Custom, Excise & Service Tax Tribunal
Metaplast Exim India Pvt Ltd vs Commissioner Of Central Excise, Thane I on 30 December, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/759, 760/11 [Arising out of Order-in- Appeal No.SB/73/TH-I/2011 dated 15-2-2011 passed by the Commissioner (Appeals), Central Excise, Mumbai Zone-I] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
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4. Whether Order is to be circulated to the Departmental: Yes
authorities?
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Metaplast Exim India Pvt Ltd
:
Appellant
VS
Commissioner of Central Excise, Thane I
:
Respondent
Appearance
Shri. Mahesh Raichandani, Advocate for the Appellants
Shri. H.M. Dixit, Asstt. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 30/12/2016
Date of decision: 20/1/2017
ORDER NO.
The appellant is a 100% EOU. Being 100 % EOU they imported goods without payment of duty for use in the manufacture of final product. The part of the imported goods were sold in domestic market as such on payment of custom duty including 4% additional duty paid under Section 3(5) of Customs Act, 1962. Subsequently, appellant filed refund claim of additional duty in terms of Notification No. 102/07-Cus dated 14-9-2007. The adjudicating authority rejected the refund claim on the ground that the appellant has not paid additional duty at the time of importation of the goods as required under para 2(a) of the notification and not fulfilled the condition of notification no. 102/07-Cus dated 14-9-2007. Aggrieved by the Order-in-original appellant filed appeal before the Commissioner(Appeals), who upheld the order-in-Original and rejected the appeal therefore appellant is before me.
2. Shri. Mahesh Raichandani, Ld. Counsel for the appellant submits that ld. Commissioner(Appeals) denied the refund of additional duty under Notification No. 102/07-Cus only on the ground that the duty was not paid at the time of the import and it was paid at the time of domestic clearance by EOU therefore there is violation of the condition of Notification No. 102/07-Cus. He submits that time of payment of duty is not relevant particularly in the present case. The appellant is an EOU. The goods imported by the EOU is under bond and remains under bond till it is cleared from the EOU, therefore at the time of clearance from EOU in the domestic market the clearance are treated as import in India and for that reason the duty is required to be paid. Therefore only on the ground that duty was not paid at the time of import, refund of additional duty paid in lieu of sales tax cannot be denied. The appellant have discharged VAT as can be seen from invoice. He placed reliance on the following judgments:
(a) Adinath Trade Link Vs. Commissioner of Customs, Kandla[2013(293) ELT 746(Tri. Ahmd.)]
(b) Meneta Automotive Components Pvt Ltd. Vs. Commissioner of Customs and Service Tax, Rohtak[2015-TIOL-1048-CESTAT-DEL]
