9911796707
TMI Blog2021 (11) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... xty Eight only) as below, raised vide various Show Cause Notices No. SCN No and Date Period Duty Demanded Duty Confirmed Duty Dropped 1. C.Ex./R-I/BSR- II/LavinoKapur/ SCN/2005 dated 21.03.2005 08.03.1999 to 31.03.2000 4,40,382/- Nil 4,40,382/- 2. V.Adj (SCN)30-33/Th- II/05 dated 28.03.2006 02.04.2001 to 30.03.2003 14,69,428/- 33,042 14,36,386 3. V.Adj (SCN)30-49/Th- II/06 dated 05.07.2006 June 2001 to March 2006 1,12,02,687/- 1,12,02,687/- - 4. C.Ex./R-I/BSR- II/LavinoKapur /SCN/2006 dated 02.01.2007 April 2006 to September 2006 3,75,933/- 3,75,933/- - 5. C.Ex./R-I/BSR-II/ LavinoKapur/SCN/2007 dated 27.07.2007 October 2006 to March 2007 2,03,838/- 2,03,838/- - 6. C.Ex./R-I/BSR-II/ LavinoKapur/ SCN/2007 dated 21.02.2008 April 2007 to Sept 2007 4,79,826-/ 4,79,826-/ - 7. V.Adj (SCN) LavinoKapur / 118/BSR-II/08 dated 16.09.2008 Oct 2007 to Dec 2007 2,94,636/- 2,94,636/- - 8. V.Adj (SCN) LavinoKapur /165/ BSR-II/08 dated 19.01.2009 Jan 2008 to Mar 2008 4,50,511/- 4,50,511/- - 9. V.Adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 05.07.2006 Nil 4. C.Ex./R-I/BSR-II/LavinoKapur/SCN/2006 dated 02.01.2007 2,94,636/- 5. C.Ex./R-I/BSR- II/LavinoKapur/SCN/2007 dated 27.07.2007 4,50,511/- 6. C.Ex./R-I/BSR- II/LavinoKapur/SCN/2007 21.02.2008 3,84,837/- 7. V.Adj (SCN) LavinoKapur /118/ BSR-II/ 08 dated 16.09.2008 2,42,089/- 8. V.Adj (SCN) LavinoKapur /165/ BSR- II/08 dated 19.01.2009 3,55,425/- 9. V.Adj (SCN) LavinoKapur /1237/ BSR- II/08 dated 06.05.2009 2,17,816/- 10. V.Adj (SCN) LavinoKapur /93/ BSR- II/09 dated 24.09.2009 3.09,876/- 11. V.Adj (SCN) LavinoKapur /136/ BSR- II/09 dated 10.11.2009 3.57,062/- 12. V.Adj (SCN) LavinoKapur /143/ BSR- II/09 dated 02.12.2009 4,16,911/- 13. V.Adj (SCN) LavinoKapur /12/ BSR- II/2010 dated 28.04.2010 4,65,676/- 14. V.Adj (SCN) LavinoKapur /83/ BSR- II/10 dated 28.10.2010 4,51,247/- 15. V.Adj (SCN) LavinoKapur /143/ BSR- II/10 dated 16.12.2010 3,75,933/- 16. V.Adj (SCN) LavinoKapur /171/ BSR- II/10 dated 14.01.2011 2,03,838/- 17. V.Adj (SCN) LavinoKapur /66/ BSR- II/11 dated 29.07.2011 4,79,826/- Total 50,05,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial imported and indigenously procured, this aspect is very significant to decide the dutiability on the cotton wastes and droppings. Similarly, the various issues raised by the appellant in his submissions was not considered properly by the adjudicating authority. The issue appears to be identical to the case of C.T. Cotton Yarn Ltd. (supra) which was decided by the Tribunal after remand from the Hon'ble Supreme Court however, the Ld. Commissioner has no occasion to deal with this judgement. It is also observed that in the case of C.T. Cotton Yarn Ltd. (supra) the appeal was allowed not only on the merit, but also on the limitation therefore the issue whether the extended period of demand is correct or otherwise also need to be reconsidered. We are therefore of the view that the entire matter requires relook on all the issues, taking into consideration the judgement given in the C.T. Cotton Yarn Ltd. (supra) therefore the matter needs to be remanded to the original authority for passing a de novo order by considering all the submissions made by the appellant before this Tribunal and to be made before the adjudicating authority. We, therefore, allow the appeals by way of remand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Supreme Court in the case of Indian Aluminum Co. Ltd. [1995 (77) ELT 268 (SC)]. * In the impugned order, it has been held that decision in case of C T Cotton Yarn Ltd is distinguishable as in the said case the indigenous raw material was consumed and not imported raw material. The distinction drawn by the learned adjudicating authority is not correct as both the cases are identical. Under main Section 3 of the Central Excise Act, 1944, as well as proviso thereto the excise duty can be levied "only on goods which are produced or manufactured". In the case of C.T. Cotton Yarn Ltd. Vs. CCE, Indore, the Tribunal had held that the cotton waste generated was not a 'manufactured' product and as such no duty could be levied. Similarly, in the case of the appellant the cotton waste generated by a mere cleaning and carding process is also not a 'manufactured' product and the question of levying any excise duty does not arise. The processes undertaken determines whether the goods are produced or manufactured and not the source of raw material on which the said processes are undertaken. * The Principal Commissioner nowhere in the impugned order states that the cotton wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice in justifying the levy of excise duty. These notifications were not brought