Karnataka High Court
The Commissioner Of Customs vs M/S Global Green Company Ltd on 19 November, 2021
Bench: S.Sujatha, Hanchate Sanjeevkumar
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF NOVEMBER, 2021
PRESENT
THE HON'BLE MRS.JUSTICE S.SUJATHA
AND
THE HON'BLE MR. JUSTICE HANCHATE SANJEEVKUMAR
C.S.T.A.No.3/2021
BETWEEN :
THE COMMISSIONER OF CUSTOMS
BANGALORE-CUS, C.R.BUILDING,
QUEENS ROAD, P.B.NO.5400,
BANGALURU-560001 ...APPELLANT
(BY SRI AMIT DESHPANDE, ADV.)
AND :
M/s GLOBAL GREEN COMPANY LTD.,
No.68, OBALAPURA VILLAGE,
ANUGONDANAHALLI HOBLI,
BENGALURU-560067 ...RESPONDENT
(BY SRI G.SHIVADASS, SENIOR COUNSEL A/W
SMT.NEETHU JAMES, ADV.)
THIS CSTA IS FILED UNDER SECTION 130(A) OF THE
CUSTOMS ACT, PRAYING TO CALL FOR RECORDS IN FINAL
ORDER No.20348/2020 DATED 29.05.2020 PASSED BY CESTAT
SOUTH ZONAL BENCH, BENGALURU IN CUSTOMS APPEAL
No.106/2009 AND TO SET ASIDE THE FINAL ORDER
No.20348/2020 DATED 29.05.2020 PASSED BY CESTAT SOUTH
ZONAL BENCH, BENGALURU IN CUSTOMS APPEAL
No.106/2009 VIDE ANNEXURE-A BY ALLOWING THIS APPEAL
OF THE REVENUE WITH EXEMPLARY COSTS.
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THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,
S. SUJATHA, J., DELIVERED THE FOLLOWING:
JUDGMENT
This appeal is filed by the Revenue under Section 130 of the Customs Act, 1962 ['Act' for short] assailing the order dated 29.05.2020 passed in Final Order No.20348/2020 by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bengaluru ['CESTAT' for short] raising the following substantial questions of law:
1. Whether the Tribunal is justified in holding that labelling and repacking of the imported goods amounts to manufacture?
2. Whether the order of the Tribunal is justified in holding that similar goods does not necessarily mean the same goods as per CBEC Circular.07/2006?
3. Whether the Tribunal was justified in holding that Chartered Accountants Certification is sufficient proof for -3- co-relating to the transfer and receipt of goods?
4. Whether Tribunal is in error in following the judgment of Nishith Impex Pvt.
Ltd., reported in 2008 (223) ELT 192 [TRI- Kol]?
5. Similarly, whether the Tribunal is in error in following the judgment of Sunilkumar Jain V/s. CCE reported in 2008 (85) ELT 105 (CESTAT-Mum)?
6. Similarly, whether the Tribunal is in error in following the judgment of CC VS. Western Electronics reported in 2000 (116) ELT 181?
7. Whether the Tribunal is in error in applying CBEC Circular No.314/30/97/CE dated 06.05.1997 to the present case?
2. The respondent - assessee is an 100% Export Orient Unit (EOU) and is engaged in bond processing and manufacturing of agricultural commodities having two units namely, one at -4- Anugondanahalli, Bengaluru and the other one at Venkatapura, Andhra Pradesh. The said EOU had a valid inbond manufacturing license for the manufacture of vegetables, fresh fruits, pickles in brine and vinegar and the same was valid up to 22.11.2007. The respondent was permitted to carryout the activity of reprocessing, repackaging, packaging of processed jams, sauce and marm. The Unit at Bengaluru used to import raw materials like vinegar, flavours, spices, olives and packaging materials like Jars, Barrels etc., as per notification No.52/2003-Cus., dated 31.03.2003. The said products were also got procured locally duty free, as per Notification No.53/1997-Cus., dated 03.06.1997 and Notification No.136/94CE dated 10.11.1994. On the investigation of intelligence, some irregularities having found, show cause notice dated 23.10.2007 was issued by the Adjudicating Authority and the same was confirmed by Order In Original No.22/2008 dated 05.11.2008. Being aggrieved, the appellant preferred an -5- appeal before the CESTAT which came to be allowed setting aside the demands made by the Adjudicating Authority. Aggrieved by the said order, the appellant has preferred this appeal.
