Duty payable on the DTA clearances by SEZ unit

PJ/Case Laws/2011-12/1212

Case: AMOD STAMPING PVT LTD. VS COMMISSIONER OF C.EX. RAJKOT

Citation: 2011(268) E.L.T. 232 (Tri- Ahmd)

Issue:- Import of scrap by SEZ unit and clearance into DTA after mutilation for recycling - Whether Duty is demandable under Section 11A of the Central Excise Act, 1944 or Customs duty is payable under Notification No. 2/95.

Imposition of penalty – lenient view to be taken when goods cleared under Notification after execution of bond and Department had knowledge of such clearance.

Brief fact:- Appellant is engaged in the manufacture of electrical stamping and laminations and had set up a unit in a Kandla Special Economic zone for recycling of iron and steel scrap. Appellant-unit situated in SEZ was importing different kinds of scrap, iron and steel and after mutilation, selling the scrap for recycling to various recycling unit in Domestic Tariff Area (DTA). At the time of clearance to DTA, the appellant was paying 50% aggregate of all custom duty under Notification No. 2/95-CE, dated 4-1-1995. The scrap was cleared by availing the concessional rate of duty under Notification No 83/90-Cus, dated 2-3-1990, as amended from time to time, which provides for concessional rate when imported into India for use in electric or induction furnace subject to the condition that it is the responsibility of the person availing the benefit to show that the same has been used as per the condition of the notification.

Appellants executed Bonds and cleared the goods. Revenue raised duty demand on the ground that the appellant could not produce the proof of use of such scrap in electric arc furnace. The demand of duty was confirmed under Section 11A of the Central Excise Act, 1944 and penalty of Rs One lakhs was also been imposed on the appellant.

Appellant is challenging the impugned order.

APPELLANT CONTENTION:- Appellant submitted that impugned order is without jurisdiction since what was to be demanded was Customs duty and not Central Excise Duty at all. Appellant also submitted that the Commissioner has traveled beyond the show cause notice, since show cause notice proposed that the condition under Notification No 83/90-Cus was not fulfilled. Further , it was also submitted that as per notification, in case scrap was not used, appellant was required to pay duty and since it was in terms of bond, the goods was cleared in the knowledge of the department, penalty was not warranted.

RESPONDENT CONTENTION:- Revenue submits that appellant was not importer but in fact he imported different types of scrap and after mutilation, the scrap was cleared among the Domestic Tariff Area under Notification No. 2/95 and for the purpose of arriving at the rate of duty applicable, Notification No. 83/90-Cus, was applied, would show that the department was right in demanding the duty under Section 11A of the Central Excise Act, 1944 only. It was submitted that the submission of the appellant that the duty was demanded in terms of notification No. 83/90 was totally wrong.

REASONING OF JUDGEMENT: - The Tribunal observed that the appellant gave the impression that the goods was imported by a 100% EOU and was cleared as such to the DTA and therefore Custom Duty should have been demanded. However, the statement of facts enclosed to the appeal memorandum, clearly shows that appellant was the importer of different types of scrap under Notification 83/90 and after mutilation was sending it for recycling to the other unit in DTA. The Statement of Facts clearly showed that appellant was availing the benefit of Notification No. 2/95-CE, which provides that the duty payable by a 100% EOU in respect of goods manufacture and cleared to DTA would be 50% of the custom duties. The Tribunal noted that as submitted by Revenue, Notification No 83/90 -Cus has been used for the purpose of calculation of rate of duty and to facilitate clearance of scrap for recycling for use electric or furnace. The Tribunal held that the matter is very clear and that the duty was demandable under Section 11A of the Central Excise Act, 1944 in terms of Bond executed by the appellant and in terms of condition of the notification under which goods were cleared to DTA.

As regard penalty, it was held that since the goods were cleared under notification after execution of bond with the knowledge of the department and in respect of considerable portion of goods Appellant has furnished end use Certificate, a lenient view is called for. Penalty set aside. Duty demands against appellant upheld.

Decision:- Appeal disposed of in the above terms.

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PJ/Case Laws/2011-12/1212

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