Customs, Excise and Gold Tribunal - Mumbai
Fabworth (India) Ltd. And Woolworth ... vs Commissioner Of Central Excise, Nagpur on 18 October, 2001
Equivalent citations: 2002(147)ELT478(TRI-MUMBAI)
JUDGMENT
P.G. Chacko
1. M/s Fabworth (India) Limited [in short, FABWORTH] are the appellants in appeal Nos. E/902 to 904/96 and appeal Nos. E/929 to 933/98 preferred against Order-in-Original No. 59-61/95 dated 9.11.95 and Order-in-Original No. 111-115/97 dated 27.11.97 respectively, of the Commissioner of Central Excise, Nagpur. M/s woolworth (India) Limited [in short, WOOLWORTH] are the appellants in appeal Nos. E/924 to 928/98 preferred against Order-in-Original No. 116-120/97 dated 27.11.97 of the same Commissioner. Both the companies have their hundred percent export-oriented units [100% EOUs] in the MIDC Industrial Area, Butibori, Nagpur District. FABWORTH's unit manufactures various processed (i.e. subjected to processes such as hydroextraction, dying, stentering, heat-setting etc.) fabrics with the grey fabrics received from their sister unit (100% EOU) working at Raipur, and exports the same. The processed fabrics so manufactured and exported are all-wool worsted fabrics (Sub-Heading 5111.22 of the Schedule to the Central Excise Tariff Act 1985), wool-silk fabrics (SH 5111.22) and poly-wool fabrics (SH 5513.22). WOOLWORTH'S 100% EOU at Butibori is engaged in the manufacture of various kinds of yarns viz. all-wool yarn and poly-wool yarn falling under Chapters 51 and 55 of the Schedule to the Central Excise Tariff Act), and export thereof.
2. 100% EOUs like the appellants' units at Butibori-approved as 'hundred percent export-oriented undertakings's by the competent authority under the Industries (Development and Regulation) Act and the Rules thereunder, and holding warehouse licence and manufacture licence issued by competent authorities under Section 58 and 65 respectively of the Customs Act- are, under the EXIM policy of the Central Government, entitled to numerous concessions such as exemption from levy of Customs duty on imported raw materials etc. They are permitted to sell 25% of their production in the Domestic Tariff Area [in short, DTA] i.e., within India, with prior permission of the Development Commissioner, and subject to payment of duty of excise under the proviso to Section 3(1) of the Central Excise Act, 1944 read with any Exemption Notification issued under Section 5A of the Central Excise Act.
(3.1) The proviso to Section 3(1) of the Central Excise Act, as it stood prior to its amendment by the Finance Act 2000, reads as under:-
Provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured,-
(i) in a free trade zone and brought to any other place in india; or
(ii) by a hundred per cent export-oriented undertaking and allowed to be sold in India, shall be an amount equal to the aggregate of the duties of customs which would be leviable under Section 12 of the Customs Act, 1962 (52 of 1962) on like goods produced or manufactured outside India if imported into India, and where the said duties of customs are chargeable by reference to their value, the value of such excisable goods shall, notwithstanding anything contained in any other provisions of this Act, be determined in accordance with the provisions of the Customs Act, 1962 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975)".
(3.2) Notification No. 101/93-CE dated 27.12.93, issued under Section 5A of the Central Act, exempted all excisable goods manufactured in a 100% EOU and allowed to be sold in India in accordance with the provisions of paragraphs 102 and 114 of the EXIM POLICY 1992-97, from so much of the duty of excise leviable thereon under Section 3 of the above Act as was in excess of the amount calculated at the rate of 50% of each of the duties of customs which would be leviable under Section 12 of the Customs Act 1962 read with any other notification for the time being in force issued under Section 25(1) of the said Customs Act on like goods manufactured outside India if imported into India.
(3.3) Notification No. 2/95-CE dated 4.1.95, issued under Section 5A ibid., granted similar exemption to excisable goods manufactured in 100% EOU and allowed to be sold in India in accordance with the aforesaid provisions of EXIM POLICY, 1992-97.
