9911796707
TMI Blog2021 (11) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Act, 1944 can be pressed into service for recovery of duty of excise and not for the recovery of any other tax or duty including the Customs Duty leviable under Customs Act, 1962. Hence there are no merits in the observations made by the Commissioner while distinguishing the decision of C T Cotton. The issue for consideration in the present case is demand of duty on the cotton waste arising during the course of manufacture of finished product exported by the appellants. Once it is held that the cotton waste is not a manufactured goods leviable to excise duty, all the subsequent arguments advanced by the Commissioner vis a vis contravention of the provisions of exemptions issued under Customs Act, 1962 and those of the Foreign Trade Policy, become irrelevant for these proceedings, initiated under provisions of Section 11A of the Central Excise Act, 1944. Commissioner have referred to the first two show cause notices, where in the demand has been made in respect of the Cotton Waste cleared clandestinely by the appellant, treating it as the goods produced by the EOU. In view of the decision of the tribunal in case of M/S CT. COTTON YARN LTD. VERSUS COMMISSIONER OF CENTR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27.07.2007 October 2006 to March 2007 2,03,838/- 2,03,838/- - 6. C.Ex./R-I/BSR-II/ LavinoKapur/ SCN/2007 dated 21.02.2008 April 2007 to Sept 2007 4,79,826-/ 4,79,826-/ - 7. V.Adj (SCN) LavinoKapur / 118/BSR-II/08 dated 16.09.2008 Oct 2007 to Dec 2007 2,94,636/- 2,94,636/- - 8. V.Adj (SCN) LavinoKapur /165/ BSR-II/08 dated 19.01.2009 Jan 2008 to Mar 2008 4,50,511/- 4,50,511/- - 9. V.Adj (SCN) LavinoKapur /1237/ BSR-II/08 dated 06.05.2009 Apr 2008 to Jun 2008 3,84,837/- 3,84,837/- - 10. V.Adj (SCN) LavinoKapur /93/ BSR- II/09 dated 24.09.2009 Sept 2008 2,42,089/- 2,42,089/- - 11. V.Adj (SCN) LavinoKapur /136/ BSR-II/09 dated 10.11.2009 Oct 2008 3,55,425/- 3,55,425/- - 12. V.Adj (SCN) LavinoKapur /143/ BSR-II/09 dated 02.12.2009 Dec 2008 2,17,816/- 2,17,816/- - 13. V.Adj (SCN) LavinoKapur /12/ BSR- II/2010 dated 28.04.2010 May 2009 to Sept 2009 3,09,870/- 3,09,870/- - 14. V.Adj (SCN) LavinoKapur /83/ BSR- II/10 dated 28.10.2010 Oct 2009 to Dec 2009 3,57,062/- 3,57,062/- - 15. V.Adj (SCN) LavinoKapur /143/ BSR-II/10 dated 16.12.2010 Jan 2010 to May 2010 4,16,911/- 4,16,911/- - 16. V.Adj (SCN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 4,79,826/- Total 50,05,677/- 6. I impose penalty of ₹ 10,00,000/- (Rupees Ten Lakhs only) on Shri Vikram Kapur, Director of M/s. Lavino Kapur Cotton Ltd., Tarapur under the provisions of Rule 26 of the Central Excise Rules, 2002. 7. 38. This order is issued without prejudice to any other action that may be initiated against the aforesaid Noticees under the provisions of the Central Excise Act, 1944 or rules framed there under or any other law for the time being in force in India." 2.1 Appellant is an 100% Export Oriented Unit (EOU) engaged in manufacture of Absorbent Cotton of Pharmacopeial Grade, falling under the Chapter Sub-heading 56912110 of the First Schedule to the CETA, 1985. 2.2 In the manufacture of finished product, the appellant company consumes indigenous raw cotton as well as cotton comber noil falling under chapter 52 of the Central Excise Tariff Act, 1985, and also the imported comber noil. The manufacturing process involves blow room cleaning of the cotton, carding and thereafter bleaching and drying of the same. In the manufacturing process waste known as 'cotton waste' dropping waste arise. The entire dispute in the present appeal for the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 2.5 The matter was adjudicated by the Commissioner as per the impugned order referred in para 1, supra. Aggrieved by the impugned order, appellants have preferred this appeal. 3.1 We have heard Shri Surinder Mehra, Chartered Accountant for the Appellants and Shri Nitin Ranjan, Deputy Commissioner, Authorized Representative for the revenue. Both sides have also filed written submissions which have been taken on record. 3.2 Arguing for the appellant, learned Chartered Accountant submits as follows: * U/s. 3(1) of the Central Excise Act, 1944, the duty of Central Excise is leviable on all excisable goods which are produced or manufactured in India at the rates specified in schedule thereto. Thus the duty of Central Excise under the main provisions of Section 3(1) of the Central Excise Act, 1944, and the proviso thereto is leviable only on any excisable goods which are produced or manufactured and as such no duty can be levied on any goods which are mere waste and not manufactured goods or produced goods by the assessee. This is as held by various authorities as follows: * Indian Aluminum Co. Ltd. [2006 (203) E.L.T. 3 (S.C)] * Tata Iron Steel Co. Ltd. [2004 (165) E.L.T. 38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a manufactured/ produced product. It has been held by the Supreme Court