Custom, Excise & Service Tax Tribunal
M/S. Sai Wardha Power Ltd vs Commissioner Of Central Excise, Nagpur on 21 August, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI LARGER BENCH Appeal No. E/89802/2013, E/89952 to 89954/2013 & E/89963 to 89966/2014 (Arising out of Order-in-Appeal No.NGP/EXCUS/000/APPL/101/14-15 dated 03.09.2013 passed by the Commissioner of Central Excise & Customs (Appeals), Nagpur.) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. P.S.Pruthi, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial) ============================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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M/s. Sai Wardha Power Ltd.
:
Appellant
VS
Commissioner of Central Excise, Nagpur
:
Respondent
Appearance
Shri J.C.Patel Advocate with
Shri D.H. Nadkarni, Advocate for Appellant
Shri Hitesh Shah, Commissioner (A.R) for respondent
CORAM:
Mr. M.V. Ravindran, Member (Judicial)
Mr. P.S.Pruthi, Member (Technical)
Mr. Ramesh Nair, Member (Judicial)
Date of hearing : 21/08/2015
Date of decision : 17/12/2015
ORDER NO.
Per : P.S. Pruthi
This Larger Bench has been constituted to decide whether in terms of Clause (b) of proviso to Section 35(B) (1) of the Central Excise Act, appeals against orders relating to rebate on goods supplied to SEZ, will lie to the Appellate Tribunal. The said proviso is reproduced below:
Provided that no appeal shall lie to the Appellate Tribunal and the Appellate Tribunal shall not have jurisdiction to decide any appeal in respect of any order referred to in clause (b) if such order relates to,
(b) a rebate of duty of excise on goods, exported to any country or territory outside India or on excisable materials used in the manufacture of goods which are exported to any country or territory outside India.
2. The background is that in some judgments the Tribunal entertained such appeals whereas in other cases the Tribunal viewed that it does not have jurisdiction. The Joint Secretary Revision Application (RA) has also entertained appeals in identical cases. Therefore, the need has arisen for a decision in the matter by the Larger Bench.
3. We find that as per the language of the legal provision, that is proviso to Section 35B(1) of the Act, the Appellate Tribunal shall not have jurisdiction to decide an appeal against an order relating to rebate of duty of excise on goods exported to any country or territory outside India or on excisable materials used in the manufacture of goods which are exported to any country outside India. Essentially what needs to be decided by us is whether the phrase exported to any country or territory outside India is to be understood mean physical export outside India or whether it can also mean supply of goods made to a SEZ in India which, under various provisions, acquires status of deemed export.
4. Heard both sides.
5. The Ld. Counsel for the appellant states that Section 35 should be strictly construed to mean physical exports outside India. According to him, the said proviso clearly ousts the jurisdiction of the Joint Secretary (RA). He relies on the case of Ballarpur Industries Limited Vs. Union of India 1987 (27) E.L.T. 414 (Bom.). Further, he relies on the Honble Gujarat High Court decision in the case of Essar Steel Limited Vs. Union of India 2010 (249) E.L.T.3 (Guj.) to state that even if supplies to SEZ are treated as export, such legal fiction should be confined to the purpose for which it has been created. This judgment was upheld by the Supreme Court in Special Civil Application No. 9656/2008 reported in 2010 (249) E.L.T. 3 (Guj.) A115(S.C.).
5.1 The next contention is that Section 26 of the SEZ Act 2005 provides for exemptions, drawback and concessions to Developers and Entrepreneurs. Specifically, it provides for exemption from Customs duty on goods exported from a SEZ to any place outside India. Similarly, it provides exemption from duty of excise on goods brought from Domestic Tariff Area (DTA) to a SEZ. In short, Section 26 clearly recognizes the separate aspects of export to any place outside India and goods brought from Domestic Tariff Area to a SEZ. Thus, it recognizes the aspect of physical export to any place outside India but does not speak of the goods brought from DTA to SEZ as export. Further, the procedure for procurement of goods from DTA to SEZ is laid in Rule 30 of SEZ Rules 2006 wherein the supply of goods is to be done as in the case of exports. The Ld. Counsel stated that the supply itself is not considered as export, only the procedure to be followed shall be as in the case of exports. In this context he also referred to referred Board Circular No. 6/2010-Cus dt. 19.3.2010 which clarifies that the rebate under Rule 18 is allowed under a procedure which is obtained by modifying the procedure for normal export.