to the notice of the appellant at any time. Thus the order for the periods subsequent to the notification is also bad in law. * DGFT had revised input/output norms in the case of the company vide their letter dated 28.5.2009, adjudicating authority has erred in applying the revised norms from 28.5.2009 when the appellant has sought revision of norms on 04.05.2006. The Assistant Development * Commissioner, SEEPZ, vide his letter dated 18.8.2011 clearly stated that as per the decision taken by the Norms Committee, the adhoc norms shall be applicable from 04.05.2006 till 31.3.2012. Thus the revised norms need to be applied from 04.05.2006. * The levy of presumptive duty on alleged excess waste became applicable only from 06.07.2007 when fresh customs and excise notifications were issued. Further, notification provided that the excess wastage is to be taken only in relation to import and consumption of imported materials and the wastage on indigenously procured raw materials is not to be considered. Accordingly, in the chart enclosed herewith the excess wastage on imported raw materials is comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned above, the cotton waste arising in the production process which were sold by the appellant was not a manufactured product and as such on clearance of the same, no excise duty was leviable and as such no permission was required. * Under Notification No. 6/97-CE, dated 01.03.1997 at Sr. No. 3 exemption is provided for goods falling under heading 52.02 produced or manufactured by a 100% EOU undertaking and allowed to be sold in India. There is no reason to disallow the benefit of the said notification to the appellant company. * Under Notification No. 23/2003-CE, dated 31.03.2003 exemption was provided to goods produced or manufactured in an export oriented undertaking specified in the said notification. At Sr. No. 15 of the said notification exemption is provided to goods falling under Chapter 52.02 - Cotton Waste (including yarn waste and garneted stock). * In the case of Mangalore Chemicals and Fertilizers Ltd. [2002-TIOL-234-SC-CX] that a subsequent notification cannot undo the benefits allowed under an earlier notification. Further, the Supreme Court held that equal importance cannot be attached to all the conditions of a policy as some of them may be substantive an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferences and the duty of excise andThe FOB value of exports of the company for custom is levied only on goods manufactured and cleared for sale and for transportation to DTA unit. This method of levying duty on the difference between the inputs and outputs is erroneous because in the process of manufacture of finished goods substantial amount of cotton waste is washed away or loss - the same is referred to as 'invisible waste'. Such invisible waste exceeds 50% of the entire cotton waste generated in the manufacture of absorbent cotton. Demanding duty on such invisible waste which is never cleared is erroneous and perverse. * The extended period of limitation was not invocable as there was no suppression of fact with intent to evade duty on the part of the appellant. The first letter of enquiry regarding non-payment of duty on sale of cotton droppings was issued on 30.10.2003 and the assessee company's reply was filed on 04.11.2003. Thereafter, another letter dated 25.01.2005 was issued by the Department and the assessee's reply was filed on 14.02.2005. Thereafter, first show cause notice was issued on 21.3.2005. Thereafter, the Additional Commissioner of Central Excise issued sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar provisions that the Waste to Input Ratio for EOUs are fixed by statue and have to be followed strictly to avail any benefits under Foreign Trade Policy or the Central Excise Act. * The SCNs issued in this case are due to excessive generation of Cotton Waste by the Appellate as allowed for an EOU by the Central Excise Act, 1944 and the Foreign Trade Policy. The amount of Cotton Waste which an EOU can generate is proportional to the utilization of inputs. In this case, the required ratio of Waste to Inputs was not followed. the Appellate should have follow the Standard Input Output Norms given in the EXIM Policy. * Also, the waste was cleared using private invoices without the approval of the Development Commissioner. The transgression was only discovered by the Revenue during EA-2000 Audit. Hence, the Appellate was issued SCNs by the Respondent to explain this deviation. * From the order of the Commissioner, it is seen that DGFT had revised the Standard Input-Output Norms for the Appellate by visiting their EOU unit. The norms have been revised for Absorbent Uncarded Cotton and Absorbent Cotton Wool