Customs, Excise and Gold Tribunal - Delhi
Amitex Silk Mills P. Ltd. vs Commissioner Of Central Excise on 13 July, 2004
Equivalent citations: 2005(98)ECC264
ORDER K.D. Mankar, Member (T)
1. In all these are four appeals from the appellants, who are a 100% E.O.U. The dispute relates to duty liability in respect of Rejects and Waste of grey fabrics and twisted yarn cleared by the appellants from their E.O.U. to the domestic tariff area (D.T.A). In the show cause notices following two common grounds are raised:
(a) There was no valid permission for D.T.A. sale, and
(b) After 1.4.1999, the Exim Policy prescribed D.T.A. entitlement based on F.O.B. value of export i.e. physical export only and not deemed exports.
1.1 The Commissioner of Central Excise confirmed the demands raised in each of the four show cause notices and imposed equal amounts of penalties in each case as indicated thereunder:
Sr. No. Appeal No. Order-in-Original No. & Date Show Cause Notice No. & Date Amount of Duty& Penalty (Rs.) Period Finished goods 1 E/3079/02 32/Dem/2C 02 dtd. 9.9.2002 V (Ch. 54) 3-41/Dem/Ol dtd. 27.6.2001 D-7,71,222 P-7,71,000 Jan. to Teb.2001 Grey Fabrics (Rejects & Waste) 2 K/3080/02 30/Dcm/20 02 dtd. 26.8.2002 V (Ch. 54) 3-42/Dem/Ol dtd. 28.6.2001 D-2,69,424 P-2,69,000 Feb. to April 2001 Twisted Yarn (Rejects & Waste) 3 E/308V02 33/Dem/20 02 dtd. 9.9.2002 V (Ch. 54) 3.71/Dem/( Idtd. 5.7.2001 D-8,19,800 P-8,20,000 Mar to April 2001 Grey Fabrics (Rejects & Waste) 4 F./3082/02 29/Dem/20 02 dtd. 26.8.2002 V (Ch. 54) 3-l5/Dem/01 dtd. 4.7.2001 D-4,54,940 P-4,54,940 Feb. to Aug. 2000 Polyester Twisted Yarn (Rejects & Waste)
2. The appellants attack against the findings recorded by the adjudicating authority is on two main grounds:
(i) The words "50% F.O.B. value of exports" would also include deemed export under para 9.9 of the policy.
(ii) In case of Rejects, Waste etc., no D.T.A. permission is required.
3. We have heard both sides.
4. On perusing the contents of the impugned order, we note that, the appellants have made a claim for duty concession in terms of Notification No. 20/98-CE dt. 18.7.1998. We note that, the said claim was rejected on the ground that, the said exemption can be extended only in the event the finished goods were manufactured from indigenous raw materials. It was held that, since the raw materials were received from the other 100% EOU, these are deemed to be imported materials. As far as this objection is concerned, we note that, it is totally contrary to the law EOUs being domestic units the products made therein are obviously indigenous. Case laws in the case of (i) Vikram Ispat, 2000 (120) ELT 800 (Tri. LB) (ii) CCE Jaipur v. Maiden Trading Co. Pvt Ltd., 2001 (132) ELT 431 (Tri.-Del). Accordingly we hold that the appellants are entitled to the said exemptions in the absence of any other ineligibility having been established.
5. We note that the adjudicating authority has focussed his findings on the third proviso to Notification No. 2/95-CE, which specifically requires that Assistant/Deputy Commissioner is required to be satisfied that total value of clearance for home consumption does not exceed 50% of the F.O.B. value of exports made in the financial year. The said proviso also requires the AC/DC to satisfy as to whether the unit has fulfilled the minimum Net Foreign Exchange Earnings as a Percentage of Exports (NFEP) prescribed in Appendix I of the said policy. The adjudicating authority also has mentioned that, in terms of amendment made to the Exim Policy with effect from 1.4.1999 the Development Commissioner was under legal obligation to permit the D.T.A. sales with reference to 50% of the value physical exports and not with reference to value including deemed exports.