3. Learned counsel for the Revenue argued on four points. Firstly, that the main condition to be fulfilled by an EOU for entitlement to concessional rate of duty on import or duty free procurement of raw materials is specified in condition No.3 of the Notification dated 03.06.1997 [Notification No.53/1997]. Condition No.4 of the Notification No.52/2003 dated 31.03.2003 stipulates that the Deputy Commissioner of Customs or Assistant Commissioner of Customs subject to certain conditions and limitations, would permit the capital goods and the manufactured goods to be taken to another EOU without payment of duty for the manufacture and export . Thus, the benefit of such inter-transfer available to the EOU is restricted only to -6- the capital goods and manufactured goods. The facility of inter-transfer of goods under the EOU has to be restricted to manufactured goods and capital goods only and not for the raw materials. The respondent - EOU effected inter transfer of raw materials clandestinely from the unit at Bengaluru to the unit at Venkatapura sans taking any permission from customs authority.
4. Secondly, sale of olives and baby corn was solely to DTA. The Tribunal wrongly placing reliance upon CBEC Circular No.7/2006-CUS dated 13.01.2006, held that DTA sale of goods are similar to export which is permissible ignoring the fact that no export of the aforesaid goods which took place after the year 2000.
5. Thirdly, the decision of the Tribunal that alleged trading of imported jams after repacking/labeling amounts to manufacture is untenable.
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6. Fourthly, it was submitted that the CESTAT failed to consider the arguments advanced by the Revenue in a right perspective.
7. Learned counsel has placed reliance on the following judgments:
1. Commissioner of Central Excise, Mumbai V/s.
Johnson & Johnson Ltd., [2005 (188) E.L.T. 467 (S.C)]
2. Crane Betel Nut Powder Works V/s.
Commissioner of Cus. & C. Ex., Tirupathi [2007 (210) E.L.T., 171 (S.C.)]
3. Commr. Of C. Ex., Mumbai V/s. BOC [i] Ltd., [2008 (226) E.L.T. 323 (S.C.)]
4. Mercantile Company V/s. Commissioner of C. Ex., Calcutta [2007 (217) E.L.T., 330 (S.C.)]
8. Learned counsel for the respondent - assessee argued that 100% EOU in diverting raw material to another 100% EOU for manufacture, is only a prodedural lapse and on the ground of not obtaining -8- permission for such diversion, exemption under the Notification No.53/97-CUS cannot be denied. To buttress this arguments, the finding of CESTAT- Mumbai in the case of Sunil Kumar Jain and Others vs. CCE & C, Nagpur - I reported in 2008 (85) RLT 105 (CESTAT - Mum.), which has been confirmed by the Hon'ble Apex Court reported in 2015 (326) ELT A87 (SC) has been relied upon. Nextly, it was argued that on the issue of eligibility of olives sold in the domestic market, Circular No.7/2006-CUS dated 13.01.2006 is applicable. DTA sale has been clarified by the CBEC which would demonstrate that "similar goods" means "goods which is although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable with the goods which have been exported or expected to be exported having regard to the quality, reputation and the existence of trade mark and produced in the same -9- unit by the same person who produced the export goods". Applying the said Circular, the appellant having exported olives till 2000 under the same LOP, the Tribunal has decided the matter in favour of the assessee.
