Custom, Excise & Service Tax Tribunal
Akshar Exports vs Cgst & Central Excise Rajkot on 31 October, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
AHMEDABAD
REGIONAL BENCH, COURT NO. 2
EXCISE APPEAL NO. 11165 OF 2014
(Arising out of OIA-RJT-EXCUS-000-APP-595-13-14 Dated- 19/12/2013 passed by
Commissioner of Central Excise-RAJKOT)
AKSHAR EXPORTS Appellant
Plot No. 250, GIDC, Phase-II, Dared,
Jamnagar, Gujarat
Vs.
COMMISSIONER OF CENTRAL EXCISE-CGST &
CENTRAL EXCISE RAJKOT Respondent
Central Excise Bhavan, Race Course Ring Road, Income Tax Office, Rajkot, Gujarat-360001 WITH I. Customs Appeal No. 11186 of 2014 (Akshar Exports) II. Excise Appeal No. 11886 of 2014 (Akshar Exports) III. Customs Appeal No. 11887 of 2014 (Akshar Exports) (Arising out of OIA-RJT-EXCUS-000-APP-595-13-14 Dated- 19/12/2013 passed by Commissioner of Central Excise-RAJKOT) (Arising out of OIA-RJT-EXCUS-000-APP-697-13-14 Dated- 06/02/2014 passed by Commissioner of Central Excise-RAJKOT) (Arising out of OIA-RJT-EXCUS-000-APP-697-13-14 Dated- 06/02/2014 passed by Commissioner of Central Excise-RAJKOT) Appearance:
Shri Vikas Mehta, Consultant for the Appellant Shri Himanshu P Shrimali, Superintendent (AR) for the Respondent CORAM:
HON'BLE Dr. AJAYA KRISHNA VISHVESHA, MEMBER ( JUDICIAL ) FINAL ORDER NO._11351-11354/2025 Date of Hearing : 02/07/2025 Date of Decision : 31.10.2025 Dr. AJAYA KRISHNA VISHVESHA The present set of all the four appeals involve common issue. For reference of details, Appeal no. C/11165/2014 Akshar Exports vs. CCE & ST Page |2 E/11165, 11186/2014 & C/11886-11887/2014 Rajkot has been chosen. The common issue involved in all the four appeals is "whether the appellant has properly availed the benefit of the input-output ratio, as statutorily prescribed under the Notification No. 52/2003-CUS dated 21st March, 2003 read with the Final Norms as fixed by the Norms Committee in respect of segregation and manufacturing of the goods out of the brass scrap with impurities or not?
1.1 The facts of the case as mentioned in appeal no. C/11186/2014 Akshar Exports vs CCE & ST Rajkot are that the appellant is holding a 100% EOU status and it was importing duty free Brass Scrap for manufacture of their final products in terms of Notification No. 52/2003-Cus dated 31st March, 2003 read with the Foreign Trade Policy 2004-2009 relating to the scheme for the EOUs.
The imported Brass Scrap was first subjected to the process of segregation. After segregation, the non-foundry scrap (i.e. iron scrap, rubber / plastic scrap) and foundry scrap (i.e. nonferrous metals) were obtained. Non foundry scrap was cleared by the appellant as such on payment of appropriate duties and under respective tariff headings, based upon the 'Quantitative Clearance Permission' given by the Development Commissioner, whereas foundry scrap was utilized / consumed in the manufacturing of various goods / products for exports. As no Standard Input Output Norms (SION) were prescribed under the provisions of Foreign Trade Policy, relating to the manufacturing process adopted by the appellant, the Final Wastage Norms in respect of the appellant were fixed by the Norms Committee in terms of para 6.8 (e) of the FTP, and was communicated / intimated by the DGFT New Delhi to the Development Commissioner, KASEZ, Gandhidham, vide letter dated 9th May, 2011 with a copy to the appellant.
