2012 (4) TMI 65 - SC - Central Excise

Exemption under Notification No.8/97-CE, dated 1.3.1997 - finished goods manufactured by the 100% EOU out of the raw material supplied by another 100% EOU, and subsequently, cleared in the Domestic Tariff Area (DTA) in accordance with the EXIM Policy 1997-2002 Revenue contended availiability of alternative benefit of Notification No.2/95-CE, dated 4.1.1995 Held that - The notification requires to be interpreted in the light of the words employed by it and not on any other basis. There cannot be any addition or subtraction from the notification for the reason the exemption notification requires to be strictly construed by the Courts. The wordings of the exemption notification have to be given its natural meaning, when the wordings are simple, clear and unambiguous. Therefore, Tribunal has rightly allowed the benefit of exemption under Notification no. 8/97-CE Decided against the Revenue.

Issues Involved:
1. Entitlement to the benefit of Notification No. 8/97-CE for goods manufactured by a 100% Export Oriented Unit (EOU) using raw materials from another 100% EOU and cleared in the Domestic Tariff Area (DTA).
2. Correctness of the adjudicating authority's decision denying the benefit of Notification No. 8/97-CE and instead allowing the benefit of Notification No. 2/95-CE.
3. Interpretation of the exemption notifications and relevant clauses of the EXIM Policy 1997-2002.

Issue-Wise Detailed Analysis:

1. Entitlement to the benefit of Notification No. 8/97-CE:
The core issue was whether finished goods manufactured by a 100% Export Oriented Unit (EOU) from raw materials supplied by another 100% EOU and cleared in the Domestic Tariff Area (DTA) are entitled to the benefit of Notification No. 8/97-CE, dated 1.3.1997. The Tribunal had concluded that the assessee could avail the benefit of Notification No. 8/97-CE. The Supreme Court analyzed the language and conditions of both Notification No. 8/97-CE and Notification No. 2/95-CE, along with the relevant clauses of the EXIM Policy 1997-2002.

2. Correctness of the adjudicating authority's decision:
The adjudicating authority had denied the benefit of Notification No. 8/97-CE, arguing that the raw materials were deemed imports when transferred between 100% EOUs, thus making the finished goods ineligible for the exemption under Notification No. 8/97-CE. Instead, the authority allowed the benefit of Notification No. 2/95-CE. The Supreme Court rejected this reasoning, emphasizing that the language of Notification No. 8/97-CE was clear and unambiguous, and that the finished goods manufactured by a 100% EOU from raw materials produced or manufactured in India were eligible for the exemption.

3. Interpretation of the exemption notifications and EXIM Policy:
The Supreme Court reiterated the principles of interpreting exemption notifications, stating that they must be construed strictly based on the language used. The Court cited previous judgments emphasizing that the words of the notification should be given their natural meaning and that any ambiguity should be resolved in favor of the state. However, once the eligibility criteria are met, the exemption should be construed liberally. The Court found that the Tribunal had correctly interpreted Notification No. 8/97-CE and the EXIM Policy 1997-2002, and there was no legal infirmity in its judgment.

Conclusion:
The Supreme Court confirmed the Tribunal's decision, allowing the assessee to benefit from Notification No. 8/97-CE. The appeals filed by the revenue were rejected, and the findings and conclusions of the Tribunal were upheld. The Court emphasized the importance of adhering to the clear and unambiguous language of exemption notifications and the need for a liberal interpretation once the eligibility criteria are satisfied.

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