EOUs should be treated on par with Importers, Eligible to claim Duty Exemptions u/s 5A of Central Excise Act: CESTAT [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai has held that Export Oriented Units (EOUs) should be treated on par with Importers and shall be eligible to claim Duty Exemptions under Section 5A of the Central Excise Act.

The assessee, HCL Technologies Ltd., a multinational IT services and consulting company, is a 100% Export Oriented Unit (EOU) with a private bonded warehouse license. The assessee had been awarded a tender by the Director of Defence Electronic Research Laboratory (DERL) for the supply of "Special Test Equipment in GSM Bands." Prior to the procurement, DERL issued a duty exemption certificate to HCL Technologies, certifying that the GSM bands were exempt under Notification No. 10/1997-CE.

The assessee had claimed duty exemptions under Notification No. 10/1997-CE, which allows duty-free clearance of certain goods.

The Revenue, Commissioner of GST & Central Excise, Chennai, challenged assessee’s eligibility to avail the exemption.

The revenue raised objections to the assessee’s claim of duty exemption, arguing that the notification did not explicitly extend to EOUs.

The revenue contended that while the notification allowed duty exemption for certain goods, it did not automatically apply to EOUs, which are subject to different customs duties.

The case hinged on the interpretation of Section 5A of the Central Excise Act, 1944, which deals with the eligibility of EOUs to claim duty exemptions.

The revenue represented by Smt. K. Komathi argued that unless there was an explicit mention of applicability to EOUs in the notification, the assessee shall not be entitled to the exemption.

The assessee, being the appellant, was represented by Shri Raghavan Ramabhadran.

The assessee argued that EOUs should be treated like importers, paying duty equal to aggregate customs duties leviable under the Customs Act, 1962.

The bench concluded that the assessee was indeed eligible to avail the duty exemption under Notification No. 10/1997-CE.

The bench clarified that when Central Value Duty (CVD) is paid, equal to the applicable excise duty, the exemption notification can be considered for calculating duty on Domestic Tariff Area (DTA) clearances by EOUs.

The demand for excise duty imposed by the revenue was set aside, rejecting the revenue's argument to re-determine the classification of the goods in question on the observation that it went beyond the scope of the Show Cause Notice (SCN).

The two-member bench consisting of Ms. Sulekha Beevi C.S (Judicial Member) and Shri M. Ajit Kumar (Technical Member)concluded that EOUs should be treated on par with importers, paying duty equal to customs duties under the Customs Act, while also allowing them to benefit from applicable duty exemptions.

To Read the full text of the Order CLICK HERE

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