3. Shri. H.M. Dixit, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned.
4. I have carefully considered the submissions made by both sides and perused the record.
5. I find that the Ld. Commissioner(Appeals) denied the refund only on the ground that the duty for which refund is sought for was not paid at the time of import but it was paid at the time of the clearance from the EOU to DTA. The appellant is a 100% EOU. As per the mandate of law they are not required to pay customs duty at the time of import of the goods as the same is covered under bond and the goods after import moved to 100% EOU and it is deposited in customs bonded premises therefore duty liability arises as and when the said imported goods cleared from EOU. The clearance from the EOU of such goods is treated as import into India for the reason that right from port of import till the deposit of the goods, it is in the custom bond therefore there is no occasion of the payment of duty at the time of import. In this statutory provision it cannot be said that duty was not paid at the time of receipt which is prescribed under scheme of EOU. The objective of the levy of Special additional duty under Section 3(5) of Customs Act, is in lieu of sale tax/VAT. Refund under Notification 102/07 is applicable if the imported goods on which additional duty is paid is sold out in the domestic market on the payment of VAT. In the present case there is no dispute that the goods so sold is on payment of VAT therefore the additional duty and VAT both cannot be levied simultaneously, to avoid this double taxation refund mechanism was provided under Notification No. 102/07-Cus. Since VAT was paid by the appellant refund of additional duty is admissible. This issue has been considered by this Tribunal in case of M/s. Meneta Automotive Components Pvt Ld(supra) wherein Tribunal has given following findings:
1.1?The appellant are a 100% EOU engaged in manufacture of an automobile part named Anti Noise Shims chargeable to Central Excise duty under heading 8708. The raw material for this auto component is HR Coils. In course of manufacture of Anti Noise Shims from HR Coils, Steel waste arises, the entire quantity of which was being cleared into DTA. The period of dispute in this case is from 1-3-2008 to 31-7-2010 and 1-8-2010 to 31-3-2011. There is no dispute that during this period, the scrap was cleared into DTA and the appellant company were paying full duty under proviso to Section 3(1) of Central Excise Act, 1944 without availing the concessional rate of duty under Notification No. 23/2003-C.E. The duty being paid by the appellant on the DTA clearances was the Basic Customs Duty at nil rate under exemption Notification No. 21/2002-Cus. (Sl. No. 200) (in terms of which melting scrap is fully and unconditionally exempt from duty) plus additional customs duty equal to the Central excise duty leviable plus Special Additional Customs Duty (SAD) at nil rate plus Education Cess and Secondary and Higher Education Cess (S&H Cess).
1.2?There are three objections of the Department.
1.2.1?The first objection is that since the clearances were not being made in terms of para 6.8 (e) of the Foreign Trade Policy (FTP) 2004-2009, in as much as neither any standard input-output norms in respect of scrap had been fixed nor the ad hoc norms had been fixed by the Development Commissioner nor other conditions of para 6.8 (e) relating to clearance of waste and scrap by a 100% EOU into DTA have been satisfied, the nil rate of basic customs duty under Notification No. 21/2002-Cus. would not be available. The Department is also of the view that the scrap cleared into DTA is not melting scrap as the same has been sold to dealers not to actual users, while Notification No. 21/2002-Cus. is applicable only to melting scrap.
1.2.2?The second objection of the Department is about method of calculation of education cess and secondary and higher education cess (S&H Cess) whether the same at the total rate of 3% (2% + 1%) of the Central Excise Duty chargeable would be leviable on the aggregate of the duties of Customs which includes education cess and S&H Cess. The Department was of the view that the cess would be leviable third time on the aggregate of the duties of customs i.e. 1st time at 2% + 1% on Additional Customs duty charged on CIF value plus basic customs duty, 2nd time at the rate of 2% + 1% on aggregate of basic customs duty plus Additional Customs duty and 3rd time at the rate of 2% + 1% on the aggregate of duties of customs + 3% of the aggregate.
1.2.3?The third point of dispute is regarding exemption to Special Additional Customs Duty (SAD). There is no dispute that the appellant in respect of their DTA sales have paid Value Added Tax/Sales Tax. In terms of Notification No. 23/2003-C.E., the goods cleared into DTA are exempt from Central Excise duty equivalent to Special Additional Customs Duty leviable under Section 3(5) of the Customs Tariff Act, 1975 read with proviso to Section 3(1) of the Central Excise Act, 1944 subject to condition that the goods cleared into DTA are not exempt from Sales Tax or Value Added Tax levied by the State Government. According to the Department, this exemption from SAD would not be applicable to the DTA clearances which are not in accordance with the provision of para 6.8 (a) of the Foreign Trade Policy i.e. the DTA clearances in excess of the ceiling of 50% of the FOB value of exports.
1.3?It is on this basis that after issue of show cause notice, the Commissioner by the impugned order-in-original dated 31-8-2012 confirmed total duty demand of Rs. 2,56,12,927/- against the appellant along with interest thereon under Section 11AB and beside this, imposed penalty of equal amount on the appellant company under Section 11AC. By the same order, penalty of Rs. 1,00,00/- was also imposed on Shri Praveen Garg, Finance Head and Authorised Signatory of the appellant company under Rule 26 of the Central Excise Rules, 2002. Against this order of the Commissioner these two appeals have been filed.
