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Kaybee Tex Spin Ltd. Vs. C.C.-Ahmedabad - (Customs, Excise and Service Tax Appellate Tribunal) (31 Jan 2022)

Once the Excise duty has been paid on DTA clearances, no customs duty can be demanded on raw material

MANU/CS/0021/2022

Customs

In facts of present case, the Appellant, a 100% EOU, during the period September 2003 to November 2003 was engaged in manufacture of Texturized Yarn, Twisted Yarn, Knitted Fabrics etc. During scrutiny of ER-2 returns and Central Excise Invoices of Appellant for the months of September-2003 to November 2003, department noticed that Appellant had cleared finished goods without having any permission from the Development Commissioner, and thereby allegedly failed to follow procedure laid down under the Exim policy and failed to fulfill the condition of exemption Notification no. 52/2003-Cus dated 31st March, 2003.

Show Cause Notices were issued to Appellant proposing recovery of customs duty on raw materials imported duty free in term of Notification No. 52/2003-Cus and also proposed confiscation of goods and imposition of penalty. The demand was confirmed by the adjudicating authority. Aggrieved, the Appellant filed appeal before Commissioner (Appeals), who confirmed the demand on the ground that, this is not a case of demand on raw material but a case of denial of exemption notification under which raw material was allowed to be imported duty free. Therefore, the appellant filed the present appeals.

There is no dispute in the fact that, though the Appellant have not obtained the permission from Development Commissioner for removal of goods in DTA but the Appellant have paid full duty on the finished goods wherein, such imported raw material have been consumed. In case of 100% EOU, as per the policy, the Appellant is required to clear the finished goods for export and if any part of the finished goods cleared in DTA, they are required to pay the excise duty equivalent to all customs duty. As per this policy in respect of DTA clearances, the customs duty which was forgone at the time of import of raw material gets subsumed in the excise duty paid on the finished goods at the time of clearance in DTA therefore, the customs duty which was forgone at the time of import stands paid in the form of excise duty on the finished goods.

Once the duty free raw material got consumed in the manufacture of final product and the final product is cleared on payment of excise duty then, demanding of customs duty on the raw material shall amount to double payment of duty. Therefore, in the facts of the present case as the Appellant have paid the full excise duty on the finished goods wherein, the raw material imported duty free has been consumed, no duty of customs can be demanded on such raw material. In the case of Commissioner of Customs Vs. Suresh Synthetics, it was held by the Apex Court that, customs duty is not sustainable on the raw material, when the finished goods have been cleared on payment of excise duty in DTA.

Once the Excise duty has been paid on DTA clearances, no customs duty can be demanded on the raw material. The Appellant have cleared the goods in DTA on payment of full duty by following the procedure such as issuance of excise invoice wherein the duty payment has been shown, the same particulars were reflected in their monthly ER-2 return. There is no change of circumstances at the time of clearance of goods, filing of ER2 return and the verification of the same at the later stage therefore, there is absolutely no suppression of fact or mis-declaration with intend to evade payment of duty on the part of the appellant. Therefore, extended period of demand cannot be invoked hence the demand for extended period is not sustainable on limitation also. The demand of customs duty on raw material is not sustainable on merit as well as on limitation. Accordingly, the impugned orders are set aside. Appeals allowed.

Tags : DEMAND   CONFIRMATION   LEGALITY  

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