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TMI Blog2016 (11) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... noticee, as mentioned above r.w. Section 11A of the CX Act, 1944 and drop the remaining demand of CX duty of Rs. 50,91,734/- duty Rs. 28,88,139/- + Ed cess Rs. 21,74,714/- + SHE Cess Rs. 28,881/-] (ii) confirm the recovery of interest on amount of delayed-payment of CX demand so raised under Section 11AA (ibid) from the noticee (iii) impose penalty of Rs. 11,13,31,986/- on the noticee (M/s Dunar Foods Ltd.) under Rule 25 of CX Rules, 2002 read with Section 11AC of the CX Act, 1944. Benefit of reduced penalty @25% would be available subject to fulfilment of conditions contained in Section 11 AC (ibid) (iv) impose penalty of Rs. 10,00,000/- (Rs. Ten Lakhs) on Shri Ranjeev Aggarwal, Executive Director of the notice-company (M/s Dunar Foods Ltd.) under Rule 26 (ibid) 2. The facts of the case are that the appellant is a 100% EOU and engaged in the export of basmati rice. The appellant has set up an exported oriented unit vide LOP dated 24.3.2009. An audit was conducted by the Anti-Evasion Wing for the period 2009-10, 2010-11 and 2011-12 which revealed that that the appellant had disclosed in the monthly ER-2 returns filed with the department, DTA clearances of broken rice, rice bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to have beeb emerged. 4. He relied on the decision of Hon'ble Supreme Court in the case of Hyderabad Industries vs.Union ofIndia-1999 5 SCC 15 to say that the process of the removal of asbestos fibre from the patent rock by manual or mechanical means does not amount to manufacture as the asbestos was embedded in the said rock and no new or distinct commodity has been realized there from. He submits that the case of the appellant is similar to the said case as the case of asbestos as even in the case of the appellant, the rice is already in existence in the husk. It is simply separated from the husk by the process of milling does not amount to manufacture. 5. He further submits that the decision of Hon'ble Supreme Court in the case of Union of India vs. Delhi Cloth and General Mills Ltd. (in Civil Appeal No. 168-170 of 1960), the Hon'ble Apex Court has clarified that mere processing does not amount to manufacture. He further submits that the Hon'ble Bombay High Court in the case of Hindalco Industries Ltd.-1995 5 SCC 338 has specified that merely because the goods satisfy the test of being marketed and saleable, it does not mean that the test of being manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.-Del.) has held that the activity amounts to manufacture would have to be decided on the basis of definition of manufacture under section 2 (f) of the Central Excise Act, 1944. Therefore, it is his submission that the excise duty can only be levied on manufacture or production. In the absence of either manufacturing or production, no question of the levy of excise duty arises. As the Revenue has failed to discharge its onus to prove that the rice has been manufactured or produced by the appellant, therefore, the first ingredient in order to charge excise duty has been absent. 8. He further submits that next issue is whether the rice is excisable goods at all. As per section2(d) of the Central Excise Act means the goods specified in the First Schedule and Second Schedule of the Central Excise Tariff Act, 1985 as being subject to duty of excise and includes salt. The eight digit classifications code was introduced in the case of Customs with effect from 1.2.2003 Thereafter in order to bring parity this Harmonized System of Nomenclature (HSN) was introduced in Excise with effect from 28.2.2005. This eight digit classification code was adopted in the Central Excise Tariff with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff entry against cut flowers has been left blank. To support this, he relied on the decision of the Tribunal in the case of Ramesh Flowers Pvt.Ltd.-2008-TIOL-2445-CESTAT-MAD to say that this Tribunal has held that the tariff entry is left blank, therefore, they are not excisable. He submits that in the case Valpus Biotech Ltd. and Praj Agro Vision Ltd. in Appeal NO.E/3040 to 3042/04-Mum, this Tribunal has held that cut flowers remain a non excisable goods. If these goods are non excisable goods, the question of levy does not arise at all. In view of above, it is clear that even the second ingredient in order to charge excise duty under proviso to section 3 under section 3 can only be charged on excisable goods and not non excisable goods. Therefore on this ground also, the impugned order is to be set aside. 11. He further drew attention to the decision of this Tribunal in the case of Eco Valley Farms & Foods Ltd.-2011 (270) ELT 607 (Tri.Mum.) has held that inclusion of goods in the First Schedule and Second Schedule of the CETA, 1985 would make them excisable subject to duty of excise under section 2(d) of the Central Excise Act, 1944 but the said decision has been set aside by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addy to rice. The processing of rice is similar to that of sesame and the view taken by the Tribunal in the case of Indo Canadian Foods Pvt.Ltd.-2012 (289) ELT 335 (Tri.Del.) is applicable. 14. He also took support from the decision of the Tribunal in the case of Markfed Vansapati and Allied Industries-2000 (116) ELT 204 (Tri.-Del.) to say that the spent earth is the residue/remains of activated clay, which emerges during the process of refining, bleaching and decolouring of facts and oils is not excisable. He further submits that in the case of Indian aluminium Co. ltd.-2006 8 SCC 314, the Hon'ble Apex Court has held that even though aluminium dross having a high percentage of metal is a marketable commodity, but it cannot be classified as manufacture only because it has some saleable value. He also took support from the decision of the Hon'ble Apex Court in the case of Union of India vs. Ahmedabad Electricity Co.Ltd.