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TMI Blog2009 (1) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed a penalty after appropriating the duty amount and the interest deposited by the respondents towards the differential duty demanded with interest. On appeal filed by the respondents, the Commissioner allowed the appeal on the ground that the respondents had not used any imported raw-material during the relevant period and had used only indigenous raw-material. The Revenue is in appeal against this order on the ground that 100% EOU units are required to discharge duty liability under proviso to Section 3(1) of Central Excise Act, 1944 and the supplies received by the respondents were from other 100% EOU and the same should not be treated as indigenous goods for the purpose of applicability of exemption. 2. Dr. Rajak, Learned S.D.R., on behalf of Revenue submitted that the respondents have received the inputs from other 100% EOU and therefore do not fulfil the conditions required to be fulfilled under Notification No. 23/2003, dt. 31-3-2003 which is the successor notification to Notification No. 8/97-C.E., dt. 1-3-97 which requires that the rate of duty will be equal to excise duty payable if the goods are produced or manufactured wholly from the raw-materials produced or ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing. 4.2 In case the raw materials received by a 100% EOU falls in the second category be mentioned above, it cannot be called as indigenous raw material. None of the decisions cited by the respondents have taken this view. Therefore when the raw material is diverted without any process, clearance has to be treated as a clearance from a Custom Bonded Warehouse, which a 100% EOU is and the receiving unit uses the raw material and manufactures goods and intends to clear the same in the DTA, the appropriate notification would be Notification No. 2/95-C.E. only. From the orders of both the Lower Authorities it is not clear whether the raw materials received by the respondent 100% EOU was by way of sale of raw material imported as it is or after undertaking manufacturing process. Further Notification No. 8/97-C.E. also requires that "goods are produced or manufactured wholly from the raw material produced or manufactured in India." Therefore even if a part of the raw materials received from respondent 100% EOU was actually mere sale of imported raw material and the balance consisted of goods manufactured by other 100% EOUs, the respondents become ineligible for exemption under Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 relating to removal of goods from free trade zone and 100% EOU for home consumption and many pro visions 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 therefore very evident that 100% EOUs are to be treated differently from other domestic units. We are therefore in agreement with the plea raised by the Revenue that no interpretation which would have the effect of defeating the very statutory provision shall be given. It has also been observed by Supreme Court in British Airway's case that while interpreting the statute, courts are required to keep in mind, the consequences which are likely to flow up on the intended interpretation that it is the duty of the court to give a harmonious construction of a stature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufactured the goods proposed to be cleared in DTA wholly from the raw materials produced or manufactured in India. Therefore the question that is required to be considered is whether for the purpose of this exemption notification goods manufactured by a 100% EOU and supplied to another unit can be considered to have been produced or manufactured in India. According to us, the term "raw materials produced or manufactured in India" cannot include the goods produced or manufactured by 100% EOU. 4.6 In addition to the observations of the Larger Bench in Jaipur Golden Co. case, another point that has to be borne in mind is for the purpose of levy of excise duty several processes which normally would not be amounting to manufacture have been defined as manufacture. Examples that readily come to the mind are goods like P or P medicines, Textiles etc. In the case of P or P medicines, labeling, re-labeling, packing, repacking etc. amount to manufacture. Further in the case of textiles dying, printing, bleaching, mercerizing, texturising, cabling or any other process or anyone or more of these processes, or the conversion of any form of the said products into another form of such product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods to another 100% EOU it is considered to have no effect on the domestic tariff area and it is as good as deemed goods transaction between two units both of which are located outside India. 4.8 Further a 100% EOU is also considered as a customs bonded warehouse and the processes in a 100% EOU are treated as in bond processes/manufacture. When goods are cleared to a customs bonded warehouse, a yellow bill of entry is filed by a importer and same is the case in the case of 100% EOUs. When goods are cleared out of a customs bonded warehouse, they have to be cleared on payment of duty if the goods are meant for home consumption and if the goods are to be exported out of India, the same can be done as a normal export. The whole discussion above clearly shows that a 100% EOU is deemed to have been located outside India when we look at it in the light of the provisions relating to 100% EOU under various Customs/Excise Provisions. 4.9 When this is so and everything in the case of 100% EOU is a deemed transaction/process, only when it comes to the manufacture for the purpose of 8/97, the real fact that a 100% EOU is located in India and therefore the goods manufactured by it only for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the case of Champagne India Ltd. v. Collector of Central Excise, Pune reported in 1998 (104) E.L.T. 134 (Tribunal). Which had taken a similar view as taken by the Larger Bench in Jaipur Golden Transport case. However in Favourite Industries case the Tribunal held that the sentence that the Commissioner had relied upon to describe a 100% EOU to be conceptually islands insulated for domestic prescription and cannot be considered to be the part of ratio and is in the nature of obiter. In Champagne India Ltd. case, the appellants had taken a stand that Champagne being alcoholic liquor was not excisable and therefore no duty of excise could be demanded after product. In that case the Collector (Appeals) had held that appellants were not liable to pay duty and Section 68 of the Customs Act is applicable. It has to be noted that what was proposed to be sold was Champagne but the Tribunal held that Champagne India Ltd. were liable to pay duty on bottles, corks, wire rods, foils etc. will be chargeable to duty. The logic behind this decision is contained in para 5 of the order which is re-produced as below :- "5. We have considered the matter. we find that Notification No. 13/81-Cus., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that 100% EOU are conceptually deemed to be located outside India and therefore when they clear goods for consumption in DTA it is deemed to be an import into the country. Therefore we find it difficult to agree with the decision in Favourite Industries case and another case of M/s. AR Textiles (Order No. A/1458/WZB/AHD/2007). The decision of the Tribunal in AR Textiles has relied upon decision of the Tribunal in Favourite industries case. 4.12 The learned advocate also submitted some other decisions which are also considered. In M/s. Vikram Ispat v. C.C.E., Mumbai reported in 2000 (120) E.L.T. 800 was that the goods manufactured by 100% EOU attract excise duty though the measure can be customs duty. As already discussed earlier, the whole concept of 100% EOU is deemed manufacture, deemed export and deemed import. However, when it comes to the levy, it is not possible to charge customs duty on deemed imports. Therefore, Proviso to Section 3 of Central Excise Act has been enacted and notifications being issued. Therefore the decision in Vikram Ispat does not help the case of the appellant. Another decision cited by the appellants is M/s. Saheli Sindicates Ltd. v. C.C.E. reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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