Excise Appeal No.12193 of 2016
(Arising out of OIO-BHR-EXCUS-000-COM-81-2016-17 dated 30/09/2016 passed by
Commissioner of Central Excise and Service Tax-Bharuch)
Sun Pharmaceuticals Industries Ltd
VERSUS
C.C.E-Bharuch
APPEARANCE:
Shri A B Nawal & Ms. Nidhi Nawal, Advocate for the Appellant
Shri Ghanasyam Soni, Joint Commissioner (AR) for the Respondent
CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON’BLE MEMBER (TECHNICAL), MR. RAJU
Final Order No. A/ 10047 /2023
DATE OF HEARING: 14.09.2022
DATE OF DECISION: 13.01 .2023
RAMESH NAIR
This appeal is directed against order-in-original No. BHR-EXCUS-000-
COM-081-2016-17 dated 29.12.2016. The brief facts of the case are that the
appellant is engaged in the manufacture of Bulk Drugs falling under chapter
29 of the Central Excise Tariff Act., 1985. They are registered as 100%EOU.
During the course of audit, the officers observed that the value of DTA sales
during the year 2012-13 and 2013-14 by the appellant was more than 50%
of FOB value of physical exports made during these years. As per the
Notification No. 23/2003-CE dated 31.03.2003 clearance to DTA sales by the
EOU in a financial year at concessional rate is allowed only upto the 50%
aggregate value of the FOB value of physical exports. If value of DTA sales
exceeds the 50% value of the FOB, full duties provided under Section 3 of
the Central Excise Act, 1994 are chargeable on such goods. Therefore, Show
Cause Notice dated 09.03.2006 was issued demanding short payment of
excise duty alongwith interest and penalty. By the impugned order-in
original, the Adjudicating authority confirmed the demand of duty along with
interest and penalty. Hence, the present appeal
- Shri A B Nawal and Ms. Nidhi Naval, learned counsels appearing on
behalf of the Appellant submits that Appellant started their commercial
activity from 18.11.2006 and first export was made in the financial year
2006-07. Thereafter, in accordance with the para 6.8(a) of the Foreign Trade
Policy they are eligible for DTA clearances upto the 50% of FOB value of
Exports, hence they had started DTA clearance within entitlement. There
was no any dispute regarding DTA sale entitlement and achievement of
positive NFE by the Appellant. Further it is also not disputed that appellant
has intimated to the Development Commissioner about DTA sale
entitlement.
2.1 He further submits that as per Appendix 14-I-H, if DTA sale
entitlement is not utilized within the same year then it can be carry
forwarded and can be utilized in the next two years. In the impugned
matter, Appellant has not utilized entire DTA sale entitlement within same
year. Hence, it was carry forwarded in the next year/ quarter and utilized in
the next year /quarter. As per the guidelines provided under Appendix 14-I-,
DTA sale entitlement can be availed of within three years of the accrual of
entitlement. It means, if DTA sale entitlement is obtained for the F.Y. 2012-
13 on the basis of export made during the F.Y. 2011-12 then that DTA sale
entitlement can be used for next 2 years if it is not utilized within first year
of obtaining of DTA sale entitlement. Accordingly , in the present matter
there was no excess DTA sale by the appellant. He produced the detail
charts and carry forward calculation as per Appendix 14-I-H. According to
this during the F.Y. 2012-13 and 2031-14, there was sufficient DTA sale
entitlement.
2.2 He also submits that the Learned Commissioner has erred while
calculating the DTA entitlement. While issuing order he has not considered
the carry forwarded eligible closing balance of last quarter.
2.3 He also submits that in Annexure –A of SCN department has proposed
to recover special additional duty (SAD) on clearance made to DTA. As per
the Sr. No. 1 and condition No. 1 of Notification No. 23/2003-CE dated
13.03.2003 special CVD is exempted if the said goods cleared in the DTA are
not exempted by the state Government from payment of sales tax. The
goods cleared by the Appellant are not exempted from levy of sales tax and
they are paying sales tax/CST as applicable. Appellant were making DTA
clearance to their sister concern as well as to other parties and claim the
exemption from SAD on all their clearances in terms of the above
Notification as the products manufactured by them i.e. Bulk Drugs are not
exempt from payment of Sales Tax by Statement Government of Gujarat
and they had paid the sales tax /VAT as the case may be on the DTA sales
made by them to other parties. But when the goods are cleared to their own
sister units on stock transfer basis the VAT/CST is not charged as ‘no sale’
has taken place. In case of clearance of goods on stock transfer the sales tax
is not leviable. Since the said goods are not exempted by the state
government appellant has not paid the SAD in terms of Notification No.
