Rajasthan High Court - Jodhpur
M/S Jain Grani Marmo Pvt.Ltd vs C.C.E.Commisionerate Jaipur-2 on 21 February, 2025
Author: Pushpendra Singh Bhati
Bench: Pushpendra Singh Bhati
[2025:RJ-JD:5825-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Central/excise Appeal No. 126/2009
Mukesh Modi, aged about 48 years, Son of Shri H.S. Modi, r/o
9A, Polo Ground Udaipur, Director of M/s. Jain Grani Marmo Pvt.
Limited, Near Charak Upvan, Village Amberi, P.O. Badgaon, N.H.
No.8, Udaipur - 313011 (Rajasthan)
----Appellant
Versus
The Commissioner, Central Excise Commissionerate, Jaipur-II,
Government of India, Ministry of Finance and Company Affairs,
Revenue Department, New Central Revenue Building, Statue
Circle, C-Scheme, Jaipur.
----Respondent
Connected With
D.B. Central/excise Appeal No. 127/2009
M/s Jain Grani Marmo Pvt. Ltd., Near Charak Upvan, Village
Amberi, P.O. Badgaon, N.H. No.8, Udaipur - 313011 (Rajasthan)
----Appellant
Versus
The Commissioner, Central Excise Commissionerate, Jaipur-II,
Government of India, Ministry of Finance and Company Affairs,
Revenue Department, New Central Revenue Building, Statue
Circle, C-Scheme, Jaipur.
----Respondent
For Appellant(s) : Mr. M.S. Singhvi, Senior Advocate
assisted by Mr. Abhishek Mehta
For Respondent(s) : Mr. Kuldeep Vaishnav
HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI
HON'BLE MR. JUSTICE MUNNURI LAXMAN Judgment Reportable Reserved on 15/01/2025 Pronounced on 21/02/2025 Per Dr. Pushpendra Singh Bhati, J:
1. These Customs Appeals under Section 130 of the Customs Act, 1962 (hereinafter referred to as 'Act of 1962') have been preferred, claiming the following reliefs:(Downloaded on 25/02/2025 at 09:35:41 PM)
[2025:RJ-JD:5825-DB] (2 of 20) [EXCIA-126/2009] Appeal No. 126/2009:
"It is, therefore, most respectfully prayed that this appeal may kindly be accepted, the impugned judgment of Customs, Excise and Service Tax Appellate Tribunal, New Delhi dated 17.02.2009 passed in Appeal No.C/473/2006 in so far as it upholds part of the order of the Commissioner, Central Excise Commissionerate, Jaipur-II dated 17.04.2006 may kindly be set aside, the appeal filed by the appellant before the Customs, Excise and Service Tax Appellate Tribunal, New Delhi may kindly be ordered to be allowed in toto and the order passed by the Commissioner, Central Excise Commissionerate, Jaipur-II dated 17.04.2006 may kindly be set aside.
In the alternative, the respondent be directed to grant set off to the company in respect of the duties paid by it while effecting DTA sales for computing the duties under the impugned order dated 17.04.2006.
Any other appropriate order or direction, which this Hon'ble Court considers just and proper in the facts and circumstances of this case, may kindly be passed in favour of the appellant."
Appeal No. 127/2009:
"It is, therefore, most respectfully prayed that this appeal may kindly be accepted, the impugned judgment of Customs, Excise and Service Tax Appellate Tribunal, New Delhi dated 17.02.2009 passed in Appeal No.C/473/2006 in so far as it upholds part of the order of the Commissioner, Central Excise Commissionerate, Jaipur-II dated 17.04.2006 may kindly be set aside, the appeal filed by the appellant before the Customs, Excise and Service Tax Appellate Tribunal, New Delhi may kindly be ordered to be allowed in toto and the order passed by the Commissioner, Central Excise Commissionerate, Jaipur-II dated 17.04.2006 may kindly be set aside.
In the alternative, the respondent be directed to grant set off to the company in respect of the duties paid (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (3 of 20) [EXCIA-126/2009] by it while effecting DTA sales for computing the duties under the impugned order dated 17.04.2006.
Any other appropriate order or direction, which this Hon'ble Court considers just and proper in the facts and circumstances of this case, may kindly be passed in favour of the appellant."