4. The appellants viz. M/s FABWORTH and M/s WOOLWORTH had sold their respective products (manufactured in their 100% EOUs) in the DTA within the quantitative limits prescribed by the Development Commissioner in accordance with the EXIM Policy. When they did so, they paid, as duty of excise on the goods (for purpose of the Proviso to Section 3(1) of the Central Excise Act), 50% of the basic customs duty leviable under Section 12 of the Customs Act, availing the exemption under Notification No. 101/93-CE or Notification No. 2/95-CE, as applicable, and they filed with the department RT-13 returns under Rule 100-F of the Central Excise Rules for their monthly clearances of the goods. Upon scrutiny of the returns, the department felt that the assessees had short-paid duty. In the department's view, the assessees ought to have also paid additional duty of customs (Countervailing duty -CVD) leviable under Section 3 of the Customs Tariff Act, 1975 to the extent of the sum of 50% each of (i) Basic Excise Duty under Section 3 of the Central Excise Act (ii) Additional Excise Duty under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act 1957 and (iii) Additional Excise Duty under Section 3 of the Additional Duties of Excise (Textiles & Textile Articles ( Act 1978. Therefore, show-cause notices [SCNs] were issued to the two assessees under Section 11-A of the Central Excise Act and the same were contested. The notices, referring to various provisions of law, contended that additional duty of customs (CVD) under Section 3 of the Customs Tariff Act was not a duty envisaged under Section 12 of the Customs Act and that the due payable under Section 3 of the Central Excise Act was only the basic customs duty under Section 12 of the Customs Act. The Notifications cited in this context were Notification No. 2/95-CE w.e.f. 4.1.95 and Notification No. 101/93-CE applicable to period prior to that date. The assessees had availed the partial exemption from duty under the said notifications for the relevant periods and accordingly paid 50% of the basic customs duty on the goods which they had manufactured in their 100% EOUs and cleared to the DTA during such periods. They contended that, no CVD being payable on their goods for purposes of Section 3 of he Central Excise Act, there was no short-payment of duty on their part. Even if it be assumed that CVD was payable, they submitted, they could still avail complete exemption from payment of Additional Duties of Excise (leviable under the 1957 Act and the 1978 Act) (which duties were also included in the department's demand of CVD) under various Exemption Notifications. In this connection, they cited the Notifications, No. 127/84-CE dated 26.5.84 and No. 55/91-CE dated 25.7.91.
5. The Commissioners adjudicating the dispute followed the Supreme Court's ruling in Khandelwal Metal & Engineering Works v. Union of India [1985 (20) ELT 222 (SC)] to hold that the assessees were required to pay (in addition to basic customs duty under Section 12 of the Customs Act) additional customs duty (DVD) under Section 3(1) of the Customs (Tariff Act comprising basic excise duty (leviable under the Central Excise Act ) and additional excise duties (leviable under the 1957 and 1978 Acts). The Commissioners rejected the assessees' contentions and confirmed the department's demand of CVD against them to the extent of the sum of 50% each of the basic excise duty and the additional excise duties as raised in the various SCNs. They also imposed penalties on the assessees. Shri Nagarkar's Order-in-Original No. 59-61/95 was passed against M/s FABWORTH in adjudication of three SCNs covering the periods, September 1994, October- December 1994 and January - March 1995 and the same has been challenged in appeal Nos. E/902-904/96. Sh. K.C. Singh's Order-in-Original No. 111-115/97 was passed against the same party in adjudication of five SCNs (three of them with corrigenda) covering the periods, April-June 1995, July-October 1995, November 1995-January 1996, February-May 1996 and June-July 1996 and the same is under challenge in appeal Nos: E/929-933/98. His Order-in-Original No. 116-120/97 was passed against M/s WOOLWORTH in adjudication of five SCNs (one of them with corrigendum) covering the periods, September 1995, January 1996, February-June 1996, September 1996-February 1997 and March-June 1997 and the same has been impugned in appeal Nos. E/924-928/98. The appellants have particularly challenged the inclusion of special customs duty in the demand of duty confirmed by Sh. K.C. Singh, Commissioner, in his two orders-in-original. This challenge is on the ground that there was no demand of special customs duty in the relevant SCNs.