-2003 11 SCC 129. He further submits that SI.No.18 of the Notification No. 23/03-CX provides exemption to residue of any other cereal. The condition No. 10 of the said notification, which is applicable to the serial No. 18 has also satisfied by the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 3(1) are: (i) Identification of excisable goods; (ii) Levy of duty and (iii) Collection of duty. These three steps are independent. Identification of excisable goods has nothing to do with levy. The corollary to this is even if some goods may be excisable, there may not be any levy of excise duty. This is the case of the entries in the Excise Tariff which have been left blank or carry word Nil in the column for duty. On those items, there is no levy prescribed by the government, but the first step of identification of excisable goods has already been done. Further, even if the goods are excisable goods and levy is prescribed by the government, collection may be dispensed with by way of exemption notification. 18. He further submits that next question is how to identify the excisable goods. As per section 2(d) of the Central Excise Act, 1944 "Excisable goods means goods specified in [the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt. 19. There are two limbs of the definition. First is for the purpose of identification which clearly says that excisable goods are those, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23. Heard both sides and considered the submissions and the case laws relied upon by both sides. 24. On careful consideration of the submissions made by both sides, we find that the following issues emerged to be decided : (1) Whether the conversion of paddy into rice amounts to manufacture as per section 2(f) of the Act or not (2) Whether the rice/bran rice are excisable goods in terms of section 2(d) of the Act or not (3) whether the extended period of limitation is invokable in the facts and circumstances of the case or not Issue No. 1 25. Learned Special Counsel heavily relied on various decisions and particularly on the decision of Hon'ble Apex Court in the case of Delhi Cloth and General Mills Co.Ltd (supra) to say that as new and different article has emerged having distinct name, character and use, therefore process undertaken by the appellant is manufacture. 26. On the other hand, learned Counsel for the appellant has relied on the decision of the Apex Court M/s.Cynamid India Ltd. (Supra) to say that the activity undertaken by the appellant is not manufacture. 27. We have seen both decisions referred before us. The decision in the case in the case of M/s.Cyn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Apex Court has held that conversion of paddy into rice is not a distinct operation and the rice and husk remain in their natural form as a result of dehusking and are covered by the term 'agricultural product. 31. Therefore, we hold that the test of manufacture has been failed as the goods are not manufactured goods as per section 2(f) of Central Excise Act, accordingly, the question of excisability does not arise. Therefore the issue No. 1 is answered in favour of the appellants. Issue No. 2 32. The learned Special Counsel has heavily relied on the decision of the Hon'ble High Court of Punjab and Haryana in the case of Hind Rubber which has been affirmed by the Apex Court. We find that in the said case, the item manufactured was having place in Central Excise Tariff and having rate of duty but the same was exempted by way of exemption notification. In that context, it was observed by the Hon'ble Apex Court as the item is mentioned in the First/Second Schedules of the Central Excise Tariff Act with rate of duty, therefore, the same cannot lose the identity of non excisable goods. But in the case in hand, the rate of duty has been left blank, in that circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court has observed as under: "9. Contrary to what has been contended by the Union of India, a bare reading of the Notification No, 8/97-C.E. dated 1-3-1997 and as amended by Notification 11/2000-C.E. dated 1-3-2000 shows that there was clear intention to rationalize the payment of duty by 100% EOUs and others. What is clearly intended relates to the liability of the manufacturer who is 100% EOU to pay the amount which amounts to aggregate of the duties of excise leviable under Section 3 of the Act or under any other law for the time being in force. That clearly indicates that whatever duty of excise was leviable under the Act and any other statute for the time being in force on the like goods produced or manufactured in India by the producer or manufacturer who is not 100% EOIJ if sold in India. The obvious object was to see that the manufacturer who is 100% EOIJ does not steal a march over his counterpart selling like goods in India. The earlier benefit given to the EOUs was for any duty payable under Section 3 of the Act which is in excess or the duties paid by its counterparts." 38. Further in the case of Vikram Ispat, this Tribunal has observed as under: 12.We have cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the method adopted by the Legislature in recovering the impost can alter its character In our opinion, the mere fact that the levy imposed by the impugned Act had adopted the method of determining the rate of levy by reference to the minerals produced by the mines would not by itself make the levy a duty of excise. Again the Supreme Court in the case of U.O.I. v, Bombay Tyre International, supra, held that Section 3 of the Central Excise Act creates the charge and defines the nature of the charge that it is a levy on excisable goods, produced or manufactured in India. "The levy of tax is defined by its nature, while the measure of the tax may be assessed by its own standard". The Supreme Court held that "When enacting a measure to serve as standard assessing the levy the Legislature need not contour it along lines which spell out the character of the levy itself." In this case the Supreme Court did not accept the contention that because levy of excise is a levy on goods manufactured, the value of excisable goods must be limited to the manufacturing cost plus the manufacturing profit. We are, thus, in agreement with the learned Advocates that the duty which is levied on the goods m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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