ORDER
S.S. Sekhon, Member (T)
1. The assessee herein is an 100% EOU who had cleared Polyester Textured Yarn in DTA on payment of duty against foreign exchange as per 9.10(b) of Exim Policy 1997-2000 as per Notifications 8/97-C.E., dated 1-3-97 & 2/95-C.E., dated 4-1-95 in case of goods manufactured from Indian and imported raw material respectively. Notice was issued demanding duty under Section 11A along with penalty. The Jurisdictional Asstt. Commissioner had confirmed the demands under Section 11A of the Central Excise Act read with Section 28 of the Customs Act, 1962. In appeal the CCE relying upon –
(i) Commissioner (Appeals)’s order in case of Shrishti Impex Pvt. Ltd. where in the Commissioner after discussing the provision of notification 125/84-C.E., dated 25-5-84, & the scope of the term “such goods if allowed to be sold in India” interpreted by Apex Court in SIV Industries Ltd. had granted the benefit of Notification 125/84 exemption & the logic was not found fault with for this case.
(ii) In CBEC Circular No. 618/9/2002-CX., dated 13-2-2002, Board has mentioned that in view of the Apex Court judgment the term ‘allowed to be sold’ has been replaced by the term ‘brought to any other place’ w.e.f. 11-5-2001 & noting that the circular directs that provision of Section 3 would apply to all goods manufactured in an EOU found that even after this circular Notification 125/84 still exists, the Central Excise duty cannot be collected in such types of case.
(iii) Relied upon the case of Kuntal Granites of Tribunal & Noel Agritech Ltd. – 2001 (128) E.L.T. 22.7 wherein para 6 relying on case of SIV Industries Ltd. – & para 18 of that decision it was held that Central Excise levy is only on such goods as are ‘allowed to be sold & having regard to paras 9.9, 9.10, 9.2 of the Policy held no Central Excise Duty was chargeable on the clearances in this case & since no customs duty was demanded in the show cause notice he set aside the order and allowed the appeal
1.2 Revenue is in appeal against this order vide Appeal No. E/3481/2002 on the grounds –
(i) There is no notification exempting duty on goods supplied against Foreign Exchange in terms as of para 9.10(b) therefore rates under notifications 2/95, 8/97 & 13/98 are not available. Recovery of full duty under Section 3 of the Central Excise Act is therefore to be recovered.
(ii) The reliance on the SIV Industries case on debonding & duty on finished goods is not called as it is not applicable. The decision of Kuntal Granites in case of Himalaya International (Larger Bench) has been held to be not good law.
(iii) Confirmation of the demand under Section 11A read with Section 28 of the Customs Act should not render the demand bad & quoting of wrong section should not initial the proceedings made under Section 11A of Central Excise Act, 1944 & the SCN notice issued for demand of Central Duty should not initiate the proceedings.
1.3 Appeal Nos. 1598/98 to 1600/98 are filed by the same assessee who is Respondent, in Revenues appeal Supra & its Director & buyers against the order of Commissioner who pursuant to a show cause notice dated 2-11-2001 determined duty under Section 11A(2) & imposed penalty under Rule 209 on the 100% BOU & under Rule 209A on the Director & the buyer since he found that there was deliberate act of no duty payments on clearances affected under para 9.10(b) of Exim Policy by the 100% EOU; therefore Central Excise Duty equal to aggregate of Customs Duty as per proviso to Section 3(1) of the Central Excise Act, 1944 was required to be paid.
1.4 These appeals, after hearing both sides are being disposed by this common order.
2.1 It is found –
(a) Interpretation by Board vide its Circular Order No. 618/9/2002-CX., dated 13-2-2002 has stipulated that clearances from an EOU duty has to be levied as per main Section 3(1) of the Central Excise Act, 1944 & proviso is applicable to sales made in DTA up to 25% of production allowed to be sold in India as per the provision of Exim Policy & reliance placed by the ld. Commissioner in the order impugned in E/1598 to E/1600/SC on the case of M/s. Himalaya International Ltd. as it appears & seen from para 23 of that impugned order & thereafter concluding that Central Excise Duty equal to aggregate of Customs Duty under proviso to Section 3(1) of Central Excise Act, 1944 is required to be recovered for clearances affected under para 9.10(b) of policy cannot be upheld as –
(i) The decision of the referring Bench is M/s. Himalaya International after the decision of the Larger Bench and applying the ratio of the Larger Bench in Himalaya case especially. The following-
“…all goods cleared to Domestic Traffic Area by an EOU, whether with the permission or without the permission of the Development Commissioner would attract duty in terms of the provision to Section 3(1) of the Central Excise Act….”
was not upheld by the Apex Court in Civil Appeal & they remitted the matter after setting aside the judgment in Civil Appeal Nos. D12500 & 12499 of 2004 as reported in 2005 (179) E.L.T. A100 (S.C.) by an order which reads as –
Delay Condoned. Appeal Admitted. Heard Parties.
