Customs, Excise and Gold Tribunal - Delhi
Cce vs Autolite India Limited on 1 August, 2007
Equivalent citations: 2007(122)ECC261, 2007(148)ECR261(TRI.-DELHI), 2007(218)ELT259(TRI-DEL)
ORDER
R.K. Abichandani, J. (President)
1. The Revenue has appealed against the order of the Commissioner (Appeals) made on 26.5.2005, holding that the respondent was eligible to pay duty in accordance with the Notification No. 2/95-CE dated 4.1.1995. It was held that the respondent had already deposited duty before the issuance of the show cause notice, but claimed benefit of the Notification No. 2/95. As regards the recovery of interest, it was held that, since the duty was paid before the issuance of show cause notice, interest was not recoverable in view of the decision of the Tribunal in G.K. Steel (CBE) Ltd. v. CCE, Coimbatore reported in 2002 (53) RLT 1065. As regards the penalty, it was held that no penalty was imposable under Section 11AC of the Central Excise Act, 1944.
2. The learned Counsel for the respondent raised a preliminary objection against the maintainability of the appeal by contending that the opinion formed by the Committee of Commissioners under Section 35B(2) that the order of the Appellate Commissioner was not legal or proper, was contrary to the earlier order of remand made by the Tribunal on 16.2.2005. It was submitted that by the said order of remand, the Commissioner (Appeals) was required to consider the applicability of the Larger Bench decision in Himalya International Ltd. v. CCE, Chandigarh-I , with regard to the benefits of the Notification No. 2/95. The Commissioner (Appeals) has decided the matter in favour of the assessee and there was no opinion formed on that aspect by the Committee and, therefore, the appeal was not maintainable due to improper authorization to file the appeal. Reliance was placed by the learned Counsel for the respondent on the decision of the Larger Bench of the Tribunal in CCE, Mumbai v. Bombay Switchgear reported in 2001 (134) ELT 659 (Tri.-LB), in which the Tribunal held that the formation of the opinion by the Collector that the order against which the appeal was to be filed is not legal or proper should be reflected from the order directing filing of the appeal or, at any rate from the note-sheet which contained the decision for filing the appeal.
2.1 There can be no dispute over the proposition that formation of the opinion by the Committee that, the order against which the appeal is to be filed is not legal or proper, is a pre-requisite under Section 35B(2) of the Act. In Bombay Switchgear's case (supra), the Larger Bench was concerned with a case where admittedly order authorizing the appeal did not refer to any satisfaction on the part of the Commissioner that the order appealed against was not legal or proper, as observed in para 7 of the judgment. Even on scrutiny of the note-sheet of the relevant file, the Tribunal found that there was a note dated 17.5.1993 to the effect that the order of the Collector (Appeals) was proper and correct. The Collector made an endorsement on 2.6.1993 that no appeal needs to be filed. Thereafter, the file was transferred to the office of the Principal Collector and a fresh note was put up that the appeal has to be filed with reasons supporting the view. The Principal Collector endorsed the said note. The Tribunal found that the endorsement by the Collector on 23.7.1993 agreeing with the fresh note was, "without giving any reason whatsoever for taking a different view from the endorsement on 2.6.1993". It was held that the Principal Collector, on 22.7.1993, had just accepted the note without applying mind to the issue independently. In the background of these facts, it was held that there was no proper authorization for filing an appeal as contemplated by Section 35B(2) of the Act. The ratio of the said decision has no application to the facts of the present case, because it has brought on record that the Committee of Commissioners recorded their opinion in detail on 14.9.2005. It was clearly mentioned that, the Committee had examined the order of the Commissioner (Appeals) and found that the same was not legal, proper and correct for the reasons discussed therein. The learned Counsel attempted to raise contentions on the validity of the reasons, which weighed with the Members of the Committee for forming their opinion that the order of the Commissioner (Appeals) was not legal and proper. The Committee referred to the statements of various witnesses and other evidence and also some grounds were given including the ground that the Tribunal had wrongly remanded the case. Even on interest and penalty, it was recorded that the Commissioner (Appeals) had erred. The Committee authorized the Joint Commissioner to file the appeal praying for setting-aside the order of the Commissioner (Appeals). The reasons, which weighed with the Committee of Commissioners would not be justiciable, and it is sufficient that the Committee takes into consideration the relevant facts of the case and records an opinion that the order of the Commissioner (Appeals) was not legal or proper, as has been done in the instant case. There is, therefore, no substance in the preliminary objection raised by the appellant and it is hereby rejected.