1.2 On scrutiny of ER-2 returns filed during the period from October-2004 to July-2009 and from April 2010 to March-2012 by the appellant, the department Page |3 E/11165, 11186/2014 & C/11886-11887/2014 observed three main issues which were found to be in violation of the provisions of said Notification read with the FTP, for which Show Cause Notices were issued to the appellant. The issue involved are as follows:
a) For the SCN No. 58/Commr./2008 dated 31st July, 2008, issued for the period from July-2007 to March-2008, the department observed that the appellant has used / consumed excess quantity of raw materials then the prescribed norms. The excess quantity of raw materials consumed was calculated by taking into consideration the provisions of clause 3 of the said notification wherein the generation of waste and scrap was allowed up to 2% of input quantity, in case where no Standard Input Output Norms (SION) were prescribed. As per the details of the calculations given in the table appended at para no. 4 of the impugned order, the appellant had used / consumed total quantity of 49.123 MT of raw materials i.e. Mixed Brass Scrap in excess to the prescribed norms, on which the Customs Duty was demanded.
b) For the SCN No. 126/JC/2012 dated 23rd May, 2012 and SCN No. VIII/48-
15/Cust-T-2012-13 dated 3rd September, 2012 issued for the period from April-2010 to December-2011 and January-2012 to March-2012 respectively, the department observed that the appellant had generated / cleared excess quantity of slag by considering the Final Wastage Norms, as fixed by the Norms Committee. Accordingly, the duty was demanded on the excess consumption of raw materials, for the period from April- 2010 to December-2011 to the tune of 15.855 MT and for the period from January-2012 to March-2012 to the tune of 8.367 MT. As per the details of the calculations given in the table appended at para no. 5.2 of the Order-in-Original, the appellant had generated / cleared total quantity of 24.222 MT (15.855+8.367) of slag in excess to the prescribed Final Page |4 E/11165, 11186/2014 & C/11886-11887/2014 Wastage Norms as fixed by the Norms Committee and therefore the benefit of the said notification was not available to them and accordingly, the Customs Duty was demanded on 24.222 MT of raw material.
c) For the SCN No. 17/ADC/2010 dated 19.01.2010 issued for the period from October-2004 to July-2009, the department observed that the appellant had cleared / generated the quantity of 51.909 MT of "Non- Foundry Scrap" during the segregation of the raw materials i.e. the Mixed Brass Scrap. In this regard, the department was of the view that as w.e.f. 01.04.2002, the activity of segregation was excluded from the activity of manufacturing, from the FTP 2004-2009 under the appendix 14-i-c 14- I.C, the generation / clearance of non-foundry scrap was considered to be the clearance of duty free raw materials as such and not used for the intended purpose. The said quantity of 51.909 MT of non-foundry scrap was considered for classification under the original CTH 74040022 of the Customs Tariff Act, 1975, declared at the time of import and Customs Duty was demanded accordingly.
1.3 It is pertinent to note here that Show Cause Notice No. V- JMR./AR./SSBY/ADS/2011/2010 dated 01.10.2010 was issued to the appellant M/s. Akshar Expxorts with the contents that during the period April-2008 to March-2010, they have consumed a total quantity of 816.197 MT of duty free raw material in the manufacture of final products as indicated in the Annexure- B. it further appears that during the aforesaid period a total quantity of 506.208 MT of finished product was manufactured. Whereas, as per the ratio fixed in the Final Norms they were allowed to consume only 556.29 MT of duty free raw material for the manufacture of 506.208 MT of finished goods. In the concerned notification as mentioned above, the consumption of the input is restricted to the allowance fixed in the Final Norms by the jurisdictional Development Page |5 E/11165, 11186/2014 & C/11886-11887/2014 Commissioner / Norms Committee. Therefore, after allowing admissible ratio of the input quantity of 556.829 MT, the balance quantity of duty free raw material works out to 259.368 MT.
