ORDER
S.S. Sekhon, Member (T)
1. The appellants are a 100% Export-Oriented Unit engaged in the manufacture of Hydrogen Peroxide. They commenced commercial production in July, 1989. They were clearing certain quality Hydrogen Peroxide in the DTA. However, after the appellants rectified the power situation, they started selling the export quality products in the DTA after obtaining necessary permission from the Development Commissioner. The present appeal of the appellants is concerned with the determination of the assessable value and consequent demands of duty in respect of the clearances made on provisional assessment basis of Hydrogen Peroxide effected by them in the DTA during the period 18-3-90 to 30-11-95.
2(a)(i). In terms of proviso to Section 3 of the Central Excise Act, 1944, when an EOU sells in DTA, the excise duty chargeable is equal to the duties of Customs leviable on like goods imported into India and the value shall be as per proviso to Section 14 of the Customs Act, 1962.
(ii) CBEC has issued a circular way back in the year 1994 stating that in respect of the goods sold by EOU in DTA, since the same is treated on par with imports of goods into India, the transaction value at which the goods purchased by the DTA buyer should be taken as the basis, for the purpose of arriving at the assessable value. The excise duty should be charged on such value. This circular is dated 17-8-94 and the same has been reiterated by circular issued in the year 1997 also.
Relevant portion of the said circular is reproduced below:
“In the aforesaid background, it is hereby clarified that while determining the value of such goods for clearances to DTA, where invoice price of such goods under assessment is in the nature of a ‘transaction value’ (e.g. more or less, corresponding to the FOB value in the case of goods or identical nature) and in conformity with the provisions of Rule 3 of the revised Customs Valuation Rules, 1988, such invoice value can be accepted for purposes of the assessment. In such cases, therefore, there would be no need to ascertain the price of identical or similar goods imported through the various Customs Houses or goods produced by other undertakings. However, in other circumstances, that is where the parameters given in Rule 3 of the said Rules are not satisfied (for example, in case of sale to sister concern or interrelated concerns or where there are other reasons to believe that the invoice price does not represent the true transaction value) recourse may be taken to determine the assessable value as indicated in Board’s Circular No. 26/84-CX-6 and reiterated in para 1 above, by suitable enquiries.”
In the present case, it is not the case of the department that the sales made by the appellants in DTA are sales made to sister concern or interrelated concern or to other related parties. It is also not the case of the department in the show cause notice or in the impugned order that the invoice price at which the goods have sold in DTA on which excise duty has been paid does not represent the true transaction value. Thus, in the absence of any of the exceptions provided for in the circular issued by the CBEC, the Assistant Commissioner of Central Excise, Nellore and the Commissioner (Appeals) ought to have applied the circular issued by the CBEC which was binding on them or arrived at reasons as, to why the invoice value should be departed from. The learned Assistant Commissioner and the Commissioner (Appeals) have erred in not applying the circular of the CBEC and therefore, the impugned order of the Commissioner (Appeals) and the Assistant Commissioner taking recourse to Rule 5 of the Customs Valuation Rules, 1988 and taking the CIF value of identical goods imported by some other parties as the basis is liable to be set aside.
(iii) The learned Commissioner (Appeals) in the impugned order has observed that the appellants did not have any objection to adopt the CIF value of identical goods imported as the basis. This finding of the Commissioner (Appeals) is totally unacceptable. One cannot effect Valuations under the provisions of Section 14 of the Customs Act, 1962 by mutual consent. The first objection of the appellants before us is with regard to the adoption of the CIF value of the identical goods imported into India; the compared goods are not identical and at same level of transaction is not established. Moreover the goods are of different quality and are also in unpacked condition. The orders of the lower authorities do not meet our approval.
2(b). The learned Advocate for the appellants did not stress on the valuation aspects, yet stressed that in any case quantification of the duty demand is incorrect as (i) Proviso to Section 3 of the Central Excise Act, 1944 states that when the EOU sells the goods in DTA, the excise duty should be equivalent to duty of Customs chargeable on the like goods imported into India. By way of several notifications issued from time to time, the same has been reduced to 50% of the duties of the customs leviable under Section 12 of the Customs Act, 1962. (ii) The show cause notice and the impugned order has calculated the duty demand for the entire period in terms of Notification No. 2/95 and its predecessor notification. The impugned order has taken the enhanced value as the basis and levied 50% of the Basic Customs Duty (leviable under Section 12 of the Customs Act) 505% of the Countervailing Duty which included the Special Excise Duty and 50% of the auxiliary duty leviable under the respective Finance Acts and deducted the total duty paid by the appellants and arrived at the differential duty demand.
(iii) During the disputed period, the appellants have paid all the aforesaid duties on the values as determined by them. They submit that in terms of Notification No. 2/95 as it stood during the disputed period as by its predecessor notification viz., No. 97/91-CE., dated 7-10-91, they are liable to pay only duty calculated at the rate of 50% of each of the duties of customs leviable under Section 12 of the Customs Act read with any other notification prevailing for the time being in force issued under subsection (1) to Section 25 of the said Act, leviable on the like goods produced or manufactured outside India when imported into India. Thus, in terms of the notifications, the appellants are liable to pay only 50% of Basic Customs Duty leviable on the like goods produced or manufactured outside India when imported into India inasmuch as the Basic Customs Duty is the only duty chargeable under Section 12 of the Customs Act. This would be so, notwithstanding amendment to proviso to Section 3(1) of the Central Excise Act, 1944 retrospectively with effect from 11-5-82 and amendment effected only to Notification 2/95 with effect from 16-9-99. They rely on the Larger Bench decision in the case of Fabworth (India) Ltd., 2002 (143) E.L.T. 663 (Trib. – LB). The learned DR consents and we find no reason not to follow the Larger Bench decision since Notification 81/91-C.E., dt. 25-7-91, Notification 97/91, dt. 7-10-99, the predecessor Notification to Notification No. 2/95 are similar in wording to Notification 2/95 before amendment dt. 16-9-99, Notification No. 2/95 has been considered by the Larger Bench in the Fabworth case (supra). Following the same, only 50% Basic Duty of Customs would be leviable in this case.
(c) Since the duties payable have to be worked out, we would set aside the order and remit the same back to the original authority to rework the duties payable and determine and grant the question of consequential relief if any, eligible as per law. 3. Appeal disposed of in above terms.