Custom, Excise & Service Tax Tribunal
Wockhardt Ltd vs Commissioner Of Central Excise And ... on 23 October, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
MUMBAI
REGIONAL BENCH - COURT NO. I
EXCISE APPEAL No. 86271 of 2015
(Arising out of Order-in-Original No. 05/C. Ex./Commr./2015 dated 18.02.2015 passed
by Commissioner of Central Excise, Customs & Service Tax, Aurangabad.)
Wockhardt Limited .....Appellants
(Biotech Park) Plot No.H-14/2,
MIDC, Waluj,
Aurangabad.
VERSUS
Commissioner of Central Excise, Customs & .....Respondent
Service Tax, Aurangabad N-5, Town Centre, CIDCO Aurangabad - 431 030.
APPEARANCE:
S/Shri Gajendra Jain a/w Rajesh Ostwal, Advocates and Shri Neeraj Bajaj, Chartered Accountant for the Appellants Shri Mahesh Patil, Authorized Representative for the Respondent CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL) FINAL ORDER NO. A/ 86699/2025 DATE OF HEARING: 24.04.2025 DATE OF DECISION: 23.10.2025 PER : M.M. PARTHIBAN This appeal has been filed by M/s Wockhardt Limited, Goa (herein after, referred to as 'the appellants'), assailing Order-in-Original No. 05/C.Ex./Commr./2015 dated 18.02.2015 (herein after, referred together as 'the impugned orders') passed by Commissioner of Central Excise, Customs & Service Tax, Aurangabad.
2.1 Briefly stated, the facts of the case are that the appellants herein is a 100% Export Oriented Unit (EOU) having four of its divisions viz., Biotechnology API, Biotechnology injections, Injections other than Biotechnology, Oral Solid Dosages (Tablets and Capsules) which are, inter alia, engaged in the manufacture/export of bulk drugs, medicaments, 2 E/86271/2015 tablets, injections including 'vaccines, injections, human insulin, injectables, pharmaceutical formulations' which are excisable goods under the Central Excise Tariff Act, 1985. They had also obtained Customs Bonded Warehouse License in terms of Section 58 & 65 of the Customs Act, 1965 duly issued by jurisdictional Assistant Commissioner of Central Excise & Customs, Aurangabad-II division, in respect of the EOU operations under bond. The appellants are also clearing the excisable goods in the Domestic Tariff Area (DTA) in terms of the notifications issued by the Ministry of Finance and the Foreign Trade Policy (FTP) issued by the Ministry of Commerce. For this purpose they are duly registered with jurisdictional Central Excise department with Registration No. AAACW2472MXM002.
2.2 In respect of the 100% EOU operations, the appellants were procuring duty free imported and indigenous capital goods and inputs by availing Notification No.52/2003-C.E. and 22/2003-C.E. both dated 31.03.2003 on the basis of Letter of Permission (LOP) dated 25.08.2003 as amended, issued by the Joint Development Commissioner, SEEPZ, Ministry of Commerce, Mumbai. Further, the said authority also gave advance DTA sale permissions to the appellants for clearance of goods manufactured by them in the domestic/local market vide letters dated 14.05.2004, 16.09.2004, 05.05.2005 and 08.03.2006 for a total value of Rs.48,29,50,000/- subject to conditions specified under Para 6.8(a) of the Foreign Trade Policy (FTP) and after payment of concessional duty at applicable rate.
2.3 In terms of Para 6.8(a) of the FTP, 100% EOU is entitled to clear the goods in DTA, provided such products are similar goods, which are exported or expected to be exported, subject overall ceiling of 50% of FOB value of exports and subject to fulfilment of positive NFE, upon payment of concessional Central Excise duty as specified vide Notification No.23/2003-C.E. dated 31.03.2003. However, the department had interpreted that the goods cleared in DTA are not 'similar goods' to those that are exported or to be exported in terms of Circular No. 12/2008- Customs dated 24.07.2008 issued by the Central Board of Excise and Customs (CBEC). Further, EOU unit has got advance DTA sale permission which is governed by para 6.8(k) and not under 6.8(a) of the FTP. Therefore, the department concluded that the appellants had contravened the FTP in clearance of such goods to the DTA by availing the 3 E/86271/2015 concessional rate of Excise duty to which they are not eligible and therefore, demanded the differential duty involved in such DTA clearances for the disputed period by invoking extended period of limitation under Section 11A ibid, besides imposition of penalty on the appellants under Section 11AC ibid read with Rule 25 of Central Excise Rules, 2002 under Sections 112(a) of the Customs Act, 1962. The above proposals made in the SCN was adjudicated by the learned Commissioner in confirmation of all the proposals vide the impugned order dated 26.02.2015. Being aggrieved with the impugned order, the appellants assessee have filed this appeal before the Tribunal.
3.1 Learned Advocate for the appellants submitted that the appellants have been granted Letter of Permission (LOP) from 2003 onwards and the relevant LOP dated 25.08.2013 issued by the Development Commissioner, Ministry of Commerce is for all items for which permission for manufacture and export was given. These include (i) Recombinant Hepatitis B; (ii) Recombinant Hepatitis B vaccine; (iii) Recombinant Erythropoietin bulk; (iv) Erythropoietin injection; (v) Recombinant human insulin bulk; (vi) Injectable human insulin and (vii) pharmaceutical Formulations.
