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M/s Green Brilliance Energy Pvt. Ltd. Versus Commissioner, Central Excise & Service Tax, Vadodara-I

2015 (9) TMI 516 - CESTAT AHMEDABAD (LB)

100% EOU - Export / DTA clearance of non-excisable / exempted goods - exempted goods versus Zero rated goods or Nill rated goods - interpretation of an exemption notification - Notification No.22/2003-CE or No.52/2003-Cus - Whether a 100% EOU is entitled to exemption on inputs used in the manufacture of finished goods, which are either non-excisable or if imported, are chargeable to Nil or exempted rates, in view of second Proviso to Clause 6 of Notification No.22/2003-CE, dt.31.03.2003 or Provi .....

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uts could be routed through 100% EOU to claim full exemption when similar clearances by DTA units will affect duty at intermediate stage.

It has to be held that non-excisable words used in second proviso to Clause 6 of Notification No.22/2003-CE, dt.31.03.2003 and Proviso to Clause 3 of Notification No. 52/2003-Cus, dt.31.03.2003 will embrace in its expression all zero rated finished goods where on account of full exemption, or Nil / Free rates, or where no rate is specified under the .....

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passed by Division Bench of CESTAT Ahmedabad. Appellant is a 100% EOU and procured inputs by importation or by locally purchasing under Notification No.22/2003-CE, dt.31.03.2013 and No.52/2003-Cus, dt.31.03.2013, for the manufacture of their finished goods Solar Panels. Appellant cleared finished goods by export and also by making DTA clearances. Solar Panels are cleared at fully exempted rate as per Sr.No.84 List 5 (Item No.11) of Notification No. 6/2006-CE, dt.01.03.2006. Similarly, under the .....

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975 (51 of 1975) and nil additional duty leviable under Section 3 of the said Customs Tariff Act, read with exemption notification in this regard, if any, no exemption in respect of inputs utilized for the purpose of processing, manufacture, production or packaging of such articles (including rejects, waste, scrap and remnants) shall be available under this notification. Proviso to Clause-3 of Notification No.52/2003-Cus, dt.31.03.2003 is as follows:- Provided further that where such finished go .....

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h finished goods (including rejects, waste, scrap, remnants and by products) shall be available under this notification. 2. During passing of the referral order, it was argued before the Division Bench that there are following judgments which give conflicting view on the interpretation of the above proviso:- i) Synergies-Doorway Automative Ltd & Ors [2008 (226) ELT 529 (Tri-Bang)] ii) Indira Printers Vs CCE Delhi-II [2010 (262) ELT 940 (Tri-Del)] 3. Shri S.R. Dixit (Advocate) and Ms.Anoli Pa .....

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not Nil/Exempted rate and will not be hit by the second proviso to Clause 6 of Notification No.22/2003-CE. To support his argument that free rate can not be equated with Nil / Exempted rate of duty, learned Advocate relied upon the case law of Geetanjali Woolens Pvt.Ltd. Vs CCE Vadodara [2007 (218) ELT 512 (Tri-Ahmd)]. That CESTAT in this case was interpreting the proviso to Para 3 to Notification No.52/2003-Cus. That since Solar Panels are classifiable under the Central Excise Tariff, therefore .....

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te to another. That as per the law laid down by Apex Court in the case of Shabina Abraham & Ors Vs UoI [2015-TIOL-159-SC-PX] (Para 26, 31 to 33) also the issue goes in favour of the Appellant. 3.2 It was also the case of the learned Advocate appearing on behalf of the Appellant that word or used in the relevant proviso to Notification No.22/2003-CE and No.52/2003 should be used conjunctively and not dis-conjunctively. That if the word or is not read conjunctively then such reading will lead .....

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de Policy cannot create a deeming fiction under Central Excise Act, 1944 which is an altogether a separate independent enactment. (c) That the above said proviso will render infructuous in cases one where EOU supplies finished products to another EOU. The reading of the proviso as per Indira Printers (supra) will render all such transactions quite meaningless. The same will also be contrary to the Larger Bench decision in the case of Ghodela Impex [2013 (294) ELT 223 (Tri-LB). (d) That the provi .....

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oviso, used by an EOU solar panel manufacturer, the Revenue would be placing such manufacturers at a disadvantage in comparison to DTA solar panel manufacturers. That this is an absurd proposition which needs to be struck down. (e) That Certain issues such as even if exemption is denied to the Appellant under Notification No.22/2003-CE, the duty should be demanded from supplier and not the 100% EOU, or that the Appellant is already covered under other Paras of Notification No.22/2003-CE, and Not .....

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the said notifications. Learned Advocate relied upon the use of expressions free , Nil or exempted rates of duties mentioned in Notification No.21/2012-Cus, dt.17.03.2012. 4. Shri J. Nagori (AR) appearing on behalf of the Revenue argued that the words either/or used in the relevant provisos of the impugned notifications cannot be used in the relevant provisos cannot be read as and . That Hon ble Apex Court in the case of UoI Vs Ind-Swift Laboratories Ltd [2011 (265) ELT 3 (S.C.)] held that the w .....

