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TMI Blog2016 (11) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... iled as the goods are not manufactured goods as per section 2(f) of Central Excise Act, accordingly, the question of excisability does not arise - decided in favor of appellant. Whether the rice/bran rice are excisable goods in terms of section 2(d) of the Act or not? - Held that: - if in the tariff, the rate of duty is left blank, in that case, the goods are not excisable goods. Admittedly in the case in hand, the rate of duty in the tariff is left blank, therefore, we hold that the rice is not excisable goods. This view also takes support from the various RTI applications filed by the appellant wherein it has been replied by the department that no unit is manufacturing rice is paying duty on the rice being 100% EOU, we hold that the rice is not excisable goods - decided in favor of appellant. Whether the extended period of limitation is invokable in the facts and circumstances of the case or not? - Held that: - the appellant has succeeded on merits, therefore, we are not going into the issue of limitation. Therefore, the issue No.3 is kept open for the appellant. Appeal allowed - decided in favor of appellant. - Appeal No. E/56804-56805/2013-Ex(DB) - FINAL ORDER NO. 613 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with section 12 of the Customs Act, 1962. Therefore, it was alleged that the appellant has made DTA clearances of broken rice, rice bran and basmati rice without payment of duty which was required to be paid in terms of section 3(1) of the Central Excise Act, 1944 read with section 12 of the Customs Act, 1962 with effect the date of bonding i.e. from 18.8.2009 to till date. The demand of duty was sought to be demanded by way of show cause notice of ₹ 11,64,23,720/ alongwith interest and to impose equivalent penalty. The matter was adjudicated and it was concluded as mentioned in paragraph 1 hereinabove. Aggrieved with the said order, the appellants are before us. 3. Learned Counsel appearing for the appellants submits that the central excise duty has been demanded as per proviso to section 3(1) of Central Excise Act, 1944. He submits that mandate of section3 of the Central Excise Act is that the duty shall be levied and collected only on those goods which are produced or manufactured and excisable. Therefore, before subjecting any domestic Tariff Area (DTA) clearance by an EOU to excise, the twin test of excisable goods and manufacturing must be satisfied. Therefore, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mers and rice is not produced by the appellant. However, it has been stated that the rice is manufactured by the appellant. He submits that the stand taken by the Commissioner is not tenable in law as held by the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Orissa vs. N.C.Budharaja and Company- AIR 1993 SC 2529 wherein it has been clarified that the word production has a wider connotation than the word manufacture. Every manufacture can be classified as production, however, every production need not amount to manufacture. Therefore, the rice can neither be said to have been produced or manufactured by the appellant. 7. He further submits that the stand of Revenue is that the activity amount to manufacture, then the burden of proving it is entirely on the Revenue as held by the Hon'ble Supreme Court in the case of Metiex (India) Pvt.Ltd. vs. CCE-2005 1 SCC 271. In this case, the department has failed to discharge its onus of proving the fact that the process of manufacturing is involved. He submits that it is pertinent to note that in an attempt to justify its stand that manufacturing is involved, reliance has been placed on the Letter of Permission (L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Tariff Amendment Bill 2004 categorically states that the changes proposed did not make any changes in the existing rate of central excise duties and hence the said changes did not involve any revenue implications. He further submits that by way of various circulars and Notifications, it is clarified by the Central Government that numbering scheme introduced by way of Amendment was merely technical in nature and involved no substantive change. (Circular No.805/5/2005-CX dated 2.5.2005, Notification No.1/2005-CE dated 24.2.2005, Notification No.5/2005 dated 24.2.2005 and Notification No.7/2005-CE dated 24.2.2005. 9. He further submits that prior to the amendment to the Central Excise Tariff Act, the Chapter 10 did not even specify rice . In fact, Chapter 10 itself was left blank. Even though after HSN, chapter 10 does specify the commodity rice, however, the said chapter has been left blank. On the other hand, there is no such deviation or omission in the Customs Tariff, even though both, Customs Tariff and the Excise Tariff are based on the same HSN. Rice has never been subjected to any kind of excise duty. There, it is submitted that the legislative intent is to not subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -AIR 2004 SC 11, the Hon'ble Apex Court has concluded that mere tariff entry does not make the product excisable. The same view has been followed by the Hon'ble Apex Court in the case of CCE, Lucknow vs. Wimco Ltd.-2007 (122) ECC 1. He also took support of the decision of the Hon'ble High Court of Allahabad in the case of Gularia Chini Mills vs. Union of India-2013 (7) ADJ 248. He also took support of the decision of the Hon'ble Apex Court in the case of Nahar Industrial Ltd.-2004 (95) ECC 457 and in the case of Vikram Ispat vs. CCE - 2009 (93) ECR 116 (Tri.-Del.). Therefore, he submits that as per section 3 of Central Excise Act what is charged on domestic clearances by 100% EOU is a duty of excise duty. As the rice is not excisable goods, therefore, no duty can be demanded under proviso to section 3(1) of Central Excise Act on rice. 13. He further submits that the rice bran falls under chapter 2302 and cannot be said to be excisable on various grounds. As per LOP, the unit shall export the entire production excluding rejects and sale in the domestic tariff area. As per Notification No.55/(RE-2008))/2004-2009 issued by the Ministry of Industry states that the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice issued is barred by limitation. In support of this contention, he relied on the decision of Madhu Silica Pvt.Ltd. in appeal No.E/10425 and 10426/2013. He submits that as the demand of duty is not sustainable, therefore, interest and penalty are not imposable on the appellant. In view of the above submissions, it is prayed that the impugned order is to be set aside. 