in the case of Union of India vs. Ahmedabad Electricity Co. Ltd. reported in 2003 (158) ELT 3 (SC) that the onus to show that particular goods on which excise duty is sought to be levied have gone through the process of manufacture in India is on the revenue. * Thus no excise duty can be levied on mere 'waste' generated, which is not a manufactured product. * The words 'manufactured or produced in India' still appear in main Section 3(1) of the Central Excise Act and the proviso thereto and the said words form the core of the charging provisions of Section 3 of the Central Excise Act and the same have not been amended in any manner. So the judgement of the Tribunal, New Delhi, in the case of C.T. Cotton Yarn and various Supreme Court judgements relied upon by the appellant are applicable * Reliance placed on notification No .84/2007-Customs and 29/2007-CE both dated 06.07.2007 is improper as the major demand of ₹ 1,12,02,687/- is for the period upto 31.3.2006 and the said notifications issued much after have no application * The duty is being imposed for mere theoretical difference between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial consumed to the total materials consumed. Thus the entire excess waste that could have been subjected to levy of excise duty upto 31.01.2011 works out to 33,119 kgs only, on which the total duty (including education cess and secondary & higher education cess) payable comes to ₹ 66,250/- * As per these notifications the appellants had time of three years from the date of import or procurement of raw material to manufacture the finished products and the excise authorities are also vested with the discretion to extend the said time. Thus in terms of notifications are dated 06.07.2007, no show cause notice can be issued prior to 05.07.2010 and as such the entire demand created pursuant to the said notifications is bad in law. * The appellant company had imported the raw materials availing the benefits of Tariff Notification No. 52/2003- Customs dated 01.03.2003. By the said notification all goods as specified in Annexure-I to the said notification when imported or procured from a public warehouse or a private warehouse for the purpose of manufacture of articles for export or being used in connection with production or packaging or job work for export of goods or service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STAT in their order dated 22.02.2017 passed earlier for the period under consideration had also highlighted that the Commissioner passed the order earlier had not considered the important fact that the entire raw material is not imported and that there is indigenously procured raw material also to decide the duty on the cotton waste and droppings. This fact has been totally ignored by the Commissioner while adjudicating the matter in remand proceedings. * Not. No. 23/2003 required the permission of the Development Commissioner for sale of goods into the DTA it specifically provided for it to avail of the exemption and the same is as found in Condition No. 7 dealing with Sr. No. 11 of the notification. The exemption in such a case would be available only to the extent the same is permitted by the Development Commissioner and not in excess thereof. There is no such requirement found in Sr. No. 15 of Notification No. 23/2003. From the reading of the notification as a whole it is crystal clear that for clearance of cotton waste no condition is prescribed. * In any event not obtaining of permission from the Development Commissioner to sell the cotton wastes/scrap (assuming that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the period from 02.04.2001 to 31.03.2003. Thereafter, the Commissioner of Central Excise had issued show cause notice, now in dispute, dated 05.07.2006 which is much beyond the limitation period of one year. Hon'ble Supreme Court has in the case of Nizam Sugar Factory [(2006) 11 Supreme Court cases 573] when the first show cause notice was issued and all the relevant facts were to the knowledge of the authorities, later on while issuing of second and third show cause notice, same/similar facts could not be taken as suppression of the facts on the part of the assessee. In the present case the assessee had disclosed all the facts in its application for Bonded Warehouse dated 26.11.1996 filed with the department. 3.3 Arguing for the revenue learned Authorized Representative while reiterating the findings recorded by the Commissioner, submits as follows: 2. The Appellate had imported 100% Cotton Comber Noir falling under the Chapter 52.02 of the Customs Tariff Act, 1975 without the payment of Customs Duty against CT-3 Forms issued to them , to be used in the manufacture of Absorbent Cotton. During this process, Cotton Waste was generated. 