Per C.N.B. Nair : The appellant is an EOU. It produces cut rose flowers for export. It is also entitled to selling part of the produce, as permitted by the Development Commissioner, in the domestic tariff area.

2. The Commissioner of Customs Central Excise, Central Excise Commissionerate, Delhi-III has demanded a customs duty of about Rs. 88 Lakhs from the appellant under Section 28 of the Customs Act, 1962 read with Notification No. 126/94 dated 3.6.1994. There is a demand for interest under Section 28AA of the Customs Act, 1962 and imposition of penalty of Rs. 17 Lakhs under Section 114 A of the Customs Act, 1962. The duty amount demanded is the customs duty payable on about Rs. 3 Crores worth flowers cleared to the domestic area during the period 1997-98 to 2001-2002. The contention of the appellant in the present appeal is that the findings in the order are entirely contrary to the settled law on the issue. It is pointed out that goods produced in an EOU are subject to central excise duty as applicable and not customs duty. The learned Counsel for the appellants also has pointed out that flowers are not excisable under the central excise tariff. Given legal position, it is the submission of the learned Counsel for the appellants that the customs duty demand under the impugned order is not sustainable in law at all. The learned Consultant for the appellant has also pointed out that the impugned order is contrary to the clarification contained in Central Board of Excise and Customs Clarification dated 24th May, 2001, which is stated as under:-

"(xi) Duty on DTA Clearance of Non-Excisable Goods;

25. At present, the EOU's and units operating under EPZ/STP/EHTP Schemes are allowed to sell finished products (including rejects, waste scrap) in the Domestic Tariff Area (DTA) on payment of applicable excise duty as per proviso to section 3 of the Central Excise Act, 1944. However, the same is applicable if the goods being cleared into DTA are excisable goods. Under the present dispensation, the notifications providing duty free import of goods under the above said Schemes stipulate that where the finished products (including rejects, wastes scrap) sought to be cleared in DTA are not excisable, such products are allowed to be cleared on payment of customs duty on the inputs used for the purpose of production, manufacture, processing or packaging such products in an amount equal to the customs duty leviable on such products as if imported as such.

26. It has been brought to notice of the Board that in some Commissionerates, the floriculture units under the EOU Scheme are being asked to pay duty equivalent to the customs duty leviable on finished goods as if imported as such, for clearance of cut-flowers, which is not an excisable commodity. It has also been stated that the DTA units are not required to pay any duty for sale of cut flowers, as the same are not excisable. This is stated to have placed the floriculture units in EOUs at a serious disadvantageous position vis-a-vis DTA units.

27. The matter has been examined. In the central excise notifications governing duty free procurement by EOUs and units under EPZ/STP/EHTP Schemes, there is a provision to recover duty on the inputs consumables procured duty free under exemption notification, which have gone into production of non-excisable goods cleared into DTA. In the notifications governing duty free import by EOUs and the EPZ/STP/EHTP units, the anomaly, however, exists in as much as the notifications talk about payment of customs duty on the inputs used in the manufacture of articles in an amount equal to the customs duty leviable on such articles as if imported as such. In order to remove this anomaly, all the notifications governing duty free import of goods by STP/EHTP/EPZ units and EOUs including those in Acquaculture and Agriculture sector have been amended so as to bring the provisions of these notifications in harmony with the provisions of corresponding Central