3. It is not disputed that the respondent EOU had short paid the duty amount on waste and scrap cleared, that there was shortage of finished goods (auto halogen bulbs) and that there was also shortage in the rejected goods. It was contended that, even if the duty was payable under the proviso to Section 3(1), the respondent was eligible to the benefit of the less rate of duty payable under the said Notification No. 2/95. It was submitted that Commissioner (Appeals) has rightly held that the appellant was eligible to the benefit of the Notification No. 2/95 dated 4.9.1995.
4. The respondent was a 100% export oriented undertaking. Duties of excise were required to be levied and collected on any excisable goods produced or manufactured by 100% export oriented undertaking and allowed to be sold in India under the proviso to Section 3(1) of the Act. The expression "allowed to be sold in India" was substituted by the expression "brought to any other place in India" with effect from 11.5.2001. Since the period involved in this matter was prior to 11.5.2001, the pre-amended provision will apply and, therefore, duty was payable by a 100% export oriented undertaking when the goods were allowed to be sold in India.
5. The phrase "allowed to be sold in India" was considered by the Division of this Tribunal in Asian Alloys Limited v. CCE, Delhi-III and it was held that this phrase cannot be read in isolation and it would mean only such excisable goods produced or manufactured by the 100% EOU, which are allowed to be sold in India in accordance with the relevant provisions of the EXIM Policy, and any exemption notification issued in this context has to be read in the context of the relevant provisions of the Act, the rules and the EXIM Policy. The Tribunal held in paragraphs 10.1, 11 and 12 of the judgment as under :
10.1 The phrase "allowed to be sold in India", appearing in the proviso has evoked much debate. It is obvious that this phrase cannot be read in isolation and it would mean only such excisable goods produced or manufactured by the 100% EOU which are allowed to be sold in India in accordance with the relevant provisions of the EXIM policy, and any exemption notification issued in this context has also to be read in the context of the relevant provisions of the Act, the rules and the EXIM Policy.
10.2 In this context, we may refer to the relevant Rules of chapter VA of the Central Excise Rules 1944 in connection with removal from a free trade zone with regard to 100% Export-Oriented Undertaking of excisable goods for home consumption. As per Rule 100A, the provisions of this Chapter shall apply to a person permitted under any law for the time being in force to produce or manufacture excisable goods in 100% EOU, and who has been allowed by the proper officer to remove such excisable goods for being sold in India, on payment of duty of excise leviable thereon. On the aspect of removal of goods on payment of duty, Rule 100D provided that when a manufacturer desires to remove excisable goods from a 100% EOU to any place in India, he was required to make removal of such goods under an invoice signed by the owner of the factory or his authorized agent and it was required that such invoice shall indicate the value of goods any duty involved separately, and also give particulars as may be specified by the CBEC or Commissioner and the triplicate copy of the invoice shall be forwarded to the proper officer within twenty four hours of the removal of the goods. Rule 100E in terms provided that no excisable goods shall be removed inter alia from a 100% EOU to any other place in India except on payment of duty of excise leviable on such goods and under an invoice, signed by the manufacturer or his authorized agent. Sub-rule (2)(a) of Rule 100E provided the manner in which such invoices were prepared and its particulars provided for. These rules and other provisions of Chapter VA have to be read for giving full meaning to the expression "allowed to be sold in India", occurring in the proviso to Section 3(1) of the Act. Admittedly, none of the provisions of Chapter VA were observed by the 100% EOU of the appellant company. Therefore, it cannot be said that the goods diverted by the EOU of the appellant company into DTA, were allowed to be sold in India. As noted above, Rule 100A specifically provides that in such cases a 100% EOU should have been allowed by the proper officer to remove such excisable goods for being sold in India. In the present case, permission was neither sought for nor granted for any of the excisable goods sold by the 100% EOU of the appellant company in the domestic tariff area.
