ORDER
P.S. Bajaj, Member (J)
1. This appeal has been preferred by the appellants against the impugned order-in-original dated 30-8-2001 passed by the Commissioner of Central Excise, Indore, vide which he has confirmed the duty demand of Rs. 44,36,547/- under Section 11A of the Central Excise Act and imposed penalty of Rs. 5 lakhs on the appellants under Rule 209 of the Rules.
2. The facts are not much in dispute. The appellants are 100% Export Oriented Unit (EOU) situated at Pithampur. The firm is engaged in the manufacture of Cotton Yarn and Polyester/Cotton Yarn falling under Chapter Heading No. 5205.11, 5509.41 & 5206.11 of the CETA and on the basis of the permission granted by the Development Commissioner, Noida Export Processing Zone, Noida, they also cleared the goods in Domestic Tariff Area (DTA), On the scrutiny of the invoices issued by them for clearance of goods in DTA, it revealed that they had been clearing Cotton Yarn and Polyester/Cotton yarn on payment of duty @ 8% and 15% adv. respectively, as per Notification No. 8/97-CE., dated 1-3-1997, as amended by Notification No. 11/2000 dated 1-3-2000. This Notification after amendment, exempted finished products, rejects waste and scrap manufactured in 100% EOU wholly from raw material produced and manufactured in India and allowed to be sold in India in accordance with the Import Export Policy from so much of duty of excise leviable thereon under Section 3 of the Central Excise Act as is in excess of an amount equal to the aggregate of duties of excise leviable under Section 3 of the Central Excises Act, 1944 or under any other law for the time being in force on like goods produced or manufactured in India by a unit other than 100% EOU, if sold in India.
3. The goods were manufactured by the appellants’ in the instant case wholly from indigenous raw material, but paid duty in accordance with the Notification No. 8/97-CE dated 1-3-1997, even after its amendment vide Notification No. 11/2000 dated 1-3-2000. In other words, the appellants continued to pay duty @ 8% adv. on Cotton Yarn and 16% adv. on Polyester Cotton Yarn, whereas they were liable to pay additional duty of excise leviable under the Additional Excise Duty (Textiles & Textile Articles) Act., 1978 also, while clearing the goods in DTA as the same became payable after the amendment of the Notification No. 8/97, dated 1-3-1997. They rather illegally claimed exemption from payment of AED (T&TA) under Notification No. 55/91-CE. issued under Section 5-A of the Central Excises Act. The short paid duty during the period 1-3-2000 to 30-9-2000 was worked out to Rs. 44,36,547/- and for the recovery of the same, show cause notice was accordingly issued to the appellants.
4. The appellants contested the correctness of the show cause notice by alleging that the amendment in Notification No. 8/97, dated 1-3-1997 by the amending Notification No. 11/2000-C.E., dated 1-3-2000 did not take away their right to claim benefit under Notification No. 55/91-CE. which allowed exemption to all excisable goods purchased or manufactured in 100% EOU and allowed to be sold in India, as the same had never been amended or rescinded by issuing any Notification. The appellants also referred to the Board’s Circular No. 384/17/98-CX., dated 20-3-1998 vide which the Board allegedly clarified that benefit of Notification No. 55/91-C.E. and No. 8/97-C.E., referred to above, could be simultaneously availed by the 100% EOU and the subsequent Circular No. 554/50/2000-CX., dated 19-10-2000 issued by the Board vide which the contrary clarification was given did not apply to their case. The Commissioner, however, did not agree with this version of the appellants and passed the impugned order, as detailed above.
5. The controversy in the present appeal centers around the question, as to whether the Additional Excise Duty (AED) leviable under the Textile & Textile Articles Act, 1978 (T&TA) is recoverable on the cotton yarn, polyester manufactured and cleared by the appellants, 100% EOU, in the DTA.
