Commissioner of
Central Excise, Surat - I Appellant Vs. M/S. Favourite Industries Respondent
[Civil Appeal No.949
of 2004]
[C.A.No.3588 of 2005]
[C.A.No.3638 of 2006]
[C.A.No.1388 of 2008]
O R D E R
For the sake of
convenience, we take the facts in C.A.NO.949/2004, for disposal of these appeals.
1.
This
appeal is directed against the judgment and order passed by the Customs, Excise
and Service Tax Appellate Tribunal (for short 'the Tribunal'), Mumbai in Appeal
No.E/158/03-Mum. dated 25.07.2003. By the impugned judgment and order, the
Tribunal has partly allowed the appeal filed by the respondent-assessee, inter
alia, stating that the assessee is entitled to avail the benefit of the Notification
No.8/97-CE, dated 1.3.1997. It is the correctness or otherwise of the said
finding and conclusion reached by the Tribunal, is the subject matter of this appeal.
2.
The
core issue that falls for our consideration and decision is: whether the finished
goods manufactured by the 100% Export Oriented Unit ('the EOU' for short) out of
the raw material supplied by another 100% EOU, and subsequently, cleared in the
Domestic Tariff Area (for short "the DTA") in accordance with the
EXIM Policy 1997-2002 are entitled to the benefit of the exemption provided under
the Notification No.8/97-CE, dated 1.3.1997. In the alternative, whether the adjudicating
authority is justified in holding that the assessee cannot take the benefit of
the Notification No.8/97-CE, dated 1.3.1997 and the assessee, at the most, can take
benefit of the Notification No.2/95-CE, dated 4.1.1995.
3.
Brief
facts, as noticed by the adjudicating authority may be stated: M/s. Favourite Industries,
respondent herein, is engaged in the manufacture of processed Polyester Grey Man
Made fabric, falling under chapter sub- heading 5407.51 of the Customs Tariff Act,
1975 and chapter sub-heading 5406.10 of the Central Excise Tariff Act, 1985 (for
short "the Tariff Act"), out of raw materials obtained indigenously
and/or imported free of Central Excise/Customs duties, as the case may be,
under the obligation of export of the final product as well as clearance of final
product in the DTA on payment of appropriate duty as applicable from time to time
as provided under the EXIM Policy for the period commencing from 1997 to 2002.
4.
The
respondent-industrial unit of the assessee has been granted licence on 27.6.2000
for Private Bonded Warehouse under 100% Export Oriented Scheme under Section 58
of the Customs Act, 1962.
5.
The
respondent-industrial unit has also obtained permission for advance DTA sale, vide
letter No. KFTWZ/100% EOU/II/765/2000- 01/3381 dated 27.7.2000 which will be valid
for a period of three months counted from the date of issuance of permission,
that is, upto 26th October, 2000 only.
6.
In
the Show Cause Notice, it was stated that the respondent-industrial unit had
filed the RT-13 returns for the months of August, 2000 to December, 2000. On going
through the invoices, in respect of clearance made in the DTA, filed by the
respondent-industrial unit along with RT 13 returns for the month of June to October,
2000, it was noticed that the unit had cleared 17,52,421/- Liter Meters Of pro M.M.
Fabrics viz. finished goods, rejected and waste worth Rs.1,41,43,082/- during
the period commencing from 1.8.2000 to 15.10.2000 in DTA on payment of 8% basic
excise duty amounting to Rs.13,53,695/- which, according to the adjudicating
authority, is a short payment of duty amounting to Rs.2,19,70,733/-.
It is further alleged
in the show cause notice that the unit has also cleared 12,78,814 L.Mtrs. of
finished goods, rejects and waste worth Rs.1,30,98,643/- during the period starting
from 16.10.2000 to 31.12.2000 in DTA on payment of 8% basic excise duty
amounting to Rs.13,52,262/-, which, according to the adjudicating authority, is
a short payment of duty amounting to Rs. 2,13,30,228/-.
According to the
adjudicating authority, the respondent has contravened the provisions of EXIM
Policy and Rules 100 D and 100 E of the Central Excise Rules, 1944 (for short "the
Rules") and also the conditions prescribed under 100% EOU scheme.
