The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) granted excise duty exemption to the assessee for goods cleared into the Domestic Tariff Area ( DTA ), citing proper record maintenance and the non-applicability of Special Additional Duty ( SAD ).
Tufropes Pvt Ltd, a 100% Export Oriented Unit (EOU) engaged in the manufacturing of HDPE/PP ropes, nylon ropes, polyester ropes, and plastic waste & scrap, faced a duty demand following a Customs inspection. The demand related to the clearance of goods into the Domestic Tariff Area ( DTA ), and the core issue centered around the appellant’s eligibility for exemptions under the relevant Central Excise notifications for the period from 2006 to 2017.
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The assessee argued that the goods cleared into the DTA were eligible for exemption from excise duty based on specific conditions outlined in the exemption notifications. A key condition was that the goods should not be exempt from sales tax or VAT in the DTA. The assessee maintained that the goods were sold in the Union Territory, where sales tax was applicable, and that they had kept proper records to differentiate between export and DTA clearances.
The department disputed the assessee’s entitlement to the exemption, alleging that the conditions had not been met. They also raised concerns regarding the assessee’s procurement of raw materials from Export Oriented Units (EOUs) and the non-payment of Special Additional Duty ( SAD ) on goods cleared to the DTA. The department further questioned the sufficiency of the appellant’s records.
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In response, the assessee provided detailed records, including raw material issue slips, demonstrating that goods cleared to the DTA were made from domestically procured raw materials, while imported raw materials were exclusively used in export goods. The assessee further argued that no part of the goods manufactured with imported materials had been cleared to the DTA.
Upon reviewing the case, the Tribunal concluded that the assessee satisfied the conditions for exemption. The goods cleared into the DTA were subject to sales tax or VAT, as required by the relevant notifications, and the assessee had maintained separate records for goods cleared to the DTA and for exports.It found that the denial of exemption benefits based on the use of raw materials from EOUs or imports was incorrect, as the materials in question were used solely in the manufacture of export goods.
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The appellate tribunal also considered the extended limitation period invoked by the department. It was found that the appellant had filed all necessary returns and disclosed all relevant details, including the fact that no SAD had been paid on DTA clearances. It concluded that there was no evidence of malafide intent or suppression of facts, and therefore, the extended limitation period was not applicable.
The two member bench comprising Ramesh Nair (Judicial Member) and Raju (Technical Member) set aside the impugned order, allowing the assessee’s appeal, and granted consequential relief in accordance with the law. The tribunal found that the assessee had met all the necessary conditions for exemption and had acted in good faith without any intent to evade duty.
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