Custom, Excise & Service Tax Tribunal
M/S. South Asian Petrochem Limited, vs Coms Cus (Airport & Admin)Kol on 13 September, 2023
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
REGIONAL BENCH - COURT NO.2
Customs Appeal No. 281 of 2011
(Arising out of Order-in-Appeal No. KOL/CUS/CKP/166/2011 dated 31.05.2011 passed
by Commissioner of Customs (Appeals), Kolkata.)
M/s. South Asian Petrochem Limited
(Now known as Dhunseri Petrochem & Tea Limited
4A, Woodburn Park, Kolkata-700020)
Appellant
VERSUS
Commr. of Customs (Airport & Admin.), Kolkata
(15/1, Strand Road, Customs House, Kolkata-700001)
Respondent
APPEARANCE :
Mr. Arvind Baheti, CA, for the Appellant Mr. Faiz Ahmed, Authorized Representative for the Respondent CORAM:
HON'BLE MR. P. K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. RAJEEV TANDON, MEMBER (TECHNICAL) FINAL ORDER NO. 76699/2023 Date of Hearing : 13 September 2023 Date of Decision : 13 September 2023 PER P. K. CHOUDHARY This appeal is directed against the Order-in-Appeal dated 31.05.2011 passed by the Commissioner of Customs (Appeal) rejecting the appeal filed by the Appellant against the Order-in-Original dated 31.01.11.
2. Briefly stated the facts of the case are that the Appellant was operating as a 100% Export Oriented Unit (EOU), within the meaning of the Foreign Trade Policy, engaged in the manufacture and export of PET Resin („the finished goods‟) at its manufacturing facility at Haldia, West Bengal. As a 100% EOU, the Appellant was permitted to procure inputs and capital goods, imported or indigenous, without payment of Customs or Excise duty in terms of Notification No. 52/2003 dated 2 Customs Appeal No. 281 of 2011 31.03.2003 and Notification No. 22/2003 dated 31.03.2003 respectively. The finished goods manufactured by an EOU and cleared in the domestic market are subject to duties of excise under the 2 nd proviso to Section 3 of the Central Excise Act, which is measured with reference to the aggregate duties of customs read with Notification No. 23/2003-C.E. dated 31.03.2003.
3. In terms of para 6.18(a) of the FTP, an EOU can opt out/exit from the EOU Scheme subject to payment of applicable Customs and Excise duties. The Appellant decided to exit from the EOU Scheme and accordingly took an inventory of the inputs, capital goods/spare parts, finished goods and manufactured waste lying at the Unit at the close of business on 15.10.2009 pursuant to an in-principle approval dated 1.09.2009 from the Development Commissioner. The said inventory was physically verified by the Customs officials on 16.10.2009 and the Appellant stopped availing the duty concessions available to an EOU from the said date. Further, the Appellant self-assessed the Customs and Excise duty liability on the stock as at the cut off date which included finished goods stock of 3917.22 MT and manufactured waste of 163 MT. The Appellant had, inter alia, provisionally assessed Excise duty of Rs. 4,58,84,590/- on the stock of finished goods on the basis of the then prevailing sales price and discharged the said Excise duty on 22.10.2009. The Customs and Excise duty as self-assessed by the Appellant were verified by the Customs Authorities vide letters dated 2.12.2009 and 30.12.2009. The said stock of finished goods was sold and removed from the factory to customers in the domestic market (3685 MT) and for export (396 MT) during the period 22.10.2009 upto 22.01.2010 at a reduced price resulting in an excess payment of Excise duty of Rs. 33,44,886/-. The Appellant obtained a No Objection Certificate dated 19.03.2010 from the Assistant Commissioner of Customs and the Unit was finally de-bonded from the EOU Scheme with effect from 1.04.2010 in terms of the de-bonding order dated 29.03.2010. The Appellant filed a refund claim on 10.06.2010 of the 3 Customs Appeal No. 281 of 2011 excess self-assessed Excise duty of Rs. 33,44,886/- paid in respect of manufactured finished goods and manufactured waste lying in Closing Stock as on 15.10.2009. The refund claim was filed with the Customs Authorities as the administration of EOU was with the Customs Authorities upto 31.07.2010. The refund claim was rejected by the Adjudicating Authority vide Order dated 31.01.2011 and an appeal filed against the said Order dated 31.01.2011 was also rejected by the Ld. Appellate Commissioner on 31.05.2011 albeit on a different point. Hence, this appeal.