3. As per the Handbook of Procedures - Inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department in their Monthly CE Returns. The benefit of the revised norms has been given to the Appellate by Revenue. The calculations have been made by taking the revised norms by the Commissioner. * The Appellate has actually imported duty free Comber Noil in terms of Notification No. 53/97-Cus and Notification No. 52/2003-Cus . In terms of condition 3(c) of Notification No. 52/2003-Cus, an exemption from Customs Duty and Additional Duty of Customs is only applicable when the imported goods are used for manufacture of exported goods : * As per Notification 6/97-CE and 23/2003-CE which were relevant during this period, Nil Rate of duty was only to be charged on cleared goods , if the conditions given in these notifications are met. In the case of Dilip Kumar and Co. 2018 (361) ELT 577 (SC), the Apex Court has held that in the interpretation of tax exemption notification, a strict rule of interpretation has to be applied. Any Exemption Notification is not to be liberally interpreted in the favour of the assesse, the Exemption Provisions have to be interpreted strictly as per their plain language. As assesse has not followed the conditions notified in the above provisions, any b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirement of permission from Development Commissioner as per the requirements of Central Excise Act and Foreign Trade Policy. This is a valid requirement which has not been followed by the Appellate and hence these cases are not applicable to the present case. * The plea made by the Appellate that Revenue was aware of the excess generation of waste is not accurate. The Appellate had also not declared the quantity of waste in their annual returns. Also they had obtained their EOU license in 1996 while the sale of waste was only allowed in the Foreign Trade Policy 2002-07 and this is the period for which SCNs have been issued. Hence, no declaration to Revenue was made. The waste was cleared using private invoices without the approval of the Development Commissioner. The transgression was only discovered by the Revenue during EA-2000 Audit. * Shri Vikram Kapur (Noticee No.2 in the 3rd SCN), is the person responsible for the day to day activities and is responsible for not declaring the Cotton Waste to the Department. This has resulted in nonpayment of duty as far as excess generation of the Cotton waste. This Excess Cotton Waste is therefore liable for confiscation. The act of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, as it is the foremost and basic contention of the assessee. 28.1 I find that in the case of C.T. Cotton yarn, upon the matter being remanded to the Tribunal by the Apex Court, CESTAT in de novo proceedings held that obtaining of Soft Cotton Waste in the course of carding and combing of ginned cotton does not amount to manufacture. 28.2 Here I would like to point out that the judgement of the CT Cotton Yarn was with regard to the dutiability of Cotton Waste arising out of indigenously procured Cotton. The judgement does not deal with cotton waste generated from imported Comber Noils, which were procured duty free by availing the benefit of exemption notification. 28.3 Further, for the period from June 2001 to Jan 2011, the duty has been demanded on the excess generation of cotton waste by alleging that they consumed excess duty free imported raw material than prescribed to that extent and computing duty amount foregone on the said imported comber noil. In other words, duty has been sought on the imported comber noil procured duty free and consumed in excess of the permitted norms. The SCNs do not demand duty on the cotton waste cleared by the assessee, Hence, the benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and used for the purpose of manufacture of such articles, which would have been paid, but for the exemption under this notification, shall be payable at the time of clearance of such articles, or where such articles are cleared to the warehouses appointed or registered under the notification of the Government of India. in the Ministry of Finance, Department of Revenue number 26/98-Central Excise (NT), dated the 15th July, 1998 or cleared to warehouse authorized to carry on manufacturing process or other operations under section 65 of the Customs Act, 1962 (52 of 1962) and under the Manufacture and Other Operations in Warehouse Regulations, 1966 or cleared to the license holders referred to in clause (e) of paragraph 6.9 of the Export and Import Policy, without payment of duty." 29. Next, I proceed to discuss whether the requirement of permission from the Development Commissioner was mandatory to avail the benefit of Notifications No. 6/97-CE or 23/2003-CE. To decide this, I find it pertinent to reproduce below the relevant portions of the EXIM Policy 1997-2002, 2002-2007, 2004-2009 and 2009-2014. 