TaxTMI 
TaxTMI 
2025 (2) TMI 139
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.... 50,62,64,739/- B-37 Sector 80 Phase II NOIDA E/70443/2017 09/2017-CE 28.02.2017 16.03.2015 to 31.12.20 15 36,39,72,762/- 57 I/1&2, Ecotech -I, Extn -I Greater Noida 1.2 The respondents in these appeal are two units of M/s Elentec India Pvt. Ltd., having their registered office at B-8/14, 1st Floor Vasant Vihar, New Delhi operating from the two different premises as per the address in column 6. 1.3 One appeal has been filed by the Respondent as detailed below: C/70664/2017 02/Pr. Comm/Noida/2017-18 18.05.2017 01.01.2016 to 29.02.2016 8,05,65,853 B-37 Sector 80 Phase II NOIDA By the impugned order the demand has been confirmed so respondent (party) filed the appeal. 2.1 Respondents, are 100% export oriented unit (100% EOU) engaged in the manufacture of battery chargers and parts/ components of mobile phone falling under tariff items 8504 40 30 and 8517 70 90 respectively of the First Schedule to the Central Excise Tariff Act, 1985. 2.2 Acting on intelligence received in Directorate General of Central Excise Intelligence to effect that. respondents were not paying Customs duty and Central Excise duty foregone on the raw materials....
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....003-CE dated 31.03.2003 and did not pay an amount equal to the duty forgone on such raw materials/ inputs, during the period 16.03.2015 to 31.12.20 15 2.5 In terms of general exemption notification No. 12/2012-CE dtd 17.03.2012 and 12/2012-Cus. dated 17.,03.2012, the exemption from duty is available to the sub-parts of the parts, components and accessories of tablet computers, mobile handsets including cellular phones. 2.6 The amount of Central Excise duty foregone by Respondent No 1, under Notification No. 22/2003- CE dated 31.03. 2003, on the indigenous procurements comes to Rs. 93,18,949/- and the amount of Customs duty foregone under Notification No. 52/2003-Cus dated 31.03.2003, on the imported raw materials/ inputs comes to Rs. 35,46,53,813/-. Thus resulting in nonpayment of total Customs duty and CVD, during disputed period of Rs 36,39,72,762/-. 2.7 A show cause notice dated 04.04.2016 was issued to respondent 1 asking him to show cause as to why (i) Customs duty & Central Excise duty (inclusive of Education Cess and Secondary & Higher Education Cess) amounting to Rs. 36,39,72,762/- (Rs. Thirty Six Crore Thirty Nine Lakh Seventy Two Thousand Seven Hundred a....
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.... stating the following ground: • Respondents admitted that they have procured raw materials under the notification no. 52/2003-Cus dated 31,03.2003 or notification no. 22/2003 dated 21.03.2003 • On the basis Notification no. 12/2012-Cus dated 17.03.2012 and notification no. 22/2003-CE dated 3103.2003 contend that "raw material, parts/sub-parts, components arc one and same thing". This is not correct as these terms have been differentiated in these notifications itself. Few examples from notification no. 12/2012-Cus dated 17.03.2012 are Entry No 357, 362, 460, 469, 407A and 431. • it is apparent that notification no. 12/2012-Cus dated 17,03.2012 itself treated raw materials, parts, sub-parts, consumable components and accessories separately. Each entry also specifies the intention of the notification to provide extent of exemption in each case to parts/sub parts/components/ accessories/ raw material / consumable separately in different contexts. Entry no. 407A or 431 have no mention of raw material or consumable, thus it is evident that raw material and consumable have been kept out of the ambit of exemption under these entries of notification ....
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.... materials under general exemption notifications is an afterthought and misleading. The facts remain that their procurement/import was under the notifications available only to 100% EOUs, • Since they had used raw materials/inputs imported or procured indigenously without payment of duty under Notification No. 52/2003-Cus dated 31-03-2003 and 22/2003-CE dated 31-03-2003, for the manufacture of finished goods, i.e., parts and components of mobile phones and battery chargers cleared in DTA at Nil rate of duty, they were required to comply with the conditions of the notifications which they have availed while procuring raw materials/inputs and were required to pay an amount equal to the duty foregone on inputs/raw materials procured without payment of duty • instructions issued vide F. No. DGEP/EOU/450/2006 dated 09- 02- 2007 of the Directorate General of Export Promotion arc not applicable, to the facts of this case as the respondent has never been denied duty free import of parts/s sub part and component duty free procurement of the or same indigenously or duty free clearances under notification 12/2012-Cus dated 17-03-2012 and 12/2012-CE dated 17-03-2012 ....