4. The learned consultant appearing for the Appellant has assailed the OIA dt. 31.05.2011 on the following grounds:
(A) The learned Appellate Commissioner has accepted at para 7 of the OIA that the duty paid on the stock of finished goods and manufactured waste was excise duty, that the provisions of excise law shall apply and that the refund claim was filed by the Appellant within the period of limitation, prescribed under the excise law. (B) Refund of excess paid excise duty is permitted under Section 11B of the Central Excise Act. Excise duty on manufactured goods is required to be discharged on "removal from the factory", as is evident from Rule 4 & Rule 8 of the Central Excise Rules, 2002 and such removal is required to be accompanied by an excise invoice under Rule 11 thereof. Further, the value under Section 4 of the Central Excise Act is also required to be ascertained on "each removal". However, in the instant case, there was no removal of the finished goods and the manufactured waste, from the factory premises when the duty was discharged on the stock thereof as at the close of business on 15.10.2009. The said stock of manufactured goods was removed from the factory for domestic and export market only during the period 16.10.2009 to 22.01.2010. Therefore, the learned Appellate Commissioner erred in holding that the "value"
on which duty was discharged prior to removal had attained finality and could not be re-visited. Since, the excise duty paid on the 4 Customs Appeal No. 281 of 2011 manufactured goods prior to removal was higher than the excise duty applicable on removal, the refund claim of the Appellant is justified.
(C) No provisional assessment was sought by the Appellant under Rule 7(1) and no order finalizing the provisional assessment was passed under Rule 7(3) of the Central Excise Rules. The letters dated 2 December 2009 and/or 30 December 2009 could not be construed as final assessment orders as there was no quantification of any confirmed liablity.
(D) The learned Consultant further referred to the decision of the Tribunal in the following cases:
(i) CC Vs. Solitaire Machine Tools Pvt. Ltd. - 2003 (152) ELT 384 (para 8)
(ii) Jubilant Life Sciences Ltd. Vs. CCE - 2013 (11) TMI 1213 (para 7 & para 6)
(iii) Bhati and Company Vs. CCE - 2019 (9) TMI 1500 (para 7)
5. The learned departmental representative appearing for the revenue re-iterates and supports the findings in the OIA
6. Heard both sides and perused the appeal records.
7. The issue arising for our consideration in this appeal relates to refund of excess paid excise duty on the manufactured Finished Goods (FG) and waste pursuant to debonding from the EOU Scheme vis-à-vis its subsequent removal/clearance from the factory to the domestic and export market at a reduced price. It is not in dispute that excise duty was initially discharged on the stock of manufactured FG (3917.22 MT) and waste (163 MT) lying on the cutoff date i.e. 15.10.2009 with reference to the then prevailing sales price under the 2nd proviso to Section 3 of the Central Excise Act. The said excise duty of Rs. 4,58,84,590/- was discharged on 22 October 2009 vide TR-6 Challan No. 09/09-10 dated 22 October 2009. Thereafter, the said stock was 5 Customs Appeal No. 281 of 2011 cleared/removed from the factory premises for domestic and export markets during the period 22.10.2009 to 20.01.2010. The Appellant‟s Unit continued to be an EOU during this period in terms of Note (ii) to Appendix 14-I-L of the FTP as the final debonding Order was dated 29 March 2010 in terms whereof, the Unit was de-bonded only with effect from 1 April 2010. Thereafter, the refund claim was filed on 10 June 2010 with reference to excise duty paid in excess under the proviso to Section 3 of the Central Excise Act vis-à-vis the ultimate selling price. Therefore, the refund is not arising out of a difference in the rate of excise duty but on account of the value adopted for the purposes of discharge of excise duty on the stock of manufactured FG and waste as in existence on the cutoff date i.e. 15 October 2009. The Ld. Appellate Commissioner accepts that the refund claim was filed within the period of limitation prescribed under the Central Excise Law. However, he has treated the letters dated 2.12.2009 and 30.12.2009 as confirmation of the provisionally assessed excise duty payment by the Appellant resulting in finalization of the value declared by the Appellant. The Appellate Commissioner further observed that subsequent variation in prices of these goods is of no avail either to the Appellant or to the department.