6. Examined the records and heard both sides.
(7.1) Ld. advocate, Sh. V. Sridharan submitted that the decision of the Commissioners on the CVD issue following the Supreme Court's ruling in Khandelwal Metal & Engineering Works v. UOI (supra) was not sustainable in view of the said ruling having been overruled by the court's Constitution Bench in the case of Hyderabad Industries Limited v. Union of India [1999(108) ELT 321 (SC)] --[1999(32) RLT 541 (SC)]. The Constitution Bench held that the Charging Section for the levy of additional duty of customs (CVD), equal to the excise duty for the time being leviable on like goods if manufactured in india, was not Section 12 of the Customs Act but Section 3 of the Customs Tariff Act. The additional duty of customs leviable under Section 3 of the Customs Tariff Act was independent of the customs duty leviable under Section 12 of the Customs Act. Relying on this ruling of the Constitution Bench, Id. counsel argued that the additional duty of customs leviable under Section 3 of the Customs Tariff Act was not at all relevant for computing the duty payable on the goods manufactured by 100% EOUs and cleared to DTA. What was relevant for the purpose was only the basic customs duty leviable under Section 12 of the Customs Act as could be understood from the text of the proviso to Section 3(1) of the Central Excise Act. The counsel also cited the following cases wherein the Tribunal followed the apex Court's ruling in Hyderabad Industries (supra) to hold that nay additional duty of customs was not leviable, under Section 12 of the Customs Act, on the goods manufactured by a 100% EOU and cleared to DTA:-
(i) Weston Electronics v. CCE [Final Order No. 1214/99-B dated 4.11.99].
(ii) CCE v. Weston Electronics [Final Order No. 312/2000-B dated 21.2.2000].
(iii) Pacific Granites Ltd. v. CCE [1999(114) ELT 917 (T) read with Misc. Order No. 39/2000-A dated 31.3.2000].
(7.2) Ld. advocate, once again, pointed out that it was only Section 12 of the Customs Act which was mentioned in the relevant context in the proviso to Section 3(1) of the Central Excise Act as well as in the equivalent context in Notification Nos. 101/93-CE and 2/95-CE during the entire period of dispute. Section 3 of the Customs Tariff Act was conspicuous for its non-mention in such contexts. However, Id. counsel fairly conceded that Section 3(1) of the Central Excise Act was retrospectively amended, by the Finance Act 2000, to include [in conjunction with "the Customs Act 1962"] "any other law for the time being in force" in the aforesaid context and that the Customs Tariff Act fell within the meaning of the expression so included. The amendment took effect from 1982 covering the entire period of dispute. Nonetheless, in the learned advocate's view, the appellants' case was not practically affected by such retrospective amendment in the absence of similar amendments to Notifications 101/93-CE and 2/95-CE. The Central Government, by Notification No. 38/99-CE dated 16.9.99 did amend Notification No. 2/95-CE thereby adding the expression "any other law for the time being in force" conjunctively with "the Customs Act" in the substantive context of the latter Notification. But, counsel hastened to add, such amendment was only prospective and hence did not have any impact on the appellant's case for the period of dispute. In this connection,k counsel relied on the Government Circular dated 24.9.99 issued in file No. 345/12/99-TRU, which, in the light of the apex Court's judgment in Hyderabad Industries (supra), clarified that any duties of customs other than the basic customs duty leviable under Section 12 of the Customs Act would not be includible in the computation of excise duty payable on the DTA clearances by 100% EOUs and that the changes brought about in Notifications 2/95-Ce etc. by Notification No. 38/99-Ce were effective from 16.9.99.
