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TMI Blog2000 (3) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... into, any part of India as, and at the rates, set forth in the Schedule to the Central Excise Tariff Act, 1985 : 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 be sold in India, shall be an amount equal to the aggregate of the duties of customs which would be leviable under section 12 of the Customs Act, 1962 (52 of 1962), on like goods produced or manufactured outside India if imported into India, and where the said duties of customs are chargeable by reference to their value; the value of such excisable goods shall, notwithstanding anything contained in any other provision of this Act, be determined in accordance with the provisions of Customs Act, 1962 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975). Explanation 1 - Where in respect of any such like goods, any duty of customs leviable under the said section 12 is leviable at different rates, then, such duty shall, for the purposes of this proviso, be deemed to be leviable under the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding of its unit from 100% EOU, i.e., withdrawal from 100% EOU Scheme. By letter, dated October 18, 1993 of the Ministry of Commerce it was agreed in principle to allow the appellant to withdraw from the 100% EOU Scheme subject to the conditions on which withdrawal was permitted and as mentioned in annexure the letter. Once the debonding of the unit is permitted, finished goods earlier manufactured in the 100% EOU could be cleared for Domestic Tariff Area (DTA) on levy of duty of Central Excise. The dispute is at what rate this duty is to be levied. 5. As noted above, it is the contention of the appellant that excise duty is payable on the finished goods under main Section 3(1) of the Act together with customs duty on the imported raw material used in the manufacture of said finished goods lying in the stock. The Revenue on the other hand contends that excise duty under proviso to Section 3(1) of the Act is payable on the finished goods and with no customs duty being levied on the raw materials gone into the manufacture of finished goods. 6. It is the expression "allowed to be sold in India" appearing in proviso to Section 3(1) of the Act which in fact is the bone of contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port Oriented Scheme, for which letter of permission No. PER: 163(91)/E.O. 335(91) - IL(MRTP), dated 18-12-1991 was granted to you for the manufacture of viscose staple fibre for an annual capacity of 18,000 tonnes. The withdrawal from 100% EOU Scheme will be subject to the conditions mentioned in the Annexure (attached). 2. After you have complied with the conditions mentioned in the Annexure, you may approach your Administrative Ministry for issue of final debonding letter. 3. As regards surrender of Letter of Permission No. PER: 163(91)/E.O.235(91)/E.O. 235(91)-IL/MRTP, dated 18-12-1991, a separate communication will follow from the Administrative Ministry (viz. Ministry of Textiles - A&MMT Section), Udyog Bhawan, New Delhi. 4. All further correspondence in the matter, if any, may please be addressed to the Administrative Ministry viz. Ministry of Textiles — A&MMT Section, Udyog Bhawan, New Delhi. 5. Please acknowledge receipt. Yours faithfully, Sd/- (Baldev Raj) Under Secretary to the Government of India" "Annexure Standard Conditions Governing Withdrawal from 100% EOU Scheme (1) The undertaking shall pay all customs and excise duties on the imported and indigenous c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed November 3, 1993 of the Government of India in the Ministry of Industry, Secretariat for Industrial Approvals (SIA) have also been complied with by the appellant. 11. On February 2, 1994 a formal letter was issued by the Ministry of Textile in the Government of India debonding the appellant's unit and permitting it to operate as a DTA unit. This letter took note of the fact that on the basis of the provisional assessment by the Assistant Collector of Central Excise appellant had deposited the amount of duties of customs and central excise and the appellant had also been allowed to clear the finished stock lying with it in its stock as on November 16, 1993 as well as the production from December 8, 1993 onwards on provisional basis. After the appellant had been allowed in principle to withdraw from the 100% EOU Scheme by letter dated November 3, 1993 of the Ministry of Industry it had recognized its manufacturing activities as a DTA unit from December 6, 1993. 