6. The learned counsel has contended that no such duty is payable by the appellants in view of specific exemption granted to them under Notification No. 55/91-C.E., dated 25-7-1991 and the clarification issued by the Board vide Circular No. 384/17/98-CX., dated 20-3-1998. This Notification, according to the learned Counsel, had never been withdrawn or rescinded and as such any amendment through the Notification No. 11/2000-C.E. dated 1-3-2000 in the Notification No. 8/97-C.E., dated 1-3-1997, did not take away the right of the appellants to claim the benefit under the said Notification No. 55/91-C.E. The learned Counsel in support of his contention has relied upon the Apex Court judgment in the case of U.O.I. v. Modi Rubber Ltd., 1986 (25) E.L.T. 849 (S.C.). The observations of the Apex Court in that case relied upon by the learned Counsel, read as under –
“It is obvious that when a notification granting exemption from duty of excise is issued by the Central Government in exercise of the power under Rule 8(1) simpliciter, without anything more, it must, by reason of the definition of ‘duty’ contained in Rule 2 Clause (v) which according to the well-recognised canons of construction would be projected in Rule 8(1), be read as granting exemption only in respect of duty of excise payable under the Central Excises and Salt Act, 1944. Undoubtedly, by reason of Sub-section (4) of Section 32 of the Finance Act, 1979 and similar provision in the other Finance Acts, Rule 8(1) would become applicable empowering the Central Government to grant exemption from payment of special duty of excise, but when the Central Government exercises this power, it would be doing so under Rule 8(1) read with Sub-section (4) of Section 32 or other similar provision. The reference to the source of power in such a case would not be just to Rule 8(1), since it does not of its own force and on its own language apply to granting of exemption in respect of special duty of excise, but the reference would have to be to Rule 8(1) read with Sub-section (4) of Section 32 or other similar provision. It is significant to note that during all these years, whenever exemption is sought to be granted by the Central Government from payment of special duty of excise or additional duty of excise, the recital of the source of power in the notification granting exemption has invariably been to Rule 8(1) read with the relevant provision of the statute levying special duty of excise or additional duty of Excise, by which the provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder including those relating to exemption from duty are made applicable.”
7. On the other hand, the learned JDR, has submitted that after the amendment of Notification No. 8/97 by Notification No. 11/2000, the appellants are liable to pay the Additional Excise Duty for the clearances of the goods made by them in the DTA when those goods were produced and manufactured by them from the indigenous raw material and that the benefit of Notification No. 55/91-C.E. cannot be availed by them. He has also referred to the Board’s Circular No. 554/50/2000-CX., dated 19-10-2000 vide which this very position had been clarified and that the earlier Circular No. 384/17/98-CX., dated 20-3-1998 did not apply to the appellants as the same had been issued before the amendment of Notification No. 8/97-C.E. He has further relied upon the judgment of the Punjab & Haryana High Court in the case of Vardhman Polytex Ltd. v. U.O.I., 2001 (135) E.L.T. 17 (P&H) wherein all these Notifications relied upon by the learned counsel and the Board’s Circulars came up for consideration, and the Hon’ble High Court has held that, “after the” amendment of Notification No. 8/97-C.E. by Notification No. 11/2000-C.E., the Additional Duty of Excise has become payable by the assessee and no exemption from the same can be claimed under Notification No. 55/91-CE. by a 100% EOU for the clearances made in the DTA.”
8. For appreciating the respective contentions of both the sides, it would be beneficial to refer firstly to the relevant Notifications relied upon by both the sides. The Notification No. 8/97-C.E. is a general Exemption Notification regarding effective rate of duty on certain goods produced in FTZ or EOU which reads as under –
Effective rate of duty on certain goods produced in FTZ or EOU. – In exercise of the powers conferred by Sub-section (1) of Section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the finished products, rejects and waste or scrap specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and produced or manufactured, in a hundred per cent export-oriented undertaking or a free trade zone wholly from the raw materials produced or manufactured in India, and allowed to be sold in India under and in accordance with the provisions of paragraphs 102 and 114 of the Export and Import Policy 1 April 1992 – 31 March 1997, from so much of the duty of excise leviable thereon under Section 3 of the Central Excise Act, 1944 (1 of 1944), as is in excess of an amount equal to the duty of excise leviable under the said Section 3 of the Central Excise Act, on like goods, produced or manufactured in India other than in a hundred per cent export-oriented undertaking or a free trade zone, if sold in India.
[Notification No. 8/97-C.E., dated 1-3-1997.]
