ORDER
Archana Wadhwa, Member (J)
1. The appellant is a 100% EOU engaged in the manufacture of Copper Phthalo Cyanine Green and Blue (hereinafter referred to as CPC Green and CPC Blue). The appellants are having two units within their factory – one of CPC Green and one as Aluminium Hydroxide Plant. The raw materials for CPC Green Plant are Aluminium Chloride, cupric chloride, crude CPC Blue, Chlorine, caustic soda. During the relevant period for the purpose of the present appeals, the appellants were importing copper bars/scrap and aluminium ingots, which were being used in the manufacture of CPC Green and CPC Blue. The said two products were being exported by them as the final products. It is seen that during the course of manufacture of CPC green, Mother Liquor emerges. The said mother liquor, which is an effluent of the CPC Green Plant mainly contains Aluminium Chloride, Copper etc. and is treated with Sodium Sulphide to get copper as Copper Sulphide. The resultant clear Mother Liquor which is free from copper and other impurities is neutralized with Soda Ash solution to get Aluminium Hydroxide slurry. This slurry is filtered in filer press, washed and dried to get Aluminium Hydroxide powder. Copper slurry which emerges during the purification of Mother Liquor from green plant with Sodium Sulphide and Aluminium Hydroxide powder obtained in Aluminum Hydroxide Plant were sold by the appellant in DTA by availing the exemption Notification No. 8/97-CE dated 1.3.97.
2. The said notification grants exemption to finished products, rejects and waste or scrap manufactured by a 100% Export Oriented Undertaking from the raw materials produced or manufactured in India and were allowed to be sold in India in accordance with the specified provisions of the Export- Import Policy from the so much duty of excise, which is in excess of an amount equal to the aggregate of the duty of excise leviable under Section 3 of the Central Excise Act. Inasmuch as Aluminium Hydroxide and Copper sludge were being manufactured from the imported raw materials, Revenue entertained a view that the same are not entitled to the benefit of the Notification in question. Accordingly, investigations were conducted and statements of various persons were recorded, on the basis of which proceedings were initiated by way of issuance of show cause notice dated 12.5.2004, proposing confirmation of demand of duty of Rs. 1,02,78,266/- (rupees one crore two lac seventy eight thousand two hundred sixty six only) for the above goods cleared during the period July, 1999 to September 2003, by invoking the extended period as provided under Section 11A of the Central Excise, 1944. The Notice also proposed imposition of penalty in terms of Section 11AC and confirmation of interest under Section 11AB along with proposal to impose penalty under Rule 173Q of erstwhile Central Excise Rules. The said show cause notice culminated into an order passed by the Commissioner confirming demand of duty, as proposed in the notice along with imposition of identical amount of personal penalty under Section 11AC and confirmation of interest under Section 11AB. In addition, personal penalty of Rs. 5 lac (rupees five lac) was also imposed upon Shri E.V.R Bhaskar, Senior Manager and authorized signatory under Rule 209A of the Central Excise Rules, 1944.
3. Shri Prakash Shah, learned Advocate appearing for the appellants has assailed the order of the Commissioner on merits as also on limitation. Shri Samir Chitkara, learned SDR appears for the Revenue in support of the order passed by the Commissioner.
4. After appreciating the submissions made by both the sides, we find that the sole issue required to be decided in the present appeals is as to whether the appellants would be entitled to the Notification No. 8/97-CE dated 1.3.97 as amended in respect of Aluminium hydroxide and Copper sludge cleared by them. The appellants’ main contention is that the imported copper bars/scrap and aluminium ingots as raw materials were used for the manufacture of Cupric Chloride, Aluminium Chloride and CPC green. Mother Liquor came into existence at that point of time. The said Mother Liquor is thus, indigenously manufactured and inasmuch as the same was used for production of Aluminium Hydroxide and copper sludge, they satisfy the condition of the Notification. It is their contention that Notification No. 8/97-CE refers to immediate parentage and does not contemplate the findings and the use of imported raw materials till eternity. They have also contended that the manufacture of Aluminium Hydroxide and Copper sludge after the manufacture CPC green and degeneration of Mother Liquor during the process is not an integrated and uninterrupted process. Use of Mother Liquor for manufacture of Aluminium Hydroxide/Copper sludge are distinct, separate processes and inasmuch as the Mother Liquor is manufactured in India, the use of the same for further manufacture of Aluminium Hydroxide and copper sludge would satisfy the conditions of the notification. For the above purpose, they relied on the following decisions of the Tribunal:
(a) C.C.E. v. Vijaya Packaging Industries
(b) Dhurvco Printers(P) Ltd. v. C.C.E.
(c) C.C.E. v. Jayna Packaging Pvt. Ltd.
