2003 (5) TMI 79 - AT - Central Excise

100% EOU finished goods sold to domestic market beyond permitted limits still get concessional excise duty u/s3(1) proviso

The dominant issue was whether finished goods cleared by a 100% EOU to the DTA in excess of the Development Commissioner's permission are chargeable at ... Determination of the rate of duty applicable to goods which are cleared from an hundred per cent EOU to DTA in excess of the permission of Development Commissioner - sales for domestic consumption - chargeable to duty under main Section 3(1) - HELD THAT:- In British Airways PLC [2001 (11) TMI 81 - SUPREME COURT], Supreme Court has observed that while interpreting the statute the courts are required to keep in mind the consequences which are likely to flow upon the intended interpretation. It has been also observed therein that it is the duty of the court to give a harmonious construction of a statute and that such construction shall suppress the mischief and advance the remedy. Therefore, we hold that so long as an hundred percent EOU continues as an EOU it will be within the proviso mere violation of the permission in the matter of sale to DTA will not take it outside the proviso. Rate of duty applicable to 100% EOU on its stock of finished products produced prior to its debonding. - A reading of the circular would show that it was issued pursuant to the decision of the Supreme Court in SIV Industries Ltd.[2000 (3) TMI 162 - SUPREME COURT], but without understanding the position that the Supreme Court did not deal with a case where clearance was made to DTA by 100% EOU in excess of the permission granted. It is contended on behalf of the assessee that the interpretation given in the circular referred to above is binding on the Revenue and therefore, this Tribunal cannot give a different interpretation to Section 3(1) and the proviso at the instance of the Revenue. In CCE, Vadodara v. Dhiren Chemicals Industries [2001 (12) TMI 3 - SUPREME COURT] the Supreme Court observed that regardless of the interpretation placed by it on the expression in the notification 'on which appropriate duty of excise has already been paid' if there are circulars which have been issued by the Central Board of Excise & Customs placing a different interpretation upon the said phrase that interpretation will be binding upon the Revenue. In the present case, we are not dealing with any circular of Central Board of Revenue interpreting the meaning of the proviso to Section 3(1) and which had been in force. On the other hand, the circular dated 13-2-2002 is one issued giving a wrong interpretation to the decision of the Supreme Court. We have no hesitation to hold that an interpretation thus given by the Board to the decision of the Supreme Court will not be binding. Thus, we hold that the rate as per the proviso to Section 3(1) would be applicable for assessing all the excisable goods which were cleared by 100% EOU to DTA whether in terms of permission granted or in excess of the permission granted. We further hold that the view taken to the contra in Kuntal Granites (P) Ltd. [2001 (3) TMI 164 - CEGAT, BANGALORE] is not good law. The reference is answered as above and appeals are sent back to the Regular Bench for hearing on other issues. Issues involved:The judgment addresses the issue of the rate of duty applicable to goods cleared from a hundred percent EOU to DTA in excess of the permission of the Development Commissioner.Summary:The Larger Bench of the Appellate Tribunal considered the interpretation of the rate of duty applicable to goods cleared from a hundred percent EOU to DTA in excess of the permission granted by the Development Commissioner. The Tribunal referred to a previous decision by the Bangalore Bench in Kuntal Granites (P) Ltd. v. CCE, Belgaum, which raised doubts about the correctness of the interpretation that such goods should be assessed under Section 3(1) of the Central Excise Act, 1944. The Tribunal analyzed the relevant statutory provision under Section 3 and the conditions for assessing goods under the proviso to Section 3(1) for hundred percent EOUs. The assessee argued that the assessment should be under the main provision of Section 3(1) based on previous court decisions and circulars issued by the Central Board of Excise & Customs.The learned DR contended that the interpretation proposed by the assessee would defeat the purpose of the proviso to Section 3(1) and cited a Supreme Court decision to support this argument. The DR also challenged the applicability of previous court decisions and circulars in this context. The Tribunal examined a Supreme Court case involving the rate of duty applicable to goods produced by a hundred percent EOU prior to debonding, emphasizing the distinction between goods allowed to be sold in India and those sold in excess of permission granted.The Tribunal agreed with the DR's argument that the interpretation suggested by the assessee would undermine the purpose of the proviso to Section 3(1) for hundred percent EOUs. It highlighted the unique functioning of hundred percent EOUs and the need for a harmonious construction of the statute to prevent anomalies in duty rates. The Tribunal also addressed an argument based on a circular issued by the Central Board of Excise & Customs, clarifying that the circular did not apply to the specific scenario under consideration. Ultimately, the Tribunal held that the rate under the proviso to Section 3(1) should apply to all goods cleared by hundred percent EOUs to DTA, regardless of permission granted, and deemed the contrary view in Kuntal Granites (P) Ltd. as not valid law. The appeals were remanded to the Regular Bench for further proceedings on other issues.