8. At the outset, we find that letters dated 2.12.2009 and /or 30.12.2009 were only verifying the duty discharged by the Appellant pursuant to their application for debonding and could not be construed as final assessment order as there was no quantification of any confirmed liability. Moreover, no provisional assessment was sought by the Appellant under Rule 7(1) of the Central Excise Rules and no order finalizing provisional assessment was passed under Rule 7(3) of the Central Excise Rules. The decision of the Tribunal in M/s. Jubilant Life Science Ltd. reported in 2013 (11) TMI 1213 fully supports the refund claim of the Appellant. In the said case also, the assessee had discharged excise duty on FG lying in stock on receiving in principle 6 Customs Appeal No. 281 of 2011 approval for debonding from the DC on 25.03.2011. After payment of duty as approved by the Central Excise Authorities, the assessee was granted No Objection Certificate (NOC) by the Assistant Commissioner, Central Excise on 28.04.2011 and the assessee was issued final debonding order by the DC on 11.06.2011. However, the assessee had exported the stock of FG before final debonding Order dated 11.06.2011 and therefore filed a refund claim in respect of excise duty paid in excess on the said stock of FG. The said FG stock was exported before and after the NOC dated 28.04.2011 from the Assistant Commissioner, Central Excise. Similar contention as is advanced herein was raised by the revenue that after in principle approval of debonding but before the final debonding Order, the stock of FG would be deemed to have been cleared into DTA. Negating the said contention of the revenue, the Tribunal observed in para 7 as under:
7. On going through the provisions, of Appendix 14-I-L, we find that in terms of Note-(ii) to this Appendix, a 100% EOU must be continued to be treated as EOU/EHTP/STP unit till the date of final exit order. Based on this note, the Tribunal in the cases of Solitaire Machine Tools Pvt. Ltd. (supra) and Bajaj Foods Ltd. (supra) has held that a unit would continue to be treated as EOU unit till the date of final exit order and would be subject to monitoring of the stipulated obligations under the relevant schemes. The Tribunal in the case of Solitare Machine Tools P. Ltd. (supra) has held that the goods lying in stock at the time of debonding would be liable to duty only at point of time of removal of those goods from place of manufacture. In this case, admittedly, there was no removal of goods into DTA from EOU and before the final debonding order the goods had been exported out of India under advance authorization claim. In terms of para 6.18 (e) of the Foreign Trade Policy, while between the date of issue of no dues certificate by the Customs and Central Excise Authorities and the date of final debonding order by the Development Commissioner, the EOU unit shall not be entitled to claim any duty exemption for procurement of capital goods or inputs, the unit can claim advance authorization/DEPB/duty draw back. Thus, during the intervening period between the date of no objection certificate by the Central Excise Authorities and the date of issue of final debonding order by the Development 7 Customs Appeal No. 281 of 2011 Commissioner, an EOU can export the finished goods under claim for advance authorization/DEPB/duty draw back and that no excise duty can be charged in respect of such goods as the same have not been cleared into DTA. In view of this, the impugned order rejecting the refund claim is not sustainable. The same is set aside. The appeal is allowed
9. Similar view was taken by this Tribunal in M/s. Bhati And Company reported in 2019 (9) TMI 1500. The reasoning advanced by the Ld. Appellate Commissioner that "value" is frozen on payment of excise duty is also not in consonance with Section 4 of the Central Excise Act as also Rule 4 of the Central Excise Rules which requires determination of value and payment of duty with respect to each removal and that there is no removal when excise duty is discharged on the stock of manufactured FG pursuant to exit bond from the EOU Scheme as the EOU Unit continues to function as a DTA Unit.
10. In view of the above, we set aside the impugned Order-in-Appeal and allow the appeal of the Appellant with consequential relief (Operative part of the Order was pronounced in the open court.) Sd/-
(P. K. Choudhary) Member (Judicial) Sd/-
(Rajeev Tandon) Member (Technical) Pooja