TMI Blog2007 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... cal Technologies Ltd. v. C.C. C.E., Aurangabad reported in 2005 (188) E.L.T. 210 (Tri.-Mumbai). 2. The learned Advocate for the appellants took us through the provisions of Section 3 of the Central Excise Act which reads as under :- "SECTION 3. Duties specified in the First Schedule and Second Schedule to the Central Excise Tariff Act, 1985 to be levied.- shall be levied and collected in such manner as may be prescribed- (a) A duty of excise on all excisable goods which are produced or manufactured in India as and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986): (b) a special duty of excise, in addition to the duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are produced or manufactured in India, as , and at the rates, set forth in the said Second Schedule, Provided that the duties of excise which shall be levied and collected in any excisable goods which are produced or manufactured. (i) in a free trade zone and brought to any other place in India, or (ii) by a hundred p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00% EOU lying with it at the time approval is granted to de-bond, the goods cannot be assessed under proviso to Section 3(1) of the Central Excise Act. 5. It was submitted that this decision of the Supreme Court was considered by the Larger Bench of the Tribunal in the case of Himalaya International Ltd. v. C.C.E., Chandigarh-I - 2003 (154) E.L.T. 580 (Tri.-LB), but the Larger Bench took a view that this was one relating to the rate of duty applicable to 100% EOU on its stock of finished products produced prior to its debonding and the question whether sales made by EOU while it continued as EOU but in excess of the permission granted would be outside the proviso to Section 3(1) was not before the Supreme Court and therefore it cannot be held that the goods which are clandestinely cleared by 100% EOU without permission from Development Commissioner are to be assessed under the main provision of Section 3(1). The Bench agreed with the contention raised by the department that in the nature of conditions under which an 100% EOU is functioning interpretation suggested by the assessee would defeat the purpose of the proviso and held that goods produced and manufactured by 100% EOU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner on the ground that the Apex Court has set aside the decision by remanding the matter back to Commissioner. This decision of the Tribunal in the Modern Denim case as been uphold by the Supreme Court inasmuch as the civil appeal against the same by the Revenue has been dismissed by the Supreme Court even though without assigning any reason. Attention was invited to the Larger Bench decision of the Tribunal in the case of S. Kumars Ltd. v. C.C.E. - 2003 (153) E.L.T. 217 (Tri. LB) wherein it was held that when a civil appeal is dismissed even though with out assigning any reason it will have an effect of binding precedent unlike in the case of dismissal of special leave petition. In view of this it was submitted that the law declared in the Modern Denim has become final and any decision to the contrary including that of the Larger Bench of Himalaya International will cease to hold good. Even otherwise once the Larger Bench decision has been set aside by the Supreme Court by remanding the matter back it cannot be held that the decision set aside was that of Division Bench only and not of the Larger Bench as Supreme Court has remanded the matter both for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lous situation is of no consequence. 9. Learned DR, explained the policy relating to 100% EOU and submitted that originally 100% EOUs were allowed to be established with a clear direction that 100% of their production was required to be exported and in consideration of that they were allowed to import capital goods, raw materials and. components free of duty and to procure them indigenously also free of duty. The scheme was introduced somewhere in 1981-82. A similar provision was made in respect of goods produced in specified free trade Zone. All the goods which were manufactured in the free trade zone 100% EOUs and were meant for export were exempt from duty. In 1982 the units in free trade zone were allowed to sell their goods not exceeding 25% of the production, in DTA on payment of excise duty, equal to the duties of customs leviable on like goods imported from abroad. Clearance to DTA was to be allowed only after necessary permission had been obtained by the unit from the Development Commissioner in charge of the free trade zone. Accordingly, proviso to Section 3(1) of the Central Excise Act was inserted in Section 3 of the Act by Act 14 of 1982. It provided that in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 3(1) and Notification 125/84 have to be given harmonious interpretation and an interpretation has to be given which should not defeat the purpose of the main Section. Reference in this regard was invited to the Apex Court decision in the case of Ispat Industries Ltd. v. Commissioner of Customs, Mumbai - 2006 (202) E.L.T. 561 (S.C.) wherein it was held that if two interpretation of a rule are possible, one which subserves the object of a provision in the parent statute and the other which does not, we have to adopt the former, because adopting the latter will make the rule ultra vires the Act. The court further held that while interpreting the statute we should follow the mimansa principles of interpretation i.e. any system which solves the difficulties should be used. One of the mimansa principle is that if a word or sentence purporting to express a subordinate idea clashes with the principal idea, the former must be adjusted to the latter or must be disregarded altogether. Further where there is a conflict between the use and the substance, greater regard should be paid to the use. When there is conflict between the purpose and the material, the purpose is to prevail, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . - Del.) wherein all the decisions cited by the respondents and others taking a similar view were considered along with Supreme Court decision in SIV Industries case, Larger Bench decisions in Himalaya International and S. Kumar's Ltd. case, Sterlite Optical and upheld the view expressed by the Larger Bench in Himalaya International and the Division Bench, in a Sterlite Optical. It further held that the plea that the Larger Bench decision in the case of Himalaya stood overruled by the Hon'ble Supreme Court is not at all borne out from the order of the Supreme Court by which the matter was remitted to the Commissioner as the Hon'ble Supreme Court was interpreting an appeal filed by the Commissioner against the decision of the Division Bench in Himalaya International Ltd. and has remitted the matter back to the Commissioner on the question as to whether the respondent/assessee was entitled to exemption. There is nothing in the order to undertake that Hon'ble Supreme Court was dealing the issue of applicability of the said provision, mush less setting aside the findings given by the Larger Bench on the issue of law which was decided in favour of the Revenue and could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification 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 domestic sale after obtaining the permission of the Development Commissioner, in respect of domestic sales the words "allowed to be sold in India" were incorporated in both the provisos. The fact however remains that 100% EOUs were never treated at par with other domestic units and for all practical purpose they were considered as units located outside India and accordingly Central Excise duty equal to amount of duties of customs leviable on like or similar goods manufactured outside India when imported 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(1) and Notification 125/84 is ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98 which was set aside and remanded back and not the issue regarding applicability of proviso to Section 3(1) in respect of clearance effected by 100% EOU with or without permission from the Development Commissioner. Even independently we are of the same view and reiterate the same as normally as remand, is on matter of facts under dispute or on a law point not considered by the lower court, whereas in the present case the law point regarding applicability of proviso to Section 3(1) in case of clandestine clearance was the only issue before Larger Bench without any dispute of facts. The facts regarding production from indigenous raw material was relevant only for Notification 13/98. We also agree with the observation of the Larger Bench that the decision of the Supreme Court in SIV Industries case is distinguishable for the reason stated therein, as in that case the main thrust was that whether on the date of removal the 100% EOU ceased to be 100% EOU and therefore the provisions relating to 100% EOU could not have been applied to them. For the same purpose we hold that exemption under Notification 125/84 shall not be applicable in respect of goods manufactured by 100% EOU but sold ..... 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