Per P.S. Bajaj:

This appeal has been filed by the Revenue against the impugned order in appeal dt. 15.11.2000 passed by the Commissioner (Appeals) vide which he had reversed the order in original dt. 27.6.2000 of the Dy. Commissioner and allowed the benefit of Notifications Nos. 5/98-CE dt. 2.6.98 and 5/99-CE dt. 28.2.99, to the respondents.

2. The facts giving rise to this appeal may briefly be stated as under;

3. The respondents an 100% EOU, were engaged in the manufacture of recycled LDPE plastic granules and recycled LDPE Plastic Agglomerates falling under sub-heading 3901.10 of the CETA. They had been clearing the goods manufactured by them into Domestic Tariff Area (DTA) against payment in foreign exchange in terms of para 9.10(6) of EXIM Policy 1997-2002. The said clearances were effected by them without payment of additional duty of customs (CVD) by claiming exemption therefrom in terms of Notification Nos. 5/98-CE dt. 2.6.98 and 5/99-CE dt. 28.2.99. But they were in fact not eligible to avail the benefit of these notifications being not applicable to the clearances effected by the 100% EOU. Accordingly, two show cause notices, one dt. 20.7.99 for the period 20.1.99 to 19.7.99 and the other dt. 1.2.2000 for the period 20.7.99 to 31.12.99, were issued to them vide which the additional duty of Customs as detailed therein, was demanded from them. They however, contested the correctness of those show cause notices on the grounds:

i) the additional duty of customs being not a duty of customs leviable under Section 12 of the customs Act, no such duty was payable in respect of DTA clearances from the EOU,

ii) the exemption under S.No. 63 of Notification No. 5/98 and S.No. 64 of Notification No. 5/99 prescribed nil rate of duty for plastic materials reprocessed in India out of the scrap on waste of the goods falling under Chapter 39 of the CETA, was available to LDPE granules and Agglomerates cleared by them in DTA,

iii) only the effective rate of duty and not the tariff rate was applicable for computing the aggregate duty of customs mentioned in proviso to Section 3 of the Customs Act, in their case.

4. The Deputy Commissioner, however, did not agree with the version of the respondents and confirmed that duty demand of Rs. 2,95,66,255/- under Section 11 -A of the Central Excise Act and imposed penalty of Rs. 30,00,000/- under Rule 173-Q of the Central Excise Rules on them, through the order in original dt. 27.6.2000. this order, was, however, challenged by the respondents in appeal before the Commissioner (Appeals) who through-the impugned order reversed the same. The Revenue has come up in appeal.

5. The Learned SDR has contended that the exemption contained in the Notifications Nos. 5/98-CE and 5/99-CE was not available to the respondents being an 100% EOU and that the goods manufactured by them could not be said to have been manufactured in India and as such were liable to pay additional duty of Customs in terms of proviso to Section 3(1) read with Section 12 of the Customs Act. Therefore, the impugned order of the Commissioner (Appeals) deserves to be set aside.

6. On the other hand, the Learned counsel for the respondents has mainly reiterated the correctness of the impugned order of the Commissioner (Appeals) and also referred to the judgment of Delhi High Court in appellants' (sic) own writ petition which they filed along with two other manufacturers, namely M/s. Plastic Processors and M/s Saphire Metals Pvt. Ltd. and vide which the Honourable High Court quashed the Circular No. 38/2000-Cus. dt. 10.5.2000 [reported in 2000 (38) RLT M41]of the board denying the benefit of the exemption Notifications Nos.5/98-CE and 5/99-CE.

7. We have hear both sides and gone through the record.

8. We find that the show cause notices specifically proposed denial of benefit of the Notifications Nos. 5/98-CE dt. 2.6.98 and 5/99-CE dt. 28.2.99 to the respondents on these grounds:

i) These notifications were issued under Section 5-A( 1) of the Ac