2. At the outset, Mr. M.S. Singhvi, learned Senior Counsel assisted by Mr. Abhishek Mehta, appearing on behalf of the appellant-company, has pointed out that a Coordinate Bench of this Hon'ble Court, vide orders dated 11.01.2010, while confirming the interim order, restraining the respondents from passing final order, had admitted the present appeals on the following substantial question of law:
"Whether the revenue authorities can question the permission granted by the DGFT or his delegate to a 100% EOU for effecting sale in DTA and thereby disentitling such EOU to the exemption available to it under the notification No.52/03-CUS?"
3. Learned Senior Counsel for the appellants (appellant- company and its director-Mr. Mukesh Modi) while briefing the factual matrix of the case, submitted that the appellant-company, registered private limited company, was a 100% Export Oriented Unit (EOU) and engaged in the business of manufacture of marble slabs, tiles and dressed marble blocks at Udaipur. 3.1. The appellant-company applied for and was granted Letter of Permission (LoP) by the competent authority, to switch over as an EOU, in the year 2000 and that the aforesaid LoP, included the permission for serpentine slabs and tiles.
(Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (4 of 20) [EXCIA-126/2009] 3.2. The LoP was based upon the Circular dated 10.06.2002 issued by the Director General of Foreign Trade (DGFT), clarifying that the exports of dressed serpentine marble blocks should be taken into consideration for discharge of export obligation of an advance licensee issued for the dressed marble block. The permissions were accordingly issued and were renewed from time to time.
3.3. That on 03.08.2005, a show cause notice was issued to the appellant-company and its Director- Mr. Mukesh Modi, alleging therein that the appellant-company has contravened the provisions contained in the Notification No. 52/03-Cus dated 31.03.2003, Notification No. 23/03-CE dated 31.03.2003, Paragraphs 6.1, 6.2(b), and 6.8 of the Export and Import Policy of 2002-2007 (hereinafter referred to as the "EXIM Policy, 2002- 2007"), Paragraphs 6.1, 6.2(b), and 6.8 of the Foreign Trade Policy 2004-2009 (hereinafter referred to as "FTP 2004-2009") and Rules 6 and 17 of the Central Excise Rules, 2002 (hereinafter referred as the 'Rules of 2002').
3.4. The crux of the allegations against the appellant-company was that it had undertaken the DTA sales of the goods produced/ manufactured by the company out of the marble blocks imported by it by enjoying the exemption from the import duty, without making the exports from out of the goods produced/manufactured by such imports.
3.5. Learned Senior Counsel also submitted that the reason given by the respondent in the aforesaid show cause notice was that the DTA Sales were permissible out of the goods (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (5 of 20) [EXCIA-126/2009] produced/manufactured by imported goods only, if the EOU concerned has made exports from the goods produced/manufactured by the same imported goods first and were required to conform to the conditions of the FTP and EXIM Policy and other notifications in connection therewith. 3.6. Learned Senior Counsel has drawn the attention of this Court towards para 6.8 of the EXIM Policy 2002-2007, which reads as under:
"6.8. DTA Sale of Finished Products /Rejects/Waste/ Scrap/Remnants/By-products The entire production of EOU / EHTP / STP / BTP units shall be exported subject to following:
(a) Unless specifically prohibited in the LOP, rejects may be sold in the Domestic Tariff Area (DTA) on payment of duties as applicable to sale under paragraph 6.8 (b) on prior intimation to the Customs authorities. Such sales shall be counted against DTA sale entitlement under paragraph 6.8(b). Sale of rejects upto 5% of FOB value of exports shall not be subject to achievement of NFE.
(b) Units, other than gems and jewellery units, may sell goods upto 50% of FOB value of exports subject to fulfillment of positive NFE on payment of applicable duties.
Sales made to a private bonded warehouse set up under the policy shall also be taken into account for the purpose of arriving at FOB value of exports by EOUs provided payment for such sales made from EEFC account. No DTA sale shall be permissible in respect of motor cards, alcoholic liquors, books and tea (except instant tea) and books or by a packaging/labeling/segragation/refrigeration unit and such other items as may be notified from time to time.