23/2003-CE dtd 31.03.2003. Appellant have followed the conditions as
mentioned in the Notification No. 23/2003 dated 21.03.2003 and rightly
claimed the exemption from payment of the SAD. He placed reliance on the
following decisions:-
MICRO INKS VS. COMMISSIONER OF CENTRAL EXCISE & SERVICE
TAX, DAMAN 2014-TIOL-258-CESTAT –AHM.
M/S VVF LTD. VS. COMMISSIONER OF CENTRAL EXCISE, BELAPUR
2014-TIOL-04-CESTAT-MUM
STI INDUSTRIES VS. CCE 2014-TIOL-CESTAT-AHMED.
- Shri Ghanasyam Soni, the learned Departmental Representative
opposed the contentions of the learned Counsel by reiterating the findings of
the Learned Commissioner in the impugned order and emphasised that the
appellant do not satisfy the conditions subject to which the exemption under
Notification No. 23/2003-C.E. is available in respect of DTA clearances. He,
therefore, pleaded that the appeal be dismissed.
- Heard both sides and perused the records of the case. A perusal of
Paragraph 6.8 of the FTP would show that subject to the conditionalities
contained therein, an EOU unit can make a DTA sale. The primary condition
being, that sales to DTA units is limited to 50% of the FOB value of exports,
subject to the fulfillment of positive NFE on payment of concessional duty.
Here there is no dispute about the DTA sale entitlement and achievement of
positive NFE by the Appellant and intimation to the development
commissioner about the DTA sale entitlement. We have also gone through
the Appendix -14-I-H of Handbook of Procedure which provide the guidelines
for sales of goods in the Domestic Tariff Area (DTA) by the EOU
/EHTP/STP/BTP units. The para (d) of the said guidelines provides as under
“ (d) The DTA sales entitlement shall be availed of within three years of
the accrual of entitlement.”
As per the above guideline there in no doubt that EOU unit can avail DTA
sales entitlement within three years of the accrual of entitlement.
4.1 We also gone through the relevant condition 2 of Notification No.
23/2003-CE dated 31.03.2003 disputed in the present matter the same is
reproduced below:-
(b) the total value of such goods being cleared under sub-paragraphs (a),
(b), (d) and (h) of Paragraph of the Export and Import Policy, into
Domestic Tariff Area from the unit does not exceed 50% of the Free on
Board value of exports made during the year (starting from 1st April of the
year and ending with 31st March of next year) by the said unit;
4.2 The case of the revenue is that during the year 2012-13 and 2013-14,
the assessee has made excess clearances into DTA than their actual
entitlement i.e. 50% of the FOB value of export and such excess clearance
of the goods into DTA were not entitled to get exemption of duties under
Notification No. 23/2003-CE dated 31.03.2003. Whereas Appellant claimed
that during the year 2012-13 and 2013-14 there was no excess DTA sales
and it was within entitlement. Department has not considered the carry
forward sales entitlements which were utilized during the disputed period.
We find that in the present matter Learned Commissioner wrongly
interpreted the condition of Notification and denied the benefit of Notification
for the reason that the DTA clearances made by appellant during the period
2012-13 and 2013-14 were in excess of 50% of the FOB value of the
physical exports made during the 2012-13 and 2013-14. Whereas, it is clear
from the guidelines of Appendix 14-I-H, if DTA sale entitlement is not
utilized within same year then it can be carry forwarded and can be utilized
in the next two years. The said Appendix 14-I-H clearly provides that the
DTA sales entitlement shall be availed of within three years of the accrual of
entitlement. The detail charts related to DTA sale entitlement submitted by
the appellant clearly shown that during the disputed period there was
sufficient DTA sale entitlement balance with them and they have not
exceeded the limit as disputed by the department. Further the condition of
notification only restricted that the clearance into DTA is not more than of
50% of the Free on Board value of exports made during the year. In the present matter Appellant has not exceeded the said limit, they have
correctly utilized the carry forwarded balance which was valid upto three
years from its accrual.
- In our view, the benefit of notification cannot be denied to the
appellant. In view of the above discussion, the impugned order is not
sustainable. The same is set aside. The appeal is allowed.
(Pronounced in the open court on 13.01.2023)
(RAMESH NAIR)
MEMBER (JUDICIAL)
(RAJU)
MEMBER (TECHNICAL)
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