Further, according to
the adjudicating authority, the respondent industrial unit has contravened the provisions
of the Notification No.2/95-CE, dated 4.1.1995 and, thereby, the duty amounting
to Rs.4,33,00,961/- has been short paid and the same requires to be recovered
by invoking the provisions of Section 11A (1) read with Section 11A (2) of the Central
Excise Act, 1944 (for short "the Act") and also for penal action
under Rule 173Q (1) of the Rules.
7.
In
view of the aforesaid material/charges the adjudicating authority had issued the
Show Cause Notices to the assessee, inter alia, directing the assessee to show cause
as to why the duty of excise amounting to Rs.4,33,00,961/- should not be demanded
and 6 recovered under Section 11A(1) read with Section 11A (2) of the Act.
Alternatively, to recover interest on the short duty payment by invoking the
provisions under Section 11AB of the Central Excise Act and to take appropriate
penal action as provided under Rule 173 Q (1) of the Rules, read with Section 11AC
of the Act. Along with the notice, the adjudicating authority had enclosed
Annexures A, B and C working out the details of the short payment of duty during
the period in question.
8.
After
receipt of the show cause notices, the assessee had filed its reply dated
18.6.2002. The assessee had contended that the goods are manufactured from the raw
material produced/manufactured in India and, therefore, they are entitled for
the benefit of the exemption from payment of certain amount of duty as provided
in the Notification No.8/97-CE, dated 1.3.1997 on payment of the appropriate duty
and, 7 therefore, it cannot be said that they had cleared the manufactured
goods as provided in the Notification No.2/95-CE dated 4.1.1995. To make things
clear, they had also said that they had purchased raw material from 100% EOU who
had manufactured/produced goods in its industrial unit and the said goods
cannot be considered as imported raw material and, therefore, the adjudicating
authority is not justified in issuing the show cause notices.
9.
After
receipt of the reply so filed, the adjudicating authority, after affording an opportunity
of hearing to the assessee, had proceeded to hold that the respondent- industrial
unit could not have taken the benefit of the exemption notification No.8/97-CE,
dated 1.3.1997 and, if at all, they are entitled to take benefit of the Notification
No.2/95-CE, dated 4.1.1995. Accordingly, had confirmed the demands made in the
show cause notices.
10.
The
assessee, being aggrieved by the order in original passed by the adjudicating authority,
had preferred an appeal before the Tribunal. The Tribunal, after considering the
conditions enumerated under both the notifications, namely, Notification No.2/95-
CE, dated 4.1.1995 and Notification No.8/97- CE, dated 1.3.1997, has come to the
conclusion that the adjudicating authority is not justified in pinning down the
assessee to take the benefit only under the Notification No.2/95-CE but not under
the Notification No.8/97-CE. Accordingly, has given relief to the assessee by setting
aside the order in original passed by the adjudicating authority. The Revenue, being
aggrieved by the order so passed by the Tribunal, is before us in this appeal.
11.
Shri.
K. Swami, learned counsel appearing for the Revenue, has taken all the pains to
take us through the Notifications, which are the subject matter of this appeal,
the reasoning of the adjudicating authority, and the so called fallacy in the reasoning,
and the conclusion reached by the Tribunal. Learned counsel also refers to the EXIM
Policy 1997-2002. Learned counsel would submit that in order to take the
benefit of the Notification No.8/97-CE, the assessee must purchase the raw material
manufactured in an industrial unit in a domestic area and if such raw material is
used for production or manufacture of goods and sold in the domestic area as
provided in the EXIM Policy, then only, it could take the benefit of the
Notification No.8/97-CE.
In the alternative,
the learned counsel would submit that the assessee in the present case has purchased
the raw material/finished products from a 100% EOU for its manufacturing activity
for the manufacture of a finished product and in the hands of the purchaser industrial
unit, the transaction would be a deemed import and the finished goods in
question would be made 1 out of imported raw material/finished product and,
therefore, the assessee cannot take the benefit of the Notification no.8/97-CE.
