TMI Blog2013 (1) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of DTA clearances of fresh mushrooms effected by the assessee. Thus, the Commissioner of Central Excise (A) while accepting the contention of the Revenue that fresh mushrooms were excisable, held that in view of the Nil rate of duty, the Revenue was not justified in demanding duty equivalent to customs duty in respect of DTA clearances of fresh mushrooms effected by the assessee, a 100% EOU. Therefore, the argument of the Revenue that the fresh mushrooms were not excisable prior to the 2004 amendment to the 1985 Act is unsustainable. Argument of the Revenue that by the 2004 amendment to the 1985 Act, fresh mushrooms were made excisable for the first time with effect from 28th February 2005 is also unsustainable, because, the said amendment was brought about with a view to convert the existing six digit entries in the schedule to the 1985 Act to eight digit entries on par with the entries in the schedule to the Customs Tariff Act and not with a view to bring in new goods within the purview of excise. This was further clarified by issuing notification No.1 of 2005-CE dated 24th February 2005 and Trade Circular No.808/2005 dated 25th February 2005 - The fact that fresh mushr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Government, at Haveli, District Pune, inter alia for the purpose of cultivation, manufacture and export of fresh / processed mushrooms. Under the EOU Scheme framed by the Government, the assessee subject to conditions could import capital goods duty free to the extent permitted by the Development Commissioner, by availing exemption under Exemption Notification No.13/81cus dated 9th February 1981 /53/03-cus dated 31st March 2003 or 53/97-cus dated 3rd June 1997, as the case may be. Alternatively, the assessee could procure indigenous capital goods duty free by availing exemption notification under notification No.1/95CE dated 4th January 1995 or 22/03-CE dated 31st March 2003. Under the 100% EOU Scheme, the assessee was obliged to export the entire quantity of processed fresh mushrooms and could effect clearances of processed / fresh mushrooms in the domestic tariff area ('DTA') only the extent permitted by the Development Commissioner on achieving the Net Foreign Exchange Percentage Earning ('NFEP'). 4. Admittedly, the assessee has imported capital goods required for the unit by availing the duty exemption under the notifications prevailing at the relevant time. Admittedly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered under heading 0701.00 and, hence, were not excisable goods under the 1985 Act and, therefore, demanding duty by invoking the proviso to Section 3(1) of the 1944 Act does not arise. Alternatively it was contended that even if it is construed that fresh mushrooms were excisable goods, since the rate of excise duty on fresh mushroom under the 1985 Act being 'nil', no excise duty equivalent to customs duty could be demanded on fresh mushrooms cleared in DTA by the assessee. The Assessing Officer (AO) accepted the contention of the assessee and by his order dated 16th November 1999 dropped the proceedings initiated against the assessee under the aforesaid four showcause notices. 9. The Revenue sought review of the aforesaid order dated 16th November 1999 and accordingly filed an appeal before the Commissioner of Central Excise (A) against the order dated 16th November 1999. By an order dated 27th May 2004 the Commissioner of Central Excise (A) dismissed the appeal filed by the Revenue by holding firstly, that the fresh mushrooms were not covered under heading 0701.00 of the Central Excise Tariff and, hence, fresh mushrooms being not excisable no duty could be demanded on clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without levying excise duty, because, as in the past, even after the 2004 Act, the excise duty on fresh mushrooms was 'Nil' and in terms of the order passed by the Commissioner of Central Excise (A) on 27th May 2004, if excise duty on fresh mushrooms was Nil, then, in respect of DTA clearances effected by the assessee covered under the proviso to Section 3(1) of the 1944 Act would also be Nil. 12. However, by a show-cause notice dated 28th December 2007 issued under Section 11A of the 1944 Act, the AO sought to recover excise duty equivalent to the customs duty leviable on the imported mushrooms amounting to Rs.1,76,21,021/- in respect of DTA clearances of fresh mushrooms effected by the assessee during the period from 1st December 2006 to 30th November 2007 by invoking the proviso to Section 3(1) of the 1944 Act. According to the AO, fresh mushrooms became excisable on being specifically covered under Entry 07095100 in Chapter 7 of the 1985 Act, with effect from 28th February 2005 and though the excise duty payable under that entry was Nil, in respect of DTA clearances of fresh mushrooms, excise duty was payable at the rate equivalent to the customs duty in terms of the proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise duty on excisable goods and if the levy is Nil, then, there would be no collection of duty and in such a case Section 3(1) of the 1944 Act would not apply and consequently the proviso to Section 3(1) also would not apply. In any event, counsel for the assessee submitted that the Revenue is barred from changing its stand retrospectively and, therefore, the decision of the AO could be applied prospectively and not retrospectively. Alternatively, it is submitted that since the Revenue is changing its stand retrospectively, the 100% EOU unit of the assessee should be permitted / treated to have been relieved from the EOU Scheme with effect from 1st December 2006, so that with effect from 1st December 2006, the unit of the assessee ceases to be a 100% EOU and the clearances effected from that day would be liable for Nil rate of duty under the Central Excise Tariff and consequently no demand would be enforceable against the assessee. In support of the above contentions, several decisions were relied upon by the counsel for the assessee. 16. On the other hand, Mr.Jetly, learned counsel appearing on behalf of the Revenue submitted that fresh mushrooms were not covered under the 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rival submissions. 20. The first question to be considered herein is, whether fresh mushrooms were excisable goods under the Schedules to the 1985 Act prior to the 2004 (Amendment) Act or whether fresh mushrooms became excisable for the first time with effect from 28th February 2005, after the 2004 amendment to the 1985 Act ? 