Customs, Excise and Gold Tribunal - Tamil Nadu
Madura Coats Ltd. vs Commissioner Of Central Excise on 29 May, 2003
Equivalent citations: 2003(161)ELT812(TRI-CHENNAI)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from Order-in-Original No. 20/2002, dated 30-4-2002 by which the Commissioner of Central Excise, Madurai has confirmed a demand of Rs. 62,03,558/- as Central Excise duty towards blended yarn removed during the period from November 1999 to 17-11-2000 under Section 11A(2) of the Central Excise Act, 1944. The appellants had paid Rs. 51,04,614.00 on 22-9-2001 vide PLA debit entry No, 34 which has been adjusted towards Additional Excise Duty (CVD) and the remaining amount of SAD to the tune of Rs. 10,98,944/-has been directed by the Commissioner to be paid. However, he has dropped the proceedings initiated for recovery of interest and for imposition of penalty. Revenue has not filed any appeal on this portion of the order.
2. The facts of the case are that the officers attached to the Regional Unit of the Directorate of Central Excise Intelligence, Madurai upon gathering intelligence that the appellants, a 100% EOU engaged, inter alia, in the manufacture of blended polyster cotton yarn falling under Chapter Heading 55.09 of CETA, 1985 were evading payment of duty in respect of Grey Fabrics and Blended Yarn, made a visit to the unit on 3-11-2000. During the course of verification, it was found out that MCL manufactured and cleared the said blended yarn to their own units at Aladiyur and Madurai without payment of duty by claiming full exemption under Advance Release Order (ARO) against Advance Licence Numbers dated 6-8-99 and 30-3-2000. On the basis of statements recorded and various details collected, a show cause notice dated 11-12-2000 was issued calling upon them to explain as to why the amounts should not be collected from them. The appellants filed their replies and after due consideration of the matter, the Commissioner passed the impugned order. The findings recorded in paras 9 to 17 are reproduced herein below: -
"9. I have gone through he records of the case and considered the points put forth. The issues arising for determination in this case are, whether the provisions of Notification No. 30/97-Cus., dated 1-4-97 could be extended to the goods cleared by a 100% EOU against advance release Order under the advance licenses issued after 1-4-95 and whether the scope of Notification No. 28/2001-C.E., dated 16-5-2001 could be extended to earlier Notification No. 82/92-C.E., dated 27-8-92 in view of Board's circular dated 24-5-2001. As per the charge in the notice, the benefit of Notification No. 30/97-Cus. cannot be extended to the goods cleared by a 100% EOU inasmuch as the Notification does not mention the goods manufactured in a 100% EOU within its ambit and any exemption from payment of Central Excise duty for the goods manufactured in India are allowable only under valid Notifications issued under Section 5A of the Central Excise Act, 1944. On the other hand, the defence put forth by MCL is that the clearances from 100% EOUs are considered as deemed export and inasmuch as the same are against import licenses, they are deemed import so far as the purchaser is concerned. Pointing to the anomalous position if the Notification No. 82/92-C.E. was interpreted in the manner done in the notice, it was argued that the intention of this Notification was clear from amending Notification No. 28/2001-C.E. by virtue of Board's circular dated 24-5-2001.
10. I find that Notification No. 30/97-Cus., dated 1-4-97 has been issued under Section 25(1) of the Customs Act, 1962 and it exempts materials imported into India subject to fulfilment of the conditions stipulated therein. As rightly alleged in the notice, this Notification having been issued under the Customs Act is applicable only to goods imported and there is nothing in the Notification to extend the benefit to the goods manufactured in 100% EOUs. 100% EOUs are units located in India and the levy and procedure for clearance relating to these units are given in the Central Excise Act, 1944 and the rules made thereunder. Section 3 of the Central Excise Act, 1944 is the charging section for the goods manufactured in a 100% EOU and for purpose of quantification of duty the provisions of Customs Act, 1962 and the Customs Tariff Act, 1975 are resorted to. Likewise, the removal of goods from a 100% EOU are governed by Chapter V-A of the erstwhile Central Excise Rules, 1944. If the interpretation of the assessee is accepted as correct, then there is no purpose in issuing a Notification under Section 5A providing for duty relief to excisable goods cleared from a 100% EOU, be it Notification No. 82/92-C.E. or Notification No. 28/2001-C.E. In fact, MCL themselves have been pleading for applying Notification No. 82/92-C.E. by reading amending Notification No. 20/2001-C.E. taking into account Circular No. 31/2001, dated 24-5-2001 of the CBEC. I have therefore no hesitation in holding that Notification No. 30/97-Cus., dated 1-4-97 or any other exemption Notification issued under the Customs Act would not be applicable to clearances from a 100% EOU. Therefore the claim of the assessees on this score is held as legally untenable.