(7.3) Without prejudice to his submissions made so far, Id. advocate claimed, for this clients, the benefit of various Exemption Notifications viz. Notn. No. 27/95-CE dated 16.3.95 (upto 23.7.96) and Notn. No. 12/96-CE dated 23.7.96 (from 23.7.96) in respect of basic excise duty on poly-wool fabrics; Notn. No. 127/84-CE dated 26.5.84 and Notn. No. 55/91-Ce dated 25.7.91 in respect of additional excise duties on all the products under the 1957 Act and the 1978 Act respectively. He also cited the Board's Circular No. 384/17/98-CX dated 20.3.1998 in support of the appellants' claim to exemption under Notn. Nos. 127/84-CE and 55/91-CE. The counsel, further, challenged the demand of special customs duty (leviable under the Finance Act, 1996) as beyond the scope of the relevant SCNs
8. Ld. Senior Departmental Representative, Smt. Reena Arya contended that, as far as the periods material to these appeals were concerned, the ruling of the Supreme Court in Khandelwal case was the law on the main point being agitated in these cases and the Commissioners were only following that law in passing the impugned orders. She, therefore, sought to justify the decision of the Commissioners on the point. The DR further argued that, such the retrospective amendment of Section 3 of the Central Excise Act by the Finance Act 2000, it became inescapable for 100% EOUs like the appellants to pay (towards duty of excise on their products cleared to DTA) the sum of the basic customs duty leviable under Section 12 of the Customs Act and the additional customs duty leviable under Section 3 of the Customs Tariff Act. As the amended law operated retrospectively from 1982, the appellants had no escape from such liability for any part of the period of dispute, she asserted. The apex Court's decision in Hyderabad Industries did not help them avoid paying the duty leviable under Section 3 of the Customs Tariff Act. Ld. SDR submitted that the appellants had paid only the basic customs duty element of excise duty, under Section 3(1) of the Central Excise Act, which they rightfully paid at the effective rate of 50% in terms of Notification No. 101/93-CE or 2/95-CE. They did not pay any amount towards the CVD (additional customs duty) element of such excise duty, which, under Section 3 of the Customs Tariff Act, was equal to the duties of excise for the time being leviable on like goods manufactured in India. The appellants have not disputed that goods identical to those cleared from their EOUs to DTA were actually manufactured in India and that basic excise duty and additional excise duties were leviable on them under the Central Excise Act and the 1957 & 1978 Acts respectively during the relevant period. Therefore, Id. Dr submitted, the appellants were liable to pay as CVD an amount equal to the sum of 50% each of these duties of excise in terms of Notification No. 101/93-CE or 2/95-CE. According to the DR, the amendment to Notification No. 2/95-CE , brought about by Notification No. 38/99-CE, should be considered to be retrospective in operation so that the legislative purpose underlying the retrospective amendment of the proviso to Section 3(1) of the Central Excise Act was not defeated. The DR pointed out that the Customs Tariff Act fell within the meaning of the phrase "any other law for the time being in force" incorporated by amendment in the proviso to Section 3(1) of the Central Excise Act as well as in Notification No. 2/95-CE and that, under the amended law, 50% of the CVD leviable under Section 3 of the Customs Tariff Act was payable on the goods cleared by the EOUs to DTA during the period of dispute, which was equal to the sum of 50% each of the duties of excise under the Central Excise Act, the 1957 Act and the 1978 Act on like goods manufactured in India during such period. The Commissioner's order were in keeping with this legal position and hence not liable to be interfered with. Insofar as the demand of special customs duty and the question whether the benefits of the various other Exemption Notifications cited by the advocate were available to the assessees were concerned, the DR has left the matter to the Bench.
(9.1) We have considered the submissions. The main issue that has emerged for our examination is whether, in terms of the retrospectively amended proviso to Section 3(1) of the Central Excise Act read with Notification No. 101/93-CE or Notification No. 2/95-CE, the appellants were liable, in respect of the goods manufactured in their EOUs and cleared to DTA, to pay (in addition to 50% of the basic customs duty under Section 12 of the Customs Act) 50% of the additional customs duty (CVD) under Section 3 of the Customs Tariff Act equal to the sum of 50% of each of the duties of excise leviable under the Central Excise Act, the 1957 Act and the 1978 Act on like goods manufactured in India during the relevant period. We have already read earlier in this orders the proviso to Section 3(1) of the Central Excise Act as it stood before the amendment under reference. After the amendment, made with effect from 11.5.1982 by Section 92 of the Finance Act 2000, the proviso reads as under:-
"Provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured,-
(i) in a free trade zone and brought to any other place in India; or
(ii) by a hundred per cent export-oriented undertaking and allowed to be sold in India, shall be an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 (52 of 1962) or any other law for the time being in force, on like goods produced or manufactured outside India if imported into India, and where the said duties of customs are chargeable by reference to their value; the value of such excisable goods shall, notwithstanding anything contained in any other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1962 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975)".