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ELT 73 (Mad.)] and that the intention behind the word non-excisable was to understand those finished goods where resultant duty is zero % whether by being Nil / Free rated or fully exempted under a notification. 4.1 Learned Authorised Representative further argued that as per CBEC Circular No.54/2004-Cus, dt.13.10.2004, that Nil rated goods (either tariff rate or effective rate) will be treated in the same manner as non-excisable goods. That this clarification provide the intention of the legis .....

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are not existing therein. 4.3 That as per Apex Court s decision in the case of CCE Surat-I Vs Favourite Industries [2012 (278) ELT 145 (SC)] an exemption in a fiscal statute is an exception and is required to be constructed strictly. It is thus the case of the Revenue that CESTAT s order in the case of Indira Printers Vs CCE Delhi-II [2010 (262) ELT 949 (Tri-Del)] is the correct interpretation of law. 5. Heard both sides and perused the case records as well as the written submissions made by ri .....

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are reproduced in the opening para of this order. Facts of the case before CESTAT in the case of Synergies-Doorway Automotive Ltd Vs CC&CE (supra) were that Appellant in that case was procuring duty free Aluminum Ingots for making Aluminum Alloy Wheels and Dross was also coming into existence during the manufacturing activity as a by product which was held to be non-excisable by a judgment of Hon ble Supreme Court. Following observations were passed by CESTAT Bangalore in this case in Para .....

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tion will not be applicable because para 3 main section will be applicable only when the finished goods are excisable because duty has to be paid under Section 3 of the Central Excise Act, 1944. To cover a situation where non-excisable goods are cleared to DTA, the legislature thought it fit to demand the Customs duty on the raw materials, which had gone into the finished goods, which includes rejects, waste, scrap, remnants and certain by-products. Therefore, in order to provide for such a situ .....

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terials, which are relatable to the Aluminium Dross, which have been cleared to DTA on the ground that this Aluminium Dross is non-excisable. In order to hold that they are non-excisable, she had relied on the Hon ble Apex Court s decision. However, the Commissioner, Shri Ramprakash who passed the first order dated 29-7-2005, has correctly interpreted the Notification and has held that the proviso will be applicable only to a situation where finished goods are non-excisable. In this case, the fi .....

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ind any merit in the Revenue s stand. The order dated 29-7-2005 is legal. 5.2 Summing up, we hold that in terms of the said Notification, as long as the finished goods are excisable, the proviso will not have any application. Whether the Aluminium Dross is excisable or not, it is immaterial because the Aluminium Dross is not a final product. The assessees are importing Aluminium Ingots to manufacture Aluminium Wheels, which are final products and not Aluminium Dross, which is just a by-product. .....

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e order dated 9-2-2007 is not at all correct. The duty demanded cannot be sustained. There is no justification for imposing any penalty. In fine, Revenue s appeal is dismissed and the assessees appeals are allowed. 5.2 On the other hand, in the case of Indira Printers Vs CCE Delhi-II, (supra) following order was passed by CESTAT Delhi:- Heard both sides. The appellants have procured duty free paper and PVC resin under Notification No. 22/2003 dated 31-3-2003 being an EOU. They have produced book .....

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, input duty is payable if the finished goods are either not excisable or are exempted or charged to nil rate of duty. 2. Admittedly, the finished goods are excisable but were exempted or charged to nil rate of duty. Hence, we are of the view that for the period prior to 6-9-2004, the appellants are not required to pay the input duty. However, the same is payable on and after 6-9-2004. We take note of the fact that the appellants have paid the duty for the subsequent period from 6-9-2004. Since .....

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the period after 06.09.2004. 6. No question of law was framed in the referral order dt.21.07.2014 passed by the Division Bench, therefore, both sides were asked to help the Bench in framing the question of law. Appellant framed the following point of law:- Whether proviso to Para 3 to Notification No.52/2003-CE and second Proviso to Para 6 of Notification No.22/2003-CE is correctly interpreted in the case of Synergies to the effect that proviso will be applicable only when finished goods are non .....

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n view of the facts available on record and the conflicting judgments on the issue, following question of law is framed by this Bench for consideration:- Whether a 100% EOU is entitled to exemption on inputs used in the manufacture of finished goods, which are either non-excisable or if imported, are chargeable to Nil or exempted rates, in view of second Proviso to Clause 6 of Notification No.22/2003-CE, dt.31.03.2003 or Proviso to Clause 3 of Notification No.52/2003-Cus, dt.31.03.2003. 8. It is .....

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l place the 100% EOUs at a disadvantage vis-vis DTA units by asking them to pay duty with respect to inputs when such inputs are also exempted under various Central Excise notifications. On the other hand, learned Authorised Representative relied upon CBEC Circular No.54/2004-Cus, dt.13.10.2007 to indicate the intention of the legislature behind issue of Notification No.22/2003-CE, dt.31.03.2003 and Notification No.52/2003-Cus, dt.31.03.2003. The apprehension of the learned Advocate appearing on .....

