TaxTMI 
TaxTMI 
2016 (6) TMI 352
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....inter alia, in trading of Polyester Textured/Twisted Dyed Yarn since 1988. Sh. Gopal Bhagwan Dutt Sharma was the Manager of Sarla Performance Fibers Limited at the relevant time. The reference to appellants herein will mean and include all the appellants. 2. The appellants had procured partial oriented yarn (POY) falling under Chapter 54 without payment of duty for the manufacture of various types of yarn, namely, polyester texturised yarn, nylon covered yarn and polyester covered yarn. A show cause notice No. V(Ch.54)15-6/OA/2000 dated 16th May, 2001 was issued by the Commissioner of Central Excise, Surat - II requiring the appellant to explain why central excise duty of Rs. 32,92,854/-should not be recovered on the texturised yarn allegedly removed by the appellants without payment of duty. The said show cause notice also required the appellants to explain why penalty should not be imposed under Section 11AC of the Central Excise Act, 1944 (for short, 'the Act'). That apart, the show cause notice also sought to confiscate the nylon covered yarn valued at Rs. 1,72,186/-and further to recover duty thereon of Rs. 55,202.96. 3. After the show cause notice was issued, the appell....
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....rder dated 15.11.2007 disposed of the appeal of the appellants and dismissed the appeal of the revenue. 6. As the facts would unfold, the appellants filed an application before the tribunal for recall of order dated 15.11.2007 in terms of judgment in J.K. Synthetics Ltd. v. Collector of Central Excise 1996 (86) ELT 472 (SC), which was dismissed on the ground that appeals were decided on merits and a detailed order considering all aspects was passed by the tribunal and as such it could not be said that the Bench defaulted in considering the merits of the case. 7. The aforesaid orders were assailed before the High Court in Writ Petition No. 4758 of 2008 and the Division Bench of the High Court taking note of the submissions of the learned counsel for the parties, directed as follows:- "3. There were certain Appeals filed by the Petitioners and also there were certain Appeals filed by the Department. Mr. Desai, the learned Senior Counsel for the Respondents, has no objection if all the Appeals are heard together denovo including the Appeals filed by the Department since the Petitioners were not heard in the Appeals. The learned Counsel for the Petitioners also has no ob....
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....s of the EXIM policy and the appellant-company did not raise any contention that the price charged included the component of excise duty. On the contrary the appellants claimed exemption under notification no. 125/84 and, therefore, the question of SPL having recovered any cum-duty price from the customers in DTA did not arise. Further it was evident that the transactions had been made by SPL in the name of Hindustan Cotton Company and M.M. Sanghavi and the demands had been raised on the invoices raised. The transaction itself was artificial and no justification had been shown to treat the same as cum-duty price and, therefore, the decision of the Commissioner not to treat the price as cum-duty price deserved to be upheld. As regards penalty on the company, the learned member held that it had been rightly imposed under Section 11AC of the Act read with Rule 173Q of the Central Excise Rules. As far as the individuals were concerned, the learned Member opined that the imposition on some was justified and imposition on certain individuals was not warranted. He, however, dismissed the appeal preferred by the department. 11. The Member, Judicial concurred with the view of the Member,....
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....r (Judicial) or the appellant's plea on the above issue is required to be rejected by upholding the decision of the Commissioner not to treat the price as cum-duty price, as observed by learned Member (Technical)? d. Consequent to the re-quantification of duty on the above ground, the penalty imposed upon M/s. Sarla Polyester Ltd. would get reduced to the quantum of duty reconfirmed against the said appellant? 14. It is necessary to state here that before the pronouncement of Order on 13.10.2010, counsel on behalf of the present assesee mentioned that the controversy was no more res integra in view of the decision rendered in CCE v. NCC Blue Water Products Ltd. (2010) 12 SCC 761 : 2010 (258)_ ELT 161. Thereafter the matter was heard on another day and on behalf of the Bench, the learned Member, Technical passed the order. He took note of the stand of the revenue that ratio of the said decision was not applicable as it was based on the principle stated in earlier decision i.e. SIV Industries Ltd. (supra). The learned Member also took note of the fact that the Larger Bench of the tribunal had distinguished the decision in SIV Industries Ltd. (supra) which was relied upon ....