3.2 Learned Advocate had also stated that the appellants had achieved positive Net Foreign Exchange (NFE) during the disputed period; all the products manufactured by them are used for pharmaceutical formulations and injectables. Therefore, he claimed that these are similar goods and given the condition applicable for DTA clearances as per Para 6.8(a) is up to 50% of FOB value of exports, for availment of concessional duty. Thus, he stated that the appellants have complied with the conditions of Notification No. 23/2003-C.E. dated 31.03.2003 and Para 6.8(a) of FTP.
3.3 Learned Advocate further stated that the competent authority for implementation of FTP being the Development Commissioner, had not raised any objection and have on the other hand had renewed their LoP from time to time, which indicate that they have complied with all the provisions of FTP. Further, Development Commissioner is the competent authority to decide whether goods are eligible for clearance in DTA in terms of FTP, and the said authority vide their letter dated 19.12.2014 has also accepted that the clearances made in DTA are within the entitlement and obligation provided under Para 6.8 of the FTP. Therefore, he claimed that the excise department does not have jurisdiction to 4 E/86271/2015 question otherwise. In this regard they relied upon the decision of the Tribunal in the case of Ginny International Vs. CCE - 2002 (139) E.L.T. 172 (T) which was maintained in the judgement of Supreme Court by upholding the said order of the Tribunal, reported in 2007 (215) E.L.T. A102 (S.C.). Advocate also stated that the condition for grant of concessional excise duty vide Notification No. 23/2003-C.E. dated 31.03.2003 to the effect that DTA clearances shall not exceed 50% of FOB value of exports, have also been duly fulfilled by the appellants.
3.4 He further stated that all facts regarding DTA clearances were known to the Department as such details were filed in the form of ER-2 returns; the appellants' EOU unit was audited by the Department and therefore, there are no grounds alleging any suppression, misrepresentation of facts etc. for demand of differential duty invoking extended period of time. On the above basis, he submitted that the demands confirmed in the impugned orders be set aside.
3.5 Learned Advocate stated that in respect of clearance of goods made by appellants to DTA, they had complied with all the laws and regulations laid down under Customs statute as well as FTP. In support of their stand, they relied upon the following decisions:
(i) BR Steel Products Private Ltd. Vs. Commissioner of Central Excise, Navi Mumbai - 2021 (378) E.L.T. 356 (Tri. - Mumbai.)
(ii) Abi Turnamatics Vs. Commissioner of GST & Central Excise -
2019 (366) E.L.T. 1048 (Tri. - Chennai)
(iii) Abi Showatech India Ltd. Vs. Commissioner of GST & Central Excise - 2019 (2) TMI 1186 - CESTAT Chennai
(iv) Axiom Cordages Limited Vs. Commissioner of Central Excise, Thane-II - 2021 (5) TMI 665 - CESTAT Mumbai affirmed by the Hon'ble Supreme Court
4. Learned Authorized Representative (AR) appearing for Revenue, reiterated the findings made by the Commissioner in the impugned order. He further stated that since the appellants had not correctly mentioned manufacture and clearance details in the period returns submitted to the Department, the demand of duty in the impugned order is sustainable.
5. Heard both sides and perused the records of the case. We have also perused the additional written submissions presented in the form of paper book for this case.
5E/86271/2015
6. The issues involved in these appeals are as follows:
(i) to determine whether the DTA clearance of excisable goods made by the appellants is in violation of Para 6.8(a)/6.8(k) of the Foreign Trade Policy or not?
(ii) whether the differential duty confirmed and imposition of penalty on the appellants in the impugned order is legally sustainable or not?
7. In order to address the above issues relating to Foreign Trade Policy, classification of excisable goods, we would like to refer the relevant legal provisions contained in Central Excise Act, 1944 for levy of Central Excise duty on 100% EOUs and Foreign Trade Policy. The disputed period in the case is from January, 2008 to September, 2015.
Central Excise Act, 1944 Valuation of excisable goods for purposes of charging of duty of excise.
"Section 3. Duties specified in First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 to be levied. -
(1) There shall be levied and collected in such manner as may be prescribed,-
(a) a duty of excise, to be called the Central Value Added Tax (CENVAT) on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in Schedule I to the Central Excise Tariff Act, 1985;......
Provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured,--
(i) xxx
(ii) by a 100% export - oriented undertaking and brought to any other place in India, shall be an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 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 at chargeable by reference to their value; the value of such excisable goods shall, notwithstanding anything contained in any other provision of this Act, we determined in accordance with the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975 (51 of 1975)......."
Foreign Trade Policy 2009 - 2014 "CHAPTER-6 EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE TECHNOLOGY PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS (STPs) AND BIO-TECHNOLOGY PARKS (BTPs).
Eligibility 6.1 Units undertaking to export their entire production of goods and services (except permissible sales in DTA), may be set up under the Export Oriented Unit (EOU) Scheme, Electronics Hardware Technology Park (EHTP) Scheme, Software Technology Park (STP) Scheme or Bio-Technology Park (BTP) 6 E/86271/2015 Scheme for manufacture of goods, including repair, re-making, reconditioning, reengineering and rendering of services. Trading units are not covered under these schemes....
