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TMI Blog2011 (4) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... are the manufacturers of cotton yarn classifiable under Chapter heading 5205 of the Central Excise Tariff Act. Previously the appellants were 100% EOU. The appellants applied to the Development Commissioner for exit from EOU scheme and obtained the debonding permission from yarn division. The final debonding from 100% status to normal unit in respect of yarn division was granted by the Assistant Development Commissioner, NOIDA under order dated 20-4-04 to be effective from 31-3-2004. The Commissioner, Indore under order dated 16-4-04 directed the appellants to deposit duty payable. In view of debonding from 100% EOU status to normal unit, the appellants were required to pay duty on the finished goods manufactured or produced and lying in stock on the day of debonding in terms of provisions of law applicable thereto. Accordingly, the Commissioner, Indore vide letter dated 16-4-04 directed the appellants to deposit the duty payable on the raw materials, consumables, capital goods, waste and finished goods as self assessed by them to the tune of Rs. 1,08,83,399/-. At the time of debonding the appellants had paid the Central Excise duty at the concessional rate on the basis of Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Notification. According to the appellants S. No. 2 of the said Notification has no application. He further submitted that the decision of the Larger Bench of the Tribunal in the matter of Himalaya international Ltd. v. CCE, Chandigarh reported in 2003 (154) E.L.T. 580 (Tri - LB) is not applicable to the case in hand. According to the learned advocate, the ratio of the said decision is inapplicable to the facts of the case wherein an assessee stands exited from LOU scheme and functions as normal DTA unit and in such a case duty payable on debonding unit is in terms of i+ Section 3(1) of said Act and not by applying the proviso to the said section. He further submitted that the appellants debonded their unit in March, 2004 and final debonding order was obtained on 20-4-2004. The appellants paid the Central Excise duty on the finished goods at the time of debonding on 4-4-2004. The show cause notice was issued on 6-3-2009. There, was no suppression of any fact and therefore, the extended period of limitation was not invokable. 5. The DR on the other hand, while justifying the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; provisions of Section 3(1) inasumuch as they had not discharged the duty as stipulated for such purposes, it is obligatory on the part of the noticee to abide by the Rules and Notification laid therein for the purpose of debonding'. It was also stated that 'the benefit of Notification No. 23/2003-C.E. is restricted to sale allowed to be sold' states and not for debonding purposes". The show cause notice further recorded that "the noticee also appears to have contravened the provisions of Rule 4, 6 and 8 of the Central Excise Rules, 2002 as much as at the time of debonding while self assessing the duty liability, the noticee had wrongly availed the benefit of Notification No. 23/2003-C.E., dated 23-3-03, thereby short paid the duty." It was also stated therein that "the noticee has not followed the Notification No. 23/2003-C.E., dated 31-3-03 and proviso to Section 3 of Central Excise Act, 1944 and intentionally paid the lesser duty at the time of debonding which resulted In short payment of duty due to suppression of facts." It is therefore, apparent that the demand of duty was not in relation to the goods cleared after debonding the unit from EOU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the benefit of EOU scheme on ceasation of being EOU has obviously to pay the normal duty payable for exporting the goods in the absence of applicability of the said scheme, and that is what had been held by Larger Bench in Jaipur Golden Transport Co. Pvt. Ltd. cited supra. It was clearly ruled therein as under:- "We find that the wordings of proviso to Section 3(1) of the Central Excise Act and Notification 125/84 which we have been called upon to interpret are similar and the basic dispute is as to how the words "allowed to be sold in India" are to be interpreted. After going through the various submissions made by both sides, we find that 100% EOUs were allowed to be established with the sole purpose of exporting 100% of their production as is evident from the words 100% EOUs. However, on account of certain hardship faced in getting export order, sales in DTA up to 25% were permitted from the year 1984 but there was a clear intention to distinguish between such sales by the 100% EOU from the sales by domestic units other than 100% EOU and it was for this purpose that proviso to Section 3(1) and Notification 125/84 was introduced. Since there were only two modes of clearance i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be adjusted to the latter or must be disregarded altogether. Further when there is a conflict between the use and the substance, greater regard should be paid to the use. Following these principles, we find that the purpose all along has been to treat 100% FOUs differently from domestic units other than 100% EOU and therefore we hold that so long an hundred per cent EOU continues as an EOU, it will be within the proviso to Section 3(1) of the Central Excise Act and a mere violation of the permission in the matter of sale to DTA will not take it outside the proviso to Section 3(1) of the Central Excise Act and Notification 125/84-C.E. Any other interpretation will mean that while the law abiding assessee will be liable to pay duty on domestic clearances, others violating the law can conveniently escape duty liability and this would be against the principle of suppressing mischief and advancing remedy." 9. In Himalaya International Ltd. v. CCE, Chandigarh-I reported in 2003 (154) E.L.T. 580(Tri. - LB), the Larger Bench had ruled as under :- "5. We find merit in the contention raised by the learned DR that in the nature of the conditions under which an hundred percent EOU is functi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in particular clause 6.18 of Chapter 6 of the Foreign Trade Policy as was in force at the relevant time, sub-clause (e) specifically provided that "Units proposing to exit from EOU scheme should obtain permission for in principle approval and submit details of imports and exports made to the Central Excise/Customs Authority. After such verification, the said authority will assess the duty payment and the unit will pay the duty so assessed and obtain 'no due certificate' from the excise authority. During the period between such payment of customs duty and obtaining the final debonding letter, the unit will not be entitled to claim any exemption for procurement of capital goods or inputs." It is therefore, clear that at the time of debonding, the question of availing the benefits available to DTA unit cannot arise. 12. Both the authorities below on detailed discussions about applicability of the proviso the Section 3(1) of the said Act in the facts of the case have clearly applied the provisions of law as they are applicable to the facts of the case and therefore, we do not find any infirmity in the impugned order in that regard. Commissioner (Appeals) was justified in observing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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