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2020 (3) TMI 375 - SC - Central Excise100% EOU - allegation that they were doing job work in violation of Exim policy - quantum of sale made to DTA unit - debonding - conversion of raw material supplied by M/s Tata Iron Steel Company Ltd. - transfer of Manganese Ore by TISCO to UFAC for the purposes of processing the same and converting it into Silicon Manganese - sale and purchase - case of Revenue is that since in the transaction between UFAC and TISCO there is no transfer of property in goods, the same cannot be termed as sale and therefore would not be covered under paragraph 9.9 (b) of the EXIM Policy - HELD THAT - The perusal of the definition makes it clear that when there is a transfer of possession of goods in the ordinary course of trade or business either for cash or for deferred payment or any other valuable consideration, the same would be covered by the terms sale and purchase within the meaning of the Central Excise Act, 1944. Undisputedly, in the present case, there is a transfer of Manganese Ore by TISCO to UFAC for the purposes of processing the same and converting it into Silicon Manganese. Undisputedly, the same is also for a valuable consideration. This Court has held, that it is a settled principle in excise classification that the definition of one statute having a different object, purpose and scheme cannot be applied mechanically to another statute. It has further been held, that the conditions or restrictions contemplated by one statute having a different object and purpose should not be lightly and mechanically imported and applied to a fiscal statute - It is also equally well settled that the first principle of interpretation of plain and literal interpretation has to be adhered to. We are therefore of the considered view, that the narrower scope of the term sale as found in the Sale of Goods Act, 1930 cannot be applied in the present case. The term sale and purchase under the Central Excise Act, 1944, if construed literally, it would give a wider scope and also include transfer of possession for valuable consideration under the definition of the term sale . Whether under the EXIM Policy, UFAC was entitled to carry out the job-work for TISCO and whether it was entitled to exemption from payment of duty under the Exemption Notification? - HELD THAT - Under para 9.9(a) of the EXIM Policy, EOU is entitled to sell the rejects in the DTA on prior intimation to the Customs authorities. Such sales are to be counted against DTA sale entitlement under paragraph 9.9(b) of the EXIM Policy. The sale of rejects shall be subject to payment of duties as applicable to sale under paragraph 9.9(b) of the EXIM Policy - Under paragraph 9.9(b) of the EXIM Policy, DTA sale upto 50% of the FOB value of exports is also permitted subject to payment of applicable duties and fulfilment of minimum Net Foreign Exchange earning as a Percentage of exports (NFEP) as prescribed in Appendix1 of the Policy. It can thus clearly be seen, that paragraph 9.9(b) and paragraph 9.17(b) of the EXIM Policy operate in totally different fields. Under paragraph 9.9 (b), an EOU is entitled to sell upto 50% of the FOB value of exports to DTA subject to payment of applicable duties and fulfilment of minimum NFEP as prescribed in Appendix-I of the Policy, whereas under paragraph 9.17(b), an EOU is entitled to undertake job-work for export, on behalf of DTA units, with the permission of Assistant Commissioner of Customs, provided the goods are exported direct from the EOU/EPZ units. In such type of exports, the DTA units would be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback. In view of paragraph 10 of the Circular dated 22.5.2000, the facility of undertaking job-work by EOU/EPZ units which was restricted to specific sectors has been amended and the said facility has been extended to all sectors. It has also been provided, that DTA units shall be entitled to brand rate of duty draw back. Similarly, paragraph 11 of the Circular dated 22.5.2000 also provides, that the facility which was given to EOU/EPZ to undertake job-work on behalf of DTA units in textiles, readymade garments and granite sectors which was subsequently extended to the EOU/EPZ units in aquaculture, animal husbandry, hardware and software sectors vide Circular dated 5.11.1999, was extended to EOU/EPZ units in all sectors. It has further been provided, that DTA units shall be entitled to avail of the brand rate of duty drawback for such job-work undertaken by EOUs/EPZ units concerned. It also provides, that earlier circulars issued by the Board stood modified to the said extent - failure on the part of the Commissioner, who passed the order-in-original, to notice the Circular dated 22.5.2000 has resulted in passing an erroneous order. It also appears, that after the show cause notice was issued to UFAC, the Commissioner had sought a clarification from the Sponsoring Authority i.e. the Development Commissioner, SEEPZ vide communication dated 6.11.2001. The combined reading of paragraph 9.9(b) of the EXIM Policy, the Circulars issued by the Board, particularly, the Circular dated 22.5.2000 and reply to the query of the Customs Authorities by the Development Commissioner, SEEPZ would clearly show, that the UFAC was entitled to carry out the job-work on behalf of TISCO on payment of duty as provided under Exemption Notification of 1997. If such an interpretation is accepted, the words unless specifically provided in such notification in subsection (1) of Section 5A will have to be ignored and the said words would be rendered otiose. It is a settled principle of law that while interpreting a provision due weightage will have to be given to each and every word used in the statute - the interpretation as sought to be placed by Shri Radhakrishnan would render the term unless specifically provided in such notification in subsection (1) of Section 5A otiose or useless. Such an interpretation would not be permissible. The harmonious construction of sub-Section (1) of Section 5A of the Act and the proviso thereto would be, that an EOU which brings the excisable goods to any other place in India would not be entitled for a general exemption notification