6.8 DTA Sale of Finished Products/Rejects/Waste/Scrap/Remnants and by-products Entire production of EOU / EHTP / STP / BTP units shall be exported subject to following:
(a) Units, other than gems and jewellery units, may sell goods upto 50% of FOB value of exports, subject to fulfilment of positive NFE, on payment of concessional duties. Within entitlement of DTA sale, unit may sell in DTA, its products similar to goods which are exported or expected to be exported from units. However, units which are manufacturing and exporting more than one product can sell any of these products into DTA, upto 90% of FOB value of export of the specific products, subject to the condition that total DTA sale does not exceed the overall entitlement of 50% of FOB value of exports for the unit, as stipulated above. No DTA sale at concessional duty shall be permissible in respect of motor cars, alcoholic liquors, books, tea (except instant tea), pepper & pepper products, marble and such other items as may be notified from time to time. Such DTA sale shall also not be permissible to units engaged in activities of packaging/labelling/segregation/refrigeration unit/ compacting/micronisation/pulverization/granulation/conversion of monohydrate form of chemical to anhydrous form or vice-versa and such other items as may be notified from time to time.
Sales made to a unit in SEZ shall also be taken into account for purpose of arriving at FOB value of export by EOU provided payment for such sales are made from Foreign Exchange Account of SEZ unit. Sale to DTA would also be subject to mandatory requirement of registration of pharmaceutical products (including bulk drugs).
xxx xxx xxx xxx
(k) In case of new EOUs, advance DTA sale will be allowed not exceeding 50% of its estimated exports for the first year except the pharmaceutical units where this will be based on its estimated exports for the first two years."
8.1 On plain reading of the above legal provisions under the Central Excise Act, 1944 it transpires that in respect of domestic tariff area clearances of excisable goods by a 100% EOU, the levy of excise duty shall be determined as though it is the aggregate of customs duties that are leviable on like goods, when the goods are removed from EOU/bonded area into the DTA. Classification of the excisable goods are based on the Schedule to the Central Excise Tariff as given under the Central Excise Tariff Act, 1985. Central Excise classification had initially followed Six-digit classification code until 2003 and was broadly based upon HSN (Harmonized System of Nomenclature) classification. However, there were a number of differences with HSN classification and as such the 6-digit classification was not totally aligned with HSN, on the basis of which Customs Tariff has been designed. Eight-digit HSN based 7 E/86271/2015 Commodities Classification Code was adopted for the purpose of levy of Customs duty with effect from 01.02.2003. Same eight-digit Code was also adopted by DGFT for FTP/EXIM Policy and by DGCIS for compilation of trade statistics. In such background, the Central Government thought it is desirable to adopt a common commodity classification code for all trade related transactions so as to avoid disputes and facilitate smooth flow of trade. Accordingly, for the purpose of eight-digit classification code for levy of Central Excise duty also, Central Excise Tariff (Amendment) Act, 2004 was brought into force with effect from 28th February 2005. Therefore, it can be seen that classification of goods for the purposes of Central Excise duty, Customs duty and for compliance with Foreign Trade Policy follow a common code. Therefore, if the goods cleared for DTA are held to be 'similar goods' to those exported or to be exported by the competent authority to determine compliance with the provisions relating to EOU under the FTP, then such decision would also apply for the purpose of customs/central excise inasmuch as the basis for ITC (HS), customs and central excise tariff are the same.
8.2 In this regard, we find that as per the legal provisions of the Central Excise Tariff Act of 1985, for legal purposes, the classification of goods shall be determined according to the terms of the headings of the tariff and any relative Section notes or Chapter notes. We also find upon careful reading of the various tariff entries of chapter 30 covering Pharmaceutical products and more particularly chapter heading 3002, we find that the following categories of goods are covered under its scope:
(i) Vaccines, toxins, cultures of micro-organisms and similar products, cell cultures, Immunological products used for treatment of various ailments.
(ii) Vaccines for human medicine and single vaccines for Hepatitis is specifically covered under tariff item 3002 4112; and similarly single vaccines for Cholera and typhoid, Tetanus, Polio, Tuberculosis, Rabies, Japanese encephalitis and Whopping cough (pertussis) are covered under tariff items 3002 4111, 3002 4113, 3002 4114, 3002 4115, 3002 4116, 3002 4117 and 3002 4118, respectively.
(iii) All types of 'Vaccines' used as human medicine which are not covered specifically as above are covered under tariff item from 3002 4119;
(iv) Mixed vaccines for other diseases such as Diphtheria, pertussis and Tetanus (DPT), Diphtheria and Tetanus (DT), Measles, mumps and rubella (MMR), Typhoid-paratyphoid (TAB), Typhoid-paratyphoid-cholera (TABC) are also covered by specific tariff items such as 3002 4121, 3002 4122, 3002 4123, 3002 4124, 3002 4125.8
E/86271/2015 8.3 From the facts on record it clearly transpires that the classification of items under dispute are vaccines for Hepatitis and similar vaccines for other diseases, injections and other pharmaceutical formulations. It would be travesty of justice to contend that a pharmaceutical product for treating one ailment/disease is not similar goods to other pharmaceutical product, since that is for treatment of some other disease. The classification of goods of Chapter 30 and more particularly heading 3002, clearly provide that in terms of heading and the sub-headings, all pharmaceutical products manufactured by the appellants and cleared in the DTA as well as the pharmaceutical products exported or to be exported in terms of LOP granted by the Development Commissioner, are duly covered under single heading 3002 of the Central Excise Tariff. Therefore, it cannot be said that these are not 'similar goods'. From the above discussion, we are of the prima facie view that the impugned order for denial of concessional duty, by treating the goods cleared in the DTA are not similar goods, does not stand the scrutiny of law.