12. On January 21, 1994 Assistant Collector of Central Excise issued a show cause notice to the appellant now seeking to assess the finished goods lying in the stock on the date of debonding and demanding excise duty unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into India for the purpose of manufacture of articles for export out of India or for being used in connection with the production or packaging of goods for export out of India by 100% EOU approved by the Board of Approvals (BOA) from whole of the duty of customs leviable thereon and the additional duty, if any, subject to the conditions contained in the notification. One of the conditions was "on the clearance of five per cent of articles so manufactured or such other percentage as may be fixed by the said Board, which are allowed to be sold in India, being in the nature of rejects, the importer shall pay a sum equivalent to the duty of excise payable on such articles under Section 3(1) of the Act, which have not been exported". Benefit of the notification is to be availed of by the importer, if he exports out of India 100% or such other percentage as may be fixed by the said Board, of articles manufactured wholly or partly from the goods for the period stipulated by the Board or such extended period as may be specified by the said Board. On the expiry of this period the importer is required to pay customs duty on the imported capital goods, material handling equipment, office equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic Notice No. 16-ITC(PN)/92-97 was issued, being one of the import and export pubic notices, laying down guidelines for sale of goods in DTA by EOUs and units in the Export Processing Zone (EPZs). The Public Notice referred to the export and import policies and the Handbook of Procedures (1992-97) providing for sale of goods in the DTA by EOUs and units in EPZs up to 25% and then laid down the guidelines which would govern sales in DTA. This Public Notice could not be applicable to EOU when it is debonded in view of the norms laid in Public Notice which could apply only to the unit not withdrawing from EOU Scheme. 18. Contention of the Revenue is that permission to withdraw from scheme is itself a permission to sell in India, i.e., when unit is permitted to debond, it would be deemed to have been permitted to sell the goods in India. But then permission to sell in India has to be in terms or in accordance with the provisions of the export import policy. Permission to sell in India by 100% EOU consists of all those factors like value addition, fulfilment of export obligation, sale of a general currency licence holder, item being not mentioned in the negative list and then there bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant was never acceded to by the concerned authority and letter of debonding was issued. This application of the appellant, therefore, could not be treated as an application for permission to sell in India as contended by the Revenue and the debonding letter of the BOA cannot be construed as permission to sell in India. Argument of the Revenue that debonding assumes allowing all closing stock of the goods on the date of debonding to be sold in India would be stretching the matter a little too far. Conditions for sale of 25% of the finished products by EOU and sale of finished stock by a debonded 100% EOU on the date of debonding are different. 21. It was contended by Mr. Lakshmikumaran, learned counsel for the appellant, that under Rule 9A(1) (ii) of the Central Excise Rules framed under the Act duty is chargeable at the rate on the date of removal of the goods and not from the date of their manufacture (See Wallace Flour Mills Co. Ltd. v. Collector of Central Excise, Bombay, Division III [1989 (44) E.L.T. 598 (S.C.) = (1989) 4 SCC 592]. He said it is not material when the goods were manufactured and that it is the date of removal for sale in India that matters. He, therefore, sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed sale in the DTA all rejects up to 5% production or such percentage as may be fixed by the Board of Approvals subject to payment of applicable duties and other conditions. DTA sale entitlement is 25%. It is to be determined in relation to the ex-factory value of the total production, excluding permissible levels of rejects. DTA sale entitlement may be up to 25% of the total production provided the value of indigenous constituents of the final products excluding water, power, services and spares for capital goods is in excess of 30% of the cost of the product. Such entitlement may be up to 15% only if the value of indigenous constituents is less than 30% of the total cost. 25. Chapter VA of the Central Excise Rules contains provisions for removal from a Free Trade Zone or from a 100% EOU of excisable goods for home consumption. This Chapter was made applicable to units under the EOU Scheme by a Notification No. 130/84-C.E., dated May 26, 1984. This Chapter contains Rules 100A to 100H. Rule 100A provides that the provisions of this Chapter shall apply to a person permitted under any law for the time being in force to produce or manufacture excisable goods in a 100% Export Or ..... 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