Customs, Excise and Gold Tribunal - Delhi
S.T.L. Exports Ltd. vs Cce on 14 March, 2003
Equivalent citations: 2003(87)ECC624, 2002ECR465(TRI.-DELHI), 2003(162)ELT546(TRI-DEL)
JUDGMENT S.S. Kang, Member (J)
1. Appellants filed this appeal against the Order-in-Appeal passed by the Commissioner (Appeals).
2. Brief facts of the case are that the appellants are 100 per cent EOUs. They were bringing mild steel pipes and zinc without payment of Central Excise Duty/Customs Duty for exporting galvanised mild steel (MS) pipes and were availing the benefit of exemption Notification No. 1/95-CE dated 4.1.95. Appellants cleared galvanised pipes for Domestic Tariff Area (DTA) without payment of duty. Show cause notice was issued to the appellants asking for duty on the galvanised M.S. pipes cleared for DTA. The adjudicating authority confirmed the demand and imposed the penalty. The appeal filed by the appellants was also dismissed.
3. Heard both sides.
4. The contention of the appellants is that they were only undertaking the process of galvanising, which does not amount to manufacture under Section 2(f) of the Central Excise Act.
5. Appellants were bringing MS pipes and zinc without payment of duty under Notification No. 1/95-CE. As per the provisions of this notification, the specified excisable goods brought in connection with the manufacture of goods for export out of India by the 100% EOUs, are exempt from payment of duty. The benefit of this notification is not available when the excisable goods are brought in the EOU, but in place of exporting the goods, the same were removed for home market. The Central Board of Excise & Customs, vide Circular No. 332/40/97-TRU dated 28.4.97, clarified that in terms of Notification No. 1/95-CE, the manufacture includes the process of blending of any goods or making alteration or any other operation thereof. In para 5 of the said circular, it has been mentioned that broader view is called for in respect of interpretation of provisions of Notification No. 1/95-CE and exemption is not to be restricted only to the cases where the manufacture under Section 2(f) of the Central Excise Act, is involved. It has also been clarified that exemption under said notification is applicable to 100% EOU engaged in the galvanising of MS black pipes. In terms of this notification, any production, processing or packaging of articles in 100% EOU, shall be deemed to be covered under the definition of 'manufacture'.
6. Appellants brought MS pipes and zinc without payment of Central Excise/Customs duty. The MS pipes were processed and were sold in DTA without payment of duty. These facts were not disputed by the appellants. The only contention of the appellants is that the process of galvanising did not amount to manufacture and thus they were not liable to pay any Central Excise Duty.
7. In para 9.9 (B) of the Export Import (Exim) Policy," the unit was required to pay applicable duties and taxes on the sale of goods in DTA and permission given by competent authority for such sale was subject to the condition of payment of applicable duties and taxes. The exemption from the payment of Customs Duty/Excise Duty to the inputs brought by EOU was for the manufacture and packing of articles used solely for export.
8. The provisions of Notification No. 1/95-CE provide that specified excisable goods enjoyed exemption from payment of Central Excise Duty only when they were brought in connection with, among others, the manufacture and packaging of articles, or for production or packaging or job work for export of goods in EOU. This exemption is subject to the condition that such EOU exported out of India 100% or such other percentage as may be fixed by the competent authority of the articles manufactured wholly or partly from the said goods for the period stipulated by the competent authority. In para 6(c) of the notification, it provides that EOU was permitted to clear any of the said goods for being taken outside to any other place in India in accordance with the Exim Policy, then the clearance was to be made on the full value at the time of their clearance from the EOU, and at the rates of duty in force on the date of payment of such excise duty.
9. We find that in the case of Siddhartha Tubes Ltd. v. CCE, Indore, 1996 (82) ELT 399 (T), the Tribunal held that galvanising goes not amount to manufacture. The Tribunal, further held that even when galvanising was does, subsequent to payment of duty, the galvanisation charges were includible in the assessable value of the galvanised pipes. The Tribunal held that the cost of galvanising or the enhanced price referrable to galvanisation is one of the components which is related to the value of the galvanised product and this has to be taken into account in its valuation for the purpose of excise duty.
10. The Hon'ble Supreme Court upheld the decision of the Tribunal reported as Siddhartha Tubes Ltd. v. CCE, 2000 (67) ECC 601 (SC) : 2000 (115) ELT 32.
11. In the present case, appellants, who received MS pipes without payment of Central Excise Duty and on clearance for home market, after galvanisation, they had not paid any excise duty. The effect to this will be that while the pipes cleared for home market directly by the manufacturers of MS pipes will be paying the appropriate Central Excise Duty, but when the same pipes are cleared to the home market, through the EOU, no duty will be payable. Such situation could not be said to be valid in the scheme of EOU and in the Notification No. 1/95-CE. The appellants received duty-free ungalvanised pipes for export of galvanised pips and the galvanised pipes were not exported. In such a situation, the appellants are liable to pay duty, which would have been leviable on receipt of pipes, should be paid on the value of the galvanised pipes when in place of export they were removed in DTA. In these circumstances, we find no infirmity in the impugned order in respect of demand of duty. However, taking into consideration the facts and circumstances of the case, the penalty is reduced to Rs. ten lakh, otherwise the impugned order is upheld.