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....¢ The following judicial pronouncements are relevant to the present case • Nicco Corporation Lld. [2006 (203) E.L.T.362 (S.C.)| • Paul Lazar [1977(40) STC 437 (Kerala HC)] • Rai Agro Industrics Lld. [2006 (206) ELT 123 (Del)], SLP (Civil) No 15926 of 2006 was dismissed by the Hon'ble Supreme Court [2007 (207)ELT A135 (SC)| • Mediwell Hospital and Health Care Pvt. Ltd. [1997 (89) E.L.T. 425 (S.C.)] • The part, sub-part, component as mentioned in notification No. 12/2012- Cus do not fall under the definition of raw material which they have actually imported/procured indigenously. What respondents has imported is raw material and consumable from which they manufactured parts sub-parts, components and accessories of mobile phones/ battery chargers which are their finished products cleared under Notification No. 12/2012-Cus dated 17-03-2012. • However, merely by identification of an item in the finished product, the same cannot be defined as part/component of the finished goods, as any inputs such as raw material, consumable, parts, sub-parts, components will be constituent of the finished products. But t....
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....emand of Customs duty & Central Excise duty amounting to Rs. 8,05,65,853/- (Rs. Eight Crore Five Lakh Sixty Five Thousand Eight Hundred Fifty Three only) and order its recovery from M/s. Elentec India Pvt. Ltd., B-37, Sector-80, Phase-II, Noida, Gautam Budh Nagar, U.P. under the provisions of Section 28(8) of the Customs Act, 1962 and Section 11A(10) of the Central Excise Act, 1944; (ii) I also confirm the demand of interest on the above amount of Customs duty & Central Excise duty, at the appropriate rate, and order its recovery from them under the provisions of Section 28 AA of the Customs Act, 1962 and Section 11AA of the Central Excise Act, 1944; and (iii) I also impose a penalty of Rs. 80,00,000/- (Rs. Eighty Lakh only) upon them under Section 112(b)(ii) of the Customs Act, 1962 and Rule 25 of the Central Excise Rules, 2002 read with Section 11AC(1)(a) of the Central Excise Act, 1944. If the duty as determined and interest payable thereon is paid within thirty days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person shall be twenty-five per cent. of the penalty so dete....
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....ll as the review order of the Committee of Chief Commissioners. The same is reproduced below: "3.1 The AA had carefully considered the facts of the case on record, written submissions made by the party and record of personal hearing. Various issues taken by the AA are discussed below: 3.2.1 As regards the issue whether M/s Elentec are eligible for the benefit of Not. No. 12/2012- Cus. dated 17.03.2012 and Not. No. 12/2012-C.E dated 17.03.2012 or they are required to pay an amount equal to duty foregone on raw materials/ inputs during the period from 10.03.2015 to 31.12.2015 as per the conditions of Notification No. 52/2003-Cus. dated 31.03.2003 and Notification No. 22/2003-C.E. dated 31.03.2003, the AA found that M/s Elentec had claimed that they were eligible to avail the benefit of Notification No. 12/2012-Cus. and Notification No. 12/2012-C.E, as per C.B.E.C. instruction issued vide F. No. DGEP/EOU/450/2006 dated 09.02.2007. (Para 24 (Al) of O-i-O refers) 3.2.2 From the clarification by the Board the AA found that the board enjoins upon an EOU to be treated at par with a DTA unit, if it substantially satisfies the requirements of the Rules to be follow....
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....he contention that these are 'consumables' and not 'parts, components or accessories' 3.3.2 The AA had gone through various definitions of consumables, components, raw materials and others. The AA found that M/s Elentec had enclosed details and uses of various items in support of their contention that all their imports' indigenously procured goods were identifiable in the finished products manufactured by them. From the details, the AA found that some parts were used in the manufacture of charger parts/mobile parts and were identifiable in the finished goods, some were used for quality checks and some were used for manufacture of parts which were supplied to another 100% EOU. 3.3.3 From various judgments pertaining to definition of components, the AA found that some of the items which were subject matter of the SCN were either covered under Exemption Notification No. 12/2012-Cus. (Sr. No. 431) or under Exemption Notification No. 12/2012 -C.E (Sr. NO. 272). Three items viz. High Frequency Iron Machine, Aluminated Magnifier and Mask continued to be covered as capital goods, tool etc. under Notification No. 52/2003-Cus. and under Notification No. ....
