Madhya Pradesh High Court
Customs Central Excise And Service Tax vs M/S Sti India Ltd. on 31 January, 2018
1
HIGH COURT OF MADHYA PRADESH, BENCH AT INDORE
, CEA No.32 of 2017 & CEA No.34 of 2017
(The Commissioner, Customs, Central Excise and Service Tax vs. Shri Mukesh
Maheshwari),
(The Commissioner, Customs, Central Excise and Service Tax vs. Shri R. C. Gupta) &
(The Commissioner, Customs, Central Excise and Service Tax vs. M/s STI India Ltd.)
Indore, dated : 31.01.2018
Shri Amol Shrivastava, learned counsel for the appellant.
Shri Alok Barthwal, learned counsel for the respondent.
Heard.
This order shall govern the disposal of CEA No.32/2017 and CEA No.34/2017 also. For the sake of convenience, the facts are borrowed from CEA No.31/2017.
2. These Central Excise Appeals have been filed by the Department under Section 35(G)(2) of the Central Excise Act, 1944 against the order dated 28.10.2016 by which learned Tribunal dismissed the appeal of the Department and upheld the order passed by the Commissioner, Central Excise, Indore.
2. Brief facts of the case are that the respondent - M/s STI India Ltd. is registered as 100% EOU for manufacture of cotton yarn, cotton knitted fabric and polyester cotton yarn. They have cleared their finished goods for export and sales in Domestic Tariff Area (DTA) along with cotton waste generated during the course of manufacture of finished goods.
3. The dispute in the present case relates to treatment of cotton waste cleared to DTA sales. The view of the Department is that sale value of cotton waste should be included in arriving at the eligible quantum of sale in DTA. Accordingly, proceedings were initiated to demand Central Excise duty on cotton yarn cleared to DTA. Proposals were also made to impose penalties under various provisions of law. The original authority dropped the demand on cotton waste cleared to DTA.
4. The main grounds of appeal by the Revenue are that the 2 HIGH COURT OF MADHYA PRADESH, BENCH AT INDORE , CEA No.32 of 2017 & CEA No.34 of 2017 (The Commissioner, Customs, Central Excise and Service Tax vs. Shri Mukesh Maheshwari), (The Commissioner, Customs, Central Excise and Service Tax vs. Shri R. C. Gupta) & (The Commissioner, Customs, Central Excise and Service Tax vs. M/s STI India Ltd.) respondent has to add the sale of cotton waste while arriving at the entitled clearance of 50% of FOB value of DTA sales. It was contended that the cotton waste even if exempted by Notification No.23/2003-CE is of no consequence as the DTA sale entitlement has to be calculated taking together of the goods cleared by the respondent to DTA.
5. Learned Tribunal, after examining the provisions of paras-6.8(e), 9.9 and 9.20 of the Exim Policy 1999-2002 and Notification No.23/2003-CE held that obtaining soft cotton waste in the course of carding and combing, ginning cotton does not amount to manufacture and no new product with distinct name, usage and character emerges. The cotton waste is exempted under Notification No.23/2003-CE without any condition. The Assistant Development Commissioner of NSEZ, Noida had clarified that as cotton waste is unconditionally exempted from duty, the same is not be counted for DTA sales entitlement in terms of para-6.8(e) of the Exim Policy 1999-2002.
6. Learned Tribunal affirmed the order passed by the original authority and dismissed the appeal filed by the Revenue. It is this order, which has been impugned in these appeals.
7. Learned counsel for the appellant has submitted that the respondent for the relevant year 2004-05 cleared the cotton waste without including the same in the DTA limit and thus paid concessional rate of duty for cotton goods also which were over and above the limit of 50%. If the value of cotton waste exported was included in the DTA limit then full rate of duty was payable in respect of cotton goods also.
3HIGH COURT OF MADHYA PRADESH, BENCH AT INDORE , CEA No.32 of 2017 & CEA No.34 of 2017 (The Commissioner, Customs, Central Excise and Service Tax vs. Shri Mukesh Maheshwari), (The Commissioner, Customs, Central Excise and Service Tax vs. Shri R. C. Gupta) & (The Commissioner, Customs, Central Excise and Service Tax vs. M/s STI India Ltd.)
8. Clause 6.8(e) of the Exim Policy 2004-2009 reads as under :-
6.8 The entire production of EOU/EHTP/STP/BTP units shall be exported subject to the following:
(e) Scrap/ waste/ remnants arising out of production process or in connection therewith may be sold in the DTA as per the Standard Input-Output norms notified under the Duty Exemption Scheme on payment of concessional duties as applicable within the overall ceiling of 50% of FOB value of exports. Such sales shall not, however, be subject to achievement of positive NFE. In respect of items not covered by the norms, the Development Commissioner may fix ad-hoc norms on the basis of data for a period of six months and within this period, he shall get the norms fixed by the BOA. Sale of waste/scrap/remnants by units not entitled to DTA sale or sales beyond the DTA sale entitlement, shall be on payment of full duties.
The scrap/waste/remnants may also be exported.
9. As per para-6.8(e) of the Exim Policy 2004-2009, the overall ceiling of 50% is applicable to goods as well as scrap/waste/remnants. Over and above this limit, goods as well as scrap/waste will attract full rate of duties.
