only from 16-9-99. (d) Coming to circular 345/12/99/TRU, dated 24-9-99 we find that the applicant s consultant is reading para 3 thereof in isolation. Para 3 reads as follows : 3. In the case of M/s Hyderabad Industires Ltd., [1999 (108) E.L.T. 321], the Hon ble Supreme Court has held that the charging section for the additional duty of customs, leviable under Section 3(1) of the Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 100% EOU, (in terms of proviso to Section 5A(1)), the benefit of which was denied to him. We cannot accept the argument that benefit of exemption notifications issued under Section 5A of Central Excise Act is not available to permitted clearances in terms of proviso to Section 5A of Central Excise Act but is available to unauthorised clearances since it cannot be the intention of the Government to deny benefit of exemption to law abiding 100% EOUs clearing goods to DTA with proper permission and to extend such benefits to illegal and clandestine clearances by law breaking concerns. 6. Coming to the duty liability, the duty computed by Commissioner (Inv.) on 5% of so called permitted clearances of rejects amounting to Rs. 24,30,119/- is not contested by the Revenue and thus stands accepted. However, the computation of duty on clandestine clearances by Revenue is Rs. 25,52,299/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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