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.... Nil 2 2 Where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed. 4.4 The disputed items with their usage is as follows: Appeal No E/70467/2017 S No Description Usage 1 Polycarbonate Resin It is in the form of granules which is melted through injection moulding to form the body of battery charger. 2 TA wire/ DC wire It is used to transfer DC output from charger to mobile phone 3 Solder bar/ solder wire It is used to solder components on the PCB 4 Tape It is used for packing the charger in the inner box so that it is stable in its place. 5 Cable Tie It is used to tie up the cable of charger. 6 Insert Jig Essential part of inserting pin in front and rear cover. Screwing is done for front & rear cover for tight interlocking 7 High Frequency iron machine This machine is used for manual soldering of PCB parts. Using this all parts can be soldered at their defined place. 8 Barcode sticker It ....
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....or the manufacture of" and not "of". Thus anything which goes into the manufacture of these items would be eligible to exemption under the said entry of this notification. It is settled position in law that the exemption notification need to be construed strictly as per the words and phrase used in the notification. From the phrase used we are of the view that this phrase would cover all the items that are consumed directly or indirectly for the manufacture of these items. Similar expressions were used while defining the "Capital Goods" as per Rule 57 Q of the Central Excise Rules, 1994 and Hon'ble Supreme Court has in the case of Jawahar Mills Ltd. [2001 (132) E.L.T. 3 (S.C.)] interpreted the said phrase to be very wide to cover all things used in the factory of production to be covered by the said definition. The observations made by Hon'ble Apex Court are reproduced below: 2. Rule 57Q was introduced by Notification No. 4/94-C.E., dated 1st March, 1994. It enabled manufacturers to claim Modvat credit of duty paid on 'Capital goods' used in their factory. The expression 'Capital goods' has been defined in the Explanation to Rule 57Q. For the proper appreciation of the con....
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.... manufacture of final product would be 'Capital goods', and, therefore, qualify for availing Modvat credit. Per clause (b), the components, spare parts and accessories of the goods mentioned in clause (a) used for the purposes enumerated therein would also be 'Capital goods' and qualify for Modvat credit entitlement. Clause (c) makes moulds and dies, generating sets and weigh bridges used in the factory of the manufacturers as capital goods and thus qualify for availing Modvat credit. The goods enumerated in clause (c) need not be used for producing the final product or used in the process of any goods for the manufacture of final product or used for bringing about any change in any substance for the manufacture of final product and the only requirement is that the same should be used in the factory of the manufacturer. Thus, it can be seen that the language used in the explanation is very liberal. 5. In the case of Indian Farmers Fertiliser Cooperative Ltd. (supra) this Court interpreted the notification which conferred exemption in respect of such raw naphtha as was used in the manufacture of ammonia provided such ammonia was used elsewhere in the manufacture of fertiliz....
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....may go into the machine used by the manufacturer and, thus, may qualify the requirement of clause 1(a) and, at the same time, another part of the cable which is used only for lights and fans would not so qualify. We have no difficulty in accepting the contention of the learned Additional Solicitor General that, under these circumstances, user will determine whether an item qualifies or not the requirement of clause 1(a). However, in the present cases this aspect has no relevance. It was not the case of the revenue at any stage before the authorities that an item does not satisfy the requirement of 'Capital goods' within the meaning of the Rule on the ground of its user as it now sought to be urged by the learned counsel. The case of the revenue has all through been that the items in question per se are not 'Capital goods' within the meaning of the expression as defined in Explanation 1(a). ....." 4.6 The larger bench of tribunal has in case of Jawahar Mills [1999 (108) E.L.T. 47 (T-LB)] interpreting the same phrase has observed as follows 35. It has been contended that producing means bringing into existence a new article from raw material and processing signifies an op....
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.... asbestos, mica or similar materials; ceramic products; glass and glassware. Chapter 68 covers "Articles of stone, plaster, cement, asbestos, mica or similar materials." Chapter 69 takes in "Ceramic products". Chapter Heading 69.02 took in the following : "Refractory bricks, blocks, tiles and similar refractory ceramic constructional goods, other than those of siliceous fossil meals or similar siliceous earths" Sub-heading 6902.10 read as follows : "Containing by weight, singly or together, more than 50% of the elements Mg, Ca or Cr, expressed as MgO, CaO or Cr2O3". 85% Sub-heading 6902.20 read as follows : "Containing by weight more than 50% of alumina (Al2O3), of Silica (SiO2) or of a mixture or compound of these products". 85% Chapter 84 of the new tariff deals with machinery and parts thereof. Chapter Note 1(a) of Chapter 84 excluded articles of Chapter 68 from the purview of Chapter 84. Chapter Note 1(b) of Chapter 84 excluded appliances and machinery or parts thereof of ceramic material (Chapter 69) from the purview of Chapter 84. under the new tariff refractory bricks would fall under Chapter 69 (tariff rate of duty was 85%). T....
