Central Excise - EOU - clearance to DTA without permission - Duty u/s 3(1) and not proviso: Supreme Court
By TIOL News Service
NEW DELHI, JUNE 08, 2016: THE issue in this case before the Supreme Court was the duty payable by an EOU for the goods cleared to DTA , without permission.
As per Section 3(1) of the Central Excise Act as it stood prior to the amendment on 11.5.2001,
a) There shall be levied and collected in such manner as may be prescribed a duty of excise on all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)
Provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured by a hundred per cent export-oriented undertaking and allowed to be sold in India, shall be an amount equal to the aggregate of the duties of customs.
This literally meant that when goods are allowed to be cleared from EOUs , the duty liability was the aggregate of the Customs duties, but when they were cleared otherwise, say clandestinely or without permission, the duty would be as per the Central Excise Tariff.
This anomaly was corrected by the amendment with effect from 11.05.2001. After the amendment in 2001, it became a There shall be levied and collected in such manner as may be prescribed, a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods …. as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
Provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured, -- by a hundred per cent export-oriented undertaking and brought to any other place in India, shall be an amount equal to the aggregate of the duties of customs...
The present case before the Supreme Court pertains to the period prior to the amendment.
The issue had been decided by the Supreme Court in the NCC Blue Water Products case - 2010-TIOL-73-SC-CX
where the core question was, whether the sales of shrimps and shrimp seeds by the assessee in DTA , without requisite permission from the Development Commissioner, are to be assessed to excise duty under Section 3(1) of the Act or under the proviso to the said section?
The Supreme Court had then observed,
"It is manifest that all excisable goods produced or manufactured in India are exigible to duty of excise under Section 3 of the Act, the charging section, at the rates set forth in the Schedule to the Tariff Act. However, the proviso to the said section provides that the duties of excise on any excisable goods, which are produced or manufactured by a 100% EOU and allowed to be sold in India shall be an amount equal to the aggregate of the duties of customs which would be leviable under Section 12 of the Customs Act, 1962. As aforestated , the controversy at hand is whether in the absence of an order by the competent authority, allowing the assessee to sell the shrimp seeds and shrimps in India, excise duty on such sales could be levied and collected in terms of the proviso. To put it differently, the issue relates to the significance of the expression “allowed to be sold in India” as appearing in clause (ii) to the proviso to sub-section (1) of Section 3 of the Act."
After detailed examination of the present case, the Supreme Court followed the NCC Blue Water Products decision and allowed the appeals holding that the assessee shall be liable to pay the excise duty as per Section 3(1) of the Act. It is clarified that the judgement does not concern with the amended provision.
(See 2016-TIOL-82-SC-CX)