16. The arguments advanced by the learned Counsel were strongly opposed by the Special Counsel appearing on behalf of the Revenue. He submits that the section 3 (i) of the Act makes it clear that for any goods liable to be taxed, those must be manufactured or produced, those must be excisable goods and the rate of duty will be as rates fixed in the First Schedule to the Central Excise Tariff Act. However, the said section 3 of the Act has a proviso which fixes the quantum of excise duty for goods which are produced in EOU. As per the provisions of the said section, it is clear that while the goods produced or manufactured in India are chargeable to duty at the rates indicated in the tariff, but for the goods manufactured in the EOU, the duty of excise will be as mentioned in the proviso. To support his contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to indicate that government can impose excise duty only on those goods. The charging section 3 of the Act has been explained earlier to show that levy of duty can be made only on excisable goods. The Government, in its discretion, may not levy excise duty on certain goods which are mentioned in the first schedule of the CE Tariff, but the goods, if mentioned in the first schedule of the Tariff will remain prone to Excise duty. The term 'subject to' used in section 2(d) of the Act, came for interpretation on several occasions before different Courts. 20. In support of his contention, he took support from the following judgements: (1) In hind Rubber vs. UOI-1999 (48) ELT 263 (P H) which has been affirmed by the Apex Court reported in 2000 (119) ELT A178 (SC) (2) Associated Cement Co.Ltd.-2001 (128) ELT 21 (SC) (3) Geetanjali Woollens Pvt.Ltd.-2007 (218) ELT 152 (Tri.Ahmd.) (4) Tamilnadu (Madras State) Handloom Weavers Co-operative Society Ltd.-1978 (2) ELT j57 (Mad.) (5) Eco Valley Farms Foods Ltd.-2011 (270) ELT 607 (Tri-Mum) (6) Delhi Cloth and General Mills Co.Ltd.-1977 (1) ELT J 199 (SC) (7) Bharat Petroleum Corpn.Ltd.-1995 (77) ELT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 2 (29BA) of the Income-tax Act, 1961 the term manufacture means with its grammatical variation means a change in non living physical object or article - (a) resulting in transportations of object or article or things into a new and distinct object or article or having a distinct name, character and use or (b) bringing into existence of a new distinct object or article or thing with different chemical composition or integral structure. 28. On going through the above definition of the manufacture, the test laid down by the apex court in the case of Delhi Cloth and General Mills Co.Ltd. (supra) support the definition that a new and different article must emerge having a distinct name, character and use. Therefore, the definition of manufacture as section 2(f) of the Central Excise Act, 1944 is pari material to definition of manufacture in Income Tax Act as per section 2 (29BA) of the Income Tax Act,1961. 29. Therefore, the decision in the case of M/s.Cynamid India Ltd. is applicable to the facts of this case wherein the Apex Court has observed as under: 5. The High Court has answered the question in favour of the assessee and against the Revenue. Having re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se are not applicable to the facts of the present case. 33. Further, we find that in the case of Ramesh Flowers (P) Ltd.(supra), this Tribunal has observed as under: 8. In the light of the above discussion, we uphold the finding of Commissioner (Appeals) that potpourris are classifiable under Chapter 6 of the Customs Tariff Act, 1975. Equivalent heading in the Central Excise Tariff is Chapter 6 which is blank. Hence they are non-excisable. 34. Further, we find that in the case of Valpus Biotech Ltd. an Praj Agro Vision Ltd., this Tribunal has observed as under: 3.1 As per Section 2(d) of the Act, excisable goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise and includes salt . The period involved in these appeals is April, 1998 to September, 1998 and January, 1999 to June, 1999 July, 1999 to September, 1999. During this period, the Central Excise Tariff did not specify cut flowers as excisable goods nor any rate of duty was prescribed for cut flowers . Even in the amended tariff effective from 2008 where the excise tariff, has been aligned with the cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. We have considered the submissions of all the sides. The concept of 100% E.O.U. was brought with an idea to increase the export from the country. These units were provided facilities, among other things, of importing capital goods raw materials, components, etc. without payment of customs duty and also to obtain similar goods from domestic market without payment of central excise duty. These units have also been provided a facility to sell a specified quantity of their product in Domestic Tariff Area in India. In respect of excisable goods manufactured by them, Section 3(1) of the Central Excise Act provides that the duty of excise shall be an amount equal to the aggregate of the duties of customs on like gods produced or manufactured outside India, if imported into India. There is substance in the submissions of the duty lived on the goods manufactured by 100% E.O.Us. Is central excise duty whereas the measure of collection of duty is customs. The measure of duty does not change the nature or duty. In support of their contention the learned Advocate has relied upon the decision in the case of DIG. Gouse Co. Pvt. Ltd. v. State of Kerala supra, wherein it was held that a ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied on the goods manufactured and cleared by 100% E.O.Us to the Domestic Tariff Area is a duty of Excise and not a duty of Customs on account of a measure being the Customs duty provided in proviso to Section 3(1) of the Central Excise Act. 39. In view of above discussion, we find that the ratio of the decision cited herein above is that if in the tariff, the rate of duty is left blank, in that case, the goods are not excisable goods. Admittedly in the case in hand, the rate of duty in the tariff is left blank, therefore, we hold that the rice is not excisable goods. This view also takes support from the various RTI applications filed by the appellant wherein it has been replied by the department that no unit is manufacturing rice is paying duty on the rice being 100% EOU, we hold that the rice is not excisable goods. 40. In view of the above discussion, the issue No. 2 is also answered in favour of the appellant. 41. As the appellant has succeeded on merits, therefore, we are not going into the issue of limitation. Therefore, the issue No.3 is kept open for the appellant. 42. In the result, the appellants succeed on both grounds, therefore, the impugned order is set a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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