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....er would attract entry 65 or the residuary entry 22. It was held that while the word "part" has a general sense, "spare part" takes colour from the word "spare", that is a part which would require replacement in ordinary course on account of wear and tear and would not have the amplitude of the word "component". It was indicated that the owner of radio will not ordinarily keep an extra cabinet spare and, therefore, cabinet cannot be regarded as a spare part, though it is a component of radio and, therefore, entry No. 65 would not apply. In Commissioner of Sales Tax v. Pritam Singh - 1968 (22) STC 414 (All. HC) the question arose in the context of manufacture of bodies of motor vehicles. Item 24 of the exemption notification referred to motor vehicles and component parts of motor vehicles. It was held that a component part of an article is an integral part necessary for the constitution of the whole article and without it the article will not be complete and body of a motor vehicle being an integral part of the motor vehicle has to be regarded as a component part. In Sujan Singh & Another v. A.A.C. Sales Tax - 1969 (24) STC 504 (Delhi HC) the question was whether the body of motor v....
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....w. In State of Tamil Nadu v. Tube Investments of India Ltd. - 1992 (85) STC 245 (Madras HC) it was held that dynamo of a cycle is not a component part but an accessory of cycle. In Televista Electronics v. Commr. of Sales Tax - 1992 (87) STC 410 (Delhi HC) in considering the entry relating to wireless receiving instruments and spare parts and accessories in the schedule to the Bengal Finance (Sales Tax) Act, it was held that a spare part is always a component part but the converse may not be invariably true. 15. In Star Paper Mills Ltd. v. Collector of Central Excise - 1989 (43) E.L.T. 178 (S.C.), the Supreme Court held that paper core used for rewinding of paper in rolls is a component part within the meaning of Notification No. 201/79. The court relied on the dictionary meaning of the word "component" as "a constituent part". Since use of paper core is necessary for rewinding of paper if delivered to the customers in rolls, it should be a component part within the meaning of the Notification. 16. Notifications 246/76, 77/90 and 112/87 do not define the word "component part" with the result that one has to go by the meaning the word carries in common pa....
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....c qualification or restriction. There are several notifications where such qualifying or restrictive words have been used to suggest that the component part must have been used in the initial assembly or in the manufacture of the final product thereby excluding "spare" from the ambit of the expression "component part". There are no such qualifying or restrictive words used in the notifications under consideration. Hence, with respect, it is not possible to agree with the view taken in some of the decisions of the Tribunal that "component" implies parts used in the initial assembly or manufacture and excludes "spares". The amplitude and significance of the word "component" cannot be cut down in the absence of clear words indicative of any intention to restrict its meaning and operation. The view taken in Vaz Fowarding Pvt. Ltd. - 1989 (43) E.L.T. 358 (Tribunal) was not followed in Metal Impacts Pvt. Ltd. - 1993 (64) E.L.T. 286 (Tribunal), but the distinction drawn based on the fact that the words "component parts" occur in isolation and not in conjunction with the final product is a distinction without difference. The amplitude of the words "component part" is not in any way restric....
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...., spare parts of machinery, consumables, packaging materials, office equipment, spares and consumables thereof, Tools, jigs, gauges, fixtures and accessaries proto types, technical and trade samples for development and diversification, Drawings, Blue prints and charts etc..... imported for the production of goods for export or for being used in connection with the production or packaging of goods for export or for the promotion of such export by units....... 3 256/87- Cus Capital goods, raw materials, components, spares of production machinery, consumables etc. imported by or on behalf of the gem and jewellery units set up in ................ Export processing zone ........... for manufacture of jewellery for export by .......... 4 260/87-Cus -Ditto- 5 3/88-Cus. -Ditto- 6 277/90 -Ditto- He points out that these notifications refer to components as well as spare parts and indicated that they refer to different articles, namely, parts used for first assembly or manufacture on the one hand and spares used for replacement. Notification No. 13/88 refers to raw materials, components and not spares, while the remaining notifications refer to bo....