21. Chapter 7 of the 1985 Act as it stood prior to the 2004 (Amendment) Act to the extent relevant read thus : Chapter 7 EDIBLE VEGETABLES AND ROOTS AND TUBERS Notes : 1) In this Chapter, the word "vegetables" includes edible mushrooms, truffles, olives, capers, marrows, pumpkins, aubergines, sweet corn (zea mays var. saccharata), fruits of genus capsicum or of the genus pimenta, feenl, parsley, chervil, tarragon, cress and sweet marjoram (Majorana hortensis or origanum majorana) 2) ------ 3) ------ Heading No. Sub-heading No. Description of goods Rate of duty 07.01 0701.00 Dried Vegetables, including potatoes onions mushrooms, whole, cut, sliced, broken or im powder, but not further prepared; dried leguminous vegetables, including peas and beans, shelled, wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 2004 amendment to the 1985 Act, fresh mushrooms were made excisable for the first time with effect from 28th February 2005 is also unsustainable, because, the said amendment was brought about with a view to convert the existing six digit entries in the schedule to the 1985 Act to eight digit entries on par with the entries in the schedule to the Customs Tariff Act and not with a view to bring in new goods within the purview of excise. This was further clarified by issuing notification No.1 of 2005-CE dated 24th February 2005 and Trade Circular No.808/2005 dated 25th February 2005, wherein it is stated that by the 2004 amendment merely a technical change of transition from six digit to eight digit classification is brought about and no substantive change is brought about. The fact that fresh mushrooms classified in the general category under heading 07.02 of the Central Excise Tariff prior to the 2004 amendment have been classified specifically under entry 07095100 in Chapter 7 of the Central Excise Tariff after the 2004 amendment, it cannot be inferred that fresh mushrooms became excisable for the first time after the 2004 amendment to the 1985 Act. In any event, prior to the 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue is precluded from taking a different stand in the present appeals as per law laid down by this Court in a catena of cases. See Collector of Central Excise, Pune v. Tata Engineering Locomotives Co Limited reported in (2003) 11 SCC 193; Berger Paints India Limited v. Commissioner of Income Tax, Calcutta reported in (2004) 12 SCC 42; Birla Corporation Limited v. Commissioner of Central Excise reported in (2005) 6 SCC 95 = 2005 (186) E.L.T. 266 (S.C.); and Jayaswals Neco Limited v. Commissioner of Central Excise, Nagpur reported in 2006 (195) E.L.T. 142 (S.C.)." 28. Similarly, the Apex Court in the case of Union of India V/s. Kamlakshi Finance Corporation Limited reported in 1991 (55) E.L.T. 433 (S.C.) held inter alia thus : "6. ............... The high Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasijudicial issues before them, revenue officers are bound by the decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise, Nagpur reported in 2006 (195) E.L.T. 142 (S.C.)". 30. In the present case, the specific case of the Revenue prior to the 2004 amendment to the 1985 Act was that fresh mushrooms were excisable under Chapter 7 of the 1985 Act and even though the rate of excise duty on fresh mushrooms was Nil, as per the proviso to Section 3(1) of the 1944 Act in respect of DTA clearances of fresh mushrooms effected by the assessee, a 100% EOU, the excise duty was payable equivalent to the customs duty payable on imported fresh mushrooms. The Commissioner of Central Excise (A) held that the fact that fresh mushrooms were excisable would not entitle the Revenue to recover duty, because, so long as the duty on fresh mushrooms under the Central Excise Tariff was Nil, in respect of DTA clearances of fresh mushrooms by a 100% EOU covered under the proviso to Section 3(1) of the 1944 Act would also be Nil. That decision of the Commissioner of Central Excise (A) dated 27th May 2004 was admittedly accepted by the Revenue. Therefore, so long as the decision of the Commissioner of Central Excise (A) dated 27th May 2004 was holding the field, all the adjudicating authorities including the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act as amended by the Finance Act 2000 empowers the Central Excise Officer to demand excise duty for a period of one year prior to the issuance of show-cause notice even if duty was not paid on account of approved classification list / price list / assessment order, it does not mean that the AO can disregard the orders passed by the higher authorities. By amending Section 11A, the legislature has empowered the AO to demand duty not paid on account of erroneous approval of classification list / price list / assessment order and the legislature has not empowered the AO to demand duty if he considers that the duty was not paid or payable on account of the erroneous order passed by the Appellate Authority or the competent Court. Therefore, the AO was not justified in demanding duty on DTA clearances of fresh mushrooms contrary to the decision of the Commissioner of Central Excise (A) dated 27th May 2004, especially when the Revenue has accepted the said decision of Commissioner of Central Excise (A). 34. It is only on 31st May 2011 when the CESTAT held that even if the rate of excise duty under the Central Excise Tariff on excisable goods is Nil, under the proviso to Section 3(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agree with the decision of the Commissioner of Central Excise (A) dated 27th May 2004, the CESTAT ought to have held that the adjudicating authority was bound by the decision of the Commissioner of Central Excise (A) till it was set aside on 31st May 2011 and accordingly the CESTAT ought to have set aside the demands confirmed by the AO on 27th February 2009. 37. Reliance placed by the counsel for the Revenue on the decision of the Apex Court in the case of Plasmac Machine Manufacturing Company Private Limited (supra) is totally misplaced. In that case, injection moulding machines manufactured by the assessee which were in the past classified under Tariff Item No.68 were sought to be classified in the year 1981-82 under Tariff Item 52 of the Central Excise Tariff. In that context, it was held that there is no estoppel against the statute and it is open to the excise officer to revise the classification from one tariff heading in to another. It is relevant to note that in that case the AO sought to take a view contrary to his own view in the past, where as, in the present case, the AO is seeking to take a view contrary to the view taken by the Commissioner of Central Excise (A) on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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