11. It was clear from Notification No. 82/92-C.E., dated 27-8-92 that it conferred duty relief only to that portion of duty of excise equivalent to the basic customs duty since the clearances in question took place against advance release order under duty free import license issued after 1-4-95. Consequently, excise duty equivalent to Additional Duty of Customs (CVD) and Special Additional Duty of Customs (SAD) was payable on the goods as there was no exemption for these components of levy. As said already, the assessee is urging for extending the benefit to these two excise duty components also by taking recourse to Notification No. 28/2001-C.E., dated 16-5-2001 read with Board's Circular, dated 24-5-2001. They also pressed into service a judgment of the Supreme Court and two decisions of CEGAT stating that while interpreting an earlier Notification, the intention of the authority could be gathered from subsequent Notification.
12. I have gone through the Board's instructions cited. The relevant portion reads as follows:
"21 Thus the existing Notification No. 82/92-C.E. is not aligned with the revised provision of EXIM policy, which has given rise to the dichotomy between direct import of inputs by advance license holders vis-a-vis input sourced from EOU .........against ARO.............
22. In view of this a Notification (No. 28/2001-C.E., dated 16-5-2001) has been issued in supersession of Notification No. 82/92-C.E., dated 27-8-1992 so as to allow sourcing of goods from EOU........units against advance release order.."
13. There is nothing in the Circular to even remotely assume that the scope and extent of benefit conferred under Notification No, 28/2001-C.E., dated 16-05-2001 should be read in such a way as to enlarge the coverage of Notification No. 82/92-C.E., dated 27-08-92. On the other hand, the Circular makes it clear that the issue of amending Notification became a necessity for correcting an anomaly (dichotomy) which had crept into the earlier Notification. It nowhere said that the earlier Notification was improperly worded or the benefit was unjustly denied to inputs sourced from 100% EOUs. Thus, in the event of anything being stated contrary, a Notification comes into effect only from the date on which it is issued and not even a day earlier.
14. Now I come to the case laws cited. The first one is the judgment of the Supreme Court rendered in the case of M/s. Johnson & Johnson Limited reported in 1997 (92) E.L.T. 23 (S.C.). In that case, the judgment was rendered in the context of a classification dispute as to whether the item in question fell for classification under heading 3005.90 or under heading 90.18 of the Central Excise Tariff Act, 1985, and the issue was resolved in favour of the petitioner by holding that the terminology "surgical appliances" under heading 90.18 had a broader meaning than the terminology "suturing appliances" of Chapter 30. Therefore this ratio has absolutely no application to the facts of this case. The second decision relied by the assessee related to M/s. Johnson & Johnson Limited reported in 1994 (71) E.L.T. 438 (T). The facts of that case show that by an amending Notification dated 21-11-1986, the words "miconozole Nitrate" was substituted for the word "miconozole" in the earlier Notification. The Tribunal emphasized that the amending Notification used the expression that the words miconozole Nitrate shall be substituted and not the word miconozole be amended to read as miconozole Nitrate. In this case, Notification No. 28/2001-C.E., dated 16-5-2001 was issued after superseding in entirety the earlier Notification No. 82/92-C.E., dated 27-8-92. Therefore the ratio of this decision is also not applicable to the facts of this case. The other decision relied by the assessee is in the case of M/s. Fertilisers and Chemicals Travancore Ltd. reported in 2001 (133) E.L.T. 175 (T). In that case, the exemption notification originally provided duty-relief only to sulphur powder and not sulphur in granular form. However, by a subsequent amendment the words 'sulphur powder' were substituted with the word 'sulphur'. Thus, in this case also, there had been a substitution of the word and not merely amendment and therefore following the ratio of the decision rendered in M/s. Johnson & Johnson Ltd, case discussed supra, the Tribunal held that the subsequent notification was only clarificatory in nature. In that case, the Tribunal also took note of the fact that the Revenue had not adduced any evidence to show that sulphur in granular form could not be considered as sulphur in powder form. Therefore the ratio of this decision is also of no avail to the assessee.