5.1 In this connection, we would like to reproduce the relevant provision.
"Provided also that the exemption under this notification shall not be availed until the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the said goods, including software, rejects, scrap, waste or remnants,-
(a) being cleared for home consumption, other than scrap, waste or remnants are similar to the goods which are exported or expected to be exported from the units during specified period of such clearances in terms of Export and Import Policy, 1 April, 1997 - 31 March, 2002;
(b) the total value of such goods being cleared under paragraphs 9.9 and 9.20 of the Export and Import Policy, 1 April, 1997 - 31 March, 2002, for home consumption from the unit does not exceed 50% of the free on board value of exports made during the year (starting from 1st April of the year ending with 31st March of next year) by the said unit and the unit has fulfilled the minimum Net Foreign Exchange Earning as a Percentage of Exports (NFEP) prescribed in Appendix-I of the said Policy; and
(c) the balance of the production of the goods which are similar to such goods under clearance for home consumption, is exported out of India or disposed of in terms of paragraph 9.10 of the Export and Import Policy, 1 April, 1997-31 March 2002".
6. We further note that, while the adjudicating authority has proceeded on the ground that in terms of the said third proviso, the Assistant/Deputy Commissioner is empowered to determine the quantum of D.T. A. clearance for duty concession, countering this position, the appellants claim that such an exercise tantamount to sitting over the judgment of the Development Commissioner. The appellants have cited the judgments of CEGAT in the case of Ginni International Ltd. v. CCE, 2002 (79) ECC 85 (Tri-Del): 2002 (139) ELT 172 (Tri-Del) and subsequent judgments which relied on the case law of Ginni International Ltd. (Supra) to claim that once the permission was obtained from the Development Commissioner the excise authorities have no jurisdiction to question the contents of such permission.
7. We have perused the CEGAT judgment in the case of Ginni International Ltd. (Supra) which has been relied upon in the subsequent judgments of the CEGAT cited by the appellants. On carefully going through the text of the said judgment, we note that, certain facts present in that case are of critical significance. The first and foremost, there is no discussion in the said judgment that, in terms of the third proviso to Notification 2/95-CE, notwithstanding the permission granted by the Development Commissioner, it is the Assistant/Deputy Commissioner who is required to ascertain:
(i) Similarity of goods for D.TA sales with the goods exported.
(ii) the quantum of D.T.A. sales, and
(iii) the NPEP of the exports.
8. The next significant difference is that in Ginni International case as could be seen from the arguments put forth by the Ld. Counsel appearing for the appellants Ginni International, the AC/DC concerned and the adjudicating authority had, in fact, acting in terms of the powers conferred under the said third proviso, had reopened the matter, which was decided on the basis of the permission of the Development Commissioner.
9. It appears to us that, the entire thrust of the discussions in Ginni International case was that, once a competent authority (Development Commissioner in this case) had arrived at a finding regarding the quantum of entitlement, the excise authorities cannot sit over the judgment pronounced by that authority. It appears to us that the fact the AC/DC had not only the statutory power but also the statutory obligation to independently determine (i) similarity (ii) the quantum of entitlement, and (iii) N.F.E.P. in terms of the Exim Policy, was not highlighted before the Bench. As mentioned above, in the case of Ginni International the AC/DC had, infact exercised the powers under the said proviso and permitted clearances relying on the permission granted by the Development Commissioner. Therefore the issue of validity of AC /DC exercising the power under the third proviso did not come up before the bench for discussion because AC/DC had accepted the quantification done by the Development Commissioner and subsequently there was an attempt to reopen the matter. In the light of this subtle and critical difference on facts, the judgments cited by the appellants cannot provide assistance to them.
10. We would not have had any difficulty in accepting the propositions made by the appellants, that once competent authority viz. Development Commissioner grants a permission for D.T.A. clearance, then the Central Excise authorities are precluded from questioning its validity or correctness. The relied upon judgments, viz., (i) Ginni International (supra), (ii) Virton Textile Mills v. CCE, Mumbai-III, 2002 (139) ELT 371 (Tri.- Mum.) and (iii) Shabanam Synthetics v. CCE, 2002 (58) RLT 485 (CEGAT), do support this proposition.