5.2. The last contention of the Ld. Counsel is that the legal fiction which is sometimes contemplated expressly in the statute should only be considered so for the purpose for which it is created. He relied on the case law Mancheri Puthusseri Ahmed and Ors. in Civil Appeal No.868 of 1980 Etc. (1996)6SCC185, and Commissioner of Income Tax, Kanpur Vs. Mother India Refrigeration Industries P. Ltd.
6. The Ld. AR took us through the statutory provisions under which rebate is sanctioned. He drew attention to proviso to Section 11B under which rebate is paid on excisable goods exported out of India. The rebate is granted under Rule 18 of Central Excise Rules 2002 subject to conditions/limitations/procedure prescribed on goods which are exported to a place outside India. The term export includes shipment of goods as provision or stores for use on board a ship. Essentially, the argument is that the Central Excise Act/ Rules is the only statutory provision for grant of rebate on exports. Therefore if supplies made to a SEZ is not considered as export, then the question of sanction of rebate does not arise. In Board Circular No. 29/2006 dt. 27.12.2006 the important provisions of SEZ Act are listed. One of the provisions is Section 2(m) which states that supplying goods from DTA to a SEZ has been defined to constitute export. Another provision, Section 53 of the SEZ Act, states that a Special Economic Zone shall be deemed to be territory outside the Customs territory of India. Further, under the same circular it is laid down that the procurement of goods from DTA to SEZ shall be on the basis of ARE-1/Bill of Export as in the case of regular exports. It also states that in the case of non-receipt of proof of such export in the form of endorsement on ARE-1, duty shall be demanded from the DTA supplier. The contention of the Ld. AR is that all these provisions clearly warrant that supplies from DTA to SEZ are to be treated as export. Ld. AR relied on the Apex Court judgment in the case of Industrial Supplies Pvt. Ltd. Vs. Union of India (1980) 4 Supreme Court Cases 341 in which the Apex Court held that full effect must be given to the statutory fiction and it should be carried towards its logical conclusion.
7. We have given careful consideration to the submissions made by both sides.
The issue involved is very clear and needs no repetition. We note the divergent judgments on the issue at hand. In the case of Hindustan Petroleum Corpn. Ltd. Vs. Commissioner of C.Ex. Mumbai 2013 (294) E.L.T. 509 (Tri.-Mumbai) the Tribunal held that appeal against orders on refund in respect of goods supplied to SEZ are not maintainable under proviso (c) to Section 35 (1)of the Central Excise Act. In the case of Tata Consultancy Services Ltd. Vs. Commr. Of C. Ex. & S.T. (LTU), Mumbai 2013 (29) STR 393 (Tri.Mumbai) an appeal regarding refund in respect of services supplied to SEZ was entertained by the Tribunal. Also in Commissioner Vs. Shree PLA Pvt. Ltd. 2013 (296) ELT 282 (Tri-Bang), Tribunal decided on appeal relating to exports from DTA to SEZ. In Rohit Poly Product Pvt. Ltd. 2012 (284) ELT 137 (GOI) and in Indo Amines Ltd. 2012 (284) ELT 147 the Joint Secretary (RA) passed Orders-in-appeals against Orders-in-Appeal in matters relating to rebate on supplies from DTA to SEZ.