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tion of duty foregone on procurement of such inputs. The provisos for our consideration only denies exemption to inputs procured under Notification No.22/2003-CE or Notification No.52/2003-Cus, but do not prohibit that benefit of all other applicable exemption notifications with respect to inputs procured stand denied. The concept contained under the second proviso to Clause 6 of Notification No.22/2003-CE and Proviso to Clause 3 of Notification No.52/2003-Cus is the same what is applicable to i .....

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te of duty. 9. Main argument of the Appellant is that their finished goods Solar Panels are excisable as the same are classifiable under the Central Excise Tariff by virtue of definition of excisable products given in Section-2(d) of the Central Excise Act, 1944. In this regard, we are of the considered view that a definition given in the Central Excise Act, 1944 cannot be considered as the applicable definition for the interpretation of an exemption notification, when such definition has not be .....

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y of Customs with respect to the finished goods. The words either non-excisable used in these provisions do not highlight that the finished goods should be non-excisable as per the definition contained in Section 2(d) of the Central Excise Act, 1944. The word non-excisable used in the relevant provisions, alongwith the company of words Nil rate of duty and exempted rate of Customs/Additional duty, will have to be interpreted to mean those finished goods where effective rate of duty payment is ze .....

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ty on intermediate stage/input stage when end product is either fully exempted or Nil/Zero rate under the tariffs or no rate is mentioned against a tariff entry. Similarly, the language and words used in another exemption notification cannot be made applicable to the exemption notifications under consideration when the intentions behind both the exemption notifications are different. For example, reliance on the wordings of Sr.No.1 of Notification No.21/2012-Cus dt.17.03.2012 for exemption of CV .....

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of charging duty from 100% EOU when the finished goods are chargeable to Nil / Free rate of duty or Fully exempted or no rate is specified in the tariff. In view of the above observations, we are of the opinion that words non-excisable used in second proviso to Clause 6 of Notification No.22/2003-CE, dt.31.03.2003 and Proviso to Clause 3 of Notification No.52/2003-Cus, dt.31.03.2003 will include all those categories of finished goods where the end rate applicable is Zero as the definition of exc .....

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ority to increase the rate of input duty. On the same analogy, the plain reading and interpretation behind issue of Notification No.22/2003-CE and No.52/2003-Cus are required to be interpreted without going into the definition of Section 2(d) of the Central Excise Act, 1944. If this strict interpretation is not followed, then the provisos under consideration can never be made applicable for the recovery of input duty where finished goods are cleared at Nil , Exempted or free rates because all of .....

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thorised Representative, have made the following citations in Para 14 to 17 of this judgment. 14. Before we deal with the contentions canvassed by the learned counsel for the parties to the lis, we deem it appropriate to notice the observations made by the Constitution Bench of this Court in the case of Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal & Ors., (2011) 1 SCC 236 = 2010 (260) E.L.T. 3 (S.C.), insofar as the mechanism and interpretation of an exemption notificat .....

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to the State. 15. The observations made by the Constitution Bench of this Court are binding on us. 16. Furthermore, this Court in Associated Cement Companies Ltd. v. State of Bihar & Ors., (2004) 7 SCC 642, while explaining the nature of the exemption notification and also the manner in which it should be interpreted has held : 12. Literally exemption is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially, in a growing economy. In fact, an exemption provisio .....

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nt stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in the nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. (See Union of India v. Wood Papers Ltd. and Mangalore Chemicals and Fertilisers Ltd. v. Dy. Commr .....

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.C. para 26); TISCO v. State of Jharkhand (SCC paras 42 to 45); State Level Committee v. Morgardshammar India Ltd.; Novopan India Ltd. v. C.C.E. & Customs; A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala and Reiz Electrocontrols (P) Ltd. v. C.C.E.] 9.2 In the case of Jaipur Golden Transport Co. Pvt.Ltd. Vs CCE Surat [2007 (215) ELT 503 (Tri-LB)], Larger Bench, inter alia, held that purpose of a statute prevails over the material and passed the following observations in Para 14:- 14. We ha .....

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Us. However, on account of certain hardship faced in getting export order, sales in DTA up to 25% were permitted from the year 1984 but there was a clear intention to distinguish between such sales by the 100% EOU from the sales by domestic units other than 100% EOU and it was for this purpose that proviso to Section 3(1) and Notification 125/84 was introduced. Since there were only two modes of clearance in which the 100% EOUs could have cleared the goods i.e. one by export and the other by dom .....

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ted into India was made applicable. In fact a different procedure was carved out and a separate Chapter VA was inserted in Central Excise Rules relating to removal of goods from free trade zone and 100% EOU for home consumption and many provisions of the Central Excise Rules were made inapplicable. Even exemption notifications issued under Rule 8 were made inapplicable unless notification itself said so. The intention of the legislature and the purpose of introducing proviso to Section 3(l) and .....

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interpretation that it is the duty of the court to give a harmonious construction of a statute and that such a construction shall suppress the mischief and advance the remedy. Further as observed by the Supreme Court in the case of Ispat Industries it is no where laid down by our constitution or any other law that only Maxwell's Principles of Interpretation can be used by the court. We can use any system of interpretation which helps us solve the difficulties like the mimansa of principle of .....

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