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....or assembly of which a manufactured product is made up and into which it may be resolved and includes an accessory or attachment." "Spare means a part or sub-assembly or assembly for substitution i.e. ready to replace an identical similar part or sub-assembly or assembly, if it becomes faulty or worn out, and includes an accessory (attachment) in the same regard." The two sets of definitions are almost identical except that according to 1992-97 Policy, spare includes component. This, in our opinion is clarificatory of the correct position, namely, that while every spare is a component, every component may not be a spare as illustrated by the decisions in Commissioner of Sales Tax v. Amar Radio Cabinet Works - 1968 (22) STC 63 (Bom. HC), Sujan Singh and Another v. Appellate Asstt. Commissioner of Sales Tax - 1969 (24) STC 504 (Delhi HC), Bajoria Halwasiya Service Station v. The State of Uttar Pradesh and Another - 1970 (26) STC 108 (All. HC) and Televista Electronics (P) Ltd. v. Commissioner of Sales Tax - 1992 (87) STC 410 (Delhi HC). The broad definitions of component and spare given in the Policies are only a reflection of the dictionary-meaning which we have al....
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.... directly used in the fatty acid derived from rice bran oil. The whole purpose and object of the notification is to encourage the utilisation of rice bran oil in the process of manufacture of soap in preference to various kinds of oil (mainly edible oils) used in such manufacture and this should not be defeated by an unduly narrow interpretation of the language of the notification even when it is clear that rice bran oil can be used for manufacture of soap of the only after its conversion into fatty acid or hydrogenated oil." (Emphasis supplied) 22. We have considered the matter in the light of the guidelines formulated by the Supreme Court. The furnace, the final product is made of layers of sheets put together and inner sides are lined with Refractory Bricks of special shape or quality which could withstand high temperatures. After some time, the Refractory Bricks get damaged or suffer wear and tear and are no longer fit for the purpose for which they are used in the lining and require to be replaced. For a long period prior to the coming into force of Central Excise Tariff, under erstwhile T.I. 72(3), tariff rate of duty of all component parts of machinery....
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....of "component part" which had not been defined in the Notification. The various decisions of High Courts referred to earlier under relevant Sales Tax statutes also deal with the expression "component parts" also not defined in those statutes and the High Courts resorted to dictionary meaning or popular meaning. In the Notification under our consideration also, "component part" has not been defined and we have gone by the dictionary meaning which is also the popular or common parlance meaning and to that extent the decisions have relevance. 24. Appellant has placed reliance [on] Circular No. 8/88 dated 12-4-1988 of the Central Board of Excise and Customs issued on a representation claiming that Refractory Bricks use in Electric Arc Furnace for the manufacture of steel must be treated as input for the purpose of availing Modvat credit under Rule 57A of the Central Excise Rules, 1944. The Board indicated that Refractory Bricks "are used in Electric Arc Furnace for giving inner lining which become an integral part of Electric Arc Furnace (Machinery). Therefore the same would not be eligible for Modvat credit." A Larger Bench of the Tribunal has held that parts of machiner....
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....of the appellant it is mere procedural lapse. For this reason, the substantial benefit of notification Nos. 25/1999-Cus. and 25/2002-Cus. cannot be denied. The judgments cited by the Ld. Commissioner (A) is in the facts of the case where the goods are cleared from the Customs and received by DTA unit which are not under the control of Customs/Excise department whereas the facts of the present case is different as the appellant is a 100% EOU. Therefore the judgments cited by Revenue stand distinguished. As per the above discussion, we are of the view that the appellant is entitled for exemption under notification 25/2002-Cus. and 25/1999-Cus. Accordingly, the impugned order is set aside. Appeals are allowed." 4.11 Similar Clarification has been issued by the Director General Export Promotion vide his letter issued from F.No. DGEP/EOU/450/2006 dated 09.02.2007. The relevant text is reproduced below: "2. The matter has been examined. It is seen that parts, components and accessories of mobile handsets including cellular phones are exempted from basic customs duty, additional duty of customs under Section 3 (1) and Section 3 (5) of the Customs Tariff Act,1975 under notifica....
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....disadvantageous position vis-avis DTA manufacturers. This is not the intention behind the relevant provision of EOU notification 52/2003-Cus and 22/2003-CE. Accordingly, it is hereby clarified that exemption of customs and central excise duties on parts, components and accessories of mobile handsets including cellular phones under notification no. 21/2005-Cus dated 01.03.2005, 39/2005-Cus dated 02.05.2005 and 6/2006-C.E.dated 01.03.2006 shall be applicable for EOUs, if all substantive conditions of rules required to be followed under these notifications are fulfilled by an EOU to the satisfaction of the jurisdictional Asstt./ Dy. Commissioner of Customs or Central Excise, as the case may be." Revenue in their appeal have not disputed the above clarification but have stated that this circular would not be applicable for the reason that these items do not fall within the category of components, parts etc. However for the view taken by us we hold that the said clarification would be applicable and the benefit of said notification will be admissible to the appellant. 4.12 The last issue raised by the revenue in there appeal is whether respondent could have claimed the benefit of ....