8.4 In terms of the notification No.23/2003-C.E. dated 31.03.2003, all goods produced or manufactured in an export oriented undertaking/EOU is exempt from payment of duty of excise that is equal to the aggregate of duties of customs leviable on like goods. The condition is that such clearance of the excisable goods in DTA shall be in accordance with the paragraph 6.8(a) of FTP policy. In respect of advance DTA clearances in respect of pharmaceutical sector, paragraph 6.8(k) of FTP provide for permitting the DTA clearances on the basis of estimated exports of the appellants in the first two years.
8.5 On plain reading of the Paragraph 6.8 (a) of FTP (2019-14) it provides that "Units other than gems and jewellery units may sell goods up to 50% of FOB value of exports, subject to the fulfilment of positive NFE on payment of concessional duties". Within entitlement of DTA sale, units may sell in DTA, its products similar to goods which are exported or expected to be exported from units. In the legal provision governing the levy of excise duty under Section 3 of the Central Excise Act, 1944 duty leviable on 'like' goods imported into India is mentioned. However, in CBIC Circular No. 7/2006-Customs dated 13.01.2006, it is stated that the definition of 'similar goods' would be based on the definition of similar goods as provided in the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The term 'similar goods' means goods 9 E/86271/2015 which is although not alike in all respects, have like characteristics and like constituent materials which enable them to perform the same functions and to be commercially interchangeable with the goods which have been exported or expected to be exported having regard to the quality, reputation and the existence of trade mark and produced in the same unit by the same person who produced the export goods. Since Chapter 30 and more particularly heading 3002, covers all types of pharmaceutical products, it is not feasible to treat the goods covered under single heading as other than 'similar goods'. Further, even if we consider by usage of such goods, these are used vaccines, injections, medicines for treatment of diseases/ailments and therefore, this condition of 'similar goods' is also fulfilled by the goods under dispute in the present case.
8.6 Further, we find that the Joint Development Commissioner, SEEPZ SEZ, Mumbai vide his letter No. SEEPZ-SEZ/20/2003-04/Vol. XIII dated 19.12.2014, had quoted the reference received from the Assistant Commissioner (Tech.), Central Excise and Customs, Aurangabad vide their letter dated 04.07.2014, in his reply to the appellants by stating the following:
"Sub:- Confirmation of duty paid on unadjusted DTA Sale - reg.
Kindly refer to your letter dated 29.10.2014 on the subject cited above.
In this connection we write to inform you that, the Assistant Commissioner (Tech), Central Excise and Customs, Aurangabad, vide his letter No. VIII(CUS)153/TA/2013/7272 dated 04.07.2014 has confirmed that M/s Wockhardt Ltd., 100% EOU has done backward calculation of un-adjusted Advance DTA sale of Rs.269.47 lakhs, and the duty liability of Rs.8,56,858/- has been paid vide e-payment challan No.00010 dated 29.08.2010 and the same is verified and found to be correct; no liability is pending against the unit in respect of un- adjusted DTA sale.
In view of the above, it is to confirm that no liability is pending against the unit on account of un-adjusted DTA sale."
8.7 Furthermore, we also find that the impugned order has also recorded the above fact of compliance of the disputed issue raised in the Customs Revenue Audit by the Office of C&AG and that the audit para has been closed by the department. The relevant extract in the impugned order is extracted and given below:
"12. I have carefully gone through the show cause notice dated 21.07.2008, reply filed by the assessee, documents on records, written 10 E/86271/2015 & oral submissions made by the assessee during personal hearing and other records of the assessee.
13. The assessee is a 100% EOU, engaged in manufacture of Medicaments. They were given Advance DTA sale permissions, by the Development Commissioner, SEEPZ, Mumbai and accordingly they had cleared the goods in DTA paying duty at concessional rate under Notification No. 23/2003-C.Ex. dated 31.3.2003 at the rate of 50% of the aggregate duties of customs. It is alleged in the instant SCN that this notification is applicable to the clearances effected in accordance with sub-paragraphs (a), (d), (e) and (g) of Paragraph 6.8 of the Foreign Trade Policy (FTP) and DTA sale should not exceed 50% of FOB value of similar goods which are exported or expected to be exported from the unit during the specified period, whereas the clearances effected by the assessee were covered under Para 6.8(K) of the FTP and the assessee had failed to export similar goods during the stipulated period to the extent of accruable DTA sale entitlement, Therefore, the assessee was not eligible to avail the said concession and they were required to pay duty on DTA clearances and accordingly differential duty has been demanded from the assessee 13.1 I find that the SCN has been issued due to Para 6 of LAR No. CRA/EOU/LAR/Dec05/1056 dated 31.1.2006 of CERA (CAG office) which was converted into SOF F. No. CRA/EOU/Review/SF.No.6/05- 06/38 dated 2.6.2006 on the objection that the DTA clearances effected by the assessee were covered under Para 6.8(k) of the FTP. The Department had contested this CERA objection based on the permission issued by Development Commissioner, SEEPZ, as per para 6.8(a) of FTP, and other relevant paras of the FTP. CERA has finally closed the objection and informed accordingly vide their letter F.No CRA/AS/OW No. 362 dated 30.9.2013. Since the DTA clearances effected by the assessee were covered under Para 6.8(a) of the FTP. Therefore, there remained no dispute on this issue."