9. He has also drawn our attention to para-6 of the decision in the case of Hindustan Granites vs. Union of India & others reported in 2007 (12) SCC 178 and submits that the ceiling is included in the sale of rejects under para-6.8(d) as well as sale of waste under para-6.8(e) and by-products under para-6.8(g). He further submits that as per para-9.9 and 9.20 of the Exim Policy 2004-2009, for home production from the unit does exceed 50% 4 HIGH COURT OF MADHYA PRADESH, BENCH AT INDORE , CEA No.32 of 2017 & CEA No.34 of 2017 (The Commissioner, Customs, Central Excise and Service Tax vs. Shri Mukesh Maheshwari), (The Commissioner, Customs, Central Excise and Service Tax vs. Shri R. C. Gupta) & (The Commissioner, Customs, Central Excise and Service Tax vs. M/s STI India Ltd.) of the free on board value of exports made during the year (starting from 1st April of the year and ending with 31st March of next year) by the said unit.
10. He lastly submits that dutibility of cotton waste has nothing to do with the DTA restriction as the restriction for EOUs on domestic sales is clearly in relation to the "Value of goods" and not the tax. The concessional rates for domestic sales have been restricted so that EOUs concentrate on exports in view of various benefits given to them. The policy is for promotion of exports and not domestic trade.
11. As per the Exim Policy 2002-2007, the value of scrap/waste is to be included in the sale of 50% under para-9.20 and prays that the impugned order be set aside.
12. Per contra, Shri Alok Barthwal, learned counsel for the respondent has submitted that this issue was considered by the Gujarat High Court in the case of Commissioner of Central Excise and Customs, Surat-II vs. Sabnam Synthetics Ltd. reported in 2015 (321) ELT 436 (Guj.) and submits that when 100% EOU has submitted the permission to sell goods manufactured by them in DTA in accordance with para-9.9 of the Exim Policy, the Government cannot go beyond such permission and dispute the value of clearance allowed by the competent authority which in that case is the Development Commissioner.
13. To support the aforesaid, he has drawn our attention to the letter No.F.No.4/323/99-100%/EOU/10242 dated 05-06.12.2005 issued by the Assistant Development Commissioner, Noida Special Economic Zone. Para-3 of the aforesaid communication 5 HIGH COURT OF MADHYA PRADESH, BENCH AT INDORE , CEA No.32 of 2017 & CEA No.34 of 2017 (The Commissioner, Customs, Central Excise and Service Tax vs. Shri Mukesh Maheshwari), (The Commissioner, Customs, Central Excise and Service Tax vs. Shri R. C. Gupta) & (The Commissioner, Customs, Central Excise and Service Tax vs. M/s STI India Ltd.) reads as under :-
3. However, in case of cotton waste the applicable duty is NIL unconditionally in terms of S. No.15 of Notification No.23/2003-CE dt. 31.03.2002 (erstwhile Notification No.6/97-CE dt. 01.03.1997).
Therefore the benefit of NIL duty is available irrespective of the fact whether DTA sale entitlement is available with the unit or not. Under the circumstances, this office feels that the value of such clearance cannot be counted against DTA sale entitlement in terms of para 6.8(e) of ETP and notification 23/2003-CE dt. 31.03.2003.
14. He has further drawn our attention to the decision of the Apex Court in the case of Virlon Textile Mills Ltd. vs. Commissioner of Central Excise, Mumbai reported in 2007 (211) ELT 353 (SC). Para-9 of the aforesaid decision reads as under :-
Accordingly, the civil appeal filed by the appellant herein stands allowed. The impugned judgement of the Tribunal is set aside and the matter is remitted to the Commissioner for calculation of duties payable in terms of notification No.2/95-CE, as interpreted hereinabove.
15. On due consideration of the aforesaid so also the fact that the Assistant Development Commissioner is the final authority, learned Tribunal has rightly held that obtaining soft cotton waste in the course of carding and combing, ginning cotton does not amount to manufacture and no new product with distinct name, usage and character emerges. The cotton waste is exempted under Notification No.23/2003-CE without any condition. The Assistant Development Commissioner unconditionally exempted 6 HIGH COURT OF MADHYA PRADESH, BENCH AT INDORE , CEA No.32 of 2017 & CEA No.34 of 2017 (The Commissioner, Customs, Central Excise and Service Tax vs. Shri Mukesh Maheshwari), (The Commissioner, Customs, Central Excise and Service Tax vs. Shri R. C. Gupta) & (The Commissioner, Customs, Central Excise and Service Tax vs. M/s STI India Ltd.) from duty.
16. On careful examination of the aforesaid, we are of the view that there is no merit in the present appeals and no substantial question of law arise in these appeals. In view of the aforesaid, all these appeals (CEA. No.31/2017, CEA No.32/2017 & CEA No.34/2017) are accordingly, dismissed. Copy of this order be retained in the record of other connected appeals (CEA No.32/2017 & CEA No.34/2017) also.
(P. K. Jaiswal) (Virender Singh)
Judge Judge
Digitally signed by Geeta Pramod
Date: 2018.02.03 11:43:04 +05'30'