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TMI Blog2015 (9) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... h 100% EOU to claim full exemption when similar clearances by DTA units will affect duty at intermediate stage. It has to be held that non-excisable words used in second proviso to Clause 6 of Notification No.22/2003-CE, dt.31.03.2003 and Proviso to Clause 3 of Notification No. 52/2003-Cus, dt.31.03.2003 will embrace in its expression all zero rated finished goods where on account of full exemption, or Nil / Free rates, or where no rate is specified under the relevant tariffs. - Decided against the assessee. - Appeal No. E/10026,10027/2014 - Order No. A/11277-11278/2015 - Dated:- 8-9-2015 - Mr. P.K. Das, Member (Judicial), Mr. H.K. Thakur, Member (Technical) And Mr. P.M. Saleem, Member (Technical), J. For the Appellant : Shri S. R. Dixit, Ms. Anoni Patwa - Advocates For the Respondent : Dr. J. Nagori, Authorised Representative ORDER Per : H. K. Thakur This Larger Bench was constituted in terms of Referral Order No.M/13697-13698/2014, dt.21.07.2014, passed by Division Bench of CESTAT Ahmedabad. Appellant is a 100% EOU and procured inputs by importation or by locally purchasing under Notification No.22/2003-CE, dt.31.03.2013 and No.52/2003-Cus, dt.31.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of proceedings before the Larger Bench, as well as through written submissions, that as per the second proviso to Clause 6 of Notification No. 22/2003-CE, the finished goods should be non-excisable and if imported, should attract Nil rate of duty of Customs or Nil Additional duty of Customs. It was his case that Solar Panels manufactured by the Appellant, if imported, would attract free rate of duty and not Nil/Exempted rate and will not be hit by the second proviso to Clause 6 of Notification No.22/2003-CE. To support his argument that free rate can not be equated with Nil / Exempted rate of duty, learned Advocate relied upon the case law of Geetanjali Woolens Pvt.Ltd. Vs CCE Vadodara [2007 (218) ELT 512 (Tri-Ahmd)]. That CESTAT in this case was interpreting the proviso to Para 3 to Notification No.52/2003-Cus. That since Solar Panels are classifiable under the Central Excise Tariff, therefore, the same are excisable as per Section 2(d) of the Central Excise Act, 1944 and not hit by the above proviso. 3.1 Learned Advocate further argued that the case law of Madras High Court Century Flour Mills Vs UoI [2014 (301) ELT 73 (Mad.)] (Para 15 21), relied upon by the learned Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absurd proposition which needs to be struck down. (e) That Certain issues such as even if exemption is denied to the Appellant under Notification No.22/2003-CE, the duty should be demanded from supplier and not the 100% EOU, or that the Appellant is already covered under other Paras of Notification No.22/2003-CE, and Notification No.52/2003-Cus, and hence, exemption cannot be denied to them; 3.3 That in view of the above arguments, the word or used in the above provisos of exemption notifications have to be read as and for a harmonious interpretation. That accordingly law laid down by CESTAT in the case of Synergies-Doorway Automotive Ltd Vs CC CE Vishakhapatnam-I (supra) was the correct interpretation of provisions that the finished goods should be excisable for getting the benefit on DTA clearances under the said notifications. Learned Advocate relied upon the use of expressions free , Nil or exempted rates of duties mentioned in Notification No.21/2012-Cus, dt.17.03.2012. 4. Shri J. Nagori (AR) appearing on behalf of the Revenue argued that the words either/or used in the relevant provisos of the impugned notifications cannot be used in the relevant provisos cannot be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCE Delhi-II [2010 (262) ELT 949 (Tri-Del)] 5.1 Both the above case laws interpreted the provisos contained in Notification No.22/2003-CE, dt.31.03.2003 and Notification No.52/2003-Cus, dt.31.03.2003, which are before this Larger Bench, and are reproduced in the opening para of this order. Facts of the case before CESTAT in the case of Synergies-Doorway Automotive Ltd Vs CC CE (supra) were that Appellant in that case was procuring duty free Aluminum Ingots for making Aluminum Alloy Wheels and Dross was also coming into existence during the manufacturing activity as a by product which was held to be non-excisable by a judgment of Hon ble Supreme Court. Following observations were passed by CESTAT Bangalore in this case in Para 5.1 and 5.2, to hold that excisability of Dross is not at all relevant when the main product Aluminum Wheels is excisable:- 5.1 A clear reading of the Notification reveals that the proviso will be applicable only when the finished goods are non-excisable. What happens when the finished goods are non-excisable If duty free goods are imported and used in the manufacture of non-excisable goods, then, if they are exported, it is a different thing. But if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sees are importing Aluminium Ingots to manufacture Aluminium Wheels, which are final products and not Aluminium Dross, which is just a by-product. Therefore, the question of excisability of Aluminium Dross as far as the present notification and appeals are concerned is a non-issue. No duty can be demanded on the imported Aluminium ingots relatable to the Aluminium Dross generated as all ingots have been used in the manufacture of final products (Aluminium Wheels), which have been exported. We do not find any infirmity on the stand taken by the Commissioner in his order dated 29-7-2005. Consequently, the view taken by the Commissioner in the order dated 9-2-2007 is not at all correct. The duty demanded cannot be sustained. There is no justification for imposing any penalty. In fine, Revenue s appeal is dismissed and the assessees appeals are allowed. 