7.1 The Ld. Counsel for the appellant referring to the legal provisions such as Section 26 of the SEZ Act and Rule 30 of the SEZ Rules emphasized that where the statute intends to distinguish physical exports as a separate activity, it has done so as in Section 26. And where the intention is only to treat the supplies from DTA to SEZ as deemed export, then also the intention is brought out unambiguously by using the phrase as in the case if export. According to him, Board Circular No. 6/2010 and Rule 30 of the SEZ Rules clearly bring out that while dealing with supplies from DTA to SEZ, only the procedure applicable for exports made out of India shall be followed. We have seen the judgments cited by him.
7.2. In the case of Essar Steel Ltd. (supra) the issue was whether export duty can be imposed under the Customs Act, 1962 by incorporating the definition of the term export under the SEZ Act into the Customs Act. The facts in this case were that export duty was sought to be levied under the Customs Act on goods supplied from DTA to the SEZ. The Honble Court observed that a definition given under an Act cannot be substituted by the definition of the same term given in another enactment, more so, when the provisions of the first Act are being invoked. The Court went on to observe that even in the absence of a definition of the term in the subject statute, a definition contained in another statute cannot be adopted since a word may mean different things depending on the setting and the context. In this case what was sought to be done was to incorporate the taxable event under one statute into the other statute. The Court held this to be impermissible under the law. It was in this context that the court held that the legal fiction created under the SEZ Act 2005, by treating movement of goods from DTA to the SEZ as export, should be confined to the purposes for which it has been created. Although at first glance the judgments appears attractive to apply to the facts of the present case, on a deeper analysis, we find that the said judgment is made in a different context.
7.3 The whole purpose and effect of the statutory provisions of grant of rebate is to authorize the Joint Secretary RA to hear appeals against orders in the domain of export. It is true that proviso (b) to Section 35B(1) of the Central Excise Act specifically speaks only of exports out of India and seemingly ousts the jurisdiction of the Appellate Tribunal to decide appeals in cases of rebate on goods sent from DTA to SEZ. It is a historical fact that the SEZ Act 2005 come into existence much later than the Central Excise Act. In this context it could hardly have been the intention of Government to segregate rebate matters into two categories for appeal purposes - one category in respect of exports to a place outside India and another category in respect of so called deemed exports from DTA to a SEZ. It appears that a suitable amendment to the proviso to Section 35B was overlooked in 2005 to bring supplies to SEZ under its ambit. Nevertheless, the question arises whether the said legal provision can be ignored to reach a conclusion that the second category of cases will also get covered under the proviso to Section 35B In our view an interpretation holding such inclusion as valid will not lead to ousting of jurisdiction without reason. It will not lead to an impermissible illegality; it will only rationalize and streamline the procedural law as it was intended to be. It will not render anything redundant or unworkable. The conclusion that, even supplies to a SEZ will get covered by the proviso to Section 35B will only result in an ancillary or natural consequence of reading the words deemed export into the word export in the proviso to Section 35B. In this context a very apt reference may be made to the Supreme Court judgment in the case of Industrial Supplies Pvt. Ltd.(supra) wherein the court held as follows:
It is now axiomatic that when a legal fiction is incorporated in a statute, the court has to ascertain for what purpose the fiction is created. After ascertaining the purpose, full effect must be given to the statutory fiction and it should be carried to its logical conclusion. The court has to assume all the facts and consequences which are incidental or inevitable corollaries to giving effect to the fiction. The legal effect of the words as if he were in the definition of owner in Section 3(n) of the Nationalization Act read with Section 2(1) of the Mines Act is that although the petitioners were not the owners, they being the contractors for the working of the mine in question, were to be treated as such though, in fact, they were not so. The oft-quoted passage in the judgment of Lord Asquith in East End Dwelling Co. Ltd. Vs. Finsbury Borough Council brings out the legal effect of a legal fiction in these Words:
2. LR 1952 AC 109, 132 If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequence and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it The statute says that you must imagine a certain state of affairs it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.