15. On the other hand, I have before me the decision of the Larger Bench of CEGAT rendered in the case of M/s. L & T Ltd. reported in 2000 (119) E.L.T. 51 (T - LB). In that case, the question arising for decision was as to whether the amendment made in erstwhile Rule 57C with effect from 01-03-1992 carving out an exception for goods cleared to a 100% EOU or a unit located in a FTZ would have prospective effect or retrospective effect. Holding the issue in favour of Revenue, the Hon'ble CEGAT categorically held that any amendment of substantive nature would have only prospective effect. In this case, the notification as it stood at that point of time provided duty-relief only to the extent of Basic Customs Duty and in order to remove an anomalous position, this notification was rescinded and a fresh notification was issued in its place. The later notification was issued afresh and there was nothing either in the notification or in the Board's instructions to suggest that the intention and purport of the later notification should be read into the earlier Notification also. Therefore, I hold that the exemption under the erstwhile Notification No. 82/92-C.E., dated 27-08-92 could be extended only that portion of Excise duty equivalent to the Basic Customs Duty and not to CVD and SAD, as proposed in the notice.
16. Now I come to the proposal to recover interest under Rule 173G and to impose penalty under Rules 9(2) and 173Q of erstwhile Central Excise Rules, 1944. As rightly argued by the assessee, in terms of Rule 173A(2), the provisions of Chapter VII-A covering rules from 173B to 173Q would not be applicable to removals from a 100% EOU covered by Chapter V-A. Therefore the question of recovering interest under Rule 173G and imposition of penalty under Rule 173Q would not arise. It was vehemently argued that the question of imposition of penalty under Rule 9(2) would not arise for the simple reason that the clearance documents like invoices and AR3A were duly endorsed by the Bond Officer-in-charge. In this connection, copies of relevant documents were placed on record as evidence. I have perused the same. It is seen that in the invoices and the AR3As issued for clearances, MCL had respectively indicated "exempted" quoting the DEEC Licence No./Advance release No. and "yarn for weaving - under deemed export". I also find that these documents have been endorsed by the Superintendent of Central Excise in charge of the unit. Thus there is force in their submission that merely because nothing was indicated in the 173B declarations filed, it could not be held that they had an intention to either evade or avoid payment of duty. Therefore, the question of penalising the unit under Rule 9(2) also would not arise.
17. As the duty amount relating to CVD had been paid and supplementary invoice had been issued for the payment made enabling the buyer to avail CENVAT credit, I do not think that re-determination of duty liability is warranted in terms of the Larger Bench decision of CEGAT rendered in the case of M/s. Srichakra Tyres Ltd. Further, the assessee did not also press this point in the written submission filed at the time of hearing."
3. We have heard learned Vice President Shri S.S. Thakur for the appellants and learned SDR Smt. R. Bhagya Devi for the Revenue.
4. Learned representative filed written submissions and contended that there was an anomalous situation and a dichotomy created in granting benefit of Notification No. 82/92-C.E., dated 27-8-92 with regard to basic Customs duty to the importers. The said benefit was not given to the purchasers of the imported raw material purchased from EOU. The matter was agitated for a long and the Government realizing the anomaly issued a Notification No. 28/2001, dated 16-5-2001 granting benefit of exemption of the Additional Duty of Customs (CVD) and Special Additional Duty of Customs (SAD) to the EOU also. A CBEC Circular No. 31/2001-Cus., dated 24-5-2001 was issued by the Government to clarify that a dichotomy between direct imports of inputs by Advance Licence Holders vis-a-vis inputs sourced from EOU/EPZ/EHTP/STP/SEZ against ARO existed and, therefore, the circular clarified that it needed Notification No. 28/2001-C.E., dated 16-5-2001 in supersession of similar Notification No. 82/92-C.E., dated 27-8-92 to grant the benefit of exemption from levy of CVD & SAD. It is his contention that this itself indicated that the element of Additional Duty of Customs (CVD) and Special Additional Duty of