1.4 It appears that the unit has not regulated their operations based on the norms finally fixed by the Norms Committee and thereby not fulfilled the condition laid down under the Notification No. 52/2003-Cus. Dated 31st March, 2003 and Notification No. 22/2003-CE dated 31st March, 2003 and therefore benefit of duty forgone under this Notification cannot be allowed for the 259.368 MT of duty free raw material used in excess. The Customs Duty has been works out to Rs. 74,82,640/- on 254.390 MT valued at Rs. 4,20,10,409/- and the Central Excise Duty has been worked out to Rs. 48,533/- of 4.978 MT valued at Rs.5,47,463/-. Accordingly, the Customs Duty as well as Central Excise duty has mentioned above, chargeable has been worked out. 1.5 During the adjudication of the above mentioned Show Cause Notices, the lower authority had considered the 'final wastage norms' for the entire period of demand and had recalculated the wastage norms and finally confirmed the demand on 49.123 MT of excess utilized raw materials then the final wastage norms fixed in respect of SCN no. 58/Commr./2008 dated 31 st July, 2008 and 3.742 MT of excess utilized raw materials then the norms fixed. In respect of SCN NO. 166/JC/2012 dated 23rd May, 2012 and SCN No. VIII/48-15/Cus- T/2012-13 dated3rd September, 2012. While calculating the excess consumption of raw materials, the lower authority had applied the ratios of input-output norms as prescribed in the 'Final Wastage Norms' fixed by the statutory 'Norms Committee', in respect of the raw materials consumed i.e. "Mixed Brass scrap with impurities". Whereas the ratio of input-output norms in respect of the raw materials i.e. Mixed Brass Scrap or Brass Scrap Honey was calculated in view of the provisions of clause 3 of the said notification, Page |6 E/11165, 11186/2014 & C/11886-11887/2014 wherein the generation of waste and scrap was allowed up to 2% of input quantity, in case where no Standard Input Output Norms (SION) were prescribed. The above two types of ratios were taken into consideration by the lower authority for arriving at the figure of excess consumption of raw materials as the "Final Wastage Norms' were fixed in respect of the Mixed Brass Scrap with impurities only and were not pertaining to the Normal Brass Scrap. The Mixed Brass Scrap or Brass Scrap Honey is considered to be normal brass scrap as per the Institute of Scrap Recycling Industries (ISRI) code. 1.6 The above mentioned Show Cause Notices dated 31st July, 2008, 19th February, 2010, 23rd May, 2012 and 3rd September, 2012 were jointly adjudicated by the lower authority and vide Order-in-Original demand of Customs Duty of Rs. 23,29,686/- and Rs.1,23,494/- was confirmed on excess utilization of raw materials than the norms fixed weighing49.123 MT and 3.742 MT under Section 28 read with Section 72 of the Customs Act, 1962 and also confirmed Central Excise Duty of Rs. 96,646/- on the excess utilization of raw materials indigenously procured under Section 11A of the Central Excise Act, 1944 along with interest and order was also passed regarding confiscation of 49.123 MT and 3.742 MT of raw materials under Section 111 (o) of the Act but as the goods were not available for confiscation, redemption fine of Rs. 9,00,000/- was imposed. Penalty was also imposed under Section 72 and Section 112 read with Section 114A of the Act and Section 11AC of the Central Excise Act, 1944.
1.7 The Show Cause Notice No. V-JMR./AR./SSBY/ADC/211/2010 dated 1st October, 2010 was adjudicated by the learned Additional Commissioner, Central Excise Rajkot vide Order-in-Original dated 31st December, 2012 through which the learned Adjudicating Authority confirmed the Customs Duty amounting to Rs. 42,04,872/- on 143.258 MT of duty free raw material used in Page |7 E/11165, 11186/2014 & C/11886-11887/2014 excess of admissible ratio of consumption and ordered to recover the same along with interest. The learned Adjudicating Authority also confirmed Central Excise Duty amounting to Rs. 31,198/- on 3.2 MT of duty free raw material used in excess of admissible ratio of consumption and ordered to recover the same along with interest. He also ordered to confiscate 143.254 MT of raw material valued at Rs. 2,36,57,874/- under Section 111(o) of Customs Act, 1962. He also imposed penalty of Rs. 8.50 lacs under Section 72 and Section 112 of Customs Act 1962 upon the assessee and penalty of Rs. 10,000/- under Rule 25 of Central Excise Rules, 2002.
1.8 Feeling aggrieved from the Order-in-Original, the appellant preferred appeal before the learned Commissioner (Appeals).