5.2 On the other hand, in the case of Indira Printers Vs CCE Delhi-II, (supra) following order was passed by CESTAT Delhi:- Heard both sides. The appellants have procured duty free paper and PVC resin under Notification No. 22/2003 dated 31-3-2003 being an EOU. They have produced books which are neither dutiable under the Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of the First Proviso of Para 3 of Notification No.52/2003-Cus 7. In view of the facts available on record and the conflicting judgments on the issue, following question of law is framed by this Bench for consideration:- Whether a 100% EOU is entitled to exemption on inputs used in the manufacture of finished goods, which are either non-excisable or if imported, are chargeable to Nil or exempted rates, in view of second Proviso to Clause 6 of Notification No.22/2003-CE, dt.31.03.2003 or Proviso to Clause 3 of Notification No.52/2003-Cus, dt.31.03.2003. 8. It is the case of the Appellant that finished goods (Solar Panels) are excisable goods by being mentioned in the Central Excise Tariff as per the definition of Excisable goods given in Section 2(d) of the Central Excise Act, 1944 and are not hit by the above provisions of Notification No.22/2003-CE or No.52/2003-Cus. It was also strongly argued by the learned Advocate appearing on behalf of the Appellant that holding the exempted/Nil rated goods as non-excisable will lead to various anomalies and will place the 100% EOUs at a disadvantage vis-`-vis DTA units by asking them to pay duty with respect to inputs when such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y made applicable to Notification No.22/2003-CE, dt.31.03.2003 or Notification No.52/2003-Cus, dt.31.03.2003. It is now well accepted legal proposition that a notification has to be read on the basis of the plain meaning and language contained in an exemption notification and also that an exemption notification has to be interpreted strictly. The words used in the relevant provisos of the notifications under consideration are non-excisable or Nil rate of duty / Exempted rate of duty of Customs with respect to the finished goods. The words either non-excisable used in these provisions do not highlight that the finished goods should be non-excisable as per the definition contained in Section 2(d) of the Central Excise Act, 1944. The word non-excisable used in the relevant provisions, alongwith the company of words Nil rate of duty and exempted rate of Customs/Additional duty, will have to be interpreted to mean those finished goods where effective rate of duty payment is zero . Such a Zero rate could be due to Nil / Free rates mentioned in the respective tariffs or a rate fully exempted by way of an exemption notification. The intention behind the impugned notifications read with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Notification No.22/2003-CE and No.52/2003-Cus are required to be interpreted without going into the definition of Section 2(d) of the Central Excise Act, 1944. If this strict interpretation is not followed, then the provisos under consideration can never be made applicable for the recovery of input duty where finished goods are cleared at Nil , Exempted or free rates because all of them will be excisable as per the definition of excisable goods under Section 2(d) of the Central Excise Act, 1944. Such an interpretation will be discriminating to DTA units as all such inputs could be routed through 100% EOU to claim full exemption when similar clearances by DTA units will affect duty at intermediate stage. 9.1 On strict interpretation of an exemption notification, Apex Court in the case of Balwant Singh Vs Jagdish Singh [2010 (262) ELT 50 (SC)], relied upon by the learned Authorised Representative, have made the following citations in Para 14 to 17 of this judgment. 14. Before we deal with the contentions canvassed by the learned counsel for the parties to the lis, we deem it appropriate to notice the observations made by the Constitution Bench of this Court in the case of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. [See CTT v. DSM Group of Industries (S.C.C. para 26); TISCO v. State of Jharkhand (SCC paras 42 to 45); State Level Committee v. Morgardshammar India Ltd.; Novopan India Ltd. v. C.C.E. Customs; A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala and Reiz Electrocontrols (P) Ltd. v. C.C.E.] 9.2 In the case of Jaipur Golden Transport Co. Pvt.Ltd. Vs CCE Surat [2007 (215) ELT 503 (Tri-LB)], Larger Bench, inter alia, held that purpose of a statute prevails over the material and passed the following observations in Para 14:- 14. We have considered the submissions. We find that the wordings of proviso to Section 3(1) of the Central Excise Act and Notification 125/84 which we have been called upon to interpret are similar and the basic dispute is as to how the words allowed to be sold in India are to be interpreted. After going through the various submissions made by both sides, we find that 100% EOUs were allowed to be esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other law that only Maxwell's Principles of Interpretation can be used by the court. We can use any system of interpretation which helps us solve the difficulties like the mimansa of principle of interpretation which lay down that when there is the conflict between the purpose and the material, purpose is to prevail because in the absence of the prescribed material a substitute can be used, for the material is subordinate to the purpose. If a subordinate idea clashes with the principal idea, the former must be adjusted to the latter or must be disregarded altogether. Further when there is a conflict between the use and the substance, greater regard should be paid to the use. Following these principles, we find that the purpose all along has been to treat 100% EOUs differently from domestic units other than 100% EOU and therefore we hold that so long an hundred per cent EOU continues as an EOU, it will be within the proviso to Section 3(1) of the Central Excise Act and a mere violation of the permission in the matter of sale to DTA will not take it outside the proviso to Section 3(1) of the Central Excise Act and Notification 125/84-C.E. Any other interpretation will mean ..... X X X X Extracts X X X X X X X X Extracts X X X X
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