2003 (7) TMI 128 - AT - Central Excise

Denial of exemption from excise duty - 100% Export Oriented Unit - Demand - raw materials produced by the manufacturer - HELD THAT - If the intention were to deny the benefit of the exemption in respect of goods manufactured out of raw materials or components supplied by another 100% export oriented unit was easy enough to make that position clear. It will follow therefore that the appellant would be entitled to the benefit of the exemption contained in notification and liable to pay consequently such duty as would be payable by a unit manufacturing the same goods in the domestic tariff area under the Central Excise Tariff or any other law for the time being in force. It is not possible for us to attribute meanings or intentions that cannot be pressed in the notification. A notification is required to be strictly construed. We do not find any ground to say that the benefit of exemption should be denied. Annexure A to the notice refers to three shipping bills under which the grey fabrics were received by the appellant. We have referred earlier to the allegation in the notice that part of the unprocessed fabrics was imported and the contention of the imported goods from outside the country i.e. not in India from any of the country and the denial of the Counsel for the appellant. In reply to the notice, the appellant had pleaded that it received raw material from other 100% export oriented unit. It had not specifically denied receipt of any imported raw material used in the manufacture of the goods on which duty has been demanded. We think it would be desirable to have these aspects verified in order to ensure whether the benefit of the exemption under consideration which is available only to manufacture out of wholly indigenous materials used for the finished goods. The appeal is accordingly allowed, the impugned order set aside, and the matter remanded to the Commissioner. The Commissioner shall, after considering the materials that the appellant as well as the department may produce, decide upon the eligibility to exemption in respect of the goods under consideration and also to determine the duty payable.

Summary

Issues involved:
The issue involved in this case is the denial of exemption from excise duty to a 100% export oriented unit based on the contention that the goods were not manufactured wholly from raw materials produced by the manufacturer.

Summary:

1. The appellant, a 100% export oriented unit engaged in manufacturing processed polyester fabrics, availed of exemption u/s Notification 8/97. The Commissioner denied the exemption, alleging that unprocessed fabrics were not wholly manufactured by the appellant, proposing to levy duty at 50% of Customs duty. The appellant contended that the conditions for exemption were met as the fabrics were manufactured in India by another 100% export oriented unit.

2. The Commissioner relied on Chapter IX of the Export Import Policy, treating goods obtained from another 100% export oriented unit as deemed imports. He referenced a Tribunal decision and Modvat provisions to support his stance.

3. The relevant Import Export Policy on deemed export and benefits for such supplies does not equate goods received from a 100% export oriented unit to imports u/s Customs or Central Excise Acts. The deeming provision in the policy is limited to specific benefits, not general export status.

4. In a previous case, the Tribunal clarified that goods manufactured in a 100% export oriented unit in India are subject to excise duty, not Customs duty. The Commissioner's reference to Rule 57A and Modvat credit was deemed irrelevant.

5. The Tribunal found no merit in the Commissioner's argument that granting the exemption would result in unintended benefits. The appellant is entitled to the exemption if goods are manufactured from indigenous materials, as per the notification.

6. Verification is needed regarding the origin of raw materials used by the appellant to ensure compliance with the exemption conditions. The matter is remanded to the Commissioner for further assessment based on evidence presented by both parties.

7. The appeal is allowed, the previous order is set aside, and the Commissioner is tasked with determining the eligibility for exemption and duty payable after reviewing all relevant materials.

End of Summary