Learned counsel would
further submit that, if for any reason, the notification is made applicable to
the respondent-industrial unit, the said unit would receive total or undue advantage
in payment of the concessional rate of duty on the finished goods, which are
even made out of imported raw materials/goods. The learned counsel fairly
submits that there are no decisions on the issue in vogue but he would contend
nearer to the point, by relying on the two decisions of this Court reported in
Hindustan Granites v. Union of India, 2007 (211) ELT 3 (SC) and Virlon Textile Mills
Ltd. v. Commissioner of Central Excise, Mumbai, 2007 (211) ELT 353 (SC).
12.
The
learned counsel also submits that the adjudicating authority, keeping in view the
transaction of the assessee in buying the raw material/finished products from
100% EOU for 1 its manufacturing activity to manufacture finished products, has
rightly applied the Notification No.2/95-CE and, therefore, the Tribunal ought not
to have interfered with the well considered and reasoned order of the adjudicating
authority.
13.
Shri
Tarun Gulati, learned counsel appearing for the assessee, ably justifies the judgment
and order passed by the Tribunal. The learned counsel has also brought to our notice
the clear distinction between the Notification No.2/95-CE and the Notification No.8/97-CE.
He has also endeavoured to take us through the relevant clauses in the EXIM
Policy 1997-2002.
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 Commissioner of Central Excise, New Delhi v.
Hari Chand Shri Gopal & Ors., (2011) 1 SCC 236, insofar as the mechanism and
interpretation of an exemption notification issued under a fiscal enactment. This
Court has observed in the said decision: "A provision especially a fiscal statute
providing for an exemption, concession or exception has to be construed strictly.
An exemption notification has to be interpreted in the light of the words employed
by it and not on any other basis. A person who claims exemption or concession
must establish clearly that he is covered by the provision(s) concerned and, in
case of doubt or ambiguity, the benefit of it must go to the State."
15.
The
observations made by the Constitution Bench of this Court are binding on us.
16.
Furthermore,
this Court in Associated Cement Companies Ltd. v. State of Bihar & Ors.,
(2004) 7 SCC 642, while explaining the nature of the exemption notification and
also the manner in which it should be interpreted has held: "12. Literally
"exemption" is freedom from liability, tax or duty. Fiscally it may assume
varying shapes, specially, in a growing economy. In fact, an exemption provision
is like an exception and on normal principle of construction or interpretation
of statutes it is construed strictly either because of legislative intention or
on economic justification of inequitable burden of progressive approach of fiscal
provisions intended to augment State revenue. But once exception or exemption becomes
applicable no rule or principle requires it to be construed strictly.
Truly speaking, liberal
and strict construction of an exemption provision is to be invoked at different
stages of interpreting it. When the question is whether a subject falls in the notification
or in the exemption clause then it being in the nature of exception is to be construed
strictly and against the subject but once ambiguity or doubt about applicability
is lifted and the subject falls in the notification then full play should be given
to it and it calls for a wider and liberal construction. (See Union of India v.
Wood Papers Ltd. and Mangalore Chemicals and Fertilisers Ltd. v. Dy. Commr. of Commercial
Taxes to which reference has been made earlier.)"
17.
In
G.P. Ceramics Private Limited v. Commissioner, Trade Tax, Uttar Pradesh, (2009)
2 SCC 90, this Court has held: "29. It is now 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 1 exemption notification should be construed liberally. [See CTT v.
DSM Group of Industries (SCC para 26); TISCO v. State of Jharkhand (SCC paras 42
to 45); State Level Committee v. Morgardshammar India Ltd.; Novopan India Ltd.
v. CCE & Customs; A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala and Reiz
Electrocontrols (P) Ltd. v. CCE.]"
18.