29.1 Exim Policy, 1997-2002 Para 9.20 stipulates that scrap/waste/remnants arising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remnants shall not be subject to achievement of positive NFE. In respect of items not covered by norms, DC may fix ad- hoc norms for a period of six months and within this period, norms should be fixed by Norms Committee. Ad-hoc norms will continue till such time norms are fixed by Norms Committee. Sale of scrap / waste / remnants by units not entitled to DTA sale, or sales beyond DTA sale entitlement, shall be on payment of full duties. Scrap / waste / remnants may also be exported. The Appendix-14-I-H of Handbook of Procedures 2004-09 read as under: "An application for sale of goods in DTA as per EOU Scheme by the EOUS shall be submitted to the Development Commissioner concerned in the form given at Annexure-A. The application shall be certified by an independent Cost/ Chartered / Cost and Works Accountant and endorsed by the Bond Officer of Customs/ Central Excise having jurisdiction over the unit. The Development commissioner concerned will determine the extent of the DTA sale admissible and issue authorization in terms of value. However, EOUs having status holder certificate can sell finished goods into under para 6.8(a) of Foreign Trade Policy under intimation to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpts goods specified in column(3) of the Table hereto annexed and falling within the heading No of the Schedule to the Central Excise Tariff Act. 1985 (5 of 1986) specified in the corresponding entry in column (2) of the said Table, from the whole of the Duty of Excise leviable thereon under Section 3 of the said Central Excise Act. 1944, Sl. No. Heading No. Description of goods 1 2 3 3 52.02 All goods produced or manufactured - (a) in a free trade zone and brought to any other place in India; or (b) by a hundred per cent export oriented undertaking and allowed to be sold in India." Notification No.23/2003-CE, dated 31.03.2003, as amended, read as under: "In exercise of the exercise of the powers of the powers conferred by sub-section (1) of Section 5A of the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the Central Excise Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column(3) of the Table below, and falling within the chapter heading No, or sub- heading No. of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermine the extent of DTA sale admissible and issue a goods removal authorisation in terms of value. The EOU are required to effect such permitted sale in DTA on the basis of records maintained by it with prior intimation of jurisdictional Customs Authorities. 30.1 Similarly, Notification 23/2003-CE dated 31.03.2003 exempted excisable goods falling under chapter heading 52.02, produced or manufactured in a 100% EOU and brought to any other place in India with a condition that DTA sale should be in accordance with the provisions of EXIM Policy Foreign Trade Policy. For availing benefit of this Notification, the condition stipulated is that the DTA sale should be in accordance with the provisions of EXIM Policy. 30.2 A cursory glance of the EXIM policy/ FTP along with the Handbook of. Procedures reveals that for effecting DTA sale, submission of application to the Development Commissioner was a mandatory requirement for determination of the extent of DTA sale admissible and thereafter allowing the sale to that extent. It was not meant to provide blanket permission for DTA sale. Moreover, the sale was to be effected in DTA on the basis of records maintained by the EOU, with prior int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otion Council and Council for Leather Export for duty free imports as referred to in clause (e) of the paragraph 6.9 of the Export and Import Policy, without payment of duty" 30.4 Further, as per Letter of Permission (LOPI No. PER/65(1997)/EOB/19/97 dated 26.02.1997, as amended vide No. SEEPZ/28(23)/97 dated 10/10/2001 and No. SEEPZ- SEZ/EOU/28(23)/97 dated 12/08/2004 issued to the assessee, it was apparent that the approval of the permission was subject to the four conditions mentioned as (a) to (d) of the said LOP, wherein condition (a) stated that the entire (100%) production, excluding rejects and sales in the Domestic Tariff Area (DTA), as per provision of Export and Import Policy for a period of 5 the years shall be exported." 30.5 Besides, the Board has viewed that SION should be applicable not only for waste cleared in DTA on payment of duty but also for accounting of input consumption for manufacture of export products. Inputs consumed in excess of SION cannot be taken as duly accounted for and consequential action is to be initiated. To implement this, Notifications Nos. 84/2007-Cus and 29/2007-Cus both dated 06.07.2007 were issued so as to introduce a system of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case, neither the permission has been sought as per the mandatory conditions nor application for condoning the same has been made to the Development Commissioner. Hence the ratio of the said case is not applicable to the instant case. It is settled law that non-fulfilment of the prescribed conditions of a notification shall be fatal for the assessee and they cannot avail the benefit of the exemption thereunder. Reliance