The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) held that the eligibility of concessional duty is available on when the Domestic Tariff Area ( DTA ) clearances within 50% of overall ceiling of free on board ( FOB ) value of exports.
The appellant is to clear scrap/waste/remnants, however, it was found that in the guise of handling loss, the appellant had cleared 2,20,685 metric tons in the DTA without payment of Central Excise duty and without following any central excise procedure as applicable to DTA clearances. Hence, an offence case was registered and was adjudicated upon and duty to the extent of Rs.5,35,73,931/- was confirmed along with interest and equal amount of penalty.
The counsel for the appellant submitted that that this shortage is only on account of accumulated shortages over many years due to handling, loading, unloading, multimodal transportations, weathering, different methods of weighments etc; and were consolidated in the Annual Report for 2010-2011. Since this is a common feature with all other units manufacturing iron ore, the matter was taken up with the Development Commissioner vide their letter dated 9.11.2010 requesting them to take up the matter with the Board of Approval/Ministry of Commerce for prescribing the norms or guidelines for treatment of the quantity of such waste.
It was further submitted that the sale of iron ore by a DTA unit during the relevant period attracted ‘Nil’ rate of duty in terms of the Notification No.4/2006 dated 1.3.2006 and in terms of the Notification No.23/2003 dated 31.3.2003 attracts concessional rate of duty of 30% as their DTA clearances were within the 50% entitlement.
The Authorized Representative (AR) for the Revenue submitted that during verification of the records, it was noticed that the appellant had reduced/deducted 2,20,685 MTs of Iron ore from their closing balance in their unsigned ER 2 return for the month of October 2010 without any explanation for the same. They had not filed the said return with the Range Office and later, filed the returns for the period from October 2010 to February 2011 with the Range office only on 25.10.2011.
A Two-Member Bench comprising DM Misra, Judicial Member and R Bhagya Devi, Technical Member observed that “Since it is an admitted fact that neither the Development Commissioner nor the DGFT have fixed any norms in spite of their repeated representations, the question of allowing these wastages as ‘handling losses’ is not within the purview of the Department. Therefore, the appellant is liable to pay duty on these wastages/losses. The eligibility of concessional duty is available, provided the DTA clearances are within 50% of overall ceiling of the FOB value of exports. The appellant claims that their clearances are within this 50% limit and if so, they are eligible for the benefit of the concessional rate of duty. Notification No.4/2006 dated 01.03.2006 is not relevant for 100% EOU.”
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