In
order to resolve the controversy posed in this appeal, we have to notice the two
Notifications, namely, Notification No.2/95- CE, dated 4.1.1995 and Notification
No.8/97- CE, dated 1.3.1997 and also the EXIM Policy 1997-2002. The
Notification in juxtaposition reads as under: Notification No.2/95-CE, Notification
dated 4.1.1995 No.8/97-CE, dated 1.3.1997Exemption to all Exemption to finished
excisable goods produced products, rejects and in 100% EOU, FTZ, EHTP or waste or
scrap produced STP Units when sold in a 100% EOU or FTZ India In exercise of
the powers
In exercise of the
conferred by sub-section powers conferred by 1(1) of section 5A of the sub-section
(1) of Central Excises and Salt section 5A of the Act, 1944 (1 of 1944), Central
Excise Act, the Central Government, 1944 (1 of 1944), the being satisfied that it
Central Government, is necessary in the being satisfied that it public interest
so to do, is necessary in the hereby exempts all public interest so to
excisable goods do, hereby exempts the (hereinafter referred to finished products,
as the said goods) rejects and waste or specified in the Schedule scrap specified
in the to the Central Excise Schedule to the Central Tariff Act, 1985 (5 of Excise
Tariff Act, 1985 1986) and produced or (5 of 1986) and manufactured in a hundred
produced or per cent export oriented manufactured, in a undertaking or a free hundred
per cent trade zone or an export-oriented Electronic
Hardware undertaking or
a free Technology Park (EHTP) trade zone wholly from unit or a Software the raw
materials Technology Parks (STP) produced or unit and allowed to be manufactured
in India, sold in India under and allowed to be sold in accordance with the in India
under and in provisions of ,- accordance with the provisions of sub-(i)paragraphs
102 and 114 paragraphs (a), (b), of the Export and Import (d) and (h) of
Policy, 1 April, 1992 - paragraph 6.8 or of 31 March 1997, in the paragraph 6.20
of the case of hundred percent
Export and Import
export oriented Policy, 1st April, 2002 undertaking or a free - 31st March, 2007,
trade zone; or from so much of the (ii)notification of the duty of excise leviable
Government of India in thereon under section 3 the Ministry of Commerce of the Central
Excise No.42(N-8)/92-97, dated Act, 1944 (1 of 1944), the 14th September, 1992 as
is in excess of an upto a value not amount equal to the exceeding forty percent
aggregate of the duties 1of the value of excise leviable production of components
under the said section and finished goods 3 of the Central Excise manufactured,
in the case Act or under any other of a Electronic Hardware law for the time being
Technology Park (EHTP) in force on like goods, unit; produced or manufactured in
India (iii) notification of the other than in a hundred Government of India in per
cent export-the Ministry of Commerce oriented undertaking or No. 33/(RE)92-97, dated
a free trade zone, if the 22nd March, 1994, upto sold in India.
A value of production
of software manufactured in Provided that nothing the case of a Software contained
in this Technology Parks (STP) notification shall unit, apply where such finished
products, if from so much of the duty manufactured and of excise leviable cleared
by a unit other thereon under Section 3 than a hundred per cent of said Central
Excise export-oriented and Salt Act as in excess undertaking or a unit of the amount
calculated in a free trade zone, at the rate of fifty are wholly exempt from
percent of each of the duties of excise or duties of customs, which are chargeable
to Nil would be leviable under rate of duty. Section 12 of the Customs Act, 1962
(52 of 1962) read with any other [Notification No.8/97-notification for the time
CE, dated 1-3-1997 as being in force issued amended by Notification under sub-section
(1) of No.21/97-CE, dated Section 25 of the said 11.4.1997; No.7/98-CE, Customs
Acton the like dated 2.6.1998 and goods produced or No.11/2000-CE, dated
manufactured outside 1.3.2000)India if imported into India;
Provided that the amount
of duty payable in 1accordance with this notification in respect of the said goods
shall not be less than the duty of excise leviable on the like goods produced or
manufactured outside the hundred per cent export-oriented undertaking or free trade
zone or Electronic Hardware Technology Park (EHTP) unit or Software Technology Parks
(STP) unit which is specified in the said Schedule, read with any other
relevant notification issued under sub-rule (1) of rule 8 of the Central Excise
Rules, 1944, or sub-section (1) of section 5A of the said Central Excise
Act:Provided further that nothing contained in the above proviso shall apply to
the goods which are chargeable to nil rate of duty leviable under section 12 of
the Customs Act read with any other notification for the time being in force issued
under sub-section (1) of section 25 of the said Customs Act:Explanation. - For the
purpose of this notification, the expression, -
(1)"Export and Import
Policy" means the Export and Import Policy, 1st April, 1992 - 31st March,
1997" means the Export and Import Policy, 1, April, 1992-31 March, 1997 published
vide Public Notice of the Government of India in the Ministry of Commerce No.1-
published by the Government of India in the Ministry of Commerce No.1-ITC (PN)/92-97,
dated the 31st March, 1992 as amended from time to time.