(c) Gems and jewellery units may sell upto 10% of FOB value of exports of the preceding year in DTA subject fulfillment of positive NFE as prescribed in the policy. In respect of sales of plain jewellery, the recipient shall pay (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (6 of 20) [EXCIA-126/2009] concessional rate of duty to the customs in Indian rupees as applicable to sale from nominated agencies. In respect of studded jewellery, duty shall be payable in Indian rupees as notified by Customs.
(d) Scrap/waste/remnants arising out of production process or in connection therewith may be sold in the DTA as er the Standard Input-Output norms notified under the Duty Exemption Scheme on payment of duties as applicable under paragraph 6.8(b) within the overall ceiling of 50% of FOB value of exports. Such sales shall not, however, be subject to achievement of positive NFE. 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.
(e) There shall be no duties/taxes on scrap/waste/remnants in case the same are destroyed with the permission of Customs authorities.
(f) EOU/EHTP/STP units may be permitted to sell finished products, which are freely importable under the Policy in the DTA against payment of full duties provided they have achieved the positive NFE as per the policy.
Such sales may also be permitted in exceptional cases without achievement of positive NFE.
(g) For services, including software units, sale in the DTA in any mode, including on-line data communication, shall be permissible up to 50% of FOB value of exports and/or 50% of foreign exchange earned, where payment of such services is received free foreign exchange.
(h) By-products included in LOP may also be sold in the DTA subject to achievement of positive NFE on payment of applicable duties within the overall entitlement of paragraph 6.8(b). Sale of by-products by units not entitled to DTA sales or beyond the entitlements of paragraph 6.8(b) shall also be permissible on payment of full duties. NOTE: In the case of units manufacturing electronics hardware and software, the NFE and DTA sale entitlement shall be reckoned separately for hardware and software." (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (7 of 20) [EXCIA-126/2009] The said para 6.8(a) was amended firstly on 13.5.2005 and thereafter on 31.8.2005. The amended 6.8(a) reads as under:
"(a) "Units, other than gems and jewellery units, may sell goods up to 50% of FOB value of exports subject to fulfillment of positive NFE on payment of concessional duties. Within the entitlement of DTA sale, the unit may sell in DTA its products similar to the goods, which are exported or expected to be exported from the units. [No DTA sale at concessional duty shall be permissible in respect of major cars, alcoholic liquors, tea (except instant tea), pepper & pepper products marble and such other items as may be notified from time to time. Such DTA sale shall also not be permissible to units engaged in the activities of packaging/labelling/segregation / refrigeration/ compacting/micronisation/pulverization/granulation/ conversion of monohydrate form of chemical to anhydrous form or vice versa].
Sales made to a unit in SEZ shall also be taken into account for the purpose of arriving at FOB value of export by EOU provided payment of such sales are made from EEFC Account. Sale to DTA would also be subject to mandatory requirement of registration of pharmaceutical products (including bulk drugs)."
4. Learned Senior Counsel in support of his case, submitted that other notices were also issued, including the show cause notice dated 03.08.2005. Another show cause notice dated 08.11.2005 was also issued to the appellant-company and its director- Mr. Mukesh Modi(appellant), as to why it(appellant- company) should not be held liable to pay the demand equal to the customs and central excise duty leviable on the imported marble blocks and block/slabs cleared in DTA. He further submitted that appropriate replies to the aforesaid notices dated 03.08.2005 and 08.11.2005, were submitted on 14.10.2005 and (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (8 of 20) [EXCIA-126/2009] 04.01.2006, respectively, however, the demands were raised by the respondents to the tune of Rs. 2,97,07,986/- for the customs duty & Rs.1,91,75,007/- towards the excise duty. 4.1. Learned Senior Counsel also submitted that the appellant- company and its director (appellant- Mr. Mukesh Modi) filed separate appeals against the order dated 17.04.2006 before the learned Customs, Excise & Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as 'CESTAT'), which were registered as Customs Appeal No.472-473 of 2006, whereupon the same were partly allowed vide the impugned order dated 17.02.2009 and the demand in respect of central excise duty has been held to be invalid however the liability regarding the customs duty and the penalties were upheld.
