2004 (8) TMI 105 - SC - Central Excise

Whether by addition of the words or under any other law for the time being in force producers or manufacturers other than 100% EOUs incur a liability to pay AED? Held that - A perusal of the un-amended Notification 8/97-C.E. and notification after amendment vide Notification No. 11/2000-C.E. shows that only the following words were inserted by way of amendment (i) introduction of the words the aggregate of after words equal to in the original notification (ii) introduction of the following words after Section 3 of the Central Excise Act in the original notification i.e. or under any other law for the time being in force . That does not in any way create a liability on the 100% EOUs to pay AED. Notification No. 55/91-C.E., dated 25-7-1991 is in no way diluted so far as the manufacturers like the appellants are concerned, notwithstanding what has been provided in Notification No. 8/97-C.E. dated 1-3-1997 as amended by Notification No. 11/2000-C.E., dated 1-3-2000. As stated above, the only change is that under Notification 8/97-C.E., dated 1-3-97 the 100% EOUs were exempt from paying duty in excess of amount of BED paid by the producer or manufacturer who is not 100% EOU, whilst after amendment by Notification 11/2000-C.E., dated 1-3-2000 the 100% EOU is exempt from paying duty in excess of amount of BED plus the amount of AED plus any other duties of excise under any other law for the time being in force, paid by the producer or manufacturer who is not 100% EOU. Thus, the view expressed in the Circular dated 19-12-2000 and view of the High Court are indefensible. The Circular afore-noted is, therefore, quashed. The High Court s judgment impugned in these appeals is set aside. Appeal allowed.

Issues Involved:

1. Legality of the Circular dated 19-10-2000 by the Central Board of Excise and Customs.
2. Applicability of Additional Excise Duty (AED) on yarns manufactured by 100% Export Oriented Undertakings (EOUs) from indigenous raw materials and cleared into Domestic Tariff Area (DTA).
3. Interpretation of various Notifications, particularly Notification No. 55/91-C.E., Notification No. 8/97-C.E., and Notification No. 11/2000-C.E.
4. The impact of the phrase "or under any other law for the time being in force" on the liability of 100% EOUs to pay AED.

Detailed Analysis:

1. Legality of the Circular dated 19-10-2000 by the Central Board of Excise and Customs:

The appellants contested the Circular dated 19-10-2000 issued by the Central Board of Excise and Customs, which clarified that AED under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, is payable on yarns manufactured by 100% EOUs from indigenous raw materials and cleared into DTA. The Supreme Court found that the Circular's interpretation was flawed, as it disregarded the exemption provided by Notification No. 55/91-C.E., dated 25-7-1991. The Court held that the Circular was indefensible and quashed it.

2. Applicability of Additional Excise Duty (AED) on yarns manufactured by 100% Export Oriented Undertakings (EOUs) from indigenous raw materials and cleared into Domestic Tariff Area (DTA):

The core issue was whether 100% EOUs were liable to pay AED on yarns cleared into DTA. The Supreme Court clarified that the introduction of the words "or under any other law for the time being in force" in the amended Notification No. 8/97-C.E. did not create a new liability for 100% EOUs to pay AED. The intention was to ensure parity between 100% EOUs and other domestic manufacturers, not to impose additional duties on EOUs. Therefore, 100% EOUs were not liable to pay AED on yarns cleared into DTA.

3. Interpretation of various Notifications, particularly Notification No. 55/91-C.E., Notification No. 8/97-C.E., and Notification No. 11/2000-C.E.:

The Court examined the relevant Notifications in detail. Notification No. 55/91-C.E. exempted all excisable goods produced or manufactured in a 100% EOU from the whole of the duty of excise leviable under the AED Act. Notification No. 8/97-C.E. provided an exemption for 100% EOUs from paying duty in excess of the amount equal to the duty of excise leviable under Section 3 of the Central Excise Act on like goods produced or manufactured in India. The amendment by Notification No. 11/2000-C.E. included the phrase "or under any other law for the time being in force," which aimed to rationalize the payment of duties by 100% EOUs and other manufacturers. The Court concluded that these Notifications did not impose additional AED liability on 100% EOUs.

4. The impact of the phrase "or under any other law for the time being in force" on the liability of 100% EOUs to pay AED:

The Supreme Court analyzed the impact of the phrase "or under any other law for the time being in force" introduced by Notification No. 11/2000-C.E. The Court held that this phrase was intended to ensure that 100% EOUs were not in a more advantageous position compared to other manufacturers. It did not create a new liability for 100% EOUs to pay AED. The exemption provided by Notification No. 55/91-C.E. remained intact, and 100% EOUs were only required to pay duties equivalent to those paid by other domestic manufacturers.

Conclusion:

The Supreme Court set aside the judgment of the High Court and quashed the Circular dated 19-10-2000. The appeals were allowed, and it was clarified that 100% EOUs were not liable to pay AED on yarns cleared into DTA beyond the duties paid by other domestic manufacturers. No costs were ordered.

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