TaxTMI 
TaxTMI 
2020 (7) TMI 485
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....me portion of their final products within the country (Domestic Tariff Area) subject to conditions as specified from time to time. As EOUs are practically duty-free, they are also treated as if they are outside India. Therefore, in respect of any goods which are cleared by the EOU for sale within India, excise duty is collected at a rate equivalent to Customs duty leviable on identical goods imported into India in terms of the proviso to section 3 of Central Excise Act, 1944. 3. In this case, the appellant had imported inputs claiming the benefit of exemption notification No.52/2003-CUS dt.31.03.2003 for Basic Customs Duty and applicable Central Excise Duty (on indigenously procured raw materials). They were supposed to manufacture solar modules and export. However, the appellant was not able to export goods and had cleared their final products in DTA claiming exemption under notification Nos.24/2005-CUS as amended by notification No.132/2006-CUS and notification No.06/2006-CE and notification No.12/2012-CE. Final products manufactured by the appellant have zero basic customs duty because they appear in List-5 of notification No.06/2006-CUS dt.01.03.2006 and at Sl.No.332 of noti....
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....heir final products by virtue of the exemption notifications available to them. Therefore, no duty was paid on the final products cleared by the appellant to the DTA. There is no dispute regarding the eligibility of the exemption notification for their final products. 5. What is in dispute is whether the appellant is also entitled to duty-free inputs (both imported and indigenous) under the exemption notifications 52/2003-CUS dt.01.03.2003 and 22/2003-CE. 6. It is undisputed that the notification Nos.52/2003-CUS and 22/2003-CE are meant for exemption to 100% EOUs. It is also not in dispute that both these exemption notification are issued by the Finance Ministry in consonance with corresponding provisions of Foreign Trade Policy. Para 6 of notification No.22/2003-CE reads as follows: "6. Notwithstanding anything contained in this notification, the exemption contained herein shall also apply to the goods used for the purposes of processing, manufacture, production or packaging of articles in an user industry and such articles (including rejects, wastes, scrap and remnants arising out of such processing, manufacture, production, or packaging of such articles) even if n....
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....of Approval or the Inter Ministerial Standing Committee, as the case may be, on payment of appropriate duty of excise leviable thereon under section 3 of the Central Excise Act, 1944 ( 1 of 1944) or where such finished goods (including by-products, rejects, waste and scrap) or services are cleared to the warehouse appointed or registered under notification of the Government of India in the Ministry of Finance ( Department of Revenue) No. 26/98-Central Excise ( NT), dated the 15th July, 1998 or No. 46/2001-Central Excise ( NT), dated the 26th June, 2001 or cleared to the warehouse authorised to carry out manufacturing process or other operation under section 65 of the Customs Act, 1962 (52 of 1962) and under the Manufacture and Other Operations in Warehouse Regulation, or cleared to the holders of certificate from Apparel Export Promotion Council and Council for Leather Export for duty free imports as referred to in clause (e) of the paragraph 6.9 of the Export and Import Policy, without payment of duty. Provided that where such finished goods (including rejects, waste and scrap and remnants) are not excisable, customs duty equal in amount to that leviable on the inputs imp....
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....uties were demanded in the four SCNs. Sl.No. SCN No. & Date Central Excise Duty Customs Duty Total 1 71/Commr/Bol/13 dt.07.10.2013 77,65,349 1,61,64,228 2,39,29,577 2 33/Commr/Bol/14 dt.29.04.2014 71,19,907 1,22,95,842 1,94,15,749 3 06/Commr/Dgp/15 dt.29.01.2015 66,34,027 76,39,578 1,42,73,605 4 35/Commr/Dgp/15 dt.01.10.2015 1,37,80,071 2,63,08,348 4,00,88,419 TOTAL 3,52,99,354 6,24,07,996 9,77,07,350 11. Interest was also demanded on the aforesaid amounts and penalties were proposed to be imposed under section 11AC of Central Excise Act and Rule 25 of Central Excise Rules (CER), 2002. Penalty was also proposed to be imposed under section 112 of Customs Act, 1962. The appellant contested the demands and after following due process, the learned Commissioner, in the impugned order, held as follows: " In view of the discussions made hereinbefore, I pass the following order: i. I confirm the demand of Central Excise duty of an amount Rs. 3,52,99,354/- (Rupees Three Crore Fifty-two lakh Ninety-nine thousand Three hundred Fifty-four only) and order recovery of the same from M/s Sov....
