- (1.) Appellant-M/s Virlon Textile Mills Ltd. is a 100% Export Oriented Unit (EOU) engaged in the manufacture of Texturised Polyester Yarn and Dyed Polyester Yarn. The said yarn is sold against foreign exchange by the appellant in Domestic Tariff Area (DTA) subject to permission given by the competent authority under para 9.10(b) of Export and Import Policy (Exim Policy) 1997-2002. In this civil appeal, the question for consideration is the rate of duty applicable to sales falling under para 9.10 (b).
(2.) On 4.11.1999 a show cause notice was issued by the Joint Commissioner of Central Excise, Mumbai to the appellant stating that the appellant was not paying appropriate duties on the goods cleared as per the permission granted by the Development Commissioner. According to the show cause notice, the appellant had paid Countervailing duty (CVD) @ 30% on Texturised Polyester Yarn plus Rs. 9 per kg. on Dyed Polyester Yarn cleared under para 9.10 (b) of Exim Policy against foreign exchange. According to the show cause notice, under the proviso to sub-sec. (1) of Sec. 3 of the Central Excise Act, 1944 , (the "1944 Act") duty of excise was leviable on excisable goods produced by 100% EOU and allowed to be sold in India, equal to the aggregate of the duties of customs leviable u/s. 12 of the Customs Act, 1962, on like goods produced or manufactured outside India if imported into India, and where the said duty of customs is chargeable by reference to value; the value of such goods shall be determined in accordance with the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975. According to the said show cause notice, in the present matter, on clearance of the said yarns into DTA under para 9.10(b), appellant, being a 100% EOU, was required to pay duty of excise equal to the aggregate of duties of customs leviable on such yarns falling under Chapter Sub-Heading (CSH) 5402.33 of the Customs Tariff Act 1975 as follows: "A. Basic Customs duty - @ 35% ad valorem. B. Additional Duty equal to excise duty u/s. 3 of the Customs Tariff (also known as Countervailing Duty or CVD) - 24% + 6%. C. Special Additional Duty of Customs u/s. 3A of Customs Tariff Act, 1975 - @ 4%. D. Cess @ 0.05% under Textile Committee Act, 1963." According to the show cause notice, the appellant had failed to pay the duty in respect of clearances of the above yarns under para 9.10 (b), as indicated hereinabove, and accordingly, it was asked to pay Rs. 33.58 lacs (rounded off figure) on their clearances during the period 8.4.1999 to 20.10.1999 falling during the Exim Policy period 1997-2002.
(3.) This demand had been confirmed by all the authorities and the Tribunal (CEGAT) vide impugned judgment dated 19.10.2001. In the impugned judgment, the Tribunal took the view that the entire supplies of yarns to DTA against foreign exchange earned by the appellant was liable to duty payment on clearance in accordance with the proviso under sub-sec. (1) to Sec. 3 of the 1944 Act equal to the customs duty leviable u/s. 12 of the Customs Act, 1962 on like goods produced by a manufacturer outside India. In other words, the Tribunal has upheld the order of the Commissioner (A). The Tribunal has also rejected the contention raised on behalf of the appellant saying that even if the supplies of the yarn under para 9.10(b) was comparable to the DTA sales in para 9.9 of the said Exim Policy, still the appellant was entitled to the benefit of exemption under notification No. 2/95-CE dated 4.1.1995. The Tribunal also rejected the contention of the appellant that, in any event, it was entitled to exemption under notification No. 53/97-Cus. Dated 3.6.1997. According to the Tribunal, the said notification No. 53/97 exempted specified goods from customs duty which were imported into India for manufacture of articles for export out of India or for being used to produce final products for export in cases where the final products/ articles stood produced or manufactured by 100% EOU approved by the Commissioner. According to the Tribunal, para 7 of notification No. 53/97 was not applicable to the present case since para 7 applied only to goods (raw materials) which were imported for the manufacture of articles allowed to be sold in India on payment of duty u/s. 3(1) of the said 1944 Act. According to the Tribunal, para 7 applied only to DTA sales falling under para 9.9 and it did not apply to DTA sales (supplies) falling under para 9.10 (b) and if they are equated still the appellant was not entitled to the benefit, in full, of the exemption notification no. 2/95-CE. According to the Tribunal, the appellant was also not entitled to the benefit of exemption under notification No. 2/95-CE because that notification was applicable to goods allowed to be sold in India in accordance with the provisions of para 9.9 of Exim Policy 1997-2002. According to the Tribunal, notification bearing no. 2/95-CE had the effect of fixing a value or the amount of which 50% of the duty leviable u/s. 12 of the Customs Act, 1962 stood payable. But Sec 12 of the Customs Act, 1962 only applied to goods sold to domestic tariff at the rate of duty leviable on like goods when imported into India. According to the Tribunal, in terms of notification No. 2/95-CE the rate of duty applicable was 50% of the amount of duty. According to the Tribunal, the appellant herein was not entitled to the benefit of exemption under notification No. 2/95-CE since the goods have not been sold in DTA in terms of para 9.9. The Tribunal came to the conclusion that, there was no merit in the contention of the appellant that even supplies made to DTA against payment in foreign exchange should be counted towards fulfilment of export obligations and, therefore, all sales made to DTA whether against payment in foreign exchange or payment in rupees should be treated as DTA sales and, in that event, the assessee-appellant would also be entitled to the benefit of exemption notification No. 2/95-CE.;