(2)"Electronic Hardware
Technology Park (EHTP) unit" means a unit established under and in
accordance with Electronic Hardware Technology Park (EHTP) Scheme notified by the
notification of the Government of India in the Ministry of Commerce No. 5 (RE-95)
92-97, dated 30th April, 1995 and approved by an inter-Ministerial Standing
Committee appointed by the notification of the Government of India in the Ministry
of Industry {Department of Industrial Development) No. S.O. 117(E), dated the 22nd
February, 1993;(3) "Software Technology Parks (STP) unit" means a
unit established under and in accordance with Software Technology Parks (STP) Scheme
notified by the notification of the Government of India in the Ministry of Commerce
No.4/(RE-95)/92-95, dated 30th April, 1995 and approved by an inter-Ministerial
Standing Committee appointed by the notification of the Government of India in
the Ministry of Industry (Department of Industrial Development) No. S.O.
117(E), dated the 22nd February, 1993.[Notification No.2/95-CE, dated 4.1.1995]
19.
The
relevant clauses for our purpose in the EXIM Policy 1997-2002 are 9.9, 9.10, 9.13(a),
9.16 (c) and 9.20. They read as under: "DTA Sales 9.9 The entire production
of EOU/EPZ/EHTP/STP units shall be exported subject to the 2following:
a. Unless specifically
prohibited in the LOP/LOI, rejects may be sold in the domestic tariff area (DTA),
on prior intimation to the customs authority. Such sales shall be counted
against DTA sale entitlement under para 9.9(b) of the Policy. Sale of rejects shall
be subject to payment of duties as applicable to sale under para 9.9.
b. DTA sale up to 50%
of the FOB value of exports may be made subject to payment of applicable duties
and fulfillment of minimum NFEP prescribed in Appendix 1 of the Policy. No DTA sale
shall be permissible in respect of motor cars, alcoholic liquors and such other
items as may be stipulated by Director General of Foreign Trade by a Public Notice
issued in this behalf.
e. EOU/EPZ/EHTP/STP
units may be permitted to sell finished products which are either freely importable
under the Policy, or against other import licenses, in the DTA, over and above the
levels permissible under sub paragraph (b) above, against payment of full duties,
on annual basis, provided they have achieved the stipula ted NFEP and export
performance.
g. For services,
including software units, sale in the DTA in any mode, including on-line data communication,
shall be permissible up to 50% of FOB value of exports and/or 50% of foreign exchange
earned, where payment for such services is received in free foreign exchange.h.
Items included as by-products in the 2 LOP/LOI may be sold in the DTA on payment
of applicable duty.Note:-In the case of units manufacturing electronics hardware
and software, the NFEP and DTA sale entitlement shall be reckoned separately for
hardware and software.Other Supplies In DTA9.10The following supplies in DTA shall
be counted towards fulfillment of export performance and NFEP:a. Supplies
effected in DTA in terms of paragraph 10.2 of the Policy. b. Supplies effected in
DTA against payment in foreign exchange.
c. Supplies to other EOU/EPZ/SEZ/EHTP/STP
units provided that such goods are permissible for procurement in terms of
paragraph 9.2 of the Policy.
d. Supplies made to bonded
warehouses set up under paragraph 11.14 of the Policy and/or under section 65 of
the Customs Act.
e. Supply of goods against
special entitlement of duty free import of goods.
f. Supply of goods to
defence and 2 internal security forces, foreign missions/diplomats provided they
are entitled for duty free imports of such items in terms of general exemption notification
issued by Ministry of Finance.