10.1 However, as we have noted, in the case before us, a note is required to be taken of the fact that the third proviso to the notification specifically requires that AC/DC Central Excise is also required to be satisfied with the quantum of permissible clearances to D.T.A. in terms of the Policy. The entitlement to exemption flows from the said determination by the AC /DC Central Excise and not automatically from the fact of grant of approval by the Development Commissioner. In this connection in somewhat similar situation, the Hon'ble Supreme Court in the case of M/s. Sheshank Sea Foods v. UOI, 1996 (88) ELT 626 (SO held that, notwithstanding the fact that the D.G.F.T. authorities have the jurisdiction to determine the aspect of fulfilment of export obligation [under the Foreign Trade (DQR) Act] the custom authorities are also empowered to ascertain the aspect of fulfilment of export obligations for the purpose of entitlement to customs duty exemption in terms of customs Notification No. 204/92-Cus. This view is also further supported in terms of Supreme Court judgment reported in the case of British Airways PLC v. UOI, 2002 (139) ELT 6 (SC) where the Court ruled that:
"It is a cardinal principle of construction of a statute that effort should be made in construing the different provisions so that each provision will have its play and in the event of any conflict a harmonious construction should be given. The well known principle of harmonious construction is that effect shall be given to all the provisions and for that any provision of the statute should be construed with reference to the other provisions so as to make it workable. A particular provision cannot be picked up and interpreted to defeat another provision made in that behalf under the statute. It is the duty of the Court to make such construction of a statute, which shall suppress the mischief and advance the remedy. While interpreting a statute the Courts are required to keep in mind the consequences which are likely to flow upon the intended interpretation".
11. In this case also, in terms of specific powers having been conferred on the AC/DC Central Excise to determine this aspect for the purpose of ascertaining the availability of excise duty exemption and the exemptions being dependent only in terms of such determinations, the determination made by such authority namely AC/DC of the Central Excise, of the same aspect, cannot be treated as illegal or without the authority of law unless on facts and on legal basis such a determination is demonstrated to be incorrect. In the event the permission granted by the Development Commissioner alone is treated to be ultimate determitant of the exemption, then it has the effect of making the provisions of the third proviso redundant. As discussed above, in terms of the decisions of the Supreme Court the said interpretation has to be discarded.
11.1 Therefore, we hold that obtaining the permission from the Development Commissioner is only one of the steps and not the only step for seeking the benefit of exemption under Notification No. 2/95-CE and the Central Excise authorities (including the Commissioner of Central Excise) are well within their legal right to determine the quantum of D.T.A. clearances etc. as provided in the third proviso to the notifications.
12. Once having reached the above conclusion the next step would be to examine as to whether or not the exclusion of the quantum of deemed exports from the value of exports in terms of Exim Policy for arriving at the quantum of D.T.A. clearances for exemption under Notification No. 2/95-CE was correct. On this point we note that though the notification speaks of entitlement in terms of 50% F.O.B. value of exports the Exim Policy provisions nowhere mentions about inclusion of deemed exports. The terms "export" is well defined under Section 2(18) of the Customs Act, 1962, Unless the policy itself in specific terms provides that the term "export" in the said paragraph shall also include deemed exports, the term "export" has to be accorded its natural meaning especially the meaning which is assigned to the term in Customs and Central Excise when the subject deals with excise exemptions. In this regard, the appellants themselves have relied upon the judgment of the Tribunal in the case of Vikram Ispat (supra) and other judgments to claim that the supplies from 100% EOUs to their unit cannot be treated as import for the purpose of interpreting the scope of exemption Notification No. 20/98-CE dated 18.7.98, to which we have agreed as per our findings recorded in para 5. In the said judgments the Tribunal had relied upon the definition of the term import under Section 2 (23) of the Customs Act to hold that clearances from 100% EOU to D.T.A. is not import. Therefore, what is stated for import (with reference to inward flow of goods in a 100% EOU) will also apply for export (outward flow of goods from a 100% EOU) defined under Section 2 (18) of the Customs Act, since there cannot be different standards for interpreting import and export. Therefore, if sourcing of goods by a 100% EOU from a 100% EOU by applying definition of import contained in the Customs Act, is not considered as an import, then sale of goods to any unit in a domestic market (even to a 100% EOU) cannot be considered as 'export'.
12.1 We therefore, are in agreement with the adjudicating authority that the value of deemed export was required to be excluded and the central excise authorities were not required to be bound by the wrong quantification of the D.T.A. clearances fixed by the Development Commissioner.
13. The next issue relates to clearance of wastes for which in terms of provisions of the Exim Policy it is claimed that no permission is required. In other words there is an open permission to clear that waste on payment of applicable duty. From the provisions of para 9.9 of the Exim Policy it is noted that rejects upto 5% of the value of production are permitted to be sold in the D.T.A. sale of rejects above 5% are to be approved by the Development Commissioner concerned in consultation with the local customs authorities. Therefore we agree with the appellants that since no permission from the Development Commissioner is required in respect of clearance of waste, they are entitled to the duty concession applicable to D.T.A. clearance.