4.2. Learned Senior Counsel further submitted that question involved herein is essentially with respect to the interpretation of the scope of Notification No.52/03-CUS dated 31.03.2003, as in terms of circulars dated 28.11.1995 & 31.01.2005, the Commissioner was bound to refer the matter to the Board before initiating any action against the appellant-company. 4.3. Learned Senior Counsel also submitted that the action has been initiated in contravention of the Circular No. 93/2000-Cus dated 21.11.2000, wherein it is provided that the unit was eligible to clear the goods in DTA to the extent of the permission given by the Development Commissioner on payment of applicable duties. 4.3.1. Learned Senior Counsel further submitted that once such permission for DTA Sales was granted by the competent authority i.e. the Development Commissioner, neither Customs nor (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (9 of 20) [EXCIA-126/2009] the Excise authorities can question the same for the purpose of excise duties.
4.3.2. Learned Senior Counsel also submitted that each category of goods, which were to be exported, sold/supplied in DTA or transfer to other SEZ/EOU/EHTP/STP/BTP units constitute one class. He further submitted that this was supported by the Handbook of Procedures which has been issued by the respondent.
4.3.3. Learned Senior Counsel further submitted that the sale made by the appellant-company in DTA was permissible and hence, the exemption was applicable upon them. 4.4. Learned Senior Counsel also submitted that even if Notification No. 52/03-cus dated 31.03.2003, is held to be applicable only in the event the goods disposed of in DTA are 'similar' to the one which have been exported by 100% EOU, then too, the findings recorded by the Learned CESTAT were erroneous in holding that serpentine blocks, slabs and tiles are different from marble blocks, slabs and tiles. Learned Senior Counsel has also drawn the attention of this Court to the expert report of the Directorate of Mines and Geology, showing that there is no difference in serpentine (popularly known as the green marble) and the white/coloured marble, along with other material record that has been placed on record.
4.5. Learned Senior Counsel further submitted that the Customs Circular No.07/2006 dated 13.01.2006 gives out the clarification regarding 'similar goods' for the purpose of effecting sales in DTA, which is reproduced as hereunder:-
(Downloaded on 25/02/2025 at 09:35:41 PM)
[2025:RJ-JD:5825-DB] (10 of 20) [EXCIA-126/2009] "DTA Sale:
3. The paragraph 6.8(a) of the FTP provides that EOU/EHTP/STP may sell goods upto 50% of FOB value of exports in DTA on payment of concessional duty subject to fulfillment of positive NFE. It also provides that within the entitlement of DTA sale, the unit has to sell in DTA its products similar to the goods, which are exported or expected to be exported. There has been doubt as to what constitutes 'similar goods'. Further, when the units are not required to take any permission for DTA sale under paragraph 6.39.9., it is felt necessary to provide definition of "similar goods" to bring clarity and uniformity. Therefore, it has been decided that the definition of 'similar goods' would be based on the definition of similar goods as provided in the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The term "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 unit by the same person who produced the export goods. The Board's Circular No.85/95 dated 26-7-95 issued in this regard stands rescinded." 4.5.1. Learned Senior Counsel also submitted that while determining the issue of similarity between the two goods/products, the functional as well as commercial distinction was also required to be considered.
4.5.2. Learned Senior Counsel further submitted that commercial utility and use of the white marble and green marble was the same, and that both the marbles were used for finishing of premises, flooring and walls in domestic as well as commercial (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (11 of 20) [EXCIA-126/2009] buildings. Attention of this Court has been drawn towards the relevant extract from Notification No.52/2003-CUS dated 31.03.2003, which is reproduced as hereunder:
• Used for the purpose of manufacture of finished goods, • Even if not exported, are allowed to be sold in Domestic Tariff Area in accordance with the Export and Import Policy and subject to such other limitations and conditions as may be specified in this behalf by Development Commissioner, on payment of appropriate duty of excise leviable thereon under section 3 of the Central Excise Act, 1944, (Thus, Custom duty is not applicable at all.) • Provided that where such finished goods are not excisable, customs duty equal in amount to that leviable on the inputs imported under this notification and used for the purpose of manufacture of such finished goods, which would have been paid but for the exemption under this notification shall be payable at the time of clearance of such finished goods. (This is applicable only in case of finished goods are not excisable. In the case of the appellant, finished goods are excisable, hence excise duty has been paid which much higher than custom duty, therefore, this clause is not applicable.)"