11. The contention that the goods are not allowed to be sold under the proviso to Section 3(1) and therefore the proviso will not apply and Section 3(1) will apply is too naive to be countenanced and proceeds on a misreading of the phrase "allowed to be sold in India" in isolation and e hors the provisions of the policy and the rules. As per paragraph 9.1 of Chapter 9 of the Export-Import Policy 1997-2002 which was applicable to the present case, the units undertaking to export their entire production of goods, were to be allowed to be set up under the 100% Export-Oriented Unit (EOU) Scheme. Therefore, there was no scope for diverting the production into the DTA. Under paragraph 9.6 such unit was required to execute a legal undertaking to fulfil the obligations stipulated in the letter of approval/intent, and was liable to penalty in or under any other law for the time being in force for the breach. Paragraph 9.9 of the EXIM Policy dealing with DTA sales, inter alia, provided that the entire production of the EOU unit shall be exported subject to Clauses (a) to (f) thereof. Clause (a) provided for approval by the Development Commissioner in consultation with the local customs authority for allowing sales of rejects up to 5% of the value of production, in the DTA. Clause (b) provided that 25% of the production in value terms may be sold in the DTA subject to payment of applicable duties. It was also provided that no DTA sale shall be permissible in respect of certain goods such as motorcars, alcoholic liquors etc. Thus, the goods for which no permission could be given were the goods, which were not allowed to be sold under the policy itself. Even the sale of 25% of the production terms of value, which could be sold in the DTA, was required to be dealt with as per the provision of Chapter VA of the Central Excise Rules, 1944 which was specifically enacted to deal with such removal for home consumption from 100% EOU. It would appear from the provisions of the EXIM Policy relating to the EOU scheme and the contents of the proviso to Section 3(1) read with Chapter VA of the Rules that, even to the limited extent to which the goods were allowed to be sold in the DTA under the policy itself, the requisite permission from the concerned officer was required in accordance with Chapter VA for their being treated as "goods allowed to be sold in India under the proviso to Section 3(1). These concessions of sale of such goods, were subject to the condition that, the excise duty payable thereon would be the amount of Customs duties that would be attracted to such like goods when imported. The rationale behind this provision is obviously to prevent the abuse of the concessions given to those who set-up such EOU units. The scheme was intended to boost up exports and the very purpose underlying the scheme would be frustrated if a unit purported to have been set up for genuine exports is allowed to divert its production to the DTA by simply paying duty under Section 3(1) read with the Schedule to the Central Excise Tariff Act. In fact, the only rate of excise duty payable in respect of such excisable goods produced and manufactured by 100% EOU would be under the proviso to Section 3(1) alone at the rate being the aggregate of the amount of Customs, duties and there is no scope whatsoever for applying the provision of the main provision of Section 3(1) in respect of the goods manufactured by 100% EOU and diverted to the domestic tariff area. It is precisely for this reason that the notifications were issued with a view to provide a concessional rate of duty in cases where the goods are allowed to be sold in India meaning thereby, their being sold in India in accordance with the provisions of the Rules in Chapter VA, more particularly Rule 100A which required permission of the concerned authority for such removal.
12. The contention that the Larger Bench decision in Himalaya International Ltd., stood overruled by the Hon'ble the Supreme Court is not at all borne out from the order of the Supreme court by which the matter was remitted to the Commissioner as noted above. The Division Bench, had after the issue of the applicability of the proviso to Section 3(1) was answered by the Larger Bench in favour of the Revenue proceeded to decide the connected issue of the applicability of the Notification No. 13/98 under which the assessee had claimed the benefit of effective rate of duty. The Hon'ble the Supreme court was entertaining an appeal filed by the Commissioner against the decision of the Division Bench in Himalaya International Ltd., and had passed the following order as reported in 2005 (179) ELT A100:
Delayed condoned.
Appeal admitted.
Heard parties.
Impugned judgment is set aside. The matter is remitted back to the Commissioner for consideration of not only the rate but also to decide the question whether the respondent is entitled to exemption keeping in mind the aspect as to whether the goods have or have not been manufactured from raw material produced or manufactured in India. The appeal stands disposed of accordingly. There will be no order as to costs.
It is obvious that the matter was remitted to the Commissioner on the question as to whether the respondent assessee was entitled to exemption and the rate. There is nothing in this order to indicate that Hon'ble Supreme Court was dealing with the issue of applicability of the said proviso, much less setting aside the finding given by the Larger Bench on the issue of law, which was decided in favour of the Revenue and could not have been challenged by the revenue in its appeal.
Since, admittedly, no permission was obtained, and the goods were not allowed to be sold in India, as contemplated by the provisions of the Act, rules and the EXIM Policy, the benefit of the said notification, which was available only in cases where the goods were allowed to be sold was not available to the respondent. There is also no substance in the contention that there is no challenge against the findings of the Commissioner (Appeals) that the benefit of the Notification No. 2/95 was not available to the respondent. The impugned order of the Commissioner (Appeals) cannot, therefore, be sustained and is hereby set-aside and the order of the adjudicating authority stands restored.
[Dictated and pronounced in the open Court]