is placed on the case of Harichand Shri Gopal 2010 (260) ELT 3 (SC), Eagle flask Industries Limited (2004(09)LCX 0235] in this regard. It is also settled law that the conditions of the notification have to be read strictly according to the language employed therein. Reliance is placed on the case law of H.M.M Ltd Vs .Collector - 1986 (87) ELT 593(SC), Dharmandra Textile PROCESSOIS Vs. Union of India reported in [2008 (231) ELT.3 (S.C.)], Novopan India LACHEESCO (1994(73) ELT.769 (S.C.)], Sunder Steels Ltd., [2005(181) E.L.T. 154 , (SC Rajasthan Spg. & Wvg. Mills vs. CCE [1995 (77) ELT.474 (SC)] in this the latest case of Dilip Kumar & Co. 2018 (361) E.L.T. 577 (SC), Hon'ble Supreme Court has held with regard to interpretation of tax exemption Notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir claim. I observe that in these relied upon judgments, the duty was sought to be levied as per the main section 3 of the Central Excise Act, 1944, the duty is demanded on the clearance of goods (Emphasis laid without obtaining the permission of the Development Commissioner. However, in the instant case, concerning the period from June 2001 onwards, duty is not demanded on the clearance of Cotton waste but is being demanded on the generation of excess waste or ex imported Comber Noil, which was procured duty free, hence ratio of these judgments are not applicable. Further, the period covered in the various judgments relied upon by the assessee is prior to May 2001 amendment of Section 3 of CEA, 1944, hence reliance cannot be placed on these judgments for the demand made for the period post 10.05.2001. 32.5 After the amendment in charging Section, all clearances are to be effected by applying the proviso clause of Section 3(1) of CEA 1944. The Tribunal's Larger Bench decision in case of Kumar Arch Tech Pvt. Ltd. v. CCE Jaipur-II - 2013 (290) E.L.T. 372 (Tri.- LB), especially relevant para-9 thereof is referred to in this regard: " 9. We also find it difficult to accept the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification. Thus the Commissioner has proceeded to demand the duty not on the clearance of the cotton waste but on the excess generation of the cotton waste during the period from June 2001 to Jan 2011, as per this notification (refer para 28.3 of impugned order). We do not find much merits in the approach adopted by the Commissioner because the show cause in respect of all the demands made have been issued in terms of section 11A of The Central Excise Act, 1944. For the contravention of provisions of a notification issued under Customs Act, 1962 and provisions of Foreign Trade Policies (issued from time to time) and Handbook of Procedures, the demand should have been made under Section 28 of Customs Act, 1962. Proviso to Section 3, of Central Excise Act, 1944, do not clothe the customs duty as central excise duty but provide a measure for levy of central duty on goods produced or manufactured by a Export Oriented Unit. In case of C T Cotton, tribunal has laid down as follows: "6. The point of dispute is as to whether DTA clearances of "soft cotton waste" would attract duty in terms of proviso to Section 3(1) of Central Excise Act, 1944, read with exemption Notification No. 2/95 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N explanatory notes to this heading, the same includes - combing waste, usually referred to as comber noils, strippings recovered from carding or combing cylinders; carding fly, broken fibres detached during drawing process, and fragments of slivers or roving. The 'soft cotton waste' in question, arising during carding and combing of ginned cotton consists of short fibres and other waste (dust etc.). In our view, this waste would be covered by Heading 5202. 6. Coming to the question, as to whether 'soft cotton waste' is the resultant product of a process of manufacture, i.e. a product with a new and distinct commercial identity with distinct character and usage from that of raw material, we find that it is nothing but short fibres and other waste material obtained in course of carding and combing of ginned cotton. The Department has not produced any evidence to show that 'soft cotton waste' is a product commercially distinct from cotton with different character and usages - the Department's decision to treat the same and excisable is based only on the fact that during the period of dispute, tariff heading 5202 covered "cotton waste", which by itself, in view of Apex Court's judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed." 6.2.1 The dispute in case of BPCL was as to whether they would be eligible for set-off of sales tax paid on Sulphuric Acid, used in Acid Sludge emerging in course of refining of crude oil for manufacture of kerosene, for which sulphuric acid had been used. Acid sludge had been sold and sales tax had been paid on that sale. Proportionate set-off was sought to be denied by the sales tax authorities on the ground that what was manufactured was kerosene and not acid sludge. 