2.?Heard both the sides.
3.?Shri B.L. Narasimhan, Advocate, the learned Counsel for the appellant, pleaded that so far as the issue relating to method of calculation of education cess and S&H cess is concerned, the same stands decided in the appellants favour by Larger Bench judgment of the Tribunal in the case of Kumar Arch Tech Pvt. Ltd. v. CCE, Jaipur-II reported in 2013 (290) E.L.T. 372 (Tri.-LB), that as regards the question of Basic Customs Duty exemption in respect of scrap under Notification No. 21/2002-Cus. (Sl. No. 200), in terms of this exemption notification, the melting scrap is fully and unconditionally exempt from duty, that this exemption from Basic Customs Duty to melting scrap is not linked with DTA clearances being made in accordance with para 6.8(e) or 6.8(a) of the Foreign Trade Policy or otherwise, that in this case the appellant had made clearances of scrap into DTA by paying full duty leviable in terms of proviso to Section 3(1) of Central Excise Act, 1944 in terms of which the duty payable in respect of DTA clearances of a 100% EOU is the aggregate of Duties of Customs which has to be determined after taking into account the exemption notification, if any, applicable in respect of the same and such exemption notifications would be applicable irrespective of whether the clearances have been made in accordance with para 6.8 of the Foreign Trade Policy or otherwise, that in respect of the clearances of waste and scrap into DTA, the conditions specified in para 6.8(e) of the Foreign Trade Policy are relevant only when the exemption under Notification No. 23/2003-C.E. is availed, that in any case, the appellant had applied to the Development Commissioner in 2009 for determining their input - output norms and same had been approved in 2010 and in this regard, the Commissioners observation in the order that the waste norms having been determined after the DTA clearances are not applicable, is totally wrong, that another ground taken by the Commissioner for denying the Basic Customs Duty exemption under Notification No. 21/2002-Cus. is that the scrap had been sold to dealers and, hence, it is not melting scrap, that this stand of the Department is totally incorrect as, the Iron and Steel scrap is used only for melting purposes and nature of the scrap is not determined on the basis of the persons to whom it is sold, that as regards the SAD exemption, Notification No. 102/2007-Cus., dated 14-9-2007 exempts the goods imported into India from SAD if the Sales Tax or Value Added Tax is leviable on the same and since in this case the goods sold by the appellant into DTA were chargeable to Value Added Tax and VAT has been paid, the SAD exemption has been correctly availed, that in any case in terms of Sl. No. 1 of Notification No. 23/2003-C.E., the exemption from the part of the Excise Duty leviable which is equivalent to the SAD, is subject to the condition that the goods cleared into DTA have not been exempted by the State Government from the Sales Tax or Value Added Tax and this exemption from SAD portion of the Central Excise Duty is not subject to the clearances being made in accordance with the provision of para 6.8 (a) of the Foreign Trade Policy, and that in view of the above submissions, the impugned order is not sustainable.
4.?Shri M.S. Negi, the learned DR, defended the impugned order by reiterating the findings of the Commissioner in the impugned order.
5.?We have considered the submissions from both the sides and perused the records.
6.?As regards the dispute regarding the calculation of education cess and S&H cess, we find that this issue stands settled in favour of the appellant by the Larger Bench judgment of the Tribunal in the case of Kumar Arch Tech Pvt. Ltd. v. CCE, Jaipur-II (supra). In view of this, the part of the duty demand based on this issue is not sustainable and has to be set aside.