8.8 On the basis of the above facts, we find that the clearance of excisable goods to DTA are in compliance with the FTP Policy. Further, in case of advance DTA sale, since respective duty has also been paid by the appellants taking into account the un-adjusted advance DTA sale, there is no violation of para 6.8(k) of the FTP. Therefore, we find that the case of the appellants in clearance of DTA sale are eligible to be considered for extending the exemption under No.23/2003-C.E. dated 31.03.2003.
9.1 We find that the issue of similar goods had been examined by various Hon'ble High Courts and Tribunal in a number of cases. In the case of Abi Turnamatics (supra) the Co-ordinate Bench of the Tribunal have held that for interpretation of the term 'similar goods' in respect of DTA clearances from EOU, the common parlance meaning has to be adopted and not the one suggested by the department in the CBIC 11 E/86271/2015 circular. The relevant paragraph of the said order is extracted and given below:
"5.5 In the first place, we find that the Tribunal in the case of Meghmani Industries Ltd. (supra) has addressed the very controversy in respect of the definition of 'similar goods' for exemption under Notification 23/2003-C.E. The Tribunal in the decision after referring to the judgment of the Hon'ble Supreme Court in Wood Craft Products Ltd. - 1995 (77) E.L.T. 23 (S.C.) and of the Tribunal in TELCO - 2000 (126) E.L.T. 1102 (Tribunal) noted that the definitional available in the Customs Act cannot be used in respect of notifications issued under another enactment; that in such cases common parlance or dictionary meaning is to be applied."
9.2 In the case of Axiom Cordages Ltd. (supra), the Co-ordinate Bench of the Tribunal vide Final Order No. A/86338-86340/2021 dated 19.05.2021 had elaborately dealt with various case laws on the issues under dispute in a similar case and had extended the benefit of similar goods and exemption applicable to EOUs in respect of DTA clearances. The relevant paragraphs of the said order is given below:
"15. We find that coordinate benches of the Tribunal in a series of decisions held that the appellants contention is correct and that in terms of the Para 6.8 of FTP, in respect of the units which are manufacturing more than one item, goods whose exports are less can be cleared more in the DTA subject to the overall limitation of 50% of the FOB of export performance. Chennai Bench of the Tribunal in the case of M/s ABI Showatech India Ltd 2019-TIOL-1246-CESTAT-Mad held that "6.2. Thus it can be seen that within entitlement of DTA sale, units may sell in DTA, its products similar to goods which are exported or expected to be exported from units. The description of goods in the green card does not differentiate or specify goods on the basis of customs tariff. It merely treats them belonging to a class. Bearing machines are considered by department as part of turbo charger which are parts of automobile, then precision automotive components also being part of automobiles should fall in the same class, since they are engaged in manufacture and export of various part of automobile as stated in the green card. Further, as per the table given in paragraph 2 above, the appellant has cleared in DTA bearing housing only. Precision automotive competent was not cleared in DTA. In paragraph 6.8 what is stated is that when more than one product is exported such unit can clear in DTA up to 90% of value of such specified goods provided the total DTA sale does not exceed 50% FOB value of exports of the unit. The appellant have sold 90% FOB of value of export of bearing housing in DTA and has not exceeded 50% of FOB value of the unit since there is no DTA sale of precision automotive component. The condition is therefore fully satisfied. The denial of concessional rate of duty as per the notification is unjustified. The demand raised cannot sustain and requires to be set aside, which we hereby do. The impugned order is set aside and the appeal is allowed with consequential relief if any."
16. In the case of ABI Turnamatics 2019 (366) ELT 1048 (Tri-Chennai) it was held that "5.5 In the first place, we find that the Tribunal in the case of Meghmani Industries Ltd has addressed the very controversy in respect of the 12 E/86271/2015 definition of similar goods for exemption under notification no. 23/2003- CE. The tribunal in the decision after referring to the judgement of the Hon'ble Supreme Court in the case of Woodcraft Products Ltd. 1995 (77) ELT 23 (SC) and the Tribunal in Telco 2000 (126) ELT 1102 (Tri) noted that the definition available in the Customs Act cannot be used in respect of notifications issued under another enactment; then in such cases common parlance or dictionary meaning is to be applied. Secondly, we find from the green card dated 31.03.2006 issued by the Development Commissioner MEPZ and subsequently also further revised by the MEPZ/SEZ that the main products that was manufactured /exported to be turbo charger components. There is no doubt that the appellant had exported bearing housing whereas the goods to be cleared into DTA seeking benefit of notification no. 23/2003 was turbo wheel assembly. While the adjudicating authority has been at pains to cite the difference in characteristic and function of these two items, the fact remains that both of them are components of turbo charger and hence would surely fall under the broad banded term "turbo charger components' which is the export product as per the EOU / green card issued to be appellant by the Development Commissioner. Hence, when the permission granted to the appellant has not listed any specific components of a turbo charger but instead has only indicated as export product of 12,50,000 nos. of turbo charger component which was even subsequently enhanced to 32,00,000 nos. of turbo charger components, the appellant cannot then be said to have caused the breach of the conditions. Both bearing housing and turbine wheel are surely component parts of turbo charger, the fact which has been admitted by the adjudicating authority in para 12 of the impugned order. If, on the other hand, the permission granted by the Development Commissioner to the EOU was only for bearing housing, in that event, the clearance of turbine wheel which is part distinct from bearing housing would have come under the scanner. But when the permission is generic and only states "turbo charger components" the condition of the impugned notification gets satisfied so long as the parts that they exported and the parts cleared into DTA are both like components of turbine charger."
