The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Ahmedabad Bench held that no duty can be demanded on semi-finished goods lying at time of de-bonding of 100% EOU (Export Oriented Units Scheme).
The appellant M/s IPCA Laboratories Ltd. are engaged in manufacture of bulk drugs and intermediates classifiable under Chapter heading 29 of Central Excise Tariff Act. The appellant is registered as 100% EOU and applied for exit from the said EOU status i.e conversion of 100% EOU to normal DTA Unit. Thereafter the appellant had informed the central excise department about the stock of input, input contained in work in process and input contained in finished goods lying with the department.
The jurisdictional Superintendent informed to the appellant that the payment of duty on raw material contained in finished goods is not correct and duty is required to be paid on the finished goods lying on the date of debonding. The appellant paid the differential duty along with interest. Subsequently, the Superintendent informed that even in respect of semi-finished goods and the duty is required to be paid on the value of semi-finished goods under Section 3(1) of Central Excise Act.
The department issued the show cause notice alleging that the duty on work in process / semi-finished goods is required to be paid equal to aggregate duty of customs on combined value of raw material i.e indigenous imported raw material contained in finished goods including the cost of manufacturing of semi-finished goods. The Commissioner (Appeals) confirmed the demand and aggrieved this appeal has been preferred.
Mehul Jiwani, Chartered Accountant appearing on behalf of the appellant submitted that the duty not payable on work in process / semi-finished goods at the time of debonding and referred to the Foreign Trade Policy 2009-2014 whereby the customs and excise duties for the purpose of debonding should be paid on the imported and indigenous capital goods, raw materials, components, consumables, spares and finished goods in stock. The Counsel submitted that the work in process and semi-finished goods are different and thereby the said clarification will not apply to work in process.
A Bench consisting of Ramesh Nair, Judicial Member and Raju, Technical Member held that “The issue has been decided that no duty can be demanded on semi-finished goods/ work in process, lying at the time of debonding of 100% EOU.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