Impugned judgment is set aside. The matter is remitted back to the Commissioner for consideration not only the rate but also to decide the question whether the respondent is entitled to exemption keeping in mind the aspect as to whether the goods have or have not been manufactured from raw materials produced or manufactured in India. The appeal stands disposed accordingly. There will be no orders to costs’
(Emphasis supplied)
The Tribunal in the decision before the SC, vide its order had held the rate of duty applicable to clearances of goods from an EOU to DTA as the rate in terms of proviso to Section 3(1) of Central Excise Act, 1944 & not the rate under Section 3(1) ibid, whether goods are cleared with the permission or without the permission of Development Commissioner. The underlined emphasis in the remand order of the Supreme Court (Supra) would indicate that the issue of consideration now kept open is not only entitlement to exemption but also the rate. Therefore reliance on the Larger Bench decision in Himalaya International para 7 and the ratio therein to the effect. We hold that the rate as per the proviso to Section 3(1) would be applicable for assessing all excisable goods which were cleared by 100% EOU to DTA whether in terms of permission granted or in excess of the permission granted has not been upheld by the Supreme Court. In that view of the matter the reliance on the law laid down by the Larger Bench in Himalaya International Ltd. relied by the ld. Commissioner in para 23 of the impugned order cannot be now an approved reliance. The Boards orders & circular of main Section 3(1) levy shall prevail.
(b) The reliance placed by the appellant on the case of M/s. Maruti Cottex Ltd. (T) where in para 7 the Tribunal held as –
“7… the clearance to DFRC holders (ARC) Holders against foreign exchange cannot come within the purview of the category of goods allowed to be sold in India in view of the restrictive interpretation of the expression “allowed to be sold in India” by the Hon’ble Supreme Court in the SIV case. The clearance to DFRC holders and also to suppliers against foreign exchange cannot be treated as per with the clearance permitted by the Development Commissioner for sale to DTA. Since suppliers in DTA against foreign exchange covered by para 9.10(b) shall be content against NFEP/EP; these clearances cannot suffer central excise duty. Hence, Notification No. 125/84 is squarely applicable to these clearances. Moreover, even if duty is paid on these clearances by virtue of the fact that they are considered as deemed exports vide Chapter 10 of Exim Policy, the appellant would be entitled to the benefit of refund of Terminal Excise duty. Hence, the whole exercise appears to be revenue neutral. In view of these observations we allow, the appeal with consequential relief”
We agree with this finding of applicability of Notification 125/84 benefit as arrived & applied by the ld. Bench. Nothing contrary is shown. Therefore following the same interpretation we would uphold duty free clearances effected & find no reason to uphold the duty demands.
(c) It is found that in the case of SIV Industries – in para 18 thereof the term ‘allowed to be sold’ has been interpreted by the Hon’ble Apex Court, relating to its use in the EXIM Policy and in the law relating to an EOU as follows :-
“18…It also becomes apparent that in view of the EOU scheme as modified from time to time and corresponding amendments to Section 3 of the Act the expression “allowed to be sold in India” in proviso to Section 3(1) of the Act is applicable only to sales made up to 25% of production by 100% EOU in DTA and with permission of the Development Commissioner. No permission is required to sell goods manufactured by 100% EOU lying with it, at the time approval is granted to debond”.
In this view of the matter, we hold that “Supplies” against DFRC are not covered by the relevant para of the EXIM Policy applicable to DTA sales permissible and ‘allowed to be sold’ as interpreted by the Hon’ble Supreme Court. DFRC removals are not within the 25% quota. When the provision of the policy Paras 9.9, 9.10 and Chapter 10 and Appendix 42 of the EXIM Policy are read and the fact that as per Appendix 42, DFRC removals under Chapter 10 i.e. para 10 onwards would count towards determining the 25% of production of an EOU, which is ‘allowed to be sold’ in DTA vide para 9.9, therefore clearance under para 9.9 and para 9.10 and/or para 10 of the EXIM Policy cannot be equated.
Notification No. 125/84 which very clearly exempts ‘all goods manufactured in an EOU’ from the levy under Section 3, other than goods which are allowed to be sold. The term ‘allowed to be sold’ in this notification have to be interpreted as per para 18 of SIV Industries – (supra). The notification being applicable to an EOU, the terms used therein have to be restricted & understood in EOU milieu.
(d) It is also found that in the case of Jumbo Box Ltd. Final Order No. 430/2005, dated 23-3-2005 [(T)] Appeal No. E/2005 Tribunal have considered provisions of Exim Policy para 9.10 & have set aside duty demands confirmed by the Commissioner in that case. Nothing contrary is shown. We also follow this decision to arrive at no duty demands in this case.
(e) In view of the findings, the Revenues appeal is required to be rejected & assessee, the Director & Buyers affected is to be allowed.
3.1 Consequential to the finding the Appeal No. E/3489/2002 is to be rejected & Appeal Nos. E/1598, E/1599 & E1600/98 are to be allowed.
3.2 Ordered accordingly.
3.3 Appeals disposed in above terms.
(Pronounced in Court)