Customs (SAD) were supposed to be exempted retrospectively in terms of Notification No. 82/92-C.E., dated 27-8-92 as amended. On a specific query from the Bench as to whether there was any ambiguous provision in Notification No. 82/92-C.E., dated 27-8-92 as amended, the learned representative admitted that the said notification was crystal clear and there was no ambiguity. However, there was an anomalous situation inasmuch as that when the goods were purchased from foreign supplier the benefit of customs duty was extended while it was not so when it was purchased from local 100% EOU. He, in this regard, relied on a large number of judgments wherein the Apex Court has looked into the aspect of an ambiguous provisions of the notification and in such circumstances held that, when an amending notification is clarificatory in nature, then in such circumstances, such a notification was held to be retrospective in nature. In this regard, he referred to the Apex Court judgment rendered in the case of -
(1) Johnson 6- Johnson Ltd. v. CCE, Aurangabad, 1997 (92) E.L.T. 23 (S.C.);
(2) Jain Engineering Co. v. CC, Bombay, 1987 (32) E.L.T. 3 (S.C.);
(3) Bindawala Electrical Industries v. CCE, Kolkata-I, 2002 (145) E.L.T. 698 (Tri-Kolkata);
(4) Johnson & Johnson Ltd., 1994 (71) E.L.T. 438 (T);
(5) FACT Ltd., 2001 (133) E.L.T. 175 (T);
(6) Shaw Wallace & Co., 1990 (50) E.L.T. 143 (T);
(7) Super Cassettes Industries, 1992 (58) E.L.T. 105 (T);
(8) CCE v. Parle Exports, 1988 (38) E.L.T. 741 (S.C.);
5. In sum, the learned representative argued that the CBEC circular makes it clear that the issue of amending Notification No. 31/2001 became a necessity for removing the anomalous situation. Therefore, the subsequent notification is a clarificatory notification having a retrospective effect. The demands are not liable to be confirmed.
6. Ld. SDR on the other hand took us through the entire order. She also relied on the written note filed by the Commissioner in this matter. The Commissioner in the written note has explained that the provision of Notification No. 82/92-C.E., dated 27-8-92 as it stood at the relevant time, provides duty relief only to that portion of duty of excise equivalent to the Basic Customs duty. The above notification was issued under Section 5A of the Central Excise Act, 1944 and the provisions issued thereunder in respect of any duty exemption would be the fiscal law of the land until such time the Notification is withdrawn or rescinded. Only on the basis of the said Notification No. 82/92, the demand of excise duty equivalent to Additional Duty of Customs (CVD) and Special Additional Duty of Customs (SAD) was made in the show cause notice, inasmuch as there was no exemption for these components of levy under the Notification. It is stated that any amendment of substantive nature would have only prospective effect. In support of this contention, learned SDR relied on the following judgments : -
(a) L & T. Ltd. v. CCE, Mumbai, 2000 (119) E.L.T. 51 (T-LB);
(b) Delta Jute & Industries Ltd. v. CCE, Calcutta, 2001 (130) E.L.T. 392;
(c) Rajeev Ship Breaking Yard v. CCE, Mumbai, 2001 (136) E.L.T. 682 (T-Del.);
(d) CCE, Mumbai v. Samyak Tools, 2003 (151) E.L.T. 373;
(e) Futura Polymers Ltd. v. CCE, Chennai, 2003 (152) E.L.T. 156 (T-Del.).
7. In sum, the learned SDR submitted that the benefit of CVD & SAD was not available in the Erstwhile Notification No. 82/92 and, therefore, a substantive benefit extended at a later point of time in 2001 cannot be said to be retrospective in nature. She points out that there was no ambiguity in Notification No. 82/92-C.E. for being clarified in the subsequent notification. The Government was conscious in not extending the benefit of CVD and SAD in Notification No. 82/92-C.E. Therefore to say that this benefit which was extended by later Notification No. 28/2001 was retrospective in nature cannot be accepted in the light of the citations referred to by her. She submits that all the citations discusses a similar situation and holds that where a substantive benefit is granted, then it will have only prospective effect. She submits that the Commissioner has analysed the matter in the right perspective in the light of law laid down and, therefore, the demand has been rightly confirmed.
8. In counter, learned representative submitted that there was a clear discrimination between Indian supplier and foreign supplier and in view of this discrimination an amending-notification in 2001 was issued to remove this anomaly.
