R. Sudhakar, J.
1. The civil miscellaneous appeal, at the instance of the assessee, was admitted on the following substantial questions of law:-
''''(1) Whether on a plain reading of the provision of the EXIM policy the Tribunal was correct in its interpretation of the provisions of the Handbook of Procedures specifically under paragraph 9.22(b) to the effect the goods/rejects which were cleared from the EOU itself should bear the stamp as ''Rejects'' notwithstanding the fact that such stamping as ''Rejects'' appeared on the invoice along with distinct marks on the goods and in the absence of any such specific requirement in terms of the said EXIM policy para 9.9?
(2) Whether on a plain reading the Tribunal erred in interpreting that the conditions of Notification 13/98- CE dated 2.6.1998 when it went on to hold that the conditions were not satisfied by the appellant in the absence of any specific requirement to that effect in the said Notification and ignoring the fact that the said Notification adopts a referential process only with respect to the requirement under EXIM policy?
(3) Whether the Tribunal erred into concluding that the condition that goods rejects must be ''invoiced and stamped'' is a substantial condition as against the plea of procedural requirement for the purpose of the Exim Policy and Notification 13/98-CE dated 2.6.1998?
(4) Whether the Tribunal erred in coming to a finding that the extended period of limitation on the ground of suppression of materials with intent to evade duty would be applicable especially when the Tribunal itself went on to hold that the appellant had made disclosure and maintained sufficient records and separate records which have been certified by the Central Excise Officer with regard to Rejects and Export quality goods during the relevant period?''''
2. Though the appeal was admitted on the above substantial questions of law, the learned counsel for the second respondent has raised a preliminary objection on the maintainability of the appeal and we are inclined to consider the same on the issue raised in the grounds of appeal. The appellant challenges the order of the Tribunal, which reads as follows:-
''''14. In view of the above discussion, we order as follows:-
(i) the demand of duty of Rs.83,15,372/- is to be re-determined by adopting the values as per invoices of the appellant but without extending benefit of notifications of the type 13/98-CE. Consequent interest and penalty under 11AC equal to duty as re-determined will be payable;
(ii) Duty demand of Rs.2,91,370/- on imported needles is upheld along with interest and penalty;
(iii) Rs.5,24,296/- is along with interest and penalty in respect of local needle, the adjudicating authority is directed to examine as stated above.''''
3. The appellant is a 100% EOU engaged in the manufacture of cotton knitted fabrics falling under sub-heading No. 6003.92 of the Central Excise Tariff Act, 1985. On 4.1.2001, the officers of headquarters preventive unit, Coimbatore visited the factory premises of the appellant and conducted verification of physical stock. They found shortage of 1,71,700 of needles that were imported duty free under the Notification No. 13/81-Customs dated 9.2.81 and Notification No. 53/97-Customs dated 3.6.97. They further found that in respect of clearance of rejected knitted fabrics to domestic tariff area (DTA), the appellant had obtained permission from the Development Commissioner, MEPZ vide letter dated 22.7.97 and from the Assistant Commissioner of Central Excise, Coimbatore III Division by letter dated 22.8.97 to clear 5% of the rejected knitted fabrics for a value of Rs.93.37 lakhs. However, goods valued at Rs.63.92 lakhs alone were cleared under the permission claiming concessional rate of duty provided in the Notification No. 4/97-CE dated 1.3.97 and Notification No. 13/98- CE dated 2.6.98. Therefore, a show cause notice was issued on 13.9.02 demanding duty and penalty in respect of the needles found short, as they were cleared to DTA without obtaining permission from the jurisdictional officer and also on the allegation that the appellant cleared fabrics of good quality at nil rate of duty in the guise of ''Rejects'' and such clearance was not in compliance with the conditions stipulated in the notification and the permission letter from the Development Commissioner. The case was adjudicated and the Commissioner issued an order confirming the demand of duty in respect of the needles both imported and indigenously procured and in respect of good quality fabrics cleared as rejects, a sum of Rs.83,15,372/- was demanded together with penalty under the relevant provisions.