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....l be eligible for the exemption and therefore, no demand can be confirmed against them. Accordingly, the entire demand needs to be set aside along with interest and penalties. 13. Learned DR argues in the first place that this bench cannot go beyond the scope of the SCN which only sought to deny the benefit of such exemption notifications which they were admittedly not entitled to. However, even if the submissions of learned counsel were accepted, the appellant was not entitled to the benefit of the other exemption notifications which they now claimed in respect of these inputs which they had procured. Therefore, he submits that this appeal needs to be rejected. 14. In this factual background, we proceed to examine the appellant's eligibility to exemption notifications which are now being sought. Notification No.24/2005-CUS reads as follows: " In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962(52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, herebyexempts the following goods, falling under the heading, sub-heading or tariff-item of the First Schedule to the Customs....
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....ure of goods covered by S.Nos. 1 to 38 above, provided that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. 15. Notification No. 06/2006-CE reads as follows: "In exercise of the powers conferred by sub-section (1) of section 5A of theCentral Excise Act, 1944 (1 of 1944), the Central Government, on being satisfied that it is necessary inthe public interest so to do, hereby exempts the excisable goods of the description specified in column (3)of the Table given below read with the relevant List appended hereto, as the case may be, and falling within the Chapter, heading or subheading or tariff item of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), as are given in the corresponding entry in column (2) of the said Table, from so much of the duty of excise specified Thereon under the First Schedule to the Central Excise Tariff Act, as is in excess of the amount calculated at therate specified in the corresponding entry in column (4) of the said Table and subject to the relevantcond....
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....h they used are admittedly not covered at Sl.No.3. Learned counsel for the appellant submits that all goods used for manufacture of goods covered at Sl.No.1 to Sl.No.4 of the table are also covered at Sl.No.5 of the table which is reproduced above. 17. This notification was revised by notification No.132/2006-CUS which also covers the products at Sl.No.23 of the table and their inputs at Sl.No.39 of the table. Both S.No.5 of Notification No.24/2005-CUS and S.No.39 of the Notification No.132/2006-CUS require the importer to follow the procedure set out in Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996. These rules require the claimant to obtain a registration from the department and also follow some procedures. However, they were already registered with the Central Excise department as an EOU. The CBEC had issued a clarification in DOF No.334/7/2017/TRU dt.01.02.2017. Para 6 of which interalia reads as follows: " ... EOUs will also be eligible to import or procure raw materials/ inputs at other concessional/ nil rate of BCD, excise duty/ CVD or SAD, as the case may be, provided they fulfil all conditions for being el....
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.... where the benefit of such exemption is dependent upon the use of imported goods covered by that notification for the manufacture of any commodity or provision of output service. (2) These rules shall apply only in respect of such exemption notifications which provide for the observance of these rules. 3. Definition. - In these rules, unless the context otherwise requires, - (a) "Act" means the Customs Act, 1962 (52 of 1962); (b) "exemption notification" means a notification issued under sub-section (1) of section 25 of the Act; (c) "information" means the information provided by the manufacturer who intends to avail the benefit of an exemption notification; (d) "Jurisdictional Custom Officer" means an officer of Customs of a rank equivalent to the rank of Superintendent or an Appraiser exercising jurisdiction over the premises where either the imported goods shall be put to use for manufacture or for rendering output services; (e) "manufacture" means the processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term "manufact....
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....and ending with the date of actual payment of the entire amount of the difference of duty that he is liable to pay. (3) The Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs having jurisdiction over the premises where the imported goods shall be put to use for manufacture of goods or for rendering output service, shall forward one copy of information received from the importer to the Deputy Commissioner of Customs, or as the case may be, Assistant Commissioner of Customs at the Custom Station of importation. (4) On receipt of the copy of the information under clause (b) of sub-rule (1), the Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs at the Custom Station of importation shall allow the benefit of the exemption notification to the importer who intends to avail the benefit of exemption notification. 6. Importer who intends to avail the benefit of an exemption notification to give information regarding receipt of imported goods and maintain records. - (1) The importer who intends to avail the benefit of an exemption notification shall provide the information of the receipt of....