9. We have carefully considered the submissions and have perused the entire records and the citations referred to before us. Appellants have drawn much support from the CBEC Circular which brought out the reason for bringing in an amending Notification No. 28/2001-C.E., dated 16-5-2001. It referred to the dichotomy which existed between the direct imports of inputs by Advance Licence Holders vis-a-vis the inputs sourced from EOU/EPZ/EHTP/STP/SEZ against Advance Release Order (ARO). Nowhere in this circular, it speaks about any ambiguity in the Notification No. 82/92-C.E. An anomalous situation is an incongruous situation created, wherein the Government has consciously given benefit to a set of persons while it has not given the same to another set of persons who are similarly placed. In order to remove such an anomaly, an amending notification was issued. It does not lead to an inference that the previous Notification No. 82/92-C.E. had inherent effects and ambiguity and what was implicit in the mother notification was required to be made explicit by issuing a subsequent notification. If such a situation was in existence, then amending notification can be said to be clarificatory in nature and to be having a retrospective effect. This was the situation in the case of CCE v. Shaw Wallace & Co. In this particular case, the CBEC circular itself throws light that the situation was in the nature of anomaly and there was a dichotomy between direct imports of inputs by Advance Licence holders vis-a-vis inputs sourced from EOU/EPZ/ EHTP/STP/SEZ against ARO. Ld. representative clearly admitted that the Notification No. 82/92-C.E. was a crystal clear one and there was no ambiguity in the said notification. The said notification granted benefit to basic customs duty. There was no exemption to the element of CVD & SAD. Therefore, the benefit which was extended to the two other elements viz. CVD & SAD were substantive in nature and it was to be prospective in nature. A similar view was expressed by the Larger Bench in the case of L. & T. Ltd. (supra). In the case of L. & T., the Tribunal noted that the benefit of Modvat credit would not be available under Rule 57C of CER but only by amendment made to Rule 57C by Notification No. 4/92-CE. (N.T.), dated 1-3-92 which created an exception in the rule to the effect that Modvat credit could not be denied on inputs if such final products were cleared either to a unit in a Free Trade Zone or a 100% EOU. The Larger Bench after due consideration and in the light of several rulings of the Apex Court noted that this amending was substantive in nature and it will have only prospective application. The present case is in the same light. The benefit of CVD & SAD were given after much lapse of time and, it is substantive in nature and it will have only prospective effect. Such a ruling was also given in a similar circumstance in the case of Rajeev Ship Breaking Yard v. CCE, Mumbai, 2001 (136) E.L.T. 682 (T-Del.). In the case of Futura Polymers Ltd. v. CCE, Chennai, 2000 (152) E.L.T. 156 (T-Del.) the Bench noted that where a clarification has been issued to a notification and which is not of statutory provision, then the Bench noted, that such a clarification given will have only prospective effect and not is retrospective in nature.
10. Ld. representative has relied on the judgment rendered in the case of Jain Engineering Co. v. CC, Bombay (supra). We have gone through this judgment and notice that the Apex Court had noticed the ambiguity in the mother notification and there was difficulty in interpreting the terms of the notification for its application. Therefore, the amending notification was brought in to make it clear and explicit. In such circumstances, the Apex Court held that the amending notification will have retrospective applicability as it was clarificatory in nature.
11. Similar view was expressed by the Apex Court in the case of CCE v. Park Exports (P) Ltd., 1988 (38) E.L.T. 741 (S.C.); Johnson & Johnson Ltd. v. CCE, 1997 (92) E.L.T. 23 (S.C.). A similar view has been expressed by the Tribunal in the case of Johnson & Johnson Ltd., 1994 (71) E.L.T. 438 (T); FACT Ltd. 2001 (133) E.L.T. 175 (T) and Super Cassettes Industries, 1992 (58) E.L.T. 105 (T). In all the citations referred to by the representative of the appellants, we notice that there was inherent defect in the original notification and an ambiguity existed which required to be clarified. In the present case, admittedly, the Notification No. 82/92-C.E. did not have any ambiguity and it was crystal clear one. The intention of the Govt. was not to grant the benefit of CVD & SAD when Notification No. 82/92-CE. was introduced. The benefit of these two elements were considered to be extended by a subsequent notification for specific reasons. Consciously, the benefit was extended at a later point of time by Notification No. 28/2001. A substantive right was created subsequently and it can not be said to be clarificatory in nature to have a retrospective effect. In that view of the matter, the conclusion arrived at by the learned Commissioner on the basis of case-law is correct one which is required to be confirmed. We confirm the same by dismissing this appeal.