Entitlement For
Supplies From The DTA9.13a. Supplies from the DTA to EOU/EPZ/EHTP/ STP units
will be regarded as "deemed exports" and, besides being eligible for the
relevant entitlements under paragraph 10.3 of this Policy, will be eligible for
the following:
i. Reimbursement of Central
Sales Tax;
ii. Exemption from
payment of Central Excise Duty on capital goods, components and raw materials;
and iii. Discharge of EP, if any, on the supplier. 2 Inter Unit Transfer 9.16
a) Transfer of manufactured
goods from one EOU/EPZ/ EHTP/STP unit to another EOU/EPZ/EHTP/STP unit will be
allowed.
b) Goods
imported/procured by an EOU/EPZ/ EHTP/STP unit may be transferred or given on loan
to another EOU/EPZ/EHTP/STP unit which shall be duly accounted for, but not counted
towards discharge of export performance. Disposal Of Scrap/ Waste/ Remnants 9.20
Scrap/waste/remnants arising out of production process or in connection therewith
may be sold or disposed of in the DTA on payment of applicable duties or exported.
However, there shall be no duties/taxes on such scrap/waste/ remnants in case the
same are destroyed with the permission of Customs authority."
20.
Having
noticed two Notifications and the policy, let us analyze first, the
Notification No.2/95-CE. The Central Government, in exercise of its powers under
Section 5A(1) of the Act, has issued the Notification in public interest. The Notification
exempts all 2excisable goods mentioned in the Schedule to the Tariff Act, from payment
of duty leviable under Section 3 of the Act. The Notification provides the measure/cap
of exemption from payment of excise duty by an assessee/industrial unit.
It says the exemption
is from the excise duty which is in excess of the amount calculated at 50% of
each of the duties of customs leviable under Section 12 of the Customs Act,
1962 read with any Notification issued under Section 25 of the Customs Act. The
Notification also makes it clear with regard to the nature or type of goods that
the 100% EOU should be manufacturing in its industrial unit. It says that the
exempted goods should be in a nature or type of goods which are, normally,
produced/manufactured outside India and, but for any reason, they are imported to
India.
That only means, there
must be a similarity between the goods manufactured by a 100% EOU with that of the
goods produced or 2 manufactured outside the country but if it is imported into
this country. The Notification provides two conditions in order to avail the benefit
provided under the Notification. They are conjoint and not disjoint. Firstly, the
exemption is available only, if the goods are produced or manufactured in a
100% EOU or FTA or EHTP unit or STP unit and, secondly, they must be allowed to
be sold as per EXIM Policy 1997-2002. Proviso is appended to the Notification.
A reference to the same may not be necessary for the purpose of the disposal of
this appeal.
21.
Then
we come to the Notification No.8/97-CE. The said Notification is again issued by
the Central Government in public interest in exercise of its powers under
Section 5A(1) of the Act. It exempts finished goods, rejects and waste or scrap
enumerated in the Schedule to the Tariff Act, from payment of excise duty under
Section 3 of the Act. Yet again, the Notification provides the entitlement or cap
up to which the assessee can avail benefit under the Notification insofar as
the payment of excise duty.
The Notification also
speaks of compliance of two conditions by an industrial unit for taking benefits/advantage
of the Notification. Firstly, the finished goods must be produced or manufactured
in a 100% EOU or FTA from the raw material produced or manufactured in India (emphasis
supplied). The second condition is that the goods must have been allowed to be
sold in India as per sub paras (a), (b), (c ), (d) and (f) of para 9.9 or para
9.20 of the EXIM Policy 1997-2002.
22.
Clause
9 of the EXIM Policy 1997-2002 speaks of DTA sales. Clauses (a), (b), (c), (d) and
(f) put certain conditions to be complied with by a 100% EOU/FTA etc. for
effecting its sales in DTA area. Clause 9.3 provides for benefits for supplies made
from the DTA Area. Clause 9.16(c) in particular provides for inter unit transfers.
Clause 9.20 provides for disposal of the scrap in the DTA area by a 100% EOU.
23.
After
having the bird's eye view of the two Notifications, namely, Notification No.2/95-
CE, dated 4.1.1995 and Notification No.8/97- CE, dated 1.3.1997 and the EXIM Policy
1997- 2002, let us consider the issues canvassed by the learned counsel
appearing for the parties.
24.
Shri.