4. That order came to be challenged before the Tribunal contending that the conditions imposed by the Notification No. 13/98-CE dated 2.6.98 have been complied with and the demand for duty is erroneous. The finding of the original authority as well as the Tribunal is that the goods were not stamped as rejects and therefore the conditions in the exemption notification were not complied with in respect of the rejects fabric cleared to DTA. When an exemption notification has to be strictly interpreted and the burden of proving eligibility is on the person claiming the same, the Tribunal came to hold that the goods cleared to DTA did not satisfy the requirement of the Notification No. 13/98-CE dated 2.6.98 and therefore the conditions of clause (b) of paragraph 9.9 or of paragraph 9.20 of the Export and Import Policy dated 31st March, 2002 has not been complied with.
5. On the contrary, the assessee''s plea is that the rate of duty on the goods would be 30% of duty in terms of the Notification No. 13/98-CE dated 2.6.98, whereas the department''s contention is that the duty on import is payable on merit.
6. On this premise, the present appeal has been filed against the order of the Tribunal, which came to hold that the duty has to be re-determined without extending the benefit of the Notification No. 13/98-CE dated 2.6.98 together with interest and penalty under Section 11AC. The contention of the learned counsel for the appellant is that the rate of duty on the goods should be in terms of the Notification No. 13/98-CE dated 2.6.98, whereas the department''s contention is that the benefit of the notification dated 2.6.98 will not be applicable to the appellant and as a result import duty is to be charged on merit. As we find that the question raised by the appellant directly and proximately is relating to the rate of duty applicable to the goods cleared to DTA and contested by the Revenue, an appeal to determine any question having relation to the rate of duty would therefore not lie before this Court in terms of Section 35-G of the Act. A similar view was taken by a Bench of this Court, in which one of us (Justice R.Sudhakar) was a party, in C.M.A.No. 2424 of 2007 dated 21.11.2014 (CCE v. Vadapalani Press and another). Reliance was placed on the decision of the Supreme Court in
"11. It will be seen that sub-section (5) uses the said expression determination of any question having a relation to the rate of duty or to the value of goods for the purposes of assessment and the Explanation thereto provides a definition of it for the purposes of this sub-section. The Explanation says that the expression includes the determination of a question relating to the rate of duty; to the valuation of goods for purposes of assessment; to the classification of goods under the Tariff and whether or not they are covered by an exemption notification; and whether the value of goods for purposes of assessment should be enhanced or reduced having regard to certain matters that the said Act provides for. Although this Explanation expressly confines the definition of the said expression to sub-section (5) of Section 129-D, it is proper that the said expression used in the other parts of the said Act should be interpreted similarly. The statutory definition accords with the meaning we have given to the said expression above. Questions relating to the rate of duty and to the value of goods for purposes of assessment are questions that squarely fall within the meaning of the said expression. A dispute as to the classification of goods and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment. Whether the value of goods for purposes of assessment is required to be increased or decreased is a question that relates directly and proximately to the value of goods for purposes of assessment. The statutory definition of the said expression indicates that it has to be read to limit its application to cases where, for the purposes of assessment, questions arise directly and proximately as to the rate of duty or the value of the goods.
12. This, then, is the test for the purposes of determining whether or not an appeal should be heard by a Special Bench of CEGAT, whether or not a reference by CEGAT lies to the High Court and whether or not an appeal lies directly to the Supreme Court from a decision of CEGAT: does the question that requires determination have a direct and proximate relation, for the purposes of assessment, to the rate of duty applicable to the goods or to the value of the goods."
(emphasis supplied)
7. In fact, the very same view was expressed by the Gujarat High Court in
"10. In the light of the aforesaid judicial pronouncements, it is apparent that the question as to the applicability of a notification or a circular which has a bearing on the determination of the rate of duty is a question which has a direct and proximate relationship to the rate of duty and to the value of goods for purposes of assessment . In the circumstances, the present appeal which relates to the applicability of the above referred circular, relates directly to the determination of rate of duty for the purpose of assessment and as such, in the light of the provisions of Section 35G read with Section 35Lof the Act, this Court has no jurisdiction to entertain the appeal."
(emphasis supplied)
8. For the above reasons, sustaining the preliminary objection raised by the department, we dismiss this civil miscellaneous appeal as not maintainable. It is, however, open to the appellant-assessee to pursue the matter as per law or to agitate the issue before the original authority, as directed by the Tribunal. Consequently, M.P.No. 1 of 2014 is also dismissed. No Costs.
