2012 (4) TMI 65 - SC - Central Excise

Finished goods by 100% EOUs from raw material supplied by another 100% EOU cleared into DTA qualify under Notification No.8/97-CE

SC held that finished goods manufactured by a 100% EOU from raw material supplied by another 100% EOU and cleared into the DTA under the EXIM Policy ... Entitlement to the benefit of Exemption under Notification No.8/97-CE, dated 1.3.1997 - finished goods manufactured by the 100% EOU out of the raw material supplied by another 100% EOU, and subsequently, cleared in the Domestic Tariff Area (DTA) in accordance with the EXIM Policy 1997-2002 - Revenue contended availability of alternative benefit of Notification No.2/95-CE, dated 4.1.1995 - Held that:- Having noticed two Notifications and the policy, let us analyze first, the Notification No.2/95-CE. The Central Government, in exercise of its powers under Section 5A(1) of the Act, has issued the Notification in public interest. The Notification exempts all excisable goods mentioned in the Schedule to the Tariff Act, from payment of duty leviable under Section 3 of the Act. The Notification provides the measure/cap of exemption from payment of excise duty by an assessee/industrial unit. It says the exemption is from the excise duty which is in excess of the amount calculated at 50% of each of the duties of customs leviable under Section 12 of the Customs Act, 1962 read with any Notification issued under Section 25 of the Customs Act. The Notification also makes it clear with regard to the nature or type of goods that the 100% EOU should be manufacturing in its industrial unit. It says that the exempted goods should be in a nature or type of goods which are, normally, produced/manufactured outside India and, but for any reason, they are imported to India. That only means, there must be a similarity between the goods manufactured by a 100% EOU with that of the goods produced or manufactured outside the country but if it is imported into this country. The Notification provides two conditions in order to avail the benefit provided under the Notification. They are conjoint and not disjoint. Firstly, the exemption is available only, if the goods are produced or manufactured in a 100% EOU or FTA or EHTP unit or STP unit and, secondly, they must be allowed to be sold as per EXIM Policy 1997-2002. Proviso is appended to the Notification. A reference to the same may not be necessary for the purpose of the disposal of this appeal. We are afraid that we can accept the argument canvassed by Shri. Swami, in the light of the unambiguous language employed in the Notification no.8/97-CE. There is no ambiguity, whatsoever, in the Notification issued by the Central Government. The Notification speaks of finished goods produced or manufactured by a 100% EOU and if it is sold in a DTA, the said EOU can take the benefit of the Notification no.8/97-CE. If for any reason, we accept the submission of Shri K. Swami, learned counsel for the Revenue, then we will be adding something into the notification and, in our opinion, the same is impermissible. The notification requires to be interpreted in the light of the words employed by it and not on any other basis. There cannot be any addition or subtraction from the notification for the reason the exemption notification requires to be strictly construed by the Courts. The wordings of the exemption notification have to be given its natural meaning, when the wordings are simple, clear and unambiguous. Therefore, Tribunal has rightly allowed the benefit of exemption under Notification no. 8/97-CE – Decided against the Revenue. Issues Involved:1. Entitlement to the benefit of Notification No. 8/97-CE for goods manufactured by a 100% Export Oriented Unit (EOU) using raw materials from another 100% EOU and cleared in the Domestic Tariff Area (DTA).2. Correctness of the adjudicating authority's decision denying the benefit of Notification No. 8/97-CE and instead allowing the benefit of Notification No. 2/95-CE.3. Interpretation of the exemption notifications and relevant clauses of the EXIM Policy 1997-2002.Issue-Wise Detailed Analysis:1. Entitlement to the benefit of Notification No. 8/97-CE:The core issue was whether finished goods manufactured by a 100% Export Oriented Unit (EOU) from raw materials supplied by another 100% EOU and cleared in the Domestic Tariff Area (DTA) are entitled to the benefit of Notification No. 8/97-CE, dated 1.3.1997. The Tribunal had concluded that the assessee could avail the benefit of Notification No. 8/97-CE. The Supreme Court analyzed the language and conditions of both Notification No. 8/97-CE and Notification No. 2/95-CE, along with the relevant clauses of the EXIM Policy 1997-2002.2. Correctness of the adjudicating authority's decision:The adjudicating authority had denied the benefit of Notification No. 8/97-CE, arguing that the raw materials were deemed imports when transferred between 100% EOUs, thus making the finished goods ineligible for the exemption under Notification No. 8/97-CE. Instead, the authority allowed the benefit of Notification No. 2/95-CE. The Supreme Court rejected this reasoning, emphasizing that the language of Notification No. 8/97-CE was clear and unambiguous, and that the finished goods manufactured by a 100% EOU from raw materials produced or manufactured in India were eligible for the exemption.3. Interpretation of the exemption notifications and EXIM Policy:The Supreme Court reiterated the principles of interpreting exemption notifications, stating that they must be construed strictly based on the language used. The Court cited previous judgments emphasizing that the words of the notification should be given their natural meaning and that any ambiguity should be resolved in favor of the state. However, once the eligibility criteria are met, the exemption should be construed liberally. The Court found that the Tribunal had correctly interpreted Notification No. 8/97-CE and the EXIM Policy 1997-2002, and there was no legal infirmity in its judgment.Conclusion:The Supreme Court confirmed the Tribunal's decision, allowing the assessee to benefit from Notification No. 8/97-CE. The appeals filed by the revenue were rejected, and the findings and conclusions of the Tribunal were upheld. The Court emphasized the importance of adhering to the clear and unambiguous language of exemption notifications and the need for a liberal interpretation once the eligibility criteria are satisfied.