unless it is so specifically provided in such a notification - since the said Exemption Notification specifically mentions, that the goods produced or manufactured by an 100% EOU, which are allowed to be sold in India in accordance with para 9.9(b) of the EXIM Policy, the proviso would be inapplicable thereby, requiring the duties to be paid, as are required to be paid under subSection (1) of Section 3 of the said Act. Undisputedly, in the present case, the transaction between UFAC and TISCO satisfies all the three conditions. The goods are produced and manufactured by UFAC, an 100% export-oriented unit; they are manufactured wholly from the raw materials produced or manufactured in India and, thirdly, they have been allowed to be sold in India in accordance with the provisions of paragraph 9.9(b) of the EXIM Policy. There would not be any conflict in the amended provisions of clause (ii) of the proviso to subsection (1) of Section 5A of the Act and the said Exemption Notification. In any case, by the 2001 Amendment, the legislature has not laid down any exhaustive code in respect of the subject matter in replacing the earlier law. It appears, that the said Amendment has been incorporated to bring the said clause (ii) of sub-Section (1) of Section 5A in sync with the words used in clause (i) of the proviso to subsection (1) of Section 5A of the Act and the words used in the proviso to subsection (1) of Section 3 of the Act. In that view of the matter, we find, that the said contention is without substance. What this Court has held is, that no permission is required to sell goods manufactured by 100% EOU lying with it, at the time approval is granted to debond. It has been held, that the expression allowed to be sold in India in the proviso to Section 3(1) of the Act was applicable only to sales made upto 25% of production by 100% EOU in DTA and with the permission of the Development Commissioner - Admittedly, in the present case, the sales made by UFAC to TISCO are within the permissible limits and with the permission of the Development Commissioner. The CESTAT has not committed any error in reversing the orders-in-original passed by the Commissioner - appeal dismissed.
Issues Involved:
1. Legality of job-work undertaken by UFAC under EXIM Policy. 2. Applicability of Central Excise duty on goods cleared by UFAC to TISCO. 3. Interpretation of "sale" under Central Excise Act vs. Sale of Goods Act. 4. Validity of exemption under Notification No. 8/97 dated 1.3.1997. 5. Impact of amendments to Section 5A of the Central Excise Act on the exemption notification. Detailed Analysis: 1. Legality of Job-Work Undertaken by UFAC under EXIM Policy: The Court examined whether UFAC, a 100% Export Oriented Unit (EOU), was permitted to undertake job-work for TISCO under the EXIM Policy. The Commissioner had found that UFAC's job-work violated para 9.17(b) of the EXIM Policy, which only allowed EOUs to undertake job-work for export purposes. However, the Court noted that Circular No. 49/2000-Cus dated 22.5.2000 extended the job-work facility to all sectors, not just those specified in earlier circulars. The Development Commissioner had also clarified that UFAC's activities were permissible under para 9.9(b) of the EXIM Policy. Thus, the Court concluded that UFAC was entitled to carry out job-work for TISCO. 2. Applicability of Central Excise Duty on Goods Cleared by UFAC to TISCO: The Commissioner had demanded full Central Excise duty on Silicon Manganese cleared by UFAC to TISCO, arguing that the job-work was not covered by the exemption notification. The Court, however, found that UFAC had paid excise duty on the value of ?20,623/PMT, which included the cost of raw materials supplied by TISCO and inputs used by UFAC. The Court held that the transaction between UFAC and TISCO satisfied the conditions of the exemption notification, as the goods were produced by a 100% EOU, manufactured wholly from Indian raw materials, and allowed to be sold in India under para 9.9(b) of the EXIM Policy. 3. Interpretation of "Sale" under Central Excise Act vs. Sale of Goods Act: The Revenue argued that the transaction between UFAC and TISCO was not a "sale" under the Sale of Goods Act, 1930, and thus not covered by para 9.9(b) of the EXIM Policy. The Court rejected this argument, stating that the definition of "sale" under the Central Excise Act, 1944, which includes any transfer of possession of goods for valuable consideration, should be applied. The Court emphasized that definitions from different statutes with different purposes should not be applied mechanically to another statute. 4. Validity of Exemption under Notification No. 8/97 dated 1.3.1997: The Court examined whether the exemption notification was valid in light of amendments to Section 5A of the Central Excise Act. The proviso to Section 5A(1) states that no exemption shall apply to goods produced by a 100% EOU and brought to any other place in India, unless specifically provided in the notification. The Court found that the exemption notification specifically provided for such an exemption, thus making it valid. The notification exempted goods produced by a 100% EOU from duties in excess of those leviable on like goods produced in India. 5. Impact of Amendments to Section 5A of the Central Excise Act on the Exemption Notification: The Revenue contended that the substitution of the words "allowed to be sold in India" with "brought to any other place in India" impliedly repealed the exemption notification. The Court disagreed, stating that the amendment did not create a direct conflict with the exemption notification. The Court held that the harmonious construction of Section 5A(1) and its proviso would allow for specific exemptions to be granted, as was the case with the exemption notification in question. Conclusion: The Court dismissed the appeals, upholding the CESTAT's decision to reverse the orders-in-original passed by the Commissioner. The Court found that UFAC was entitled to undertake job-work for TISCO and that the exemption notification was valid and applicable, thereby exempting UFAC from paying full Central Excise duty on the goods cleared to TISCO.
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