This Notification was amended by the amending Notification No. 11/2000, dated 1-3-2000. The amendment by way of substitution of the words and figures made in the above referred notification, reads as under –
In the said notification, in the opening paragraph, for the words and figure, “as is in excess of an amount equal to the duty of excise leviable under the said Section 3 of the Central Excise Act”, the words and figure “as is in excess of an amount equal to the aggregate of the duties of excise leviable under the said Section 3 of the Central Excise Act or under any other law for the time being in force” shall be substituted.
Notification No. 55/91-CE. dated 25-7-1991 for claiming the exemption for payment of Additional Duty of Excise extracts as under –
Exemption from additional duty to all excisable goods produced or
manufactured in a 100% Export Oriented Undertaking. – In exercise of the
powers conferred by Sub-section (1) of Section 5A of the Central Excises and
Salt Act, 1944 (1 of 1944), read with Sub-section (3) of Section 3 of the
Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of
1978), the Central Government, being satisfied that it is necessary in the
public interest so to do, hereby exempts all excisable goods produced or
manufactured in a hundred per cent Export Oriented Undertaking from the
whole of the duty of excise leviable thereon under the second mentioned Act.
[Notification No. 55/91-CE., dated 25-7-1991.]
9. As per the Proviso to Section 3(1) of the Act, the goods produced in a 100% EOU and allowed to be sold in India are liable to excise duty which is equal to the aggregate of duties of customs leviable on like goods when imported in India. On import of textile yarn, apart from the basic customs duty, goods will also be subject to additional duty of customs (countervailing duty) which will be equivalent to the total duties leviable as duty of excise on like goods produced in India (CV Duty will thus include basic central excise duty under the Central Excise Act + Additional Duty of Excise under T & TA Act). Notification No. 8/97-C.E., dated 1-3-1997, referred to above, before amendment provided exemption to the finished products, rejects and waste or scrap, produced or manufactured in a 100% Export Oriented Undertaking or a free trade zone wholly from the raw materials produced or manufactured in India and allowed to be sold in India from so much of duty of excise leviable thereon under Section 3 of the Central Excises Act, as is in excess of an amount equal to the duty of excise leviable under the said Section 3 of the Act on like goods produced or manufactured in India other than in a 100% EOU, if sold in India. But after amendment of this Notification as amended by Notification No. 11/2000, referred to above, it is evident that the excise duty payable by a 100% EOU under the Central Excise Act in respect of finished goods manufactured exclusively from indigenous raw material and cleared into the DTA, would be restricted to the aggregate of the duties of excise leviable under the said Section 3 of the Central Excise Act or under any other law for the time being in force, on like goods produced or manufactured in India other than in a 100% EOU or a free trade zone. In other words, textile yarn produced and cleared from 100% EOU to DTA are required to suffer under Central Excise Act itself by virtue of this exemption, duty which is equal to Basic Excise Duty on yarn plus AED (T & TA) leviable on the yarn produced. The insertion of the words “any other law for the time being in force” in the Notification No. 8/97-C.E., referred to above, through the amending Notification No. 11/2000-C.E., is quite significant and has resulted in bringing parity in the excise duties payable by 100% EOU on yarn produced exclusively from indigenous materials on their domestic clearances and a domestic manufacturer manufacturing similar goods from indigenous materials w.e.f. 1-3-2000.