14. So far as the claim for duty concession in respect of the rejects is concerned, the clearance of rejects beyond 5% of the production value alone requires the permission of Development Commissioner in consultation with the customs authorities. We accordingly hold that, the quantities of rejects in excess of 5% of the production value cleared to D.T.A. are disentitled to the exemption. In this case no data is produced before us to indicate as to what the respective permissible and non-permissible quantities are. Therefore the matter is required to be remanded to the adjudicating authority for the limited purpose of re-quantification of duty liability, by confining the benefit of D.T.A. clearance to waste without any quantity restriction and to rejects only upto extent of 5% of the value of production, as stipulated in the Policy.
15. We also note that, the appellants had effected clearance to D.T.A. in violation of the provisions of Central Excise law and the imposition of penalty was justified. Since the quantum of duty is required to be recalculated the penalty also will require requantification.
16. Accordingly we hold that the appellants are liable to the duty and penalty. However, since the amount of duty liability and consequential penalty is required to be requantified, we remand the matter to the adjudicating authority for the limited purpose of requantification of the duty and penalty in the light of our observations in the preceding para. Except for this modification, the rest of the order of the Commissioner is confirmed and the appeal of the appellants in respect of these points stands rejected. The adjudicating authority shall recalculate the duty liability and penalty after hearing the party.
17. The appeal stands disposed of in the above terms.
Appeal Nos. E/3079-3082/2002-B. S.S. Kang, Member (J)
1. I have gone through the order written by Hon'ble Technical Member. Hon'ble Technical Member has taken the view that the value of deemed export was required to be excluded and the central excise authorities were not required to be bound by the wrong quantification of the D.T.A. clearances fixed by the Development Commissioner. This view was taken after distinguishing the decision of the Tribunal in the case of Ginni International, 2002 (79) ECC 85 (Tri-Del): 2002 (139) ELT 172. With due respect to the view taken by the learned Technical Member, I find that in the present case, the demand is confirmed and penalty is imposed on the ground that for the purpose of arriving at the D.T.A. sale only physical export effected by the assessee is to be taken into account and the deemed exports are to be ignored and the benefit of the notification is not available on the excess quantity removed by the assessee to the D.T.A. The admitted facts of the case are that D.T.A. clearance was made under the permission granted by the Development Commissioner and the contention of the appellants is that once the Development Commissioner has allowed them permission to sell the goods up to a fixed value in the D.T.A., the Revenue cannot disallow the clearance and demand duty on the ground that the entitlement was required to be restricted to 50 of the FOB value of the physical exports. I find that the issue involved in these appeals is considered by the Tribunal in the case of Ginni International (Supra) and held that as per Appendix 42 of Handbook of Procedure, the Development Commissioner of the EPZ concerned will determine the extent of the DTA sale admissible and issue a goods removal authorisation in terms of value and the Revenue cannot go beyond the permission and dispute the value of clearance allowed by the Competent Authority. From the facts and circumstances of the present case, I find that the ratio of the decision of the Tribunal in the case of Ginni International (Supra) is fully applicable and I find no reason to take a different view as the appellants were clearing the goods to DTA as per permission granted by the Development Officer. Therefore, the view taken by the Adjudicating Authority that the value of deemed exports was required to be excluded that the excise authorities are not bound by the wrong quantification of the D.T.A. clearances fixed by the Development Commissioner, is not sustainable and hence set aside. The consequential demand and imposition of penalty is also set aside. The appeals are allowed to this extent only.
DIFFERENCE OF OPINION Appeal Nos. E/3079-3082/2002-B "Whether taking into facts and circumstances of the case, the value of deemed export was required to be excluded and the Central Excise Authority were not required to be bound by the quantification of D.T.A. clearance fixed by the Development Commissioner as held by the Hon'ble Member (Technical) or in view of the decision of the Tribunal in the case of Ginni International, 2002 (79) ECC 85 (Tri-Del) : 2000 (139) ELT 172, the Revenue Authority cannot go beyond the permission and dispute the value of clearance allowed by the Development Commissioner as held by Member (Judicial)."