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....f the Supreme court in SIV Industries case is distinguishable for the reason stated therein, as in that case the main thrust was that whether on the date of removal the 100% EOU ceased to be 100% EOU and therefore the provisions relating to 100% EOU could not have been applied to them. For the same purpose we hold that exemption under Notification 125/84 shall not be applicable in respect of goods manufactured by 100% EOU but sold in India." 17. After reproducing number of passages from the Larger Bench, the learned Member observed thus:- "7. It may be seen that Larger Bench had considered the decision of Hon'ble Supreme Court in case of SIV Industries Ltd., and has agreed with another decision of the Larger Bench in the case of Himalaya International, wherein also the decision of Hon'ble Supreme Court in case of SIV Industries Ltd had been considered; and distinguished. 8. To sum up, two decisions of Larger Bench of the Tribunal have considered the issue and distinguished the decision in the case of SIV Industries Ltd. and the decision of Larger Bench in the present case on a reference made in the appellant's case itself had considered, all aspects and the his....
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....ibunal. Learned senior counsel would submit that the decision in SIV Industries Ltd. (supra) and NCC Blue Water Products Ltd. (supra) when seemly applied, the 100% EOU which was cleared in DTA without permission cannot be allowed to pay duty under Section 3(1) of the Act. 21. To understand the controversy, it is necessary to scrutinize the relevant provisions, circulars in the field and the interpretations placed by this Court on the pertinent provisions. The contentious part of Section 3 of the Act, prior to amendment w.e.f. 11.05.2001 read as follows:- "Section 3. Duties specified in the 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 on all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); (b) a special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are ....
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....h 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)." 23. Having noted the relevant provisions, it is apposite to appreciate what has been held in SIV Industries Ltd. (supra). In the said case, the appeal was preferred challenging the order of the tribunal whereby it had directed that the duty of central excise was not payable under Section 3(1) of the Act but under the proviso to Section 3(1) of the Act. The appellant therein was granted permission to set up a 100% Export Oriented Unit (EOU) for the manufacture of viscose staple fibre at its factory at Sirumugal in Coimbatore District in the State of Tamil Nadu. The letter of intent dated 18.12.1991 was issued to the appellant for the purpose by the Secretariat for Industrial App....
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....gation, sale of a general currency licence-holder, item being not mentioned in the negative list and then there being a limit of 25%, etc. When permission to debond is given, none of these criteria or aspects are applied by the Board of Approvals (BoA) to the closing stock of finished goods. The Board of Approvals is a statutory authority, which permits debonding. It is created under the Industrial (Development and Regulation) Act. On the other hand permission to sell the goods in India under and in accordance with the import policy has to be given by the Development Commissioner in the Ministry of Commerce. The Board of Approvals and the Development Commissioner are two different authorities constituted for two different purposes. Permission to debond is a statutory function exercised by one statutory authority. On the other hand permission to sell in India is to be exercised by a different statutory authority. If reference is made to para 102 of the relevant import-export policy permission of the Development Commissioner is required for selling the goods in India up to a limit of 25% by 100% EOU. Para 117 of the policy deals with debonding of 100% EOU. Thus it is apparent that de....
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.... and who has been allowed by the proper officer to remove such excisable goods for being sold in India on payment of duty of excise leviable thereon. It will be thus seen that this Chapter V-A would not be applicable where EOU is outside the EOU Scheme after the unit is debonded. Under Rule 100-H, Rule 57-A and other Rules mentioned therein shall not apply to excisable goods produced or manufactured by a 100% export-oriented undertaking. Rule 57-A relates to allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 as may be specified by the Central Government in the notification, paid on the goods used in or in relation to the manufacture of the final products and for utilising the credit so allowed towards payment of duty of excise leviable on the final products." 26. In view of the aforesaid position, the Court was of the view that the tribunal was not right in holding that duty was to be leviable in terms of the proviso to Section 3(1) of the Act and, accordingly, it set aside the judgment of the tribunal and restored that of the adjudicating authority. 27. The aforesaid judgment of this Court was distinguished by the Lar....