w.e.f. from 28.05.2009. But it was also noticed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween domestically procured and imported inputs, it was observed that the Appellant has indeed procured some inputs domestically but they were not able to produce a batch wise utilization of these inputs versus the imported inputs in front of Commissioner (Appeals). This information is in special knowledge of the Appellate and hence Commissioner could not grant them any benefit for the same. The imported inputs being sufficient to produce the DTA clearances have been considered as the sole inputs in the production of waste. * The Appellant having asserted the fact should have been able to evidence in its favour in front of Commissioner (Appeals). The Appellate now cannot produce this document at this stage of litigation. The Appellate in their reply has stated several technical grounds in their favour but has not been able to counter the main allegation made by the Revenue. * They have also made a plea that the duty demanded in the SCNs should be calculated on cum basis. Here, the OIO has held that the duty demanded is actually on the Excess Consumption of Inputs compared to the waste generated and hence the benefit of cum duty cannot be accorded to the Appellant * In the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 (316) ELT 498, 2015 (327) ELT 514, 2015 (328) ELT 620 , 2015 (327) 514, 2016 (338) ELT 435, Samyu Glass 2017 (6) GSTL 330 where it has been held that on DTA Clearances of COU , duty as per Section 3 of the Central Excise Act, 1944 has to be paid. * Part of the demand was dropped in the OIO because as per the Ratio of Sarla Perf. 2016 (336) ELT [577], the duty should be demanded under Section 3(1) of the Central Excise Act, 1944 and the duty prior to 10.05.2003 on Cotton Waste is Nil. Also, the period of 1.6.2001 to 31.3.2003 is repeated in the Second and Third SCN and hence the same is dropped from the demand of the Second SCN. 4.1 We have considered the impugned order along with the submission made in appeal, during the course of argument and also in the written submission. 4.2 The matter was remanded by the CESTAT, earlier for consideration of the issue in light of the decision of the tribunal in case of C T Cotton, on remand from Hon'ble Apex Court. Commissioner has in the impugned order on the merits of the demands observed as follows after considering the decision in case of C T Cotton:- "28. First, it is of paramount importance to discuss the applicability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle. Thus, on the clearance of Cotton Waste, if considered non-excisable, the aggregate of Customs duties involved on Comber Noil imported duty free by availing exemption, but not used for the purpose specified but cleared as Waste shall be recovered from the assessee. This provision has been stipulated to safeguard the duty foregone on import of raw materials which are not used in the manufacture of finished goods or are used in excess of the permitted norms. The wordings of para 7 of the said Notification is reproduced as under: "(7) Notwithstanding anything contained in this notification the exemption herewith shall also apply to goods which on importation into India are used for the purpose of manufacture of articles within hundred per cent Export Oriented Unit and such articles (including rejects, waste and scrap material arising in the course of manufacture of such articles) even if not exported out of India, are allowed to be sold in India, in accordance with the Export and Import Policy, on payment of duty of cotton waste excise leviable thereon under section 3 of the Central Excise Act, 1944 (1 of 1944) or where such articles (including rejects, waste and scrap material) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of duties as applicable under paragraph 6.8 (b) of the Policy within the overall ceiling of 50% of FOB value of exports but shall not be subject to achievement of minimum NFEP. Sale of waste/ scrap/remnants by units not entitled to DTA sale or sales beyond the DTA sale entitlement, shall be on payment or full duties. Appendix 14F reads as under - (2) An application for sale of good in DTA as per EXIM Policy by the EUs shall be submitted to the Development Commissioner concerned in the form given at Annexure-A. The application shall be certified by an Independent Cost/Chartered/Cost and Works Accountant and endorsed by the Bond Officer of Customs/Central Excise having jurisdiction over the unit. The Development Commissioner of the EPZ concerned will determine the extent of the DTA sale admissible and issue authorization in terms of value. An EPZ unit may effect sale in DTA on the basis of records maintained by it subject to payment of applicable duties to Customs Authorities. 