2004 (97) ECC 308 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(B)

Shri V.K. Agrawal, Member (T) and Shri P.G. Chacko, Member (J)

Euro Cotspin Ltd. & Ors.

Versus

Commissioner of Central Excise, Chandigarh-I

Appeals No. E/1480-1482/2002-NB(B)

[Arising out of Order-in-Original No. 5/2002 dated 27.2.02 passed by Commissioner of Central Excise, Chandigarh I]

Final Order No. 549-551/2004-B, dt. 9.10.2003, Certified on 19.7.2004

Export Import Policy

Para 9.9(b) -- Export -- Clearance -- DTA Sales -- 5% rejects -- Clearance having been effected as per the permission granted by the Competent Authority that is Development Commissioner, the Revenue cannot demand the duty on the ground that the entitlement was required to be restricted to 50% of the FOB value of the physical export only under para 9.9(b) and (d) of the Policy. It is apparent from this Para that only sale of rejects above 5% of the FOB value of exports shall be accounted against DTA sales.

PRESENT :

Shri Balbir Singh, Adv. for the appellants.

Shri O.P. Arora, SDR for the respondent.

Cases Cited :

1. Ginni International Ltd. v. CCE Jaipur, 2002 (79) ECC 85 (Tri)............................ [Para 3]

2. Nahar Industrial Enterprises v. CCE Chandigarh I, 2003 (87) ECC 435 (Tri)......... [Para 3]

3. Virlon Textile Mills v. CCE, Mumbai III, 2003 (139) ELT 371 (Tri)........................ [Para 3]

Per : V.K. Agrawal

M/s. Euro Cotspin Ltd. and others have filed these three appeals being aggrieved with Order-in-Original No. 5/2002 dated 27.2.02 passed by the Commissioner confirming the demand of Central Excise duty and imposing penalties in respect of sales made Domestic Tariff Area.

2. Shri Balbir Singh, learned Advocate, submitted that the Appellants company is a 100% Export Oriented Unit (EOU), manufacturing various types of yarn; that during the relevant period, they were permitted to clear their final products in Domestic Tariff Area (DTA) up to 50% of the value of exports made in previous year; that besides this they were also permitted to clear 5% of waste, scrap and rejects in DTA over and above limit of 50% of the final product; that as per Appendix 42 of the Export Import Policy, 1997-2002, 100% Export Oriented Units are at liberty to adopt quarterly/half yearly/yearly basis for clearing the goods in DTA; that they were working under quarterly basis scheme and clearing their final goods in DTA on the basis of permission obtained from Development Commissioner every quarter; that the Commissioner has confirmed the demand of duty and imposed penalties on the ground that the benefit of deemed export for the purpose of arriving at the additional DTA clearance over and above the permissible limit of 50% of FOB value of previous year export is not available to them; that clearance were restricted to prescribed limit of 50% of the FOB value of previous years' physical exports and the value of rejects and waste cleared under the DTA will be taken into consideration for the limit of 50% of the FOB value of export which can be cleared in DTA.

3. Learned Advocate, further, submitted that they have made supplies in DTA under Para 9.9(b) of the EXIM Policy on the basis of permission granted by the Development Commissioner; that this permission to remove the goods under DTA have not been reviewed by the Development Commissioner; that accordingly duty liability by disputing the permission given by the Development Commissioner cannot be sustained Reliance has been placed on the basis of the case of Ginni International Ltd. v. Commissioner of Central Excise Jaipur, 2002 (79) ECC 85 (Tri) : 2002 (139) ELT 172 (Tri) and Virlon Textile Mills v. Commissioner of Central Excise, Mumbai III, 2003 (139) ELT 371 (Tri). He also mentioned that as the Appellants were availing the DTA facility on quarterly basis their export performance has to be seen on quarterly basis and therefore, duty cannot be demanded merely on the basis that DTA sales in 1999-2000 were more than 50% of FOB value of exports in the previous year; that Para 9.9(b) of the Policy provides for DTA sales upto 50% of the FOB value of the Export and it does not anywhere specify that DTA entitlement is to the extent of 50% of the FOB value of exports made in the previous year; that accordingly, the manner of calculation of excess DTA clearance is wrong. Finally, he submitted that Para 9.9(a) of the Policy specifically provides that sales of rejects above 5% should be accounted towards DTA sales entitlement under Para 9.9(b); that this clearly goes to show that rejects may be sold in the Domestic Tariff Area upto 5% separately; that similarly Para 9.30(a) of Handbook of Procedure provides that waste and scrap upto 5% of FOB value of export may be sold in DTA. He also relied upon the decision in the case of Nahar Industrial Enterprises v. CCE, Chandigarh I, 2003 (87) ECC 435 (Tri) : 2003 (154) ELT 284 (Tri).