17. In the case of Consolidated Coin Company Pvt. Ltd. 2013 - TIOL- 139-CESTAT-DELHI Tribunal held that as regards the third point of dispute since the items exported by the appellant the "copper alloys coins blanks and copper zinc nickel strip" are the similar products, both falling under heading 7409 and since the DTA Clearances are within the overall entitlement of 50% of the FOB value of the exports, in accordance with the provisions of para 6.8(a) of the FTP the DTA clearances of any one of these products can be made up to 90% of the FOB value of the export. The DTA Sales of coper alloy coin blanks are well within 90% of their clearances. In view of this, the third objection of the department also does not appear to be valid and as such the duty demand of Rs.83,23,000/- does not appear to be sustainable.
18. In terms of paragraph 6.8(a) of the FTP units which are manufacturing and exporting more than one product can sell any of these products into DTA up to 90% of FOB value of export of the specific products, subject to the condition that total DTA sale does not exceed the overall entitlement of 50% of FOB value of exports for the unit as stipulated. A plain reading of the provisions of policy gives understanding that within entitlement of DTA sale, the units may sell in DTA, its products similar to goods which are exported or expected to be exported from units and in case they are manufacturing and exporting more than one product, they can sell in DTA any of this products subject to limitation of 90% of FOB value of export of the specific products.
13E/86271/2015 However, this is subject to overall entitlement of 50% of FOB value of exports. The policy is clear in saying that the units may sell "any" of these products into DTA and subject to 90% of export value of export of the specific "products." In our understanding, a plain meaning of words is that any of the products manufactured or exported can be sold in DTA. The only restriction that appears to be that the value of DTA clearances of any of the products should not exceed 90% of FOB value of export of the specific products. The catch here seems to be on the word "products" whereas the policy mentions the same to be specified products. The department wants to read the same down as "product." As seen above, Tribunal has taken a categorical stand on the interpretation of this provision in the case of measure ABI Showatech India, ABI Turnamatics and M/s Consolidated Coin (all supra), in favour of the appellants. IN the case of ABI Showatech the export value of bearing housing machines was only about 25 thousands, whereas value of DTA clearances was about 7crores. The same was held to be valid.
19. We find that EOUs are given a facility to clear the goods in DTA, as a reward for the exports made by them subject to the fulfilment of positive NFE. It may so happen that EOU unit manufacturing more than one product may not be able to export all the products in the same proportion; the overseas market may not have demand for all the products manufactured by them. Understandably, EOU cannot be expected to throw away or destroy the product or sell in DTA at a higher rate of duty resulting in financial loss. We find that, under these circumstances, a provision has been built in to the FTP, provision has been made to enable the manufacturer to sell such goods in DTA. The Limitation of 90% of FOB of the products appears to have put to ensure that there is export of all the products manufactured and to ensure that a product which is not at all exported is not cleared in DTA. We find that, as the EOU scheme is based on value of clearances, once export obligation is fulfilled, the manufacturer cannot be constrained to clear particular products in DTA in proportion to the export of the specific product. This appears to be the understanding of the tribunal in the series of judgments cited above. Moreover, the facts and circumstances of the instant case being similar to that of the cases cited above, we find that the goods cleared in DTA are to be held to be similar to those exported and that the 90% entitlement should be seen from the value of exported specific products and not a single product. By following the ratio of the cases, we find that the DTA clearances of the appellants are in order.
20. Coming to the third submission of the appellants that the substantial portion of the demand is time barred, we find that Development Commissioner has given permission or has been regularly intimated about the DTA clearances; similar intimations and returns have also been submitted to the jurisdiction Custom/CE authorities. The clearances in DTA were going on from 2009 onwards. CERA audit of the unit has taken place and note was issued on 21.05.2013. The authorities' i.e either the development Commissioner or the Deputy/Assistant commissioner of Customs/Central Excise has never raised any red flag about the entitlement of DTA Clearances by the appellants. The revenue authorities also have accepted the clearances before the conduct of audit. It gives an understanding that the department was in agreement with the procedures followed by the appellant. As the appellants were regularly 14 E/86271/2015 submitting intimations to the Development Commissioner and Jurisdictional Central Excise authorities, it is not open to the department to invoke the extended period of limitation. Revenue sought to enforce the conditions of B-17 Bond. However, the Bond is given in respect of imports or duty free DTA procurements by the appellants. It would no way cover the duty liability if any on the DTA clearances. It is not the case of the department that the demand is of duty of Customs or duty of excise foregone on the raw material imported/procured by the appellants.