1.9 The learned Commissioner upheld the Order-in-Original No. 47 to 50/ADC/2013 dated 28.03.2013 passed by the lower authority confirming demand of Customs Duty on the excess consumption of Brass Scrap coming to 49.123 MT and 3.742 MT and confiscation of the same under Section 111(o) of the Act. The imposition of penalty upon the appellant was also upheld by the learned Commissioner (Appeals).
1.10 Against the Order-in-Original NO. 2/ADC/2013 dated 31st December, 2012 / 22nd January, 2013, appeal was preferred by the appellant before learned Commissioner (Appeals) who vide Order-in-Appeal No. RJT-EXCUS- 000-APP-697-13-14 DT 06.02.2014 rejected the appeal and of upheld the impugned Order-in-Original.
1.11 Feeling aggrieved from the impugned order dated 19.12.2013 and 06.02.2014 passed by the learned Commissioner (Appeals), these appeals have been preferred by the appellants before this Tribunal.
Page |8 E/11165, 11186/2014 & C/11886-11887/2014 2 The learned Consultant for the appellant submitted that the learned Commissioner (Appeals) has erred in law as well as on facts while arriving at the excess consumption of raw material of 49.123 for Section A SCN dated 31st July, 2008.
2.1 The learned Consultant for the appellant also submitted that the learned Additional Commissioner and the learned Commissioner (Appeals) have erred in law as well as on facts by ignoring the norms fixed by DGFT, Department of Commerce, Ministry of Commerce and Industry, Government of India for the Mixed Brass Scrap i.e. ratio of 1:1.50 of quantity of segregated brass scrap out of Mixed Brass Scrap and restricting the wastage at 2% of "Raw Material Consumed" and thereby working out excess quantity of alleged consumption of 49.123 MT and 3.742 MT of raw materials consumed.
2.2 The learned Consultant for the appellant also submitted that the Standard Input Output Norms application, appellant have submitted total imported quantity details for the year 2005-06, 2006-07 and 2007-08 and the Standard Input Output Norms are fixed based on the application submitted. Thus, excess consumption derived for the financial year 2007-08 is unsustainable as norms are fixed considering production details on the basis of data submitted. 2.3 The learned Consultant also submitted that both the authorities have confirmed Customs Duty of Rs. 23,29,686/- and 1,23,494/- on account of alleged excess consumption of 49.123 MT and 3.742 MT of raw material under Section 28 read with Section 72 of the Customs Act, 1962 and invoked B-17 bond to recover the Customs Duty.
2.4 The learned Consultant also submitted that both the authorities have also erred while confirming Central Excise Duty of 96,646/- on account of excess utilization of raw material indigenously procured under Section 11A of Central Page |9 E/11165, 11186/2014 & C/11886-11887/2014 Excise Act, 1944 and invoke B-17 Bond to recover Customs Duty. Both the authorities have erred by passing order for confiscation of 49.123 MT and 3.742 MT of raw material and since the raw material was not available for confiscation, redemption fine of Rs. 9,00,000/- has been demanded and bond B-17 was invoked to recover the said redemption fine.
2.5 The learned Consultant also submitted that the impugned order passed by the learned Commissioner (Appeals) be set aside and the appeal of the appellants be allowed.
3. The learned Authorised Representative for the department submitted that the learned Commissioner has passed the impugned order in accordance with law and it is liable to be confirmed. He has relied upon the final order no. 10567- 10272/2024 dated 30th January, 2024 in case of Amardeep Exports vs. CC Jamnagar (Prev) of CESTAT-DB, Ahmedabad in which it has been held that from the letter of DGFT dated 4th May, 2011, it is apparent that the wastage norms for the stage of manufacturing brass items from segregated process Mixed Bras Scrap is 1.26 and is obtusely inclusive of all kinds of wastage including slag. Thus, the calculation given by the appellant in their appeal cannot be adopted for the purpose of calculating unexplained consumption of slag and the Tribunal dismissed the appeal filed by the appellant.