K. Swami, learned counsel for the revenue strenuously contends that the
assessee has purchased raw material/finished goods, for its manufacturing activity
to produce or manufacture the finished products, from a 100% EOU which had
imported the raw material which are exempted from the payment of duty and when it
affects the sale of such raw material/finished goods manufactured in its industry
to another 100% EOU, then, in the hands of the said EOU, it becomes an imported
raw material/finished goods.
In this regard, he
submits that since the language employed in the Notification no.8/97-CE, dated
1.3.1997 is "raw material produced or manufactured in India", only
such raw material, when used for 2 the production or manufacturing of the finished
goods which are, ultimately, sold in the DTA, are eligible for exemption and, therefore,
the assessee cannot take the benefit of the Notification no.8/97-CE. We are afraid
that we can accept the argument canvassed by Shri. Swami, in the light of the unambiguous
language employed in the Notification no.8/97-CE.
There is no ambiguity,
whatsoever, in the Notification issued by the Central Government. The Notification
speaks of finished goods produced or manufactured by a 100% EOU and if it is sold
in a DTA, the said EOU can take the benefit of the Notification no.8/97-CE. If for
any reason, we accept the submission of Shri K.Swami, learned counsel for the
Revenue, then we will be adding something into the notification and, in our opinion,
the same is impermissible.
25.
The
notification requires to be interpreted in the light of the words employed by it
and not 2on any other basis. There cannot be any addition or subtraction from the
notification for the reason the exemption notification requires to be strictly construed
by the Courts. The wordings of the exemption notification have to be given its natural
meaning, when the wordings are simple, clear and unambiguous. In Commissioner of
Customs, Kolkata v. Rupa & Co. Ltd., (2004) 6 SCC 408, this Court has observed
that the exemption notification has to be given strict interpretation by giving
effect to the clear and unambiguous wordings used in the notification.
This Court has held
thus: "7. However, if the interpretation given by the Board and the Ministry
is clearly erroneous then this Court cannot endorse that view. An exemption notification
has to be construed strictly but that does not mean that the object and purpose
of the notification is to be lost sight of and the wording used therein ignored.
Where the wording of the notification is clear and unambiguous, it has to be
given effect to. Exemption cannot be denied by giving a construction not justified
by the wording of the notification."
26.
In
Commissioner of Central Excise, Trichy v. Rukmani Pakkwell Traders, (2004) 11 SCC
801, this Court has also held: "5. ... It is settled law that exemption notifications
have to be strictly construed. They must be interpreted on their own wording. Wordings
of some other notification are of no benefit in construing a particular
notification."
27.
In
Kohinoor Elastics (P) Ltd. v. Commissioner of Central Excise, Indore, (2005) 7
SCC 528, this Court has held: "7. When the wordings of the notifications are
clear and unambiguous they must be given effect to. By a strained reasoning benefit
cannot be given when it is clearly not available."
28.
In
Compack (P) Ltd. v. Commissioner of Central Excise, Vadodara, (2005) 8 SCC 300,
this Court has observed thus: "20. Bhalla Enterprises laid down a proposition
that notification has to be construed on the basis of the language used. Rukmani
Pakkwell Traders is an authority for the same proposition as also that the wordings
of some other notification are of no benefit in construing a particular notification.
The notification does not state that exemption cannot be granted in a case
where all the inputs for manufacture of containers would be base paper or paperboard.
In manufacture of the containers some other inputs are likely to be used for which
MODVAT credit facility has been availed of. Such a construction, as has been suggested
by the learned counsel for the respondents, would amount to addition of the
words "only out of" or "purely out of" the base paper and
cannot be countenanced. The notification has to be construed in terms of the
language used therein. It is well settled that unless literal meaning given to a
document leads to anomaly or absurdity, the golden rule of literal interpretation
shall be adhered to."
29.
In
Commissioner of Central Excise, Chandigarh-I v. Mahaan Dairies, (2004) 11 SCC 798,
this Court has held: "8. It is settled law that in order to claim benefit of
a notification, a party must strictly comply with the terms of the notification.
If on wording of the notification the benefit is not available then by stretching
the words of the notification or by adding words to the notification benefit cannot
be conferred. The Tribunal has based its decision on a decision delivered by it
in Rukmani Pakkwell Traders v. CCE. We have already overruled the decision in that
case. In this case also we hold that the decision of the Tribunal is unsustainable.