10. The contention of the learned Counsel that the benefit granted to the appellants specifically under Exemption Notification No. 55/91-C.E. dated 25-7-1991, referred to above, cannot be denied even after the amendment in the Notification No. 8/97-C.E., having been issued under a separate independent Act i.e. T & TA Act, cannot be accepted. As observed above, in the Notification No. 8/97-C.E., as amended by Notification No. 11/2000, the words “any other law for the time being in force” had been incorporated and which had effect of bringing parity in the excise duties payable by 100% EOU on the yarn produced from the indigenous materials and cleared in the DTA as well as by a domestic manufacturer manufacturing similar goods from indigenous materials. That Notification had been issued under the provisions of Section 5-A of the Central Excises Act and Proviso to that section clearly enacts that unless specifically provided in the Notification issued under this Section (Section 5-A), no exemption therein shall apply to excisable goods, which are produced or manufactured by 100% EOU and allowed to be sold in India. In the Notification No. 55/91-C.E., dated 25-7-1991, it had been no-where mentioned that the exemption contained therein shall apply to excisable goods which are produced or manufactured by 100% EOU from the indigenous raw material and allowed to be sold in India. This Notification is a general exemption notification and in the face of amendment made in Notification No. 8/97 by the amending Notification No. 11/2000, the benefit of this Notification No. 55/91-C.E. cannot be claimed by the appellants w.e.f. 1-3-2000. The Circular No. 384/17/98-CX., dated 20-3-1998 allowing benefit of both the Notifications to a 100% EOU was issued before the amendment of Notification No. 8/97. Moreover, even the Board itself by a subsequent Circular No. 554/50/2000-CX., dated 19-10-2000 clarified the position that after the amendment of the Notification No. 8/97, the benefit of Notification No. 55/91-C.E. could not be claimed by the EOU, for the goods sold in the DTA.
11. The question, as to whether the benefit of Notification No. 55/91-C.E. could still be claimed by 100% EOU for the clearances in DTA after the amendment in the Notification No. 8/97-C.E. by the amending Notification No. 11/2000, referred to above, and whether the Board’s Circular dated 19-10-2000, referred to above, clarifying the position that such a benefit was not available, was legal or not came up for consideration before the Hon’ble P&H Court in the case of Vardhman Polytex Ltd. v. U.O.I., 2001 (135) E.L.T. 17 (P&H), and the Hon’ble High Court was pleased to hold as under –
Notification 55/91-C.E., dated 25-7-1991 is directly relatable to the goods manufactured by 100% EOUs, and exported out of India and Notification 8/97-C.E., dated 1-3-1997 pertains to exemption in respect of duties leviable on goods cleared by 100% EOUs in DTA. The object of amendment made in Notification 8/97-C.E., dated 1-3-1997 appears to be to bring a parity between 100% EOUs and other manufacturers in the matter of payment of duties in respect of goods produced or manufactured and allowed to be sold in India. The impugned circular has been issued in order to clear the doubts raised in the context of Notification 11/2000-C.E., dated 1-3-2000. Therefore, the impugned circular is not ultra vires to the powers of the Board and the notifications issued by the Central Government under Section 5A(1). The expression ‘any other law for the time being in force’ used in Notification No. 11/2000-C.E. is of wide amplitude and, therefore, it would take within its fold the 1978 Act and the logical consequence of issuance of notification dated 1-3-2000 is that the petitioners are liable to pay basic excise duty along with additional excise duty in respect of clearances made in DTA.
This judgment of the Hon’ble High Court clinches the issue against the appellants as it on all fours and provides complete answer to the controversy raised in this appeal, by the appellants.
11. The observations of the Apex Court in the case of U.O.I. v. Modi Rubber Ltd., supra, relied upon by the learned Counsel are not of much help to the appellants in the present case. In that case, the issue before the Apex Court was, as to whether the notification granting exemption only in respect of duty of excise payable under the Central Excise Act could be made applicable in respect of the additional duty of excise payable under the said Act and in that context, the Apex Court was pleased to observe that benefit of such a Notification could not be taken for seeking immunity from payment of additional duty of excise. But, in the instant case, the Notification No. 55/91-C.E. is a general notification and it is relatable to only to the goods manufactured by 100% EOU and exported out of India. By amendment in the principal Notification No. 8/97, through Notification No. 11/2000, the expression “any other law for the time being in force” had been inserted and these words are of wide amplitude. Therefore, as a result of this amendment, the 100% EOUs are liable to pay basic excise duty along with the additional excise duty in respect of the clearances made in DTA.
12. In the light of the discussion made above, we do not find any illegality in the impugned order of the Commissioner. From 1-3-2000, the additional duty of excise was payable by the appellants on the cotton and polyester/cotton yarn, which they manufactured from indigenous raw material and cleared for sale in domestic tariff area. Since they had not paid this duty, the impugned order of the Commissioner confirming the duty demand of the amount in question and imposing penalty under Rule 209 on the appellants is perfectly valid and the same is upheld. The appeal of the appellants being without any merit, is ordered to be dismissed.