4. I have heard the learned Counsel for the appellant and the learned Authorised Representative for the department and perused the records. 4.1 I agree with the submissions put forward by the learned Consultant for the appellant that the issue involved in all the four appeals is squarely covered by the decision of the Hon'ble Tribunal in the case of Deep Recycling Industries and others vs Commissioner of Central Excise and Service P a g e | 10 E/11165, 11186/2014 & C/11886-11887/2014 Tax, Rajkot reported in (2024) 17 Centax 225 (Tri.Ahmd.) in which it was held as follows:-
"10. Considered. We find the case low relied upon by the department were per incuriam as they did not consider scope of the non-obstante clause of Notification No. 52/2003-Cus (ibid). In the instant case for material consumed over and above the SION notification issued by the DGFT, Department views that duty or at least penalty is liable to be charged in case excess wastage comes into play. However, it is found that Hon'ble Gujarat High Court in the matter of Commissioner of Customs (Preventive) v. Monarch Overseas as reported in 2019 (1) TMI 1513 (Gujarat High Court), While dealing with scope of Notification No. 52/2003-Cux. Dated 03.01.2003 31.03.2003 particularly clause (3) construed the non-obstante clause by interpreting that once the material procured are used for the purpose of manufacture of finished goods or services then even if, waste and scrap arises in course of production and manufacture over the norm then same is also exempt from the duty of custom leviable or the additional duty. Till the time the waste is cleared on payment of duty, and is not shown to have been removed without permission The decision was based on and affirmed decision of Meridian Impex v. CC & ST as reported in 2018 (7) TMI 865 CESTAT which has summarized findings as follows:
"We find that as been correctly pointed out by the learned advocate for the appellant the Clause (3) of the relevant notification ie. 52/2003-Cust specifically provides exemption to the goods which are imported into India and are used for the purpose of manufacture of finished goods. The condition for exemption, therefore, is such imported goods should be used for the purpose of manufacture of finished goods. In the instant case, the department is not in denial that the goods imported were all actually used for and issued for manufacture. The dispute is only about 10.841 MTs of imported material which as per the department have been excess consumed. There is no allegation or evidence, that the same has been diverted to or removed into Domestic Tariff P a g e | 11 E/11165, 11186/2014 & C/11886-11887/2014 Area. The waste arising in the manufacturing process and physically available has been duly cleared on the applicable excise duty. Therefore, we find that the dispute falls within the parameter of Clause (3) of the relevant notification and the decision quoted by the appellant including of Hon'ble Gujarat High Court is applicable and the case law quoted by the revenue are distinguishable or per incuriam. In our view, clause (3) of the Notification 52/2003-Cus takes invisible losses that arise in various industries in its ambit and wastage thus can be at variance from industry to industry.
11. In view of aforesaid finding, we find that the appeals are allowable. Ordered accordingly."
4.2 I am of the view that the conclusion arrived at by the learned Adjudicating Authority and the learned Commissioner (Appeals) is against the law laid down by Hon'ble Gujarat High Court in Commissioner of Customs (preventive) vs Monarch Overseas reported in 2019 (1) TMI 1513 (Guj.) in which it has been held as follows:-
"11. That brings us to the second question, as to whether clearance of such scrap upon payment of excise duty would fall within the ambit of paragraph 3 of Notification No. 52/2003-Cus., dated 31-3-2003? On behalf of the appellant it has been contended that the clearance of foundry scrap beyond the ratio/norms of scrap laid down by the Norms Committee is in contravention of the provisions of Notification No. 52/2003-Cus., dated 31-3- 2003. In this regard, reference may be made to the provisions of the said notification. Clause (3) of the said notification to the extent the same is relevant for the present purpose provides that notwithstanding anything contained in that notification, the exemption therewith shall also apply to goods which on importation into India or procurement, are used for the purpose of manufacture of finished goods or services and such finished goods and services, (including by-products, rejects, waste and scrap arising in the course of production, manufacture, P a g e | 12 E/11165, 11186/2014 & C/11886-11887/2014 processing or packaging of such goods) even if not exported, are allowed to be sold in Domestic Tariff Area