4.6. Learned Senior Counsel also submitted that nowhere it has been mentioned that serpentine was covered under HSN and ITC (HS) by heading 25.16. He further submitted that few copies of shipping bills issued by custom for export of polished Serpentine slabs under heading 25.15 which proves that the Serpentine was covered under the heading 25.15 under which marble was also covered.
4.7. Learned Senior Counsel further submitted that there were separate input/output norms for marble slabs/tiles and Serpentine slabs/tiles however they both have same nomenclature. As per (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (12 of 20) [EXCIA-126/2009] learned Senior Counsel, Marble and Serpentine both are called Marble, though their chemical composition may change from rock to rock as they are natural products. He further submitted that in market, different types of marble of different textures are available for use in flooring or construction however their uses are same.
4.7.1. Learned Counsel further submitted that "Wealth of India", which is a dictionary of Indian Raw Materials and Industrial Product, mentions, "Serpentine marble".
4.7.2. Learned Senior Counsel also submitted that the DGFT instruction dated 10.06.2002 clearly clarifies that Serpentine should be treated as regular marble and export of dressed Serpentine blocks should be taken into consideration for discharge of export obligation of an advance license issued for dress marble block; relevant extract whereof is reproduced as hereunder:
From Para 2:
"The Bureau has further clarified that as per the commercial classification of marble adopted by the American Society for Testing Material (ASTM), commercial marble may also be classified, among others as Serpentine marble."
From Para 3:
"For the purpose of exports under Duty Exemption Scheme, serpentine (green marble) block should be treated as regular marble only and accordingly, SION entry No.A-1985, Handbook of Procedures, Vol.2 (Part-I) would also cover serpentine (green marble) blocks and also that exports of dressed serpentine (green marble) block should be taking into consideration for discharge of export obligation of an advance licence issued for Dressed Marble Block."(Downloaded on 25/02/2025 at 09:35:41 PM)
[2025:RJ-JD:5825-DB] (13 of 20) [EXCIA-126/2009] 4.8. Learned Senior Counsel further submitted that as per the price governed by the theory of demand and supply of any commodity/product, Serpentine marble is sold even at higher rate in comparison to white marble slab. Few copies of custom invoices duly verified by the customs authorities @ USD at the time when demand was more in comparison to supply. As per learned Senior Counsel, white marble (Rajnagar) is also available in the same range of Serpentine marble even today, and therefore, price factor cannot become the basis for similarity.
4.9. Learned Senior Counsel also submitted that the Development Commissioner is the final authority and LoP and LUT executed by Development Commissioner is binding on all departments of the Government of India.
4.10. Learned Senior Counsel further submitted that the impugned Circular cannot be given retrospective effect as the period of both the impugned SCNs are prior to date of SCNs. He also submitted that the white marble and serpentine marble both are having same characteristics and function i.e. used both in flooring for construction.
4.11. Learned Senior Counsel further submitted that Board's Circular No.67-2006-CUS dated 13.01.2006 is in reference to Para 6.39.9 of HBP wherein fast track clearance are permitted for DTA sales to status holder without obtaining permission from Development Commissioner. Therefore, as per learned Senior Counsel, this Circular is not applicable in cases, wherein specific permission is given by Development Commissioner. Further, this circular is issued after the period covered under the SCN in (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (14 of 20) [EXCIA-126/2009] question and also after the date of issuance of SCN and thus the same is not the basis of the SCN as well as order in original under appeal.
4.12. Learned Senior Counsel thus summarized his averments by stating that the word "similar" cannot be given the meaning to the word "same" or "identical" in the instant case. Since, there has been no express intention of considering the two differently under the proviso to the Rule 57 F(3), the word 'similar' should be given wider interpretation and thus, the impugned order passed by the learned CESTAT, as far as customs duty is concerned, is not sustainable in the eyes of law.