21. Moreover, the Revenue has alleged violation of the condition of the notification 23/2003 dated 31.03.2003. The notification refers to the provision of the FTP policy. Development Commissioner who is the implementing authority of the policy has not objected to the clearances made by the appellants in DTA. Under the circumstances, it is to be held that revenue has gone beyond their authority in interpreting the provisions of FTP, following the decision of Delhi High Court in Great ship (India) Ltd. 2016 (338) ELT 545 (Del), where in it was held that 33. There is merit in the contention of the petitioner that in the event of conflict of views between two ministries of the Central Government, the view taken by the ministry that is primarily responsible for the policy in question, which in this case is the FTP, should prevail. The SFIS was introduced by the Ministry of Commerce and its instrumentality, i.e., the DGFT has been statutorily entrusted with the final word on the interpretation of the FTP. The letter dated 6th September, 2013 from the Commerce Secretary to the Revenue Secretary is instructive. It refers to Circular No. 837/14/2006, dated 3rd November, 2006 issued by the C.B.E.&C. under the Ministry of Finance which acknowledged that payment of customs duty could be made by using the duty credit scrips. In particular it was pointed out that the expression "duty free credit scrip" had been used incorrectly and that the correct phrase should have been "duty credit scrips". It was suggested that the "insistence by C.B.E. & C. that goods imported by use of SFIS scrip may not be alienated unconditionally, even after three years of import, can be attributable to this inadvertent choice of words." Importantly it was pointed out that "the scrip itself is a benefit that has been 'earned"'. This also answers the misconception of the DoR that customs duty can only be paid in cash, and that use of duty credit scrips is only 'revenue foregone'. The position has been explained by the Madras High Court in Tanfac Industries Ltd. (supra), where it was held that the goods cleared by using DEPB scrips for payment of duty should be treated as duty payable goods and not as duty exempted goods.
22. In view of the above discussion and following the ratio of cases of Meghmani Dyes & Intermediates Ltd 2013 (288) ELT 514 (Guj); Emcure Pharmaceuticals Ltd2014 (307) ELT 180 (Tri.-Mum.) and Surya Life Science Limited 2019 (368) ELT 148 (Tri.-Ahmd.), extended period cannot be invoked under the circumstances. On this count substantial portion of the demand should go away. However, as we already held that the DTA clearances of the appellants are in order, the appeals succeed on merits, the issue of limitation will not have any bearing on the outcome.
23. Interestingly, the counsel for the appellants as well as the ld. AR have relied upon the same cases i.e. Measures ABI Showatech India Ltd. (supra) while the appellant rely on the same stating that clearance in DTA was mostly of bearing housing only whereas exports were mainly of 15 E/86271/2015 precision automotive component. The department relies on the same saying that the appellant in that case have fulfilled the conditions of Para 6.8 of FTP and the DTA clearances were less than sold 90% of FOB value of specific product within the overall limit 50% of FOB value. However, ongoing through the case law it appears that the department's contention is incorrect. Tribunal has held categorically that even though the value product (bearing Housing) cleared in DTA was more than 90 percent of the value of FOB value of export of the same, the DTA clearances were in order. The figures of export and DTA clearances in that case are as follows. It can be seen that in the instant case, DTA clearances of Bearing Housing Machined were 280035% of the FOB value. Even then Tribunal held that the clearances are in order in view of the provisions of FTP. In the instant case during the period 2009-10 to 2013-14 (up to December 2013), exports of twisted yarn were Rs.66, 68,303/- and DTA clearances were of value Rs.470,37,94,080/- thus DTA clearances were 70,205% of the same. It can be seen that facts of the case are identical. Tribunal also held that Bearing Housing and Precision components were similar goods. In the instant case as per above discussion we held that Twisted yarn and Ropes are under the same category of goods under SION and can be held to be similar goods in the broader sense of the word. Therefore, we find that the case is in no way in favour of the Revenue. Learned Authorised Representative for the Revenue, countering the cases cited by the appellants to explain the similarity of nature of goods, submitted that the issues discussed therein are different. While we agree with this contention we hold that the cases can be relied as far as the understanding of similar goods is concerned. Therefore, we find that the contentions of Revenue are not acceptable and the ratio of the cases cited is valid to arrive at the conclusion that the impugned goods are similar in nature. Learned Authorised Representative for the Revenue further sought to rely on the case of Shri Dilip Kumar and others. We are of the considered opinion that the issue doesn't pertain to interpretation of a Notification but interpretation of Provisions of the Policy. As discussed above, the implementing authority, the Development Commissioner has not raised any objection on the DTA sales made by the Appellant. Therefore, we hold that the ratio of cases is to be applied if the facts of the case are comparable and that a strenuous stretching of facts is not permissible. Moreover, in the instant case there is no allegation that export obligation has not been fulfilled and positive NFE was not achieved. A close look at the scheme of the EOU, gives an understanding that the scheme places on reliance of the value of exports and not the quantities. Therefore, we find that positive NFE being achieved, the appellants are within their rights to avail the facility of DTA clearance in terms of Para 6.8 of FTP.
24. In view of the above, the appeals are allowed with consequential relief, if any, as per Law."
9.3 We further find that the Civil Appeal Nos. 1308-1310 of 2022 filed by the department against the above order of the Tribunal in the case of Axiom Cordages Ltd. was dismissed by the Hon'ble Supreme Court in its judgement dated 25.02.2022 by upholding the said Final Order dated of the Tribunal.