5. We note that the above three decisions relied upon by the appellants during the course of adjudication stand overruled by the Larger Bench decision of the Tribunal in the case of Jayant Agro Organics Ltd. v. CCE., Vadodara – vide Order No. M/398 & 399/WZB/2005/C-I/EB dated 9.12.2005 wherein the Tribunal while dealing with an identical dispute has held against the assessee. For better appreciation, we reproduce the relevant paragraphs from the said order:
18. EOUs are the chosen lot of the Government. Under Notification No. 8/97CE they can clear goods to DTA on payment of normal Central Excise duty provided such goods are manufactured wholly out of indigenous goods. The fact that EOUs use capital goods on which no duty was paid in the manufacture of such goods doesn’t seem to count.
19. Under Section 3 of Central Excise Act duties of Excise are levied on all goods produced in India at the rates prescribed in the first and the Second Schedule to CETA. However goods produced in EOU etc. and brought to any other place in India are leviable to a different rate (aggregate of Customs duties) of duty. If this is any guide, it is clear that goods produced in India are different from those produced in an EOU and brought into any place in India. The expression “raw materials produced or manufactured in India” occurring in 8/97 will have to be read in this background. Both refined castor oil the parent product, and glycerine its child, if one can call it so are manufactured in an EOU. By the time glycerine and Crude Sodium Sulphate came into existence refined castor oil had already come into existence in an EOU. But that reason alone, in our opinion is not enough to say that glycerine and Sodium Sulphate were manufactured out of goods produced in India. Viewed in that light one could reasonably say that glycerine Sodium Sulphate were not manufactured in India out of the goods produced in India.
20. We agree with the Ld. SDR that there are at least three decision, Century Denium, Vanasthali, Ginny (Supra) which do not brook the concept of immediate parentage. The Referral Bench’s reasoning that each of the products i.e. Refined Castor Oil, Hydro Generated Castor Oil, Hydroxy Steam Acid and Recinolic Acid is an excisable product and should be considered as those manufactured in India out of which the impugned goods emerged, does not find favour with us. In the cases cited supra also the intermediate goods in which imported raw materials is used were fully manufactured excisable goods but even then the Tribunal held that the final product is not entitled for the benefit of Notification No. 8/97.
21. We are unable to agree with the Referral Benchs’ reasoning that the appellant would have been eligible for the benefit of Notification No. 8/97 had he procured Refined Castor Oil from some other manufacturer who used imported raw material in producing it. This is because that in such an event the manufacturer in DTA would have paid duty on Bleaching Earth and filer aids used in the manufacture of Refined Castor Oil while using them. The Department’s contention is not merely that imported material is used but also that the material is imported under 53/97 without payment of duty.
6. Inasmuch as the issue stands decided against the appellants, we see no merits in their contentions. As such, we hold that the demand on merits would survive against them.
7. Shri Praksh Shah, learned Advocate has also argued on limitation submitting that the entire facts were in the knowledge of the Revenue and there is no willful misstatement, deliberate suppression so as to invoke the longer period of limitation. He has also referred to the fact that the Larger Bench in the case of Jayant Agro Organics Ltd., after laying down the law on the disputed issue had sent the matter back to the original Bench for decision on other issues like on limitation and penalty. While dealing with the said issues, the Tribunal held that the demand to be barred by limitation on the basis of conflicting opinions about the eligibility of the Notification. It was also observed that there is no justification for imposing penalty. The said decision is reported in 2006 (204) ELT 410 (Tri-Mumbai).
8. Admittedly, there were conflicting decisions and different opinions, as regards the eligibility of the assesses to Notification No. 8/97-CE. It was in view of the said conflicts that the matter was referred to Larger Bench. It is well settled that when two views are holding the field, the assessee adopting interpretation favourable to him can be said to be under a bona fide belief of his entitlement to the Notification. Inasmuch as the law was declared by Larger Bench on 9.12.2005, the appellant cannot be charged with any willful misstatement or deliberate suppression of facts with intent to evade duty. In any case, we find that while dealing with the said aspects, Commissioner has not referred to any positive attempt on the part of the appellant to keep the said vital information away from the Department. As such, we are of the view that the demand of duty raised beyond the normal period of limitation is barred and hence not sustainable. For quantification of the demand within the period of limitation, the matter is being remanded to the original adjudicating authority.
9. As regards the penalty, having held that there was no suppression or misstatement on the part of the appellant, the extended period of limitation is not applicable, we do not find any justification for imposition of penalties on both the appellants. Accordingly, penalties imposed upon them are set aside.
10. As a result, the appeal filed by M/s Heubach Colour Pvt. Ltd. is allowed on limitation with confirmation of demand of duty for the period within the normal period of limitation. Penalty imposed upon the said applicant is set aside. Appeal of Shri E.V.R. Bhaskar is allowed unconditionally.
11. Both the appeals are disposed of in the above manner.
(Pronounced in the open Court on 21.2.2007)