TMI Blog2020 (7) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... nt are concerned, they are clearly in the nature of sub-ordinate legislations. We do not think that a letter issued by the CBEC can enlarge the scope of the exemption notifications thereby truncating the scope of taxation levied by the Parliament. Even if it is presumed that CBEC had such power, these letters are not subject to scrutiny and review by the Parliament. The exemption given by the CBEC by way of a letter was only to the extent of avoiding two registrations but no exemption has been given with respect to following remaining conditions of the Rules to be followed. In view of this, the appellant is not entitled to benefit of the exemption notification 24/2005-CUS or 132/2006-CUS in respect of the inputs procured by them. Benefit of exemption notification 06/2006-CE dt.01.03.2006 - HELD THAT:- What is claimed is an exemption available for parts consumed within the factory of production of such parts for manufacture of goods specified at Sl.No.1-20 above (Sl.No.21, List-5 read with Sl.No.84 of the table). Clearly, there is no dispute with regard to the parts manufactured by the appellant and consumed within their factory. What is in dispute is that the parts which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r final products within the country (Domestic Tariff Area) subject to conditions as specified from time to time. As EOUs are practically duty-free, they are also treated as if they are outside India. Therefore, in respect of any goods which are cleared by the EOU for sale within India, excise duty is collected at a rate equivalent to Customs duty leviable on identical goods imported into India in terms of the proviso to section 3 of Central Excise Act, 1944. 3. In this case, the appellant had imported inputs claiming the benefit of exemption notification No.52/2003-CUS dt.31.03.2003 for Basic Customs Duty and applicable Central Excise Duty (on indigenously procured raw materials). They were supposed to manufacture solar modules and export. However, the appellant was not able to export goods and had cleared their final products in DTA claiming exemption under notification Nos.24/2005-CUS as amended by notification No.132/2006-CUS and notification No.06/2006-CE and notification No.12/2012-CE. Final products manufactured by the appellant have zero basic customs duty because they appear in List-5 of notification No.06/2006-CUS dt.01.03.2006 and at Sl.No.332 of notification No.12/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If such goods were imported to India they would be subjected to basic customs duty as per the Customs Tariff and additional duty of customs (also known as CVD) as per the Central Excise Tariff. Both the basic customs duty and additional duty of customs are NIL for their final products by virtue of the exemption notifications available to them. Therefore, no duty was paid on the final products cleared by the appellant to the DTA. There is no dispute regarding the eligibility of the exemption notification for their final products. 5. What is in dispute is whether the appellant is also entitled to duty-free inputs (both imported and indigenous) under the exemption notifications 52/2003-CUS dt.01.03.2003 and 22/2003-CE. 6. It is undisputed that the notification Nos.52/2003-CUS and 22/2003-CE are meant for exemption to 100% EOUs. It is also not in dispute that both these exemption notification are issued by the Finance Ministry in consonance with corresponding provisions of Foreign Trade Policy. Para 6 of notification No.22/2003-CE reads as follows: 6. Notwithstanding anything contained in this notification, the exemption contained herein shall also apply to the goods used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods) even if not exported, are allowed to be sold in Domestic Tariff Area in accordance with the Export and Import Policy and subject to such other limitations and conditions as may be specified in this behalf by Development Commissioner, or the Board of Approval or the Inter Ministerial Standing Committee, as the case may be, on payment of appropriate duty of excise leviable thereon under section 3 of the Central Excise Act, 1944 ( 1 of 1944) or where such finished goods (including by-products, rejects, waste and scrap) or services are cleared to the warehouse appointed or registered under notification of the Government of India in the Ministry of Finance ( Department of Revenue) No. 26/98-Central Excise ( NT), dated the 15th July, 1998 or No. 46/2001-Central Excise ( NT), dated the 26th June, 2001 or cleared to the warehouse authorised to carry out manufacturing process or other operation under section 65 of the Customs Act, 1962 (52 of 1962) and under the Manufacture and Other Operations in Warehouse Regulation, or cleared to the holders of certificate from Apparel Export Promotion Council and Council for Leather Export for duty free imports as referred to in clause (e) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IL CVD and were also cleared paying NIL rate of duty, they are not excisable and the exemption on the inputs under the notification No.52/2003-CUS and 22/2003-CE on the inputs is not available to the appellant. Accordingly, the following duties were demanded in the four SCNs. Sl.No. SCN No. Date Central Excise Duty Customs Duty Total 1 71/Commr/Bol/13 dt.07.10.2013 77,65,349 1,61,64,228 2,39,29,577 2 33/Commr/Bol/14 dt.29.04.2014 71,19,907 1,22,95,842 1,94,15,749 3 06/Commr/Dgp/15 dt.29.01.2015 66,34,027 76,39,578 1,42,73,605 4 35/Commr/Dgp/15 dt.01.10.2015 1,37,80,071 2,63,08,348 4,00,88,419 TOTAL 3,52,99,354 6,24,07,996 9,77,07,350 11. Interest was also demanded on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid two notifications. Instead his argument was that even if they were not entitled to the benefit of the aforesaid two notifications, they were indeed entitled to the benefit of notification Nos.24/2005-CUS dt.01.03.2005 as amended by notification No.132/2006- CUS dt.30.12.2006 read with notification No.06/2006-CE dt.01.03.2006 and notification No.12/2012-CE dt.17.03.2012 in respect of the inputs which were imported as well as which were procured indigenously. His argument was that if they are covered by other exemption notifications, even if they are not entitled to the benefit of exemption notifications which they had sought, they would still be eligible for the exemption and therefore, no demand can be confirmed against them. Accordingly, the entire demand needs to be set aside along with interest and penalties. 