Larger Period Of Limitation Not Applicable Where De-Bonding Was Done After Verification, Issuance Of No Dues Certificate: CESTAT

The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that where debonding was done after verification by Central Excise and issuance of a no-dues certificate, the larger period of limitation cannot apply.

The bench of Ramesh Nair (Judicial Member) and RAJU (Technical Member) has observed that prior to de-bonding, the factory was visited by the Central Excise officers, and the stock and calculation of duty were duly verified by the Central Excise officers. Therefore, the larger period of limitation is inapplicable.

The appellant/assessee, Contacare Ophthalmics and Diagonstics, has been functioning as 100% EOU since 2005. Hasmukh I. Patel was an employee and authorized signatory to the 100% EOU. The 100% EOU applied to the Development Commissioner for permission for de-bonding and exit from the EOU.

On August 18, 2011, the Development Commissioner granted in-principle approval, and thereafter, on August 8, 2012, the Development Commissioner granted permission to exit from EOU subject to the grant of a “No Dues Certificate” by the Assistant Commissioner of Central Excise.

The factory premises of the 100% EOU were visited by the Central Excise officers for verification of the stock of raw materials, capital goods, and finished goods available at the time of de-bonding, and the calculation of the duty payable was also verified by the department and intimated to the Assistant Commissioner of Central Excise by letter of the Superintendent of Central Excise.

Subsequent to the de-bonding and exit from the EOU, a show cause notice was issued to the appellant based on an audit objection. It was stated that the 100% EOU had wrongly claimed the benefit of Notification No. 23/2003-CE dated 31-3-2003 while calculating the duty payable on the finished goods in stock at the time of debonding. The notification applies only to goods cleared in DTA pursuant to DTA sales entitlement under Paragraph 6.8 of the Foreign Trade Policy, and the same does not apply to the finished goods cleared at the time of de-bonding. The Show Cause Notice demanded differential duty of Rs. 78,38,123 on the finished goods under Section 11A(5) of the Central Excise Act 1944, read with the B-17 Bond executed by the appellant at the time of taking the EOU license.

The Principal Commissioner of Central Excise confirmed demand for duty of Rs. 70,07,901 and imposed a penalty on the appellant Contacare Ophthalmics and Diagnostics and a penalty of Rs. 50,000/- on the Hasmukh I. Patel.

The appellant contended that basic customs duty has been wrongly calculated on the MRP, which is contrary to Proviso to Section 3(1) of the Central Excise Act 1944, which requires the basic customs duty to be calculated on value as per the Customs Act 1962. A CVD has been wrongly calculated on the MRP instead of the MRP-less abatement. Education Cess and Secondary and Higher Secondary Education Cess are wrongly taken again on the aggregate of customs duties, although the same were already considered while calculating the aggregate of customs duties.

The tribunal, while quashing the order, held that the Principal Commissioner has wrongly taken Education Cess and Secondary and Higher Secondary Education Cess once again on the aggregate of customs duties, although the same were already considered while calculating the aggregate of customs duties.

Counsel For Appellant: J.C. Patel

Counsel For Respondent: Ajay Kumar Samota

Case Title: Contacare Ophthalmics and Diagnostics Versus Commissioner of Central Excise & ST, Vadodara-i

Case No.: EXCISE Appeal No. 11611 of 2016-DB

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