‘Appropriate rate of Duty’ used in Excise Notification is same for finished goods cleared on payment of duty at ‘Nil’ rate”: CESTAT sets aside Duty Demand [Read Order]

The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that term ‘appropriate rate of duty’ used in excise notification will cover finished goods cleared on payment of duty at ‘Nil’ rate” and set aside the duty demand.

Eurotex Industries & Exports Ltd, the appellant is a 100% Export Oriented Unit (EOU), engaged in the manufacture of Cotton Yarn, falling under Chapter sub- heading 5205 11 and Knitted Grey Fabrics, falling under Chapter sub- heading 6002 92 of the Central Excise Tariff Act, 1985.  In respect of the cotton yarn and the rejected waste generated during the course of manufacture of the said final product, the appellant had claimed the benefit provided under Notification No. 52/2003-Cus. dated 31.03.2003 for non-payment of duty on clearance of the said product outside the factory premises.  However, non-payment of Central Excise Duty was objected to by the department and accordingly, proceedings were initiated for recovery of the Central Excise duty from the appellants.

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 The show cause notice issued was adjudicated by the Commissioner of Central Excise & Service Tax, Kolhapur vide the impugned order dated 09.10.2012, wherein Central Excise duty demand of Rs.65,53,984/- along with interest was confirmed and equal amount of penalty was imposed on the appellant. 

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The issue was whether the phrase payment of “appropriate rate of duty” used in the exemption Notification No. 53/1997-Cus., dated 03.06.1997 should be equated with the clearance of finished goods at ‘nil rate of duty’, was the subject matter of dispute before the Coordinate Benches of the Tribunal and finally the matter was referred to the Larger Bench for resolution of the dispute.

In the above-said case, the court held that “the term appropriate rate of duty used in Excise Notification dated 31.03.2003 and Customs Notification 12  dated 31.03.2003 will cover a case where the finished goods are cleared on payment of duty at ‘Nil’ rate; and (b) The decision of the division bench of the Tribunal in Technocraft Industries holding that the benefit of these two Notifications shall be admissible even when the finished goods are cleared on payment of duty at “Nil” rate is correct.”

A two-member bench of S.K. Mohanty, Member (Judicial) and M.M. Parthiban, Member ( Technical) held that the adjudged demands confirmed in the impugned order cannot be sustained and set aside the impugned order while allowing the appeal.

To Read the full text of the Order CLICK HERE

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