7.?As regards the exemption from Basic Customs Duty under Notification No. 21/2002-Cus. (Sl. No. 200) in respect of Steel scrap cleared into DTA, this exemption notification exempts fully and unconditionally, the melting scrap imported into India. In respect of the DTA clearances of scrap made by the appellant, the duty is payable in terms of proviso to Section 3(1) of Central Excise Act, 1944 and the quantum of this duty payable would be the Basic Customs Duty plus Additional Customs Duty plus Special Additional Customs Duty (SAD) plus education cess & S&H cess. Notification No. 23/2003-C.E. prescribes the concessional rate of duty in respect of DTA clearances subject to the conditions specified in para 6.8 of the Foreign Trade Policy. Irrespective of whether the duty on the DTA clearances is paid at the concessional rate under Notification No. 23/2003-C.E. or the duty is paid without availing of this exemption on the full rate prescribed under proviso to Section 3(1), the Basic Customs Duty would have to be calculated at the rate applicable to the import of like goods into India, read with any customs duty exemption notification issued under Section 25 of the Customs Act, 1962 and if in respect of any imported goods, the effective rate of duty is nil, it is the that rate which would have to be adopted and the basic Customs duty component of the excise duty payable on the DTA clearances would be nil. Thus if some goods imported into India are fully and unconditionally exempt from Basic Customs Duty by some exemption notification, while calculating the Central Excise Duty leviable on the DTA clearances of those goods, the Basic Customs Duty would have to be taken as nil, even if those DTA clearances are not in accordance with the conditions prescribed in para 6.8 of the Foreign Trade Policy. It is seen that same view has been taken by the Board in its Circular No. 305/83/94-FTT, dated 15-9-1994.
7.1?The other ground taken by the Department for denying basic customs duty exemption under Notification No. 21/2002-Cus. (Sl. No. 200), is that the scrap, in question, is not melting scrap, is absurd, as the nature of the scrap cannot be determined on the basis as to whether it has been sold the actual users or the dealers, as only use to which Iron and Steel Scrap can be put, is by melting the same to make some other Iron and Steel products. Same view has been taken by the Tribunal in its judgments in the case of Indo Deutsche Trade Links v. CC (Imports), Chennai reported in 2014 (303) E.L.T. 442 (Tri.-Chennai) (para 33) of the judgment.
7.2?In view of this, the part of the impugned order confirming the duty demand on the basis of denial of exemption under Notification No. 21/2002-Cus. in respect of Basic Customs Duty is not sustainable and the same has to be set aside.
8.?As regards the exemption from the portion of the Central Excise Duty equivalent to the Special Additional Customs Duty (SAD) payable under Section 3(5) of the Customs Tariff Act, the Departments contention is that the SAD would be payable as the clearances are not in terms of para 6.8 (a) of the Foreign Trade Policy and as such the exemption in terms of Sl. No. 1 of the table annexed to exemption Notification No. 23/2003-C.E. would not be applicable.
8.1?Since on the goods sold into DTA, VAT levied by the State Government has been paid, and in this regard, there is no dispute, the conditions of exemption Notification No. 102/2007-Cus., dated 14-9-2007, as applicable to the DTA clearances of a 100% EOU, have been substantially satisfied and hence the goods would be fully exempt from SAD as, in our view, the benefit of this notification, which has been issued for the goods imported by a person for subsequent sale and whose condition have been prescribed accordingly, cannot be denied in respect of DTA clearances of a 100% EOU if the condition as applicable mutatis mutandis to DTA sales are satisfied. The duty demand based on this issue is also not sustainable.
Under similar facts in the case of Adinath Trade Link(supra) the benefit of notification was extended to the assesse when the goods were sold from SEZ Unit into domestic tariff. On going through the above settled position, I find that issue in hand has been addressed by this Tribunal and the refund under Notification No. 102/07 Cus is admissible to the appellant. I therefore set aside the impugned order and allow the appeals with consequential relief, if any, in accordance with law.
(Order pronounced in Court on_______________ ) Ramesh Nair Member (Judicial) sk 11 E/759, 760/11