6.2.2 In the case of Phulgaon Cotton Mills, also decided by the same judgment by the Apex Court, the assessee purchased raw unginned cotton from agriculturists and unregistered dealers which was used in the manufacture of cotton yarn and cotton fabrics in course of which some cotton waste and yarn waste was also generated. On the purchase of raw cotton, purchase tax was paid by the assessee. Cotton waste was sold on which sales tax was paid. Here also, the dispute was as to whether the assessee can be said to have manufactured cotton waste, so as to be eligible for set-off of purchase tax paid on cotton contained in the cotton waste sold. 6.2.3 In this background the Apex Court held that when by- product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and Weaving Mills Co. Ltd. v. State of U.P. (supra) wherein it was held that the entry - "cotton ginned and unginned" in U.P. Krishi Utpadan Mandi Adhiniyam, 1964 would also cover cotton waste which is clippings, stripping and other waste obtained while ginning the cotton. Soft cotton waste which consists of other short length fibres and other waste is nothing but inferior quality of cotton." 4.4 Section 3 of the Central Excise Act, 1944 reads as follows: 3. Duties specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 to be levied (1) There shall be levied and collected in such manner as may be prescribed,- (a) a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods which are produced or manufactured in India, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); (b) a special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are produced or manufactured in India, as, and at the rates, set forth in the said Second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... staple fibre at its factory at Sirumugal in Coimbatore District in the State of Tamil Nadu. The letter of intent dated 18-12-1991 was issued to the appellant for the purpose by the Secretariat for Industrial Approvals (SIA), Ministry of Industry, Government of India. On 8-9-1993 the appellant therein made an application to the Secretary, Ministry of Commerce, Government of India and sought debonding of its unit from 100% EOU, i.e., withdrawal from 100% EOU Scheme. By letter dated 18-10-1993 of the Ministry of Commerce it was agreed in principle to allow the appellant to withdraw from the 100% EOU Scheme subject to the conditions on which withdrawal was permitted. Once the debonding of the unit was permitted, finished goods earlier manufactured in the 100% EOU could be cleared for domestic tariff area (DTA) on levy of duty of central excise. The dispute arose as to what rate of duty was to be levied. The contention of the assessee was that excise duty is payable on the finished goods under the main Section 3(1) of the Act together with customs duty on the imported raw material used in the manufacture of the said finished goods lying in the stock. The Revenue on the other hand conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission of the Development Commissioner is required for selling the goods in India up to a limit of 25% by 100% EOU. Para 117 of the policy deals with debonding of 100% EOU. Thus it is apparent that debonding and permission to sell in India are two different things having no connection with each other. It also becomes apparent that in view of the EOU Scheme as modified from time to time and corresponding amendments to Section 3 of the Act the expression "allowed to be sold in India" in the proviso to Section 3(1) of the Act is applicable only to sales made up to 25% of production by 100% EOU in DTA and with the permission of the Development Commissioner. No permission is required to sell goods manufactured by 100% EOU lying with it at the time approval is granted to debond." 24. After so stating the Court noted the stand of the revenue that by debonding permission had been granted by BoA for selling the closing stock of finished goods in India. Negativing the said contention, the Court held :- "By its application dated 8-9-1993 the appellant had only asked the Central Government for permission to debond the unit. Pending formal debonding clearance, the appellant requested the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and, accordingly, it set aside the judgment of the Tribunal and restored that of the adjudicating authority. 