In view of the judgment above, in our view a harmonious construction of the various provisions of law would lead to the conclusion that the appeals in cases of rebate on goods supplied to a SEZ will not lie to the Tribunal.
7.4. We have also gone through the judgment in the case of Mancheri Puthusseri Ahmed and Ors.(supra). We may reproduce the relevant para as below:
In the first place the Section creates a legal fiction. Therefore, the express words of the Section have to be given their full meaning and play in order to find out whether the legal fiction contemplated by this express provision of the Statute has arisen or not in the facts of the case. Rule of construction of provisions creating legal fictions is well settled. In interpreting a provision creating a legal fiction the Court is to ascertain for what purpose the fiction is created, and after ascertaining this, the Court is to assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction. But in so construing the fiction it is not to be extended beyond the purpose for which it is created, or beyond the language of the section by which it is created.
In consonance with the above judgment we find that reading proviso (b) to Section 35B to mean that it includes cases relating to goods supplied from DTA to SEZ is only an inevitable corollary to holding that such supplies may be treated as export. While doing so the legal fiction is not being extended beyond the purpose for which it was created. We hold so because there does not appear to be any intent to treat such deemed exports differently for the purpose of proviso (b) to Section 35 (1) of the Act.
8. A striking contention of the Ld. AR which appeals to us is that the only statutory provision for grant of rebate lies in Section 11B read with Rule 18 of Central Excise Rules which is for goods exported out of the country. If the supplies to SEZ is not treated as such export, there being no other statutory provisions for grant of rebate under Rule 18, the undisputable consequence and conclusion would be that rebate cannot be sanctioned at all in case of supplies to SEZ from DTA units. Certainly such conclusion would result in a chaotic situation and render all circulars and Rules under SEZ Act ineffective and without jurisdiction as far as grant of rebate on goods supplied to SEZ is concerned. The contra argument is that Section 51 of the SEZ Act would have over riding effect and the rebate can be sanctioned in terms of the provisions of Section 26 of the SEZ Act. We note that Section 26 only provides for exemption of excise duties of goods brought from DTA to SEZ. It does not provide for rebate of duty on goods exported out of the country. Therefore there is no conflict or inconsistency between the provisions of the SEZ Act and Central Excise Act so as to invoke the provisions of Section 51 of the SEZ Act. Our view is strengthened by the Honble High Court judgment in the case of Essar Steel Ltd. which held that Section 51 of the SEZ Act, 2005 providing that the Act would have overriding effect does not justify adoption of a different definition in the Act for the purposes of another statute. A non-obstante clause only enables the provisions of the Act containing it to prevail over the provisions of another enactment in case of any conflict in the operation of the Act containing the non-obstante clause. In other words, if the provision/s of both the enactments apply in a given case and there is a conflict, the provisions of the Act containing the non-obstante clause would ordinarily prevail. In the present case, the movement of goods from the Domestic Tariff Area into the Special Economic Zone is treated as an export under the SEZ Act, 2005, which does not contain any provision for levy of export duty on the same. On the other hand, export duty is levied under the Customs Act, 1962 on export of goods from India to a place outside India and the said Act does not contemplate levy of duty on movement of goods from the Domestic Tariff Area to the Special Economic Zone. Therefore, there is no conflict in applying the respective definitions of export in the two enactments for the purposes of both the Acts and therefore, the non-obstante clause cannot be applied or invoked at all.
9. In view of the above analysis, it is our considered view that in respect of rebate on goods supplied from DTA to SEZ within India, the appeals would not lie to the Appellate Tribunal under clause (b) of proviso to Section 35(1) of the Central Excise Act.
(Pronounced in court on 17/12/2015)
(M.V. Ravindran)
Member (Judicial)
(P.S.Pruthi)
Member (Technical)
Ramesh Nair
Member (Judicial)
Sm
13
Appeal No. E/89802/2013, E/89952 to 89954/2013 &
E/89963 to 89966/2014