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....e sold into India as per provisions of EXIM Policy". In other words, Hon'ble Court decided that if the goods are "not allowed" to be sold in India, the proviso to Section 3(1) of Central Excise Act, 1944 shall not be applicable. The expression 'allowed to be sold' has since been replaced with 'brought to any other place' w.e.f. 11-5-2001 vide Section 120 of Finance Act, 2001 [14 of 2001]. 2. It has come to the notice of the Board that field formations are interpreting the judgment of Apex Court to the effect that if the goods cleared by EOUs are not allowed to be sold into India, the Section 3(1) of Central Excise Act, 1944 is not applicable and duty can be demanded under the provisions of Customs Act, 1962 only. Board has taken a serious view of this mis-interpretation. The provisions of Central Excise Act, 1944 shall apply to all goods manufactured or produced in India for which Section 3 is the charging section. EOUs are also situated in India and the chargeability under Central Excise Act is never in doubt. Therefore, it is clarified that prior to 11-05-2001, the clearances from EOUs if not allowed to be sold in India, shall continue to be chargeable to duty under main....
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....ow clear that all the goods manufactured by EOU and cleared into DTA before final debonding of the EOU shall be chargeable to duty under proviso to Section 3(1) of the Central Excise Act, 1944 and under no condition, goods produced in 100% EOU can be charged under main Section 3(1) of Central Excise Act, 1944. 3. In view of the above judgment of the CESTAT, the matter has been re-considered by the Board and it has been decided to withdraw the Board's Circular No. 618/9/2002-CX., dated 13-2-2002. The above-mentioned judgment of CESTAT, which has been accepted by Board, may kindly be taken into consideration in deciding similar pending cases." 31. Having noted the circular, we may refer to the authority in NCC Blue Water Products Ltd. (supra). In the said case, the tribunal has held that the duty of Central excise on shrimps and shrimp seeds produced and removed by the assessee-respondent, a 100% export-oriented unit (EOU), in the Domestic Tariff Area (DTA) without the approval of the Development Commissioner, would be payable under Section 3(1) of the Act and not under the proviso appended thereto. The two-Judge Bench taking note of the fact that during the period 1994-1....
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.... the proviso to the said section?" 32. To deal with the said question, the Court referred to Section 3 and it expressed understanding of the provision in the following terms:- "It is manifest that all excisable goods produced or manufactured in India are exigible to duty of excise under Section 3 of the Act, the charging section, at the rates set forth in the Schedule to the Tariff Act. However, the proviso to the said section provides that the duties of excise on any excisable goods, which are produced or manufactured by a 100% EOU 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. As aforestated, the controversy at hand is whether in the absence of an order by the competent authority, allowing the assessee to sell the shrimp seeds and shrimps in India, excise duty on such sales could be levied and collected in terms of the proviso. To put it differently, the issue relates to the significance of the expression "allowed to be sold in India" as appearing in clause (ii) to the proviso to sub-section (1) of Section 3 of the Act." 33. After so stating the tw....
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....rimp seeds by the assessee in DTA, the Development Commissioner had not issued the requisite removal authorisation. Therefore, in view of the dictum of this Court in SIV Industries Ltd. (supra ), 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." [Emphasis added] 35. The impugned order, as is manifest, relies on the Larger Bench decision. It is to be noted that after the judgment in NCC Blue Water Products Ltd. (supra) the said decision was brought to the notice of the tribunal but it has opined that parent judgment in SIV Industries Ltd. (supra) was distinguished by the Larger Bench and further the circular dated 05.01.2004 was not taken note of by this Court in the subsequent judgment. On a careful scrutiny of the authority in NCC Blue Water Products Ltd. (supra), we are of the considered opinion that it concurs with the view expressed in SIV Industries Ltd. (supra). The circular dated 05.01.2004 came into existence after the Larger Bench decision in Himalaya International Ltd. (supra). We have already stated that there....