2010 (9) TMI 13 - SC - Central Excise

Export Unit Duty Clarification: Supreme Court rules on tariff area sales without approval

The Supreme Court affirmed the Tribunal's decision that the duty on shrimps and shrimp seeds sold in the Domestic Tariff Area by a 100% Export Oriented ... Shrimps and shrimp seeds - Duty of excise - 100% EOU - DTA clearance - . during the period 1994-95 to 1997-98, the assessee produced and sold 11,15,29,540 number of shrimp seeds and 48,365 Kgs. of shrimps in DTA without obtaining the permission of the Development Commissioner; without issuing proper invoices as mandated under Rule 100E of Central Excise Rules, 1944 (for short 'the Rules') and without payment of Excise Duty. Besides, the assessee also undertook certain job work whereby it processed 864.238 MT of shrimps and 905.580 MT of fish and cleared the said goods in DTA. According to the assessee, these goods were ultimately exported by the DTA units. - Held that: - admittedly at the time of sales of shrimps and shrimp seeds by the assessee in DTA, the Development Commissioner had not issued the requisite removal authorization. Therefore, in view of the dictum of this Court in SIV Industries, with which we are in respectful agreement, and the afore-extracted Circular issued by the Board following the said decision, Excise Duty on such sales is chargeable under main Section 3(1) of the Act. - Thus, it is evident that even if the stand of the revenue is accepted and shrimp seeds are classified under sub-heading 0301.00 of the Tariff Act, the rate of Excise Duty chargeable would be nil. Similarly, if the Excise Duty payable is nil, the other question regarding the extended period of limitation on the alleged ground of suppression of sales also pales into insignificance. - Revenue appeal dismissed. Issues Involved:1. Classification and duty applicability on shrimps and shrimp seeds sold in the Domestic Tariff Area (DTA) by a 100% Export Oriented Unit (EOU) without the Development Commissioner's approval.2. Applicability of Section 3(1) of the Central Excise Act, 1944 versus its proviso.3. Determination of excise duty under the main section or proviso of Section 3(1) of the Act.4. Interpretation of the expression 'allowed to be sold in India.'5. Applicability of extended period of limitation for duty evasion due to alleged suppression of facts.Issue-wise Detailed Analysis:1. Classification and Duty Applicability on Shrimps and Shrimp Seeds:The assessee, a 100% EOU, produced and sold shrimps and shrimp seeds in the DTA without the Development Commissioner's approval. The Tribunal held that the duty of Central Excise on these goods should be levied under Section 3(1) of the Act and not under the proviso appended thereto. The Tribunal also noted that shrimp seeds are not fit for human consumption and thus not excisable under Chapter 3 of the Tariff Act, making the duty on shrimp seeds nil.2. Applicability of Section 3(1) of the Central Excise Act, 1944 versus its Proviso:The core question was whether the sales of shrimps and shrimp seeds in DTA, without requisite permission from the Development Commissioner, should be assessed under Section 3(1) or its proviso. The Supreme Court referred to the relevant part of Section 3, which states that duties of excise on goods produced by a 100% EOU and allowed to be sold in India shall be equal to the aggregate of the duties of customs.3. Determination of Excise Duty under Main Section or Proviso of Section 3(1):The Tribunal, relying on the decision in Sam Spintex Ltd. vs. CCE, Indore, held that without permission from the Development Commissioner, duty is leviable under the main Section 3(1) and not its proviso. The Supreme Court affirmed this view, citing the SIV Industries Ltd. case, where it was held that the expression 'allowed to be sold in India' applies only to sales made in DTA up to 25% of production by 100% EOUs as per the Exim Policy.4. Interpretation of the Expression 'Allowed to be Sold in India':The Supreme Court interpreted the expression 'allowed to be sold in India' to mean sales permitted by the Development Commissioner. Since the assessee did not obtain such permission, the duty on sales in DTA should be assessed under the main Section 3(1). This interpretation was consistent with the Circular No. 618/9/2002-CX issued by the Central Board of Excise and Customs, which clarified that clearances from EOUs without permission should be charged under the main Section 3(1).5. Applicability of Extended Period of Limitation:The Tribunal found no convincing evidence of suppression of facts by the assessee. The Supreme Court noted that even if the classification of shrimp seeds under sub-heading 0301.00 is accepted, the duty payable would be nil, rendering the issue of extended limitation period for alleged suppression moot.Conclusion:The Supreme Court affirmed the Tribunal's orders, holding that the duty on shrimps and shrimp seeds sold in DTA without the Development Commissioner's approval should be assessed under Section 3(1) of the Act, not its proviso. The appeals by the revenue were dismissed, with no order as to costs.