27. The aforesaid judgment of this Court was distinguished by the Larger Bench of the Tribunal in Himalaya International Ltd. (supra). The Larger Bench referred to Circular No. 618/9/2002- CX, dated 13-2-2002 and ruled thus :- "A reading of the above circular would show that it was issued pursuant to the decision of the Supreme Court in SIV Industries Ltd. (supra), but without understanding the position that the Supreme Court did not deal with a case where clearance was made to DTA by 100% EOU in excess of the permission granted. It is contended on behalf of the assessee that the interpretation given in the circular referred to above is binding on the Revenue and therefore, this Tribunal cannot give a different interpretation to Section 3(1) and the proviso at the instance of the Revenue. In support of the above contention reliance was placed on a decision of the Supreme Court in CCE, Vadodara v. Dhiren Chemicals Industries, 2002 (139) E.L.T. 3 (S.C.). We find no merit in the above contention of the assessee. In CCE, Vadodara v. Dhiren Chemicals Industries the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is clarified that prior to 11-5-2001, the clearances from EOUs if not allowed to be sold in India, shall continue to be chargeable to duty under main Section 3(1) of Central Excise Act, 1944. Appropriate action may be taken immediately to safeguard revenue and all pending decisions may be settled accordingly." 29. The said circular, as is perceptible, is in accord with the decision rendered in SIV Industries Ltd. (supra). The said circular while so indicating also clearly lays down the expression "allowed to be sold" has been replaced with "brought to any other place" with effect from 11-5-2001 vide Section 120 of Finance Act, 2001 (14 of 2001). The circular being in consonance with the decision in SIV Industries Ltd. (supra) and rightly so, it was absolute unnecessary on the part of the Larger Bench of the Tribunal to say that this Court in SIV Industries Ltd. (supra) did not deal with the case where clearance was made to DTA by 100% EOU in excess of the permission granted. The attempt to distinguish the circular, in our considered opinion, was not only unnecessary but also absolutely erroneous. 30. After the judgment of the Larger Bench, the Central Board of Excise and Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not under the proviso appended thereto. The two-Judge Bench taking note of the fact that during the periods 1994-1995 to 1997-1998, the assessee produced and sold 11,15,29,540 number of shrimp seeds and 48,365 kg of shrimps in DTA without obtaining the permission of the Development Commissioner; without issuing proper invoices as mandated under Rule 100-E of the Central Excise Rules, 1944 (for short "the Rules") and without payment of excise duty. Besides, the assessee also undertook certain job work whereby it processed 864.238 MT of shrimps and 905.580 MT of fish and cleared the said goods in DTA. According to the assessee, these goods were ultimately exported by DTA units. The said action of the assessee compelled the authority to issue a show cause notice requiring the assessee to show cause as to why duty of excise equal to aggregate of the duties of customs should not be levied under Section 3 of the Act read with Rule 9(2) read with proviso to sub-section (1) of Section 11-A of the Act and interest and penalty thereon. The matter was contested by the assessee and eventually the Tribunal ruled in favour of the assessee. Before this Court, it was contended that since as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n clause (ii) to the proviso to sub-section (1) of Section 3 of the Act." The decision of the Hon'ble Apex Court thus make it clear that the duty on the finished goods manufactured and cleared by the 100 % EOU, shall be subject to subject to excise duty as determined in terms of Section 3 (1) and its proviso, and duty on the inputs lying in stock at the time of debonding, will be the customs duty leviable under Customs Act, 1962. 4.5 Section 11A (1) as it existed at the relevant time reads as follows: 11A Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. - (1) "When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, whether or not such non-levy or non-payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder, a Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the said observations. Distinction made by the Commissioner, by stating that C T Cotton was a case in which the Cotton Waste aroused from the indigenous raw material, also lack merits as the source of raw material do not determine whether a process amounts to manufacture or not in terms of Section 2 (f) of the Central Excise Act, 1944. 4.8 Since on the merits of the case we find that the demand of duty cannot survive in view of the decision in case of C T Cotton, for consideration of which the matter was earlier remanded back by the tribunal to original authority, we do not discuss the issue of limitation. 4.9 Since we hold against the demand of duty, the demand for interest and penalty to is set aside. 5.1 In view of the discussions as above the impugned order is set aside and the appeal is allowed. 5.2 While setting aside this order we make it clear that our order may not be taken to grant any immunity to appellant in respect of any demand made against them under the Customs Act, 1962 in respect of the violation of the provisions of the Notification issued under the Customs Act or any provisions of the Foreign Trade Policy etc. Any action for recovery made under the provi ..... 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