16E/86271/2015 9.4 We also find that in similar matter involving permission given by the Development Commissioner for sale of goods in DTA, the question as to who is the appropriate authority competent to decide the compliance with EXIM policy/FTP was decided in the case of Ginni International Limited Vs. Commissioner of Central Excise, Jaipur - 2002 (139) E.L.T. 172 (Tri.-Del.) by the Co-ordinate Bench of the Tribunal as follows:
"7. We have considered the submissions of both the sides. Notification No. 8/97-C.E., provides concessional rate of duty of excise to the finished products, rejects and waste or scrap produced or manufactured, in a hundred per cent EOU wholly from the indigenous raw materials and allowed to be sold in India under and in accordance with the provisions of sub-paragraphs (a), (b), (c), (d) and (f) of paragraph 9.9 or of paragraph 9.20 of Export-Import Policy 1977- 2002. On an application made by the Appellants, Development Commissioner, NEPZ, Noida under letter dated 1-12-1999 approved the sale of cotton yarn, woven fabrics and knitted fabrics valued at Rs. 801.69 lakhs in Domestic Tariff Area in terms of para 9.9 (b) of EXIM Policy, 1997-2002. The Development Commissioner, while permitting sale of cotton yarn etc. valued Rs. 801.69 had taken into consideration not only physical Exports (Rs. 1419.10 lakhs) but also supplies to other EOU units under paragraph 9.10 of the EXIM Policy (Rs. 184.28 lakhs). We find from 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 authorization in terms of value. It is not in dispute that in the present matter the Development Commissioner had issued such an authorization in terms of value (Rs. 801.69 lakhs). We find force in the submission of the learned Counsel for the Appellants that once the Development Commissioner has allowed them the permission to sell the goods up to a fixed value in the DTA, the Revenue cannot disallow the clearance and demand Central Excise duty on the ground that the entitlement was required to be restricted to 50% of the FOB value of Physical Exports. If the Revenue is of the view that the value of deemed export should not have been taken into consideration for arriving at the value of goods to be allowed to be sold in the DTA, the matter should have been taken up with the Development Commissioner who had initially accorded the permission to the Appellants. This has been the consistent view of the Appellate Tribunal wherever the permission under the Central Excise Act/Rules or Notification is accorded by an authority outside the Department. In the case of CCE, Kanpur v. Agra Leather Goods (P) Ltd, 2000 (39) RLT 674, the Tribunal, relying upon the decision in the case of Union Quality Plastics (P) Ltd v. CCE, Surat, l999 (35) RLT 339, held that the benefit of SSI "Notification could not be disallowed for the simple reason that the Revenue Department suspected the correctness of the investment disclosed by the assessee in the plant and machinery, while getting the registration." Similar views were expressed by the Tribunal in R.A. Cement Pvt Ltd. v. CCE, Ahmedabad, 1999 (34) RLT 623 (CEGAT) wherein the Tribunal held as under :17
E/86271/2015 "......the Notification No. 175/86 speaks of a certificate granted by the Directorate of Industries. In the instant case, there was a certificate granted. If something new or wrong came to the notice of the Central Excise Authority, they should bring them to the notice of the Directorate of Industries."
In Dhar Cement Ltd., supra, the appeal filed by the Revenue was rejected by observing that the Department could not substitute its own concepts for the expression "licenced capacity" in the Notification No. 23/89-C.E. Following the ratio of these decisions, we are of the view that once the Appellants had submitted the permission to sell the goods manufactured by them in the DTA under and in accordance with paragraph 9.9 of the Export-Import Policy, 1997-2002, the Revenue cannot go beyond the permission and dispute the value of clearance allowed by the Competent Authority in this case Development Commissioner, NEPZ, Noida. It is not the case of the Revenue that the demand of duty has been confirmed for not complying with any other condition of the Notification No. 8/97-C.E. We do not agree with the contention of the learned DRs that Rule 100A or 100E of the Central Excise Rules empower the Central Excise Authorities to check whether the value of goods cleared in the DTA by the Appellants is correct or not. The Appellants have shown that they had been permitted by the proper officer under Rule 100A to remove the excisable goods under letter dated 7-1-2000 of the Central Excise Division. They have also submitted and which has not been rebutted by the Revenue that the impugned goods were removed by them on payment of appropriate duty under Notification No. 8/97-C.E. In view of this, we set aside the impugned order and allow the appeal."
9.5 The aforesaid order of the Tribunal was appealed against by the Department in filing the Civil Appeal No.1900 of 2002 before the Hon'ble Supreme Court. In their judgement dated 16.08.2007, the Hon'ble Supreme Court had dismissed the department's appeal by upholding the order of the Tribunal.
10. On the basis of foregoing discussions and analysis, and the judgements delivered by the Hon'ble Supreme Court and the Tribunal, we are of the considered view that the dispute is no more open for any debate and the impugned order treating the DTA clearances made by the appellants EOU unit as ineligible for concessional duty under the notification No.23/2003-C.E. dated 31.03.2003 for determination of excise duty, imposition of penalty on the appellants do not stand the scrutiny of law. Thus, we are of the view that the impugned order dated 18.02.2015 in confirmation of the adjudged demands is not legally sustainable.
18E/86271/2015
11. In the result, the impugned order is set aside, and the appeal is allowed in favour of the appellants.
(Order pronounced in the open court on 23.10.2025) (S.K. MOHANTY) MEMBER (JUDICIAL) (M.M. PARTHIBAN) MEMBER (TECHNICAL) Sinha