13. Learned DR argues in the first place that this bench cannot go beyond the scope of the SCN which only sought to deny the benefit of such exemption notifications which they were admittedly not entitled to. However, even if the submissions of learned counsel were accepted, the appellant was not entitled to the benefit of the other exemption notifications which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March, 2005, namely:- In the said notification (i) in the opening paragraph for the words, figures and letters following goods, falling under the heading, sub-heading or tariff-item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and specified in column (2) of the Table below , the words following goods of the description as specified in column (3) of the Table below and falling under the heading, sub-heading or tariff-item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as specified in the corresponding entry in column (2) of the said Table shall be substituted; (ii) for the table, the following table shall be substituted, namely:- TABLE S.No. Heading, Sub-heading or Tariff item Description 23. 8541 All goods 39. All Chapters All goods for the manufacture of goods covered by S.Nos. 1 to 38 above, provided that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic conversion (10) Solar power generating system (11) Solar photovoltaic module and panel for water pumping and other applications (12) Solar crop drier and system (13) Wind operated electricity generator, its components and parts there of including rotor and windturbine controller (14) Water pumping wind mill, wind aero-generator and battery charger (15) Bio-gas plant and bio-gas engine (16) Agricultural, forestry, agro-industrial, industrial, municipal and urbanwaste conversion deviceproducing energy (17) Equipment for utilising ocean waves energy (18) Solar lantern (19) Ocean thermal energy conversion system (20) Solar photovoltaic cell (21) Parts consumed within the factory of production of such parts for the manufacture of goods specified at S. Nos. 1 to 20 above. 16. Notification No.24/2005-CUS exempts certain goods including the final products manufactured by the appellant viz., solar modules which fall under the Customs Tariff 8541. These are covered at Sl.No.3 of the table. The inputs which they used are admittedly not covered at Sl.No.3. Learned counsel for the appellant submits that all goods used for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be followed under these rules and the registration is only one of the steps. What has been exempted by the Board is only an additional registration but the remaining part of the rules has not been exempted. He would take us through these rules which read as follows: In exercise of the powers conferred by section 156 of the Customs Act, 1962 (52 of 1962),and in supersession of the Customs(Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules,2016 except as things done or omitted to be done before such supersession, the Central Government hereby makes the following, namely: 1. Short title and commencement. (1) These rules may be called the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017. (2) They shall come into force on the 1st day of July, 2017. 2. Application. (1) These rules shall apply to an importer, who intends to avail the benefit of an exemption notification issued under sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and where the benefit of such exemption is dependent upon the use of imported goods covered by that notification for the manufacture of any commodi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a particular consignment for a period not exceeding one year; and (b) in one set, to the Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs at the Custom Station of importation. (2) The importer who intends to avail the benefit of an exemption notification shall submit a continuity bond with such surety or security as deemed appropriate by the Deputy Commissioner of Customs or Assistant Commissioner of Customs having jurisdiction over the premises where the imported goods shall be put to use for manufacture of goods or for rendering output service, with an undertaking to pay the amount equal to the difference between the duty leviable on inputs but for the exemption and that already paid, if any, at the time of importation, along with interest, at the rate fixed by notification issued under section 28AA of the Act, for the period starting from the date of importation of the goods on which the exemption was availed and ending with the date of actual payment of the entire amount of the difference of duty that he is liable to pay. (3) The Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion notification, prescribing observance of these rules may re-export the unutilised or defective imported goods, within six months from the date of import, with the permission of the jurisdictional Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs having jurisdiction over the premises where the imported goods shall be put to use for manufacture of goods or for rendering output service: Provided that the value of such goods for re-export shall not be less than the value of the said goods at the time of import. (2) The importer who has availed benefit of an exemption notification, prescribing observance of these rules may also clear the unutilised or defective imported goods, with the permission of the jurisdictional Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs having jurisdiction over the premises where the imported goods shall be put to use for manufacture of goods or for rendering output service, within a period of six months from the date of import on payment of import duty equal to the difference between the duty leviable on such goods but for the exemption availed and that already pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r argue that even if it is held that both views are possible the benefit of doubt has to go in favour of the revenue and against the assessee while applying an exemption notification as per law laid down by the Constitutional Bench of the Hon ble Supreme Court in the case of Dilip Kumar and Co. Ors [2018 (361) ELT 577 (SC)]. Learned counsel for the appellant argues that once they are exempted from the registration under the rules, it automatically means that they are exempted from all the remaining rules altogether. Therefore, they are entitled to the exemption even though they have not followed any of the Rules. 21. As far as the Central Excise duty is concerned, the learned counsel for the appellant submits that their final products are exempted by notification 06/2006-CE and they had indeed availed the benefit of this exemption notification. Their goods are covered at Sl.No.84 of the table in this exemption notification. This notification refers to List-5 annexed to the exemption notification. Sl.No.11 of the List-5 reads Solar Photovoltaic module and panel for water pumping and other applications. There is no dispute that their final products fall under this category bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere exempted from duty. There is no doubt that the final products were exempted from duty and were indeed cleared without payment of duty. Therefore, the demand is on the duties foregone on the inputs in terms of the exemption notifications. In the first place, this bench, at this stage, cannot go beyond the SCN and give the benefit of some other exemption notifications which was not the point of dispute in SCNs themselves. Further, he would argue that even if the benefit of these exemption notifications now claimed by the appellant are considered, a plain reading of all the exemption notifications shows that the appellant was clearly not entitled to the benefit of these exemption notifications. Even if it is argued that more than one view is possible, with respect to the exemption notifications, the benefit of doubt, if any, cannot go to the appellant and must go in favour of the revenue as per the ratio of the judgment of the Constitutional Bench of the Hon ble Apex Court in the case of Dilip Kumar Co. and Ors. (supra). 25. We have considered the arguments made exhaustively by both sides and perused the records. It is undisputed that the appellant is a 100% EOU, they importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation 24/2005-CUS dt.01.03.2005 as well as amended notification 132/2006-CUS dt.30.12.2006 exempt the final products manufactured by the appellant unconditionally. However, they exempt the inputs used by the manufacturer conditionally the condition being that they have to follow the procedure set out in the Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996. Among these rules is also a requirement of registration with the department. In 2017, TRU clarified that if the appellant is already registered with the Central Excise department, obtaining a fresh registration under the rules is not required. However, the remaining conditions of the rules which are equally substantive have not been waived by the department. They must be followed to claim the exemption notification. At this stage, we feel that it is also pertinent to consider whether CBEC can enlarge or modify the scope of an exemption notification which is in the form of a subordinate legislation through a letter or circular. Taxing statutes have to be strictly construed and the power of taxation lies with the Parliament. The power to issue exemption notifications rests with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e answer the reference holding as under - (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled. 32. In view of the above, we find that the appellant is not entitled to the benefit of the exemption notifications which they have wrongly claimed and is liable to pay duties on the inputs as demanded in the SCNs. 33. Now coming to the penalties imposed under Rule 25 of the Central Excise Rules, 2002 and Section 114A of the Customs Act, 1962, we find that in the impugned order, the learned Commissioner imposed penalties under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 without speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notices issued to the appellant, penalty was proposed under Section 112 of the Customs Act, 1962 but while passing the impugned order, the learned Commissioner imposed penalty under Section 114A of the Customs Act by observing in para 5.12.5 of the impugned order that the provision of Section 114A of the Customs Act is more appropriate in the present case. Here we note that it is settled law that any penalty not proposed in the show-cause notice cannot be imposed. The justification given by the learned Commissioner for imposition of penalty under Section 114A instead of Section 112 of the Customs Act, 1962 as proposed in the show-cause notice is not tenable in law and do not apply to penalty provisions which are to be strictly construed in view of the following judgments:- i. CCE, Nagpur Vs. Ballarpur Industries Ltd. [2007(215) ELT 489 (SC)] ii. B. Lakshmichand Vs. GOI [1983(12) ELT 322 (Mad.)] iii. Shree Precoated Steel Vs. CCE, Pune [2006(203) ELTG 506 (Tri. Mumbai)] Hence by following the ratio of the decisions cited supra, we also set aside the penalty imposed under Section 114A of the Customs Act, 1962. 35. In the result, both the penalties imposed under Rule 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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