5. Per contra, Mr. Kuldeep Vaishnav, learned counsel for the respondent, while opposing the aforesaid submissions made on behalf the appellants (appellant-company and its director-Mr. Mukesh Modi) submitted that the appellant-company was having status of an EOU and the said status was granted to them with the object to increase export and to earn foreign exchange. 5.1. Learned counsel further submitted that the appellant- company was supposed to procure raw material import/domestic without payment of duty and export their product/finished goods. Thus, for the succeeding period, they could have cleared limited finished products to domestic market, as permitted. 5.2. Learned counsel also submitted that the appellant-company intentionally misused the EOU Scheme, as it procured green marble (serpentine) from domestic market at low rate and after processing has exported the same; whereas it imported a high (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (15 of 20) [EXCIA-126/2009] quality marble without payment of duty and after processing has cleared the same in domestic market at concessional rates. 5.3. Learned counsel further submitted that the appellant- company was required exporting of 'similar' goods as imported and since it (appellant-company) have not exported the goods manufactured from the imported goods, exemption of import duty was not allowed and thus it was required to pay duty exempted at the time of import.
5.4. Learned counsel with regard to the contention of the appellant-company that it was permitted for the DTA sale, submitted that the DTA sale permission was intended only in respect of 'similar' goods exported, however the appellant- company exported entirely serpentine/green marble and cleared in DTA only white imported marble.
5.5. Learned counsel further submitted that the Circulars of DGFT are not binding on Customs. Moreover, as per learned counsel, the provisions are not ambiguous and are very much clear but the appellant-company has intentionally misinterpreted the same to avail unlawful benefit, whereas, the Customs authorities are indisputably empowered to protect Excise/Customs duty evasion, if any.
5.6. Learned counsel also submitted that the appellant-company is trying to mislead this Court because in the market, there is much difference in imported white marble and serpentine/green domestic marble and that the value of imported white marble is very much higher. He also submitted that the Laboratory Certificate reflects that the Serpentine Marble is Green Marble. (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (16 of 20) [EXCIA-126/2009] 5.7. Learned counsel further submitted that the impugned order dated 17.02.2009 reflects that the imported white marble blocks have not been used for the intended purpose, and the appellant- company was required to export finished goods manufactured out of imported marble blocks.
5.8. Learned counsel also submitted that the appellant-company was intentionally not maintaining separate records for production and clearance of finished goods manufactured out of domestic and imported marble. He further submitted that the appellant- company has also not maintained proper records of DTA Sale; it merely mentioned 'marble' in their records intentionally, whereas in common trade parlance, they used to mention specific type of marble in invoice/record.
5.9. Learned counsel further submitted that in its periodic return (ER-2) submitted with the department, the appellant-company did not mention whether the goods were manufactured out of domestic marble or from imported marble. Further, as per learned counsel, the appellant-company did not disclose that it was exporting only indigenous (domestic) marble and obtained DTA sale permission for marble and that it did not export the goods manufactured out of imported goods.
5.10. Learned counsel also submitted that since the appellant- company was not using similar goods in export and in domestic sale, exemption (duty free procurement) under the Notification No.52-2003-CUS dated 31.03.2003 was not available to it, as even as per the said circular, the exemption is only for manufactured articles/goods for export, whereas the appellant- (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (17 of 20) [EXCIA-126/2009] company has not exported any goods manufactured out of imported duty free raw material, which is an undisputed fact on record. Furthermore, only those goods are to be cleared to DTA which are similar to exported goods, but the appellant-company has expoted altogether different items/goods and cleared in DTA and has thus misused the exemption so allowed.
6. After hearing learned counsel for the parties as well as perusing the record of the case, this Court finds that the limited issue before this Court is pertaining to the customs duty as the excise duty has already been set aside by the learned CESTAT vide the impugned order dated 17.02.2009 and the same has not been challenged by the respondent.
7. This Court finds that the finished goods to be exported as per the LoP were marble slabs/tiles and granite tiles, whereas the items of exports were expanded to include serpentine slabs/tiles, dressed marble blocks and dressed serpentine blocks, along with all types of natural stones in form of dressed blocks, slabs and tiles, by the way of approval by the Development Commission from time to time.