It is indisputable that the Customs Tariff Act 1975 is well within the meaning of the phrase "any other law for the time being in force" and hence the CVD leviable under Section 3 of that Act on like goods if imported into India will also enter into the computation of duty of excise chargeable, under the above amended provision of Section 3(1) of the Central Excise Act, on products of 100% EOUs cleared to DTA. The above amended provision of law is deemed to be in operation since 11.5.1982 and the same covers the entire period of dispute involved in these appeals. Therefore there can be no controversy over the liability of the appellants to pay (in addition to the basic customs duty element) the CVD element of the measure of duty of excise chargeable on their products (sold in DTA) under the proviso to Section 3(1) o the Central Excise Act during the said period. The question which immediately crops up is how apply Exemption Notifications 101/93-Ce and 2/95-CE to this situation.
(9.2) Notification No. 101/93-CE and Notification No. 2/95-CE (prior to its amendment by Notn. No. 38/99-CE had exempted the EOU products cleared to DTA, from so much of the duty of excise leviable thereon under Section 3 of the Central Excise Act as was in excess of the amount calculated at the rate of 50% of each of the duties of customs which would be leviable under Section 12 of the Customs Act. After its amendment by Notification No. 38/99-CE dated 16.9.99, Notn. No. 2/95-CE exempts the EOU products (cleared to DTA) from so much of the duty of excise leviable thereon under Section 3 of the Central Excise Act as is in excess of the amount calculated at the rate of 50% of each of the duties of customs which would be leviable under the Customs Act or under any other law for the time being in force. Obviously the Customs Tariff Act has been brought--through the phrase "any other law for the time being in force" -- within the scheme of calculation of the amount effectively payable by the EOU by availing the benefit of exemption granted by the Notification. It appears to us from the Notification (As amended on 16.9.99) that whatever amount of duty in excess of the sum of 50% each of the basic customs duty under Section 12 of the Customs Act and the CVD under Section 3 of the Customs Tariff Act is covered by the exemption w.e.f. 16.9.99. in respect of EOU products cleared to DTA. Applying the same logic to the situation obtaining prior to the amendment of Notification No. 2/95-CE, we would hold that whatever amount of duty in excess of the amount calculated at the rate of 50% of the basic customs duty under Section 12 of the Customs Act was exempted in respect of such products for the period prior to 16.9.99. The periods involved in these appeals are all prior to 16.9.99. No legislative intent to give retrospective effect to the above amendment in Notn. No. 2/95-CE is discernible. Had the legislature any such intent, it would have enacted appropriate provisions to make the above amendment retrospective. The notification was amended on 16.9.99 and the proviso to Section 3(1) of the Central Excise Act was amended later, i.e. on 12.5.2000 (the date on which the Finance Act, 2000 received the assent of the President). Without the latter (retrospective) amendment, the former would have been otiose in the light of the Supreme Court's rulling in Hyderabad Industries (supra) that the additional customs duty leviable under Section 3 of the Customs Tariff Act was not a levy under ?Section 12 of the Customs Act. In other words, the retrospective amendment of the proviso to Section 3(1) of the Central Excise Act made it possible for the Revenue to carry into effect the provisions of Notn. No. 2/95-Ce as amended by Notn. No. 38/99. however, Parliament did not provide for retrospective operation of the amendment in Notn. No. 2/95-CE, though it was open to Parliament to do so. We, therefore, are unable to apply the aforesaid amended provision of Notn. No. 2/95-CE to the appellants' case involving periods prior to 16.9.99.
(9.3) At the same time, the legislative intent behind the retrospective amendment of the proviso to Section 3(1) of the Central Excise Act is obviously that, in respect of products of 100% EOUs like the appellants, the CVD leviable under the Customs Tariff Act on like goods if imported into India should, along with the basic customs duty leviable under the Customs Act, constitute the measure of the duty of exercise chargeable on the said products under Section 3 of the Central Excise Act for all periods from 11.5.1982. But our views, already expressed, on the applicability of Notn. No. 2/95-CE to the pre-16.9.99 period seem to be inconsistent with the above legislative intent, particularly in view of the validation provisions of Section 109 of the Finance Act, 2000. We realise that the issue under examination is of vital importance to the Revenue as well as to the 100% EOUs in the country. We feel, it is necessary that the issue be examined by a Larger Bench.
10. The Registry is directed to place the papers before the Hon'ble President for constituting a Larger Bench for the aforesaid purpose.