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TMI Blog2009 (1) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005 - M/194/2009-WZB/AHD - Dated:- 20-1-2009 - Ms. Archana Wadhwa, Member (J) and Shri B.S.V. Murthy, Member (T) Dr. M.K. Rajak, SDR, for the Appellant. Shri W. Christian, Advocate, for the Respondent. [Order per : B.S.V. Murthy, Member (T)].- During the period from 1st April 2003 to June 2003, the respondents had cleared goods such as readymade garments, rejects and waste on payment of Central Excise duty. The clearances were made after obtaining permission of the Development Commissioner. However the department took a stand that respondents were required to discharge duty in terms of Notification No. 2/95-C.E., dated 4-1-95 which exempts all goods produced or manufactured by 100% EOU and allowed to be sold in India as per Para 9.9 and 9.20 of Exim policy in excess of the duty calculated at the rate of 50% of each of the duties of customs. Thus the department required the respondents to pay differential duty of Rs. 2,10,536/-. The original adjudicating authority also imposed a penalty after appropriating the duty amount and the interest deposited by the respondents towards the differential duty demanded with interest. On appeal filed by the respondents, the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LB) * Saheli Synthetics P. Ltd. - 2002 (139) E.L.T. 594 (Tri.) = 2001 (47) RLT 488 (CEGAT) * Suresh Synthetics - 2002 (49) RLT 110 (CEGAT) * Favourite Industries -2003 (156) E.L.T 802 (T) He submits that there is no reason not to treat the goods manufactured by other 100% EOUs as indigenous goods as contended by the Revenue in the appeal memorandum. 4. We have considered the rival submissions and the records of the case. 4.1 Before we proceed further it is noticed that Commissioner has allowed the benefit of the normal excise duty to the respondents on the ground that duty free raw materials procured by 100% EOU from other 100% EOUs are to be considered as procurement from indigenous sources only. The raw materials received from a 100% EOU by another 100% EOU as in the present case can be of two types (a) It would have been goods manufactured by 100% EOU. (b) It would have been a simple diversion or sale of the raw material imported by 100% EOU to another 100% EOU without undertaking any processing. 4.2 In case the raw materials received by a 100% EOU falls in the second category be mentioned above, it cannot be called as indigenous raw material. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the words 100% EOUs. However, on account of certain hardship faced in getting export order, sales in DTA up to 25% were permitted from the year 1984 but there was a clear intention to distinguish between such sales by the 100% EOU from the sales by domestic units other than 100% EOU and it was for this purpose that proviso to Section 3(1) and Notification 125/84 was introduced. Since there were only two modes of clearance in which the 100% EOUs could have cleared the goods i.e. one by export and the other by domestic sale after obtaining the permission of the Development Commissioner, in respect of domestic sales the words "allowed to be sold in India" were incorporated in both the provisos. The fact however remains that 100% EOUs were never treated at par with other domestic units and for all practical purpose they were considered as units located outside India and accordingly Central Excise duty equal to amount of duties of customs leviable on like or similar goods manufactured outside India when Imported into India was made applicable. In fact a different procedure was carved out and a separate Chapter VA was inserted in Central Excise Rules relating to removal of goods fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /84-C.E. Any other interpretation will mean that while the law abiding assessee will be liable to pay duty on domestic clearances, others violating the law can conveniently escape duty liability and this would be against the principle of suppressing mischief and advancing remedy." 4.4 The Tribunal has clearly observed that the intention of the legislature was always to treat 100% EOUs differently. The Tribunal has also observed that 100% EOU were never treated at par with other domestic units and for all practical purposes they were considered as units located outside India and accordingly Central Excise duty equal to amount of duties of customs leviable on like or similar goods manufactured outside India when imported into India was made applicable. The Tribunal came to the conclusion that so long as a 100% EOU continues as an EOU, it is within the proviso to Section 3(1) of the Central Excise Act. 4.5 Nevertheless, according to Notification No. 8/97, to be eligible for exemption under this notification, the 100% EOU should have manufactured the goods proposed to be cleared in DTA wholly from the raw materials produced or manufactured in India. Therefore the question that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the fact that while logically this looks a very good argument, it has to be supported legally also. 4.7 To examine the eligibility of the goods for the benefit of Notification No. 8/97, it is necessary to look at the 100% EOUs scheme. As observed by the Larger Bench in Jaipur Golden Transport Ltd. case 100% EOUs were never treated at par with other domestic units and for all practical purposes they were considered as units located outside India. When the goods are imported by a 100% EOU, no Customs Duty is charged and this would mean that imports made by 100% EOUs are deemed to be non imports. Similarly when goods are cleared to 100% EOU no Excise Duty is charged and they are considered as deemed export. Similarly if a 100% EOU clears to another 100% EOU, it is also considered as deemed export. When a domestic unit clears goods to a 100% EOU, if it is considered as a deemed export, it means that 100% EOU is considered to have imported the goods that is to say it is deemed to be located outside India. Similarly when a 100% EOU clears goods to another 100% EOU it is considered to have no effect on the domestic tariff area and it is as good as deemed goods transaction between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in 2007 (211) E.L.T 353 (S.C.) that clearances by a 100% EOU to domestic tariff area against foreign exchange are equated with physical exports. If the sale by a 100% EOU to the domestic tariff area is equated to exports, how can the goods manufactured by a 100% EOU and supplied to another 100% EOU be considered as goods manufactured in India? On this ground also, the goods supplied cannot be treated as supply from a domestic unit. 4.11 However, as rightly pointed out by the learned advocate, the Commissioner (Appeals) has relied upon the decision of the Tribunal in Favourite Industries v. C.C,E., Surat reported in 2003 (156) E.L.T 802 (Tri.-Mumbai). There are two reasons why we find it difficult to agree with the decision of the Tribunal in the above case. The first reason is the decision of the Larger Bench in Jaipur Golden Transport Company Pvt. Ltd. which has been discussed above which was not available at the time when this decision was rendered. The second reason is that, the Tribunal in Favourite Industries case cited the decision of the Tribunal in the case of Champagne India Ltd. v. Collector of Central Excise, Pune reported in 1998 (104) E.L.T. 134 (Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also allowed to be sold in India under the relevant Import/Export Policy. He has not dealt with the latter part of condition 7 requiring payment of duty leviable under Section 3 of the Central Excise Act. We are in agreement with the Department's contention that 100% EOUs are conceptually deemed to be islands intended to enable manufacture of goods for export and for that purpose insulated from all domestic restrictions and tariffs to enable competitiveness for the manufactured goods exported from such EOUs. As a corollary, when goods are sought to be cleared from EOUs for home consumption to the D.T.A. such clearance is deemed to be n import into the country. In the instant case we therefore hold that though champagne manufactured by the EOU cleared for consumption in D.T.A. is not chargeable to Central Excise duty because of the constitutional provisions, other imported inputs such as bottles, corks, wire rods and foil will be chargeable to duty in terms of Section 68 of the Customs Act, 1962." The decision in Champagne India came to be rendered because of the reason that 100% EOU are conceptually deemed to be located outside India and therefore when they clear goods for consu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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