Order date – 04 November 2022

 Facts –

• 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 were registered as 100% EOU and applied for exit from the said EOU status i.e. conversion of 100% EOU to normal DTA Unit on 02.03.2010
• 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 as on 31.03.2010. The appellant also worked out the duty payable on inputs lying as such, input contained in work in process and input contained in finished goods and paid the duty.
• A show cause notice was issued 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.
• Aggrieve appellant had filed an appeal.

Issue – 

• Whether the duty on work in process / semi-finished goods is required to be paid during debonding of EOU?

Order – 

• The Tribunal found that the semi-finished goods/ work in process was not in fully manufactured form and the same was at different stages of the manufacturing process. The said goods are not marketable as such which were subjected to various other processes to attain the stage of final product, therefore, at the semi-finished stage, where no excisable goods came into existence, the demand of duty at the time of debonding is incorrect in law.
• This issue is no longer res integra as the same stand decided by CESTAT Bangalore in the case of Tirumala Seung Han Textiles Ltd. it is held that as per Para 6.18 of the Foreign Trade Policy 2004-09, an EOU may opt out of the scheme with the approval of the Development Commissioner subject to the payment of Excise Duty. There is no mention about the in-process goods in the policy. In the absence of the mention of the in-process goods in the policy, there is no authority for demanding duty on the in-process goods.
• The Tribunal had not found any new grounds or reasons to deviate from the ratio already laid down in Tirumala Seung Han Textiles Ltd. (supra). Hence no duty can be demanded on semi-finished goods/ work in process, lying at the time of debonding of 100% EOU.
• Appeal is allowed.