8. This Court further finds that the anomaly arose because the appellant-company as against import of white marble blocks, exported consignment of marble slabs/tiles and granite slabs/tiles made out of indigenous marble/granite blocks, with serpentine slabs/tiles and dressed serpentine blocks, manufactured out of the domestically procured serpentine blocks. Thus apparently, the appellant-company was misusing the policy and the Notification to treat both as 'similar' for getting the exemption as the imports (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (18 of 20) [EXCIA-126/2009] were exclusively of white marble blocks, whereas only small part of it were serpentine blocks, marble blocks made out of domestically procured serpentine blocks.
9.. This Court also finds that the Custom Notification No.52/2003-CUS dated 31.03.2003 provided that the goods imported by 100% EOU or excisable goods domestically procured by 100% EOU are exempted from customs duties, provided the goods imported free of customs duty, were used in relation to manufacture of finished goods for export.
10. This Court is conscious of the fact that the customs duty exemption was made available only if the finished goods made out of the duty free imported and domestically procured goods instead of being exported are sold in DTA, as per the provisions of EXIM Policy, 2002-2007.
11. This Court is of opinion that the serpentine stone procured domestically, which is also known as 'green marble', cannot complete the export obligation casted upon the present appellants (the appellant-company and its director-Mr. Mukesh Modi) in the garb of exporting a 'similar' product which is a dressed serpentine block and serpentine slabs/tiles manufactured out of domestically procured serpentine blocks.
12. This Court, on a close examination of the record, finds that the white marble and serpentine blocks/slabs are not similar for the purpose of getting the exemption in the custom duty. References of expert reports that have been made by the respondent, convince this Court as well as have been dealt with in depth by the learned CESTAT, that the green marble/serpentine (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (19 of 20) [EXCIA-126/2009] stone is very different from marble and is mostly domestically procured and thus, is much cheaper than the imported marble blocks, and any kind of exemption in the customs duty would be detrimental to the policy of encouraging the exports.
13. The learned CESTAT has rightly held that the goods sold by an EOU into DTA must be 'similar' to the goods exported, within the meaning of the term 'similar' as defined in the Board's Circular No.07/2006-Cus dated 13.01.2006.
14. This Court also observes that as per the EXIM Policy 2002- 2007, a 100% EOU manufacturing products A and B for export, could have been sold into DTA one product, say A upto 75% of its FOB value of exports within the overall DTA sale entitlement.
15. The Court further observes that adopting a broad interpretation of the term 'similar' in the context of the present excise appeal would undermine the legislative intent behind the policy in question and at the same time have wide consequences which can lead to unforeseen damage to the economy of the nation. It is additionally noted that the term 'similar' is intended to encompass goods of the same fundamental category, such as slabs, tiles, marbles, and stones, and not those that are alike in nature and intended for comparable/analogous uses. The origin and application of serpentine marble and white marble are undeniably distinct and they thus cannot, under any circumstances, be regarded as identical.
15.1.This Court also finds that idea behind this condition was to prevent the misuse of 100% EOU Scheme by duty free import of costly materials for use exclusively in the manufacture of finished (Downloaded on 25/02/2025 at 09:35:41 PM) [2025:RJ-JD:5825-DB] (20 of 20) [EXCIA-126/2009] goods for DTA sale and meeting the export obligation by exporting the finished goods made out of domestically procured cheap material.
16. Thus, this Court agrees that the determination of the CESTAT as made in the impugned order, that the condition for duty free import by 100% EOU prescribed in the Notification No.52/2003- Cus has not been fulfilled in respect of the imported marble blocks and such exemption was not thus, permissible. Moreover, the matter has been remanded back vide the impugned order, for the purpose of de novo adjudication for re-determining the quantum of customs duty demand within the normal limitation period and re-determining the quantum of penalty upon the appellants under Section 112(a) of the Customs Act, and therefore, the appellants will have sufficient opportunity to agitate their factual matrix before such authority.
17. In view of the above, this Court does not find it a fit case so as to warrant any interference in the impugned order dated 17.02.2009 passed by the learned CESTAT. Accordingly, the substantial question of law, as afore-quoted, is answered in favour of the respondents and against the appellants.
18. Consequently, the present appeals are dismissed. All pending applications stand disposed of.
(MUNNURI LAXMAN),J (DR. PUSHPENDRA SINGH BHATI),J SKant/-
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