V.K. Agrawal, Member (T)
1. In this Appeal, filed by M/s. B.E.C. Foods, a 100% Export Oriented Undertaking, the issue involved is whether the benefit of Notification No.125/84-C.E. dated 26.05.1984 is available to the goods manufactured by them and cleared to Bhutan.
2. Shri L.P. Asthana, learned Advocate, mentioned that the Appellants cleared Tomato Paste, manufactured by them in their 100% Export Oriented Undertaking, to Bhutan in 1993 and 1994 without payment of Central Excise Duty; that subsequently the duty has been demanded from them on the ground that as the payment of goods sold has been received on rupee account in contravention of the conditions stipulated in Notification No. 150/81 dated 29.7.1981 regarding obtaining payment in freely convertible currency, the duty is payable at the rates applicable to excisable goods produced in 100% Export Oriented Undertaking when sold in India. The Learned Advocate submitted that Bhutan is an independent sovereign State and as such all supplies to Bhutan are export and not sale to Domestic Tariff Area as has been considered by the Revenue; that the goods manufactured by a 100% Export oriented Undertaking are exempt from payment of Central Excise duty under Notification No.125/84-CE so long as these are not meant for home consumption within India; that not getting freely convertible currency is because of a bilateral treaty between Bhutan and India; that Notification No.125/84 and Notification No.150/81-CE operate in two different fileds; that while Notification No.125/84 applies to all goods manufactured in a 100% EOU not meant for home consumption, Notification No.150/81-CE applies only to goods produced in a domestic industry exported to Nepal and Bhutan; that as the goods are exempt under Notification No.125/84-CE, the question of following procedure under Rule 13 of the Central Excise Rules does not arise; that similarly goods are ipso facto exempt whether they receive the export proceeds in Indian Currency or in free convertible currency. He finally, submitted that Board’s Circular No.48/95 dated 16.5.95 on the basis of which demand of duty has been confirmed is only an administrative Circular which can not override the legislated provision as notified under Exemption Notification No.125/84-Cus.
3. Countering the arguments, Shri O.P. Arora, learned Senior Departmental Representative, submitted that the export of excisable goods to Nepal and Bhutan under Rule 13 and Rule 14 of the Central Excise Rules, 1944 is permissible under bond without payment of Excise duty subject to certain conditions; that one of the conditions is that the payment for the export is received in freely convertible currency; that as in the present matter, admittedly the payment has not been received in freely convertible currency, the Appellants were not eligible to export goods under bond and therefore the duty liability arises on the goods so exported to Bhutan; that one of the objects of creating 100% Export Oriented Undertakings is that the goods are exported to general currency area so that precious foreign exchange is earned. He, further, mentioned that the Board has also clarified vide Circular No.48/95, dated 16.5.1995 that exports to Nepal are required to suffer the applicable duties if the payment for such exports is received in rupee account and the same treatment should also apply to exports to Nepal by 100% EOU/EPZ Units; that the Board has further clarified that export under bond under Rule 13 and Rule 14 without payment of duty is not permissible in the case of exports by 100% EOU/EPZ units to Nepal where the payment is received on rupee account and “accordingly, exports may be permitted to Nepal from 100% EOU/EPZs by following Nepal invoice procedure and collections of appropriate duties when the payment of received in India currency.” The learned Senior Departmental Representative contended that as payment has been received by the Appellants in Indian Currency, the duty is payable by them.
4. We have considered the submissions of both the sides. Hundred percent Export Oriented Undertakings are the units offering their entire production for export. These units have, however, been also allowed to sell a specified percentage of their production in Domestic Tariff Area on payment of appropriate duty. The contention of the Revenue is that as per provisions of sub-Rule (2) of Rule 13 of the Central Excise Rules, the Central Government may by notification permit export of specified excisable goods in bond, without payment of duty from a factory of manufactures of warehouse, to Nepal or Bhutan, subject to such conditions, or limitation as regards the class of goods, destination, mode of transport and other matters as may be specified therein. One of the conditions of the Notification issued under Rule 13(2) is that the payment for the goods shall be in freely convertible currency. It is not in dispute in this case that the payment for export was not in freely convertible currency. Even if the contention of the Revenue is accepted that as the payment has not been received in freely convertible currency in respect of export made to Bhutan and the duty of excise is payable, the fact remains that Notification No.125/84- CE, dated 26.5.84 “exempts all excisable goods produced or manufactured in a hundred percent export oriented undertaking from the v whole of the duty of excise leviable thereon under Section 3 of the Central Excise and Salt Act, 1944 (1 of 1944).
Provided that the exemption contained in this Notification shall not apply to such goods if allowed to be sold to India.”
5. It is thus apparent from the perusal of this Notification that the goods manufactured by a 100% EOU is exempted from payment of Central Excise duty provided the goods are not sold in India. It can not be claimed by Revenue that sales of goods by the Appellants to Bhutan amounts to ‘sale in India’ as Bhutan is an independent country. Once the goods have not been sold by the Appellants in India, the question of collecting any duty from them does not arise as Notification No.125/84-CE exempts all goods produced or manufactured in a 100% E.O.U. There is no condition specified in Notification 125/84-C.E. regarding sale to Nepal or Bhutan only in freely convertible currency for the purpose of availing the exemption from payment of duty. A duty liability can not be created against the appellants by issuing a Circular by the executive. Accordingly, we set aside the impugned Order and allow the Appeal.