4. Countering the arguments, Shri O.P. Arora, learned Senior Departmental Representative, submitted that a clarification was sought from the Development Commissioner who under his letter dated 14.6.2000 has clarified that "DTA sales entitlement under Para 9.9 (b) were allowed against physical exports only and no DTA sales entitlement against deemed export was issued by the NEPZ." He further, mentioned that Development Commissioner also mentioned in his letter that as regards excess clearance made to DTA exceeding 50% of the FOB value, Revenue is free to initiate recovery proceedings in all those cases where DTA entitlement has been allowed against deemed export after 1.4.99; that in view of this clarification by the Development Commissioner, the decision in the case of Ginni International is not applicable. Regarding rejects, learned Senior Departmental Representative mentioned that the Applicants had not maintained any record of rejects; that Para 9.30 of the Hand Book of Procedure stipulates that sale of scrap, waste/reject is to be made on the basis of records maintained by Export Oriented Undertaking; that similar provisions exists in respect of rejects also under Para 9.9(2) of the Hand Book of Procedure. As per this Para, rejects may be sold in DTA on the basis of records maintained by the unit. As no stock of waste/rejects was available, the clearance of the same cannot be allowed over and above the limit of 50%; that in absence of any record, these goods are to be treated as goods of good quality and not waste/rejects. In reply, the learned Advocate submitted that the Department has given them the permission to clear that rejects on the basis of details given by the Superintendent Incharge under 100% EOU. In view of this the department cannot claim that goods cleared by them are not rejects but goods of good quality. He also mentioned that invoices were marked as `rejects'.

5. We have considered the submissions of both the sides. Para 9.9(b) of the Export Import Policy also provides for DTA sales up to 50% of the FOB value of export, subject to payment of applicable duties and fulfilment of minimum NEEP prescribed in Appendix I of the policy. The Appellants have contended that they had removed the goods in DTA on the basis of permission granted by the Development Commissioner of NOIDA Processing Zone. They have emphasised that the permission given to them on 12.4.99, 13.7.99, 14.10.99 and 13.1.2000 have not been reviewed by the Development Commissioner. It is also not the case of the Department that the appellants have made clearance in DTA in excess of the permission granted by the Development Commissioner. In view of these facts, once the Development Commissioner has allowed them the permission to sell their finished goods upto a fixed value into DTA and the permission having not been reviewed, no action can be taken by the Revenue to disallow the clearance and demand Central Excise duty on the ground that the entitlement was required to be restricted to 50% of the FOB value of physical exports.

No doubt, the Commissioner of Central Excise has requested the Development Commissioner to review the permission for DTA clearance granted by the Development Commissioner to the Appellants, we find that the Development Commissioner in his letter dated 14.6.2000 has clarified that on receipt of specific advise from the Ministry of Commerce in January 2000, DTA sales entitlement under Para 9.9(b) was allowed against physical export only and no DTA sales entitlement against deemed export was issued by NPEZ. In the present matter all the permissions in question had been granted by January 2000 and not thereafter. The Development Commissioner has also specifically mentioned in the said letter that "in view of the above, DTA sales entitlement issued in the past are not being reviewed". We, therefore, hold that the clearance having been effected as per the permission granted by the competent Authority that is Development Commissioner, the Revenue cannot demand the duty on the ground that the entitlement was required to be restricted to 50% of the FOB value of the physical export only. For the same reason the Revenue can also not claim that they have cleared their final goods in DTA in excess of 50% of FOB value of the export made during the previous year as they have removed the goods as per the permission granted by the Development Commissioner. Regarding clearance of rejects, the Department has not rebutted the submissions made by the Appellants that rejects were removed by them as per permission granted by the Development Commissioner only. Para 9.9(a) of the Policy provides that unless specifically prohibited in the LOP/LOI, rejects may be sold in the Domestic Tariff Area on the basis of records mentioned by the unit and on prior intimation to the Customs Authority. Such sale above 5% of the FOB value of the export shall be accounted against DTA sales entitlement under Para 9.9(b) and (d) of the Policy. It is apparent from this Para that only sale of rejects above 5% of the FOB value of exports shall be accounted against DTA sales. There is nothing on record to show that the Appellants have removed rejects more than 5% of the FOB value of exports. Accordingly, we set aside the impugned order and allow all the Appeals.

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