29.3 FTP 2004-2009 Para 6.8(e) lays down that scrap / waste / remnants arising out of production process or in connection therewith may be sold in DTA, as per SION notified under Duty Exemption Schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der: An application for sale of goods in DTA as per EOU Scheme by the EOUS shall be submitted to the Development Commissioner concerned in the form given at Annexure -A. The application shall be certified by an independent chartered/ Cost and Works Accountant and endorsed by the Bond Officer of Central Excise having jurisdiction over the unit. The Development commissioner concerned will determine the extent of the DTA sale admissible and issue authorization in terms of value. However, EOUs having status holder certificate can sell finished goods into under para 6.8(a) of Foreign Trade Policy under intimation to the concerned Development Commissioner and Jurisdictional Central Excise Authority in terms of Para 6.39.9 of Handbook". 29.5. The assessee has submitted that the cotton waste, even if it is held dutiable is exempted in terms of Notification Nos. 6/97 and 23/2003 during the period under consideration. The relevant portion of the Notification No. 6/97-CE. dated 01.03.1997 and 23/2003 dated 31.03.2003 are reproduced verbatim as under: Notification No. 6/97-CE dated 01.03.1997 "In exercise of the powers conferred by sub-section (1) of Section 5A of the Central Excise A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by a 100% EOU and allowed to be sold in India. Thus, it is clear that to avail the benefit of the Notification ibid, the condition stipulated is that the goods are allowed to be sold in India. The term "allow' means to give permission. Hence read in the whole context of the Notification, the phrase "allowed to be sold in India' can be construed as permission from appropriate authority. I further find that the expression Allowed to be sold in India' has been interpreted as permission by concerned authorities as held by the Hon'ble Supreme Court in the case of Agricultural & Processed Food Products Vs. Oswal Agro Furnace - Civil Appeal Nos. 3785, 3786 and 3787 of 1992 and T.C. (C) No.15 of 1996, decided on 30.04.1996 Thus, the exemption benefit provided in the Notification was available only if the goods were permitted by the Development Commissioner, being the appropriate authority in case of 100% EOU, to be sold in India. In this regard, para 42(e) of the Appendix to Handbook of Procedures 1997-2002 stipulates for submission of application duly certified by independent Cost/ Chartered/ Cost and Works accountant and endorsed by the jurisdictional bond officer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, are used for the purpose of manufacture of finished goods or services and such finished goods and services, (including by by-products, rejects, waste and scrap arising in the course of production, manufacture, processing or packaging of such 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 26thJune, 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the policy are not followed. In this case as explained above, the assessee has failed to fulfil condition relating to the permitted input output norms. 31.1 If obtaining permission was a mere procedural formality and can be condoned as contended by the assessee, then they would have easily obtained the permission at the relevant time or obtained condonation for the same after the issuance of the first OIO. However, the fact remains that they failed to apply for such permission or apply for condonation with the Development Commissioner despite several OIOs ruling against them. 31.2 It is also important to note that in the judgments concerning the dutiability of Cotton Waste, the issue regarding the requirement of permission has never been disputed. The judgments determine the applicability of main Section 3(1) or use to Section 3(1) for clearances on Cotton Waste in DTA based on whether permission was obtained or otherwise. This sufficiently adds credence to my above stance that permission of Development Commissioner was mandatory. 31.3 The assessee has taken refuge in the judgement pertaining to the case of Mangalore Chemicals and Fertilisers Ltd (supra), howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Central Excise Act, 1944. 32.1 Section 3 of the Central Excise Act, 1944 is the charging section for levy of Duties specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985. Section 3 provides for levy of Duty on goods produced or manufactured by a 100% Export Oriented Undertaking (EOU). Under this first proviso, the Duties of Excise chargeable shall be an amount equal to the aggregate of the Duties of Customs which would be leviable under the Customs Act, 1962 or any other law for the time being in force, on like goods produced or manufactured outside India if imported into India. 