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2016 (4) TMI 771 - CESTAT NEW DELHI

2016 (4) TMI 771 - CESTAT NEW DELHI - TMI - Demand of differential duty - on finished goods lying in stock - at the time of debonding of the E.O.U. - Denial of exemption under Notification No.23/2003-CE dated 31.03.2003 - Appellant contended that no benefit has been availed by E.O.U. on the finished goods themselves and once the benefit availed on inputs, consumables and capital goods are surrendered then for all purposes, the unit becomes a normal DTA Unit.

Held that:- we are unable .....

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ing in stock when the E.O.U. intents to exit the scheme itself. It is noticed that the final debonding and conversion of E.O.U. to a D.T.A. Unit is legally permissible only on discharging all the duty liabilities on capital goods, raw-materials, finished goods etc. lying in the E.O.U. In such a situation, it is not legally tenable to argue that the rate of duty applicable to a normal Central Excise Unit should be applicable to a E.O.U. even before the E.O.U. becomes a normal Central Excise Unit. .....

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l) And B. Ravichandran, Member (Technical) For the Appellant : Mr. B. L. Narasimhan, Advocate, Mr. Vipul Agarwal, Advocate For the Respondent : Ms. Neha Garg, D.R. ORDER Per B. Ravichandran There are 2 appeals, one by the assessee and another by Revenue against the same order in original dated 13.02.2007 passed by the Commissioner of Central Excise, Indore. The brief facts of the case are that the appellant assessee was a 100% Export Oriented Unit (E.O.U.). In September, 2005 they applied for pe .....

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to quantum of duty payable on finished goods lying in stock at the time of debonding of the E.O.U. The appellant assessee calculated the duty liability on the finished goods after availing the benefit of exemption Notification No.23/2003-CE dated 31.03.2003. A show cause notice dated 29.08.2006 was issued to the appellant assessee to demand a differential duty of ₹ 88,69,040/- by denying the exemption under the above said Notification. 2. The case was adjudicated and the ld. Commissioner .....

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nd capital goods are surrendered then for all purposes, the unit becomes a normal DTA Unit. (b) The issue of payment of duty under proviso to Section 3 of Central Excise Act upon debonding of E.O.U. was considered by the Hon ble Supreme Court in the case of Siv Industries Ltd. 2000 (117) E.L.T. 281 (S.C.). The Hon ble Supreme Court held that duty payable on debonding cannot be equated with the expression allowed to be sold in India used in Proviso to Section 3 of the Central Excise Act. The Supr .....

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demand on the following grounds. (a) The exemption in terms of Notification No.23/2003-CE on the finished goods in an E.O.U. at the time of debonding is not available. This has already been conceded by the appellant/ assessee. As the said Notification applies only to functioning E.O.U. and not in respect of debonding E.O.U. (b) The decision of the Hon ble Supreme Court in Siv Industries (supra) is not applicable to the present case. The expression allowed to be sold in India appearing in provis .....

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ds manufactured in an E.O.U. before debonding should be in terms of rate applicable under proviso to section 3 (1) of the Central Excise Act, 1944. (c) Reliance was placed on the decisions of the Tribunal in Centrury Yarn vs. Commissioner of C.Ex., Indore 2011 (270) ELT 554, (Tri.-Del.) and Thirumala Seung Han Textiles Ltd. 2009 (237) E.L.T. 145 (Tri. Bang.) (d) The reliance placed by the appellant/ assessee on Notification No.52/2003 Cus. and Notification No.22/2003 is not relevant. A plain rea .....

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ally the proceedings against the appellant / assessee was to deny the concession claimed by them in terms of Notification No.23/2003- CE. Now both the sides agree that the said Notification is not applicable to the appellant assessee in respect of finished goods at the time of debonding. However, the appellant / assessee is contending that they are liable to duty on the finished goods only in terms of main Section 3 (1), in other words, as if the goods are manufactured and cleared by a normal Ce .....

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ion of the Hon ble Supreme Court in Siv Industreis (supra). We have perused the said decision carefully. We have also examined the Tribunal s order which was subject matter of the Hon ble Supreme Court s decision. The Hon ble Supreme Court has mainly focused and discussed the wordings of proviso to Section 3 (1). The Supreme Court after having taken note of the Revenue s plea regarding applicability of proviso to Section 3 (1), held that the term allowed to be sold in India is applicable in resp .....

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e which shall be levied and collected on any excisable goods which are produced or manufactured by a 100% Export Oriented Undertaking and brought to any other place in India shall be an amount equal to aggregate of duties of customs .. The term allowed to be sold in India was interpreted by Supreme Court to mean only goods which are permitted to be sold by the Development Commissioner in respect of their functioning E.O.U. This much has been categorically held by the Hon ble Supreme Court in Siv .....

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so took note of the Larger Bench decision in the case of Himalaya International Ltd. 2003 (154) E.L.T. 580 (Tri.- L.B.) and observed as below:- 10. In both the decisions, the Larger Benches have clearly distinguished the decision of the Apex Court in Siv Industries Ltd. case. Indeed the issue for consideration before the Apex Court in Siv Industries was relating to the duty liability after debonding and not at the time of debonding and this is apparent from the paragraph 4 of the said decision w .....

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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 per .....

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s 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 that the concessional duty under the said exemption Notification would apply only in a situation where the goods are brought to DTA under specified paragraphs (a), (d), (e) and (g) of the Foreign Trade Policy which is not the case when the unit exits from EOU scheme to DTA unit. The benefit under the said Notification i .....

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