It is accordingly set aside."
30.
In
Commissioner of Customs (Preventive), Gujarat v. Reliance Petroleum Limited,
(2008) 7 SCC 220, this Court has held: "30. We are not oblivious of the proposition
of law that an exemption notification should be construed directly but it is also
well settled that interpretation of an exemption notification would depend upon
the nature and extent thereof. The terminologies used in the notification would
have an important role to play. Where the exemption notification ex facie applies,
there is no reason as to why the purport thereof would be limited by giving a strict
construction thereto.
31. The comparison made
by the learned Solicitor General that mobility of a person would depend upon his
personal fitness and not when he is placed on a wheelchair, in our opinion, is not
apposite. The purpose of grant of exemption is different. The object for grant of
notification shall be considered in a broad based manner. The wordings used therein
have to be given their natural meaning. The purpose must be allowed to be achieved.
The words "all types of materials" should be construed widely."
31.
Moreover,
a liberal construction requires to be given to a beneficial notification. This Court
in Commissioner of Customs 3(Preventive), Mumbai v. M. Ambalal and Company,
(2011) 2 SCC 74, (in which one of us was the party) has observed that the
beneficial notification providing the levy of duty at a concessional rate
should be given a liberal interpretation: "16. It is settled law that the notification
has to be read as a whole. If any of the conditions laid down in the notification
is not fulfilled, the party is not entitled to the benefit of that notification.
The rule regarding exemptions
is that exemptions should generally be strictly interpreted but beneficial exemptions
having their purpose as encouragement or promotion of certain activities should
be liberally interpreted. This composite rule is not stated in any particular judgment
in so many words. In fact, majority of judgments emphasise that exemptions are to
be strictly interpreted while some of them insist that exemptions in fiscal statutes
are to be liberally interpreted giving an apparent impression that they are
contradictory to each other. But this is only apparent.
A close scrutiny will
reveal that there is no real contradiction amongst the judgments at all. The synthesis
of the views is quite clearly that the general rule is strict interpretation while
special rule in the case of beneficial and promotional exemption is liberal interpretation.
The two go very well with each other because they relate to two different sets of
circumstances."
32.
In
Commissioner of Sales Tax v. Industrial Coal Enterprises, (1999) 2 SCC 607, this
Court has observed thus: "11. In CIT v. Straw Board Mfg. Co. Ltd. this Court
held that in taxing statutes, provision for concessional rate of tax should be
liberally construed. So also in Bajaj Tempo Ltd. v. CIT it was held that provision
granting incentive for promoting economic growth and development in taxing statutes
should be liberally construed and restriction placed on it by way of exception
should be construed in a reasonable and purposive manner so as to advance the
objective of the provision."
33.
In
Commissioner of Central Excise, Shillong v. North-Eastern Tobacco Co. Ltd., (2003)
1 SCC 161, this Court has observed thus: "10. The other important principle
of interpreting an exemption notification is that as far as possible liberal interpretation
should be imparted to the language thereof, provided no violence is done to the
language employed. See State Level Committee v. Morgardshammar India Ltd."
34.
In
our view, the Tribunal has rightly 3 understood the purpose and the language employed
in Notification no.8/97-CE and the EXIM Policy 1997-2002. Therefore, we do not see
any legal infirmity in the judgment and order so passed by the Tribunal.
35.
Accordingly,
while rejecting the appeal filed by the revenue, we confirm the findings and conclusions
reached by the Tribunal. In the facts and circumstances of the case, the parties
are directed to bear their own costs. C.A.No.3588/2005, C.A.No.3638/2006 &
C.A.No.1388/2008 The Tribunal, while allowing the assessee's appeals has followed
the judgment and order rendered in the case of M/s. Favourite Industries Vs. CCE,
Surat-I. Since we have confirmed the reasoning and the conclusions reached by the
Tribunal in the aforesaid decision, the appeals filed by the revenue against the
impugned judgments and orders requires to be rejected and accordingly, they are
rejected.
Ordered accordingly.
...................J.
(H.L. DATTU)
...................J.
(ANIL R. DAVE)
NEW
DELHI,
FEBRUARY
29, 2012.
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