32.2 It is relevant to note that Section 3 amended by Section 120 of Finance Act, 2001 w.e.f. 11.05.2001 by substituting the words brought to any other place in India' in place of "allowed to be sold in India'. Hence, w.e.f. 11.05.2001, all clearances to D.T.A. by an EOU shall be liable to duty in terms of the proviso to Section 3(1) only. 32.3 Accordingly, w.e.f. 11.05.2001, the Duty leviable on the subject Cotton waste/ scrap would be the aggregate of Duties of Customs leviable on the said product in terms of proviso to section 3(1) of CE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral excise duty leviable on the DTA clearances of a 100% EOU. Therefore, in our view, it would not be correct to treat the clearance of the goods manufactured by 100% EOU into DTA as deemed imports into India." The above Kumar Arch Tech decision has been relied / followed in a number of judgments namely 2015 (316) E.L.T. 498 (Tri.- Ahmd.), 2015 (327) E.L.T. 514 (Tri.-Ahmd.), 2015 (328) E.L.T. 620(Tri.:- Del.), 2016 (338) E.L.T. 435 (Tri. - Ahmd.) and Samyu Glass Pvt.Ltd. 2017 (6) G.S.T.L. 330 (Tri. - Hyd.) wherein it has been held that Duty to be paid by EOU on its DTA clearances, is Central Excise Duty in terms of proviso to Section 3(1) of Central Excise Act, 1944. 33. After having held that the excess cotton waste generated by consuming imported comber noil procured duty free are chargeable to duty under the proviso clause of Section 3(1) of the Central Excise Act, 1944, I now proceed to discuss the other contentions of the assessee. 4.3 From the above observations made by the Commissioner, it appears that he distinguishes the decision of the C T Cotton, holding that the demand for duty is not by holding that the cotton waste is a manufactured product, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto DTA by the 100% EOU are excisable goods and (b) the goods are the result of a process of manufacture. 5.1 The term "excisable goods" in terms of its definition given in Section 2(d) means goods specified in the First and Second Schedule to the Central Excise Tariff Act, 1985 as being subject to duty of excise. Hon'ble Supreme Court in the cases of CCE v. Indian Aluminium Co. Ltd. reported in 2006 (203) E.L.T. 3 (S.C.) and CCE, Patna v. Tata Iron and Steel Co. Ltd. reported in 2004 (165) E.L.T. 386 (S.C.), has held that the "goods" must be a marketable commodity. 5.2 Thus for deciding the question as to whether the DTA clearances of 'soft cotton waste' would attract duty under proviso to Section 3(1) of Central Excise Act, 1944, three points have to be decided - (1) whether soft cotton waste has emerged as a result of a manufacturing process ? (2) whether it is covered by some entry in Central Excise Tariff as being subject to duty ? (3) whether soft cotton waste is a marketable commodity - know or traded commerce as a commodity which is brought and sold. 5.2.2 During the period of dispute i.e. w.e.f. 16-3-1995 Heading 5202 covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umes and it split parts called Dal, has, in para 18 of the judgment relied upon its earlier judgment in case of Modi Spinning & Weaving Mills Co. Ltd. v. State of U.P. reported in 1980 UPTC 1337, wherein in the context of U.P. Krishi Utpadan Mandi Adhiniyam, 1964 it was held that the entry "cotton ginned and unginned" would also cover "cotton waste" which is clippings, stripping and other waste product while ginning cotton. We are of the view that it is this judgment of the Apex Court which is applicable to the facts of this case as it directly answers the question as to whether 'cotton waste' is essentially an inferior quality of cotton or is something totally different from the unprocessed cotton with different character and usages. 6.2 As regards the judgment of Hon'ble Supreme Court in case of Commissioner of Sales Tax, Bombay v. BPLC and Others reported in 1995 (77) E.L.T. 790 (S.C.), Bombay Sales Tax Act, 1959 provided for set-off of the sales tax paid in respect of certain specified goods purchased by a manufacturing dealer and used within the state in the manufacture of taxable goods sold by him. The term "manufacture" was defined in Section 2(17) of the Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s may be that these processes would be 'manufacture' within the meaning of this term, as defined in Section 2(17) of the Bombay Sales Tax Act. The definition of manufacture in Section 2(17) of Bombay Sales Tax Act, is totally different from the definition of manufacture as given in Section 2(f) of Central Excise Act, 1944. The definition