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....use for manufacture of goods or for rendering output service, within a period of six months from the date of import on payment of import duty equal to the difference between the duty leviable on such goods but for the exemption availed and that already paid, if any, at the time of importation, along with interest, at the rate fixed by notification issued under section 28AA of the Act, for the period starting from the date of importation of the goods on which the exemption was availed and ending with the date of actual payment of the entire amount of the difference of duty that he is liable to pay. 8. Recovery of duty in certain case. - The importer who has availed the benefit of an exemption notification shall use the goods imported in accordance with the conditions mentioned in the concerned exemption notification or take action by re-export or clearance of unutilised or defective goods under rule 7 and in the event of any failure, the Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs having jurisdiction over the premises where the imported goods shall be put to use for manufacture of goods or for rendering output service sh....
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....ication. This notification refers to List-5 annexed to the exemption notification. Sl.No.11 of the List-5 reads "Solar Photovoltaic module and panel for water pumping and other applications." There is no dispute that their final products fall under this category being solar modules. Therefore, their parts are covered at Sl.No.21 which reads "Parts consumed within the factory of production of such parts for the manufacture of goods specified at Sl.No.1-20 above". He would, therefore, argue that all the parts which they have imported are covered by Sl.No.21 List-5 read with Sl.No.84 of the table of exemption notification 06/2006-CE. Therefore, no demand can be sustained on the CVD components as well as on the indigenously procured goods. 22. Per contra, learned DR argues on this point that a plain reading of exemption notification undoubtedly exempts the final products of the appellant being covered at Sl.No.84 of the table read with Sl.No.11 of List-5. In fact they have also availed benefit of exemption notification. As far as Sl.No.21 of List-5 is concerned, it is very specific that it exempts parts consumed within the factory of production of such parts. It does not exempt part....
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.... of the Constitutional Bench of the Hon'ble Apex Court in the case of Dilip Kumar & Co. and Ors. (supra). 25. We have considered the arguments made exhaustively by both sides and perused the records. It is undisputed that the appellant is a 100% EOU, they imported inputs availing the benefit of exemption notifications available only to 100% EOUs. These exemption notifications are available to the EOUs even if the final products are cleared to DTA. However, where the final products are cleared to DTA and such final products are not excisable, no benefit of exemption on the inputs is available to the appellant. The term non-excisable in this context has been clarified in the Foreign Trade Policy (in consonance of which the exemption notifications are issued) as "such goods which are exempted from both the basic customs duty and additional duty of customs". 26. It is not in dispute that the final products manufactured and cleared by the appellant are exempted from both the basic customs duty and additional duty of customs. Therefore, they are non-excisable and inputs used in their manufacture are clearly not covered by the exemption notifications originally claimed by the appell....
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....cope of an exemption notification which is in the form of a subordinate legislation through a letter or circular. Taxing statutes have to be strictly construed and the power of taxation lies with the Parliament. The power to issue exemption notifications rests with the Central Government. Every exemption notification which is issued is placed before the Parliament and is subjected to scrutiny by a Committee of sub-ordinate legislation of each House which at times modify the notifications on their instructions. Therefore, as far as the exemption notifications issued by the Government are concerned, they are clearly in the nature of sub-ordinate legislations. We do not think that a letter issued by the CBEC can enlarge the scope of the exemption notifications thereby truncating the scope of taxation levied by the Parliament. Even if it is presumed that CBEC had such power, these letters are not subject to scrutiny and review by the Parliament. 29. Notwithstanding the above observations, we find that the exemption given by the CBEC by way of a letter was only to the extent of avoiding two registrations but no exemption has been given with respect to following remaining conditions o....
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....Rule 25 of the Central Excise Rules, 2002 and Section 114A of the Customs Act, 1962, we find that in the impugned order, the learned Commissioner imposed penalties under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 without specifying as to which particular clause of Rule 25 has been contravened by the appellant. None of the show-cause notices mentioned regarding the violation of particular clause of Rule 25. In such circumstances, as per the Apex Court's decision in the case of Amrit Foods Vs. CCE, UP [2005(190) ELT 433 (SC)], imposition of penalty is bad in law and is liable to be set aside. This decision of the Apex Court was subsequently followed by the Apex Court in the case of Noble Moulds Pvt. Ltd. Vs. CCE [2010(259) ELT 338 (Del.)] wherein the Hon'ble Apex Court has held in para 9 as under:- 9. We may, with advantage, referred to another judgment of the Apex Court in the case of Amrit Foods v. Commissioner of Central Excise, U.P. - 2005 (190) E.L.T. 433 (S.C.). In that case, penalty was imposed under Rule 173Q of the Central Excise Rules, 1944 without mentioning that provision in the show cause notice. The said pen....