in accordance with the Export and Import Policy and subject to such other limitations and conditions as may be specified in this behalf by Development Commissioner, or Board of Approval or the Inter Ministerial Standing Committee, as the case may be, on payment of appropriate duty of excise leviable thereon under Section 3 of the Central Excise Act, 1944. Thus, waste and scrap arising in the course of production or manufacture of finished goods are also exempt from the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and the additional duty, if any, leviable thereon under Section 3 of the said Customs Tariff Act. Reverting to the facts of the present case, as noticed hereinabove, the segregated waste has arisen in the course of production/manufacture of the finished goods viz. brass articles;
the Commissioner of Customs has recorded that the segregated waste had in fact been cleared on payment of duty after being duly permitted by the Development Commissioner in accordance with the provisions of the EXIM Policy. The requirements of clause (3) of Notification [No.] 52/2003-Cus., dated 31st March, 2003 are therefore, wholly satisfied. Under the circumstances, there does not appear to be any legal infirmity in the view adopted by the Tribunal." Clause (3) of the Notification No. 52/2003-Cus dated 03.01.2003 has been reproduced here which is as follows:-
"3. Notwithstanding anything contained in this notification, the exemption herewith shall also apply to goods which on importation into India or procurement, are used for the purpose of manufacture of finished goods or services and such finished goods and services, (including by-products, rejects, waste and scrap arising in the course of production, manufacture, processing or packaging of such goods) even if not exported, are allowed to be sold in Domestic Tariff Area in accordance with the Foreign Trade Policy and subject to such other limitations and conditions as may be specified in this behalf by Development Commissioner, or the Board of Approval or the Inter Ministerial P a g e | 13 E/11165, 11186/2014 & C/11886-11887/2014 Standing Committee, as the case may be, on payment of appropriate duty of excise leviable thereon under section 3 of the Central Excise Act, 1944 (1 of 1944) or where such finished goods (including by-products, rejects, waste and scrap) or services are cleared to the warehouse appointed or registered under notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 26/98-Central Excise (NT), dated the 15th July, 1998 or No. 46/2001-Central Excise (NT), dated the 26th June, 2001 or cleared to the warehouse authorized to carry out manufacturing process or other operation under section 65 of the Customs Act, 1962 (52 of 1962) and under the Manufacture and Other Operations in Warehouse Regulation, or cleared to the holders of certificate from Apparel Export Promotion Council and Council for Leather Export for duty free imports as referred to in clause (e) of the paragraph 6.9 of the Foreign Trade Policy, without payment of duty:"
4.3 It is pertinent to mention here that Notification No. 22/2003-C.E. dated 31.03.2003 also containing "Non-Obstente Clause" (6), is similar to Clause (3) of the Notification No. 52/2003-Cust. dated 31.03.2003. The provisions of both the notifications are applicable in this case. Notification No. 22/2003-CE dated 31.03.2003 has been issued on the Central Excise side, inter alia, exempting goods from payment of Central Excise Duty and Additional Duty of Central Excise on such goods. As per proviso to Condition No. 4 (a) of the said Notification, generation of waste, scrap and remnants of the 2 % of the quantity is allowed where SION have not been notified.
4.4 It is also pertinent to mention here that there is no dispute over the fact that appellant had paid duty on entire quantity of goods that were cleared by supposedly using excess imported / indigenous duty free brass scrap.
P a g e | 14 E/11165, 11186/2014 & C/11886-11887/2014 4.5 I am also of the view that the decision in Maridian Impex reported in 2018 (7) TMI 865 CESTAT is also applicable in the facts of this case in which demand of Customs as well as Central Excise Duty have been set aside. 4.6 In view of the above observations, I have come to the conclusion that the learned Commissioner and the Adjudicating Authority have erred in confirming the demand of Customs Duty, and Excise Duty and in imposing penalty upon the appellant. Therefore, the appeals are liable to be allowed and the impugned orders passed by the learned Commissioner are liable to be set aside.
5. Consequently, the appeal are allowed and the impugned orders passed by the learned Commissioner dated 19.12.2013 and 06.02.2014 are set aside.
(Order pronounced in the open Court on 31.10.2025) (Dr. AJAYA KRISHNA VISHVESHA) MEMBER ( JUDICIAL ) Dharmi