9. Further placing reliance on the Foreign Trade Policy learned counsel argued that as per Chapter
- 9 - definitions therein, 'manufacture' has a wide meaning which includes re-packing and labelling. Circular No.314/30/97-CX, dated 06.05.1997 issued by Government of India, Ministry of Finance (Department of Revenue), New Delhi, was referred, to contend that the term 'manufacture' for the purpose of export is wider in meaning than that used in Section 2(f) of the Central Excise Act, 1944. Reliance was placed on the judgment of the Hon'ble High Court of Bombay in the case of Commissioner of Central Excise and
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Customs, Nashik vs. Rishabh Instruments Pvt. Ltd., reported in 2013 (290) ELT 543 (Bom.).
10. We have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record.
11. There is considerable force in the arguments advanced by the learned counsel for the respondent inasmuch as the goods said to have been diverted from Bengaluru unit to Venkatapur unit, both being 100% EOUs. On this inter-unit transfer of the raw material, the issue is squarely covered by Sunil Kumar Jain and Others, supra, confirmed by the Hon'ble Apex Court. The finding of the Tribunal is based on this judgment and the same cannot be faulted with.
12. Similarly, no exception can be found with the reasons assigned by the Tribunal in arriving at a decision regarding the eligibility of olives sold in the
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domestic market which is in conformity with the provisions of the Foreign Trade Policy 2004-2009 as explained by CBEC Circular No.7/2006-Cus, dated 13.01.2006.
13. In the case of Johnson and Johnson Ltd., supra, the Hon'ble Apex Court considering the meaning of 'manufacture' in the context of Section 2(f) of the Central Excise Act, 1944, has held that the repacking would have to be from bulk packs to "retail packs" so as to render the product marketable directly to the consumer, wherein it was contended that there was repacking and labelling of the medicaments before sale to the dealer and stock transfer to other depots.
14. In BOC (I) Ltd., supra, placing reliance on Johnson and Johnson Ltd., supra, the Hon'ble Apex Court has held that mere labeling or relabeling in the absence of any activity of repacking from bulk packs to
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retail packs would not render the product marketable directly to the consumer.
15. In the case of Crane Betel Nut Powder Works, supra, the Hon'ble Apex Court has considered the process of crushing betel nuts into smaller pieces and sweetening the same with essential/non-essential oils, menthol, sweetening agents etc., in the context of Section 2(f) of the Central Excise Act, 1944 has held that the said process did not result in manufacture of a new and distinct product having a different character and used as an end product continues to retain its original character though in a modified form. Similar view is taken in Aman Marble Industries (P) Ltd., supra.
16. It is significant to note all these judgments relates to Section 2(f) of the Central Excise Act, 1944. It is not in dispute that in the present case, we are dealing with 100% EOU, wherein Foreign Trade Policy is
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applicable, wherein Chapter - 9 provides for definition clause. In terms of the said definition clause - 9.37, "manufacture" means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, re-packing, polishing, labelling, re-conditioning repair, remaking, refurbishing, testing, calibration, re-engineering. Manufacture, for the purpose of FTP, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining.
17. Circular No.314/30/97-CX, dated 06.05.1997 issued by the Government of India, Ministry of Finance (Department of Revenue) deals with the subject of scope of the term "manufacture" in Notification No.1/95-CE with respect to 100% EOU. The
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said Notification clarifies that a broader view is called for in respect of interpretation of the provisions of Notification No.1/95-C.E. and the exemption may not be restricted only to cases where "manufacture" under Section 2(f) of the Central Excise Act, 1944 is involved. It is clarified that the term "manufacture" for the purpose of export is wider in meaning than that used in Section 2(f) of the Central Excise Act, 1944.
18. In the light of this Foreign Trade Policy and Circular, a wider meaning has to be given to the term "manufacture". "Repacking and labeling" is construed to be "manufacture" in terms of the said Foreign Trade Policy which is applicable to the case on hand. Hence, we find no reason to interfere with the finding of the Tribunal on this point.
19. For the reasons aforesaid, no infirmity or perversity is found in the order impugned. Accordingly,
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we answer the substantial questions of law in favour of the respondent - assessee and against the Revenue.
Resultantly, the appeal stands dismissed.
Sd/-
JUDGE Sd/-
JUDGE NC/PMR