Is concessional rate of Customs duty provided under EPCG Schemes applicable for clearances from EOU? - Rs. 2.31 Crores demand stayed

2007-TIOL-1765-CESTAT-MUM IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI Application E/S/1241/07, E/S/1240/2007 & C/S/1234/07 Appeals E/1104/07, E/1103/07 & C/685/07 Arising out of order-in-original No. 7/CX/2007 Dated : 30.4.2007 No. 8/CX/2007 Dated : 8.5.2007 Passed by the Commissioner of Central Excise, Pune - III Date of Decision : 17.09.2007 BRINTONS CARPETS ASIA PVT LTD Vs COMMISSIONER OF CENTRAL EXCISE, PUNE-III Appellant Rep. by : Mr. V Sridharan, Adv. Respondent Rep. by : Mr Ajay Saxena, SDR, and Mr. D P Mukhopadhyay, SDR Against 2 & 3 Applicants CORAM : Ms. Jyoti Balasundaram, Vice President Mr. A K Srivastava, Member (Technical) Is concessional rate of Customs duty provided under EPCG Schemes applicable for clearances from EOU? - Rs. 2.31 Crores demand stayed ORDER NO. S/638-640/CSTB/2007/C-I Per : Ms. Jyoti Balasundaram : All three stay applications involve common issues and are hence heard together and disposed of by this common order. E/S/1241/07 is an application for waiver of pre-deposit of excise duty of Rs. 2,31,98,131/- confirmed on clearances of final products manufactured by the applicants and cleared to EPCG licence holders (DTA sales) like hotels etc. on payment of duty @ 5% in terms of Notification 44/2002-Cus. dated 19.4.2002 and Notification No. 55/2003-Cus. dated 1.4.2003, and equal amount of penalty. E/S/1240/07 is an application for waiver of pre-deposit of duty of excise of Rs.7,22,478/- confirmed on indigenous inputs procured without payment of duty for manufacture of final products cleared to EPCG licence holders by denial of the benefit of exemption in terms of Notification 1/95-CE dated 4.1.1995 and Notification 22/2003-CE dated 31.3.2003, and penalty of equal amount, while C/S/1237/07 is an application for waiver of pre-deposit of duty of customs of Rs.1,91,84,794/-confirmed upon inputs imported without payment of duty for manufacture of final products cleared to EPCG licence holders by denial of the benefit of exemption in terms of Notification 53/97-Cus. dated 3.6.1997 and Notification 52/2003-Cus. dated 31.3.2003, and equal amount of penalty. The excise duty and customs duty demands on inputs are for the reason that the final products were cleared by the applicants (100% EOU) at the EPCG rate which was not the appropriate rate. As according to the department, it is the tariff rate which is the appropriate rate in such cases. 2. We have heard both sides and find that a strong prima facie case for waiver of pre-deposit of duty on the final products has been made out in the light of Tribunal's order in Sahajanand Technologies (P) Ltd. vs. CCE, Daman reported in 2007 (210) ELT 108, wherein the Tribunal has held as under- "6. We have considered the submissions. The basic issue to be determined is whether the clearances made by 100% EOUs are entitled to concessional rate of Customs duty provided under EPCG Schemes........We, however, find that the Commissioner has failed to observe that even though what is required to be paid is in the nature of central excise duty but through a legal fiction, clearances by 100% EOUs have been placed at par with the imports and it is for this reason that the duty required to be paid is equal to the aggregate of Customs duty payable on such like goods if produced or manufactured outside India and imported into India. Therefore, all clearances by 100% EOUs have to be treated as imports for the purpose of calculating the duty. What is required to be determined/quantified is the Customs duty and not the Central Excise duty. Once Sec. 3A itself creates a legal fiction of levying customs duty and treating clearances by 100% EOUs at par with imports, the question of altering nature of levy and the exemptions by circulars does not arise. The Commissioner has totally misunderstood the circulars which made it abundantly clear that notifications applicable to units working under EPCG schemes shall be equally applicable to goods being procured from 100% EOUs........ The three circulars issued by the Board in 1994, 1.12.2004 and May, 2005 make it very clear that the concessional rate of duty shall be, leviable in respect of clearances effected by 100% EOUs to EPCG units and even the condition of import through specific ports has been clarified to be inapplicable as clearance by 100% EOUs have been considered as clearance from any port in India including the specified port. We, therefore, hold that the concessional rate of duty has been rightly availed of by the appellants and there is no case for further demand of duty. Since there has been no evasion of duty the question of imposition of any penalty on any of the appellants does not arise. We, therefore, set aside all the three orders-in-original and allow the appeals of all the appellants." 3. In the light of the above, prima facie the applicants have discharged duty on the final products at the appropriate rate and hence prima facie the demands on the inputs are not sustainable. 4. We, therefore, waive pre-deposit of duty and penalty in all three cases and stay recovery thereof pending the appeals. (DISCLAIMER: Though all efforts have been made to reproduce the order correctly but the access and circulation is subject to the condition that Taxindiaonline.com Pvt. Ltd. are not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.)