in Section 2(17) of Bombay Sales Tax Act is a precise and exhaustive definition of manufacture, while the definition of this term in Section 2(f) of Central Excise Act, 1944 is an inclusive definition which without precisely defining the term 'manufacture', simply enumerates the processes which also would be treated as manufacture. The term "manufacture" in Section 2(f), as interpreted by Apex Court in a series of judgment means a process which results in emergence of a commercially new product with distinct identity, usages and character from the raw material. In the present case the question as to whether 'soft cotton waste' obtained in course of carding and combing of ginned cotton is the end product of a process of manufacture has to be answered by applying the above criteria. The judgment of the Apex Court in case of BPCL and Others (supra) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Act, 1962 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975). Bare reading of proviso indicates that it is applicable, only in respect of the excisable goods which are produced or manufactured in India. In our view if the goods fail to qualify the test of manufacture as per Section 2 (f) and the law as laid down by various courts, then the proviso to section 3 cannot be pressed in to service for the purpose of levy of duty of excise as equivalent to the Customs duty. Further by the amendment made in proviso, to section 3(1), whereby the phrase "allowed to be sold in India" was replaced by the phrase "brought to any other place in India", very clear that in case of manufactured goods by an EOU, the proviso shall apply in all situations. This amendment was made as consequence of the Decision of Hon'ble Apex Court in case of SIV Industries [2000 (117) ELT 281 (SC)]. In case of Sarla Performance Fibre [2016 (336) ELT 577 (SC)], Hon'ble Apex Court considered these amendments along with its earlier order in case of SIV Industries and held as follows: "23. Having noted the relevant provisions, it is apposite to appreciate what has been held in SIV Industries Ltd. (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng further amendment to the proviso to Section 3(1) of the Act, the Court held :- "The contention of the Revenue is that permission to withdraw from the Scheme is itself a permission to sell in India, i.e., when the unit is permitted to debond, it would be deemed to have been permitted to sell the goods in India. But then permission to sell in India has to be in terms or in accordance with the provisions of the export-import policy. Permission to sell in India by 100% EOU consists of all those factors like value addition, fulfilment of export obligation, sale of a general currency licence- holder, item being not mentioned in the negative list and then there being a limit of 25%, etc. When permission to debond is given, none of these criteria or aspects are applied by the Board of Approvals (BoA) to the closing stock of finished goods. The Board of Approvals is a statutory authority, which permits debonding. It is created under the Industrial (Development and Regulation) Act. On the other hand permission to sell the goods in India under and in accordance with the import policy has to be given by the Development Commissioner in the Ministry of Commerce. The Board of Approvals and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant Rules held thus :- "Chapter V-A of the Central Excise Rules contains provisions for removal from a free trade zone or from a 100% EOU of excisable goods for home consumption. This chapter was made applicable to units under the EOU Scheme by Notification No. 130/84-C.E., dated 26-5-1984. This chapter contains Rules 100-A to 100-H. Rule 100-A provides that the provisions of this chapter shall apply to a person permitted under any law for the time being in force to produce or manufacture excisable goods in a 100% export-oriented undertaking and who has been allowed by the proper officer to remove such excisable goods for being sold in India on payment of duty of excise leviable thereon. It will be thus seen that this Chapter V-A would not be applicable where EOU is outside the EOU Scheme after the unit is debonded. Under Rule 100-H, Rule 57-A and other Rules mentioned therein shall not apply to excisable goods produced or manufactured by a 100% export-oriented undertaking. Rule 57-A relates to allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 as may be specified by the Central Government in the notification, pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciate the whole controversy in completeness, we may reproduce the said circular dated 13-2-2002 :- "Subject : Removal of goods by 100% EOUs to DTA - Non-levy of duty under Section 3(1) of Central Excise Act, 1944. I am directed to invite reference to Supreme Court's judgment in case of SIV Industries v. CCE [2000 (117) E.L.T. 281 (S.C.)] vide which the Apex Court had held that "proviso to Section 3(1) regarding the duty chargeable on goods cleared by EOUs shall be applicable only to sales made in DTA upto 25% of production which are allowed to be sold into India as per provisions of EXIM Policy". In other words, Hon'ble Court decided that if the goods are "not allowed" to be sold in India, the proviso to Section 3(1) of Central Excise Act, 1944 shall not be applicable. The expression 'allowed to be sold' has since been replaced with 'brought to any other place' w.e.f. 11-5-2001 vide Section 120 of Finance Act, 2001 (14 of 2001). 2. It has come to the notice of the Board that field formations are interpreting the judgment of Apex Court to the effect that if the goods cleared by EOUs are not allowed to be sold into India, the Section 3(1) of Central Excise Act, 1944 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; However, attention is now invited to the decision of Larger Bench of CESTAT in the case of M/s. Himalaya International Ltd. v. Commissioner of Central Excise, Chandigarh [2003 (154) E.L.T. 580 (Tri.-LB)], wherein it has been held that "Rate of duty as per the proviso to Section 3(1) of the Central Excise Act, 1944 would be applicable for assessing all the excisable goods, which were cleared by 100% EOU to DTA whether in terms of permission granted or in excess of permission granted". In view of the said judgment of the CESTAT, it is now clear that all the goods manufactured by EOU and cleared into DTA before final debonding of the EOU shall be chargeable to duty under proviso to Section 3(1) of the Central Excise Act, 1944 and under no condition, goods produced in 100% EOU can be charged under main Section 3(1) of Central Excise Act, 1944. 3. In view of the above judgment of the CESTAT, the matter has been re-considered by the Board and it has been decided to withdraw the Board's Circular No. 618/9/2002-CX., dated 13-2- 2002. The above-mentioned judgment of CESTAT, which has been accepted by Board, may kindly be taken into consideration in deciding similar pending case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted and, therefore, they were required to pay duty under proviso to Section 3(1) of the Act. It was also urged that under the Exim Policy, an EOU is obliged to make exports of the entire production itself and not through any other entity. The Court posed the following question :- "The core question for our consideration, therefore, is whether the sales of shrimps and shrimp seeds by the assessee in DTA, without requisite permission from the Development Commissioner, are to be assessed to excise duty under Section 3(1) of the Act or under the proviso to the said section?" 32. To deal with the said question, the Court referred to Section 3 and it expressed understanding of the provision in the following terms :- "It is manifest that all excisable goods produced or manufactured in India are exigible to duty of excise under Section 3 of the Act, the charging section, at the rates set forth in the Schedule to the Tariff Act. However, the proviso to the said section provides that the duties of excise on any excisable goods, which are produced or manufactured by a 100% EOU and allowed to be sold in India shall be an amount equal to the aggregate of the duties of customs which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11A of the Central Excise Act, 1944 can be pressed into service for recovery of "duty of excise" and not for the recovery of any other tax or duty including the Customs Duty leviable under Customs Act, 1962. Hence we do not find merits in the observations made by the Commissioner while distinguishing the decision of C T Cotton. The issue for consideration in the present case is demand of duty on the cotton waste arising during the course of manufacture of finished product exported by the appellants. Once it is held that the cotton waste is not a manufactured goods leviable to excise duty, all the subsequent arguments advanced by the Commissioner vis a vis contravention of the provisions of exemptions issued under Customs Act, 1962 and those of the Foreign Trade Policy, become irrelevant for these proceedings, initiated under provisions of Section 11A of the Central Excise Act, 1944. 4.6 In view of the above we do not find much merits in the impugned order proposing to levy and demand duty of the customs on the excess waste generated, in the unit in terms of show cause notice issued under Central Excise Act, 1944. In view of the view taken by us we are also not inclin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
