Central Excise Act, 1944: s.3(1) and its proviso, s.5(1) and its proviso – Job work – Export Oriented Unit (EOU) – Respondent is 100% EOU and engaged in manufacture/processing and clearance of Ferro Manganese and Silicon Manganese – Revenue’s allegation against the respondent was that the respondent was indulging in the job work activity of conversion of raw material supplied by TISCO – As per agreement between Respondent and TISCO, TISCO was to supply Manganese Ore and Coke/Coal free of cost at its site and rest of the raw materials and consumables required for conversion of Manganese Ore/Coke into Silicon Manganese for TISCO was to be used by respondent from their own purchases – Further, TISCO was to pay job charges to respondent – Show cause notice issued to the respondent on the ground that Circular No.67/98-Cus dated 14.9.1998, issued by the CBEC had permitted the EOUs to undertake job-work on behalf of a DTA unit only in textile, readymade garments, agro-processing and granite sectors and by another Circular No.74/99 dated 5.11.1999, the said facility was extended in aquaculture, animal husbandry, electronics hardware and software sectors and the sector in which respondent-assessee had carried out the job-works was not covered by either of the Circulars and, as such, the said jobworks were in violation of EXIM Policy – Show cause notice called upon the respondent -assessee to show cause, as to why the said Silicon Manganese should not be charged to full Central Excise duty as per the proviso to s.3(1) of the Central Excise Act, 1944 by denying the benefit of Notification No.8/97 dated 1.3.1997 – In response to the show cause notices, it was submitted by respondent that the removals in the DTA were in accordance with the permission granted by the Development Commissioner and, as such, there was no ground for denial of the concessional rate of duty laid down in the said Exemption notification – Held: Under paragraph 9.17(b) of the EXIM Policy 1997-2002, the EOU/EPZ units are entitled to undertake job-work for export, on behalf of DTA units, with the permission of Assistant Commissioner of Customs, provided the goods are exported direct from the EOU/EPZ units and for such exports, the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback – It is not in dispute that all transactions between the respondent and TISCO were entered into after obtaining necessary permission from the Development Commissioner – The combined reading of paragraph 9.9(b) of the EXIM Policy and the Circulars issued by the Board, particularly, Circular dated 22.5.2000 showed that the respondent was entitled to carry out the job-work on behalf of TISCO on payment of duty as provided under Exemption Notification of 1997 – In view of paragraph 10 of Circular no.49/2000- Cus dated 22.5.2000, the facility of undertaking job-work by EOU/EPZ units which was restricted to specific sectors was amended and the said facility was extended to all sectors – It also provided that DTA units shall be entitled to brand rate of duty draw back – Notification No.21/97C.E. dated 11.4.1997 specifically provides grant of exemption to the EOUs from payment of duties, which are in excess of what is leviable under sub-section (1) of s.3 on like goods, produced or manufactured in India – Exemption Notification specifically mentions, that the goods produced or manufactured by an 100% EOU, which are allowed to be sold in India in accordance with para 9.9(b) of the EXIM Policy, the proviso would be inapplicable thereby, requiring the duties to be paid, as are required to be paid under sub-Section (1) of s.3 of the said Act – Undisputedly, in the instant case, the goods were produced and manufactured by the respondent, an 100% EOU; they were manufactured wholly from the raw materials produced or manufactured in India and, allowed to be sold in India in accordance with the provisions of paragraph 9.9(b) of the EXIM Policy – Thus the conditions of Notification No.21/97-C.E. were satisfied – Therefore, respondent was entitled to carry out the job work for TISCO and entitled to exemption from payment of duty – Revenue’s appeal was rightly dismissed by CESTAT.
Interpretation of Statutes: Excise Act – It is a settled principle in excise classification that the definition of one statute having a different object, purpose and scheme cannot be applied mechanically to another statute – It is also equally well settled that the first principle of interpretation of plain and literal interpretation has to be adhered to – Therefore, the narrower scope of the term ‘sale’ as found in the Sale of Goods Act, 1930 cannot be applied in the instant case – The term ‘sale’ and ‘purchase’ under the Central Excise Act, 1944, if construed literally, it would give a wider scope and also include transfer of possession for valuable consideration under the definition of the term ‘sale’.
Dismissing the appeals, the Court
HELD: 1.1 There is no merit in the contention of the Revenue that since in the transaction between the respondent and TISCO, there was no transfer of property in goods, the same cannot be termed as ‘sale’ and therefore would not be covered under paragraph 9.9 (b) of the EXIM Policy. The perusal of the definition of “sale and purchase” clause (h) of Section 2 of the Central Excise Act, 1944 makes it clear that when there is a transfer of possession of goods in the ordinary course of trade or business either for cash or for deferred payment or any other valuable consideration, the same would be covered by the terms ‘sale’ and ‘purchase’ within the meaning of the Central Excise Act, 1944. Undisputedly, in this case, there is a transfer of Manganese Ore by TISCO to the respondent for the purposes of processing the same and converting it into Silicon Manganese. Undisputedly, the same is also for a valuable consideration. [Paras 18, 19, 20][130-B-C, E-F]
1.2 It is a settled principle in excise classification that the definition of one statute having a different object, purpose and scheme cannot be applied mechanically to another statute. The conditions or restrictions contemplated by one statute having a different object and purpose should not be lightly and mechanically imported and applied to a fiscal statute. It is also equally well settled that the first principle of interpretation of plain and literal interpretation has to be adhered to. Therefore, the narrower scope of the term ‘sale’ as found in the Sale of Goods Act, 1930 cannot be applied in the present case. The term ‘sale’ and ‘purchase’ under the Central Excise Act, 1944, if construed literally, it would give a wider scope and also include transfer of possession for valuable consideration under the definition of the term ‘sale’. [Paras 22, 23][131-E-G]
2. Under para 9.9(a) of the EXIM Policy, EOU is entitled to sell the rejects in the DTA on prior intimation to the Customs authorities. Such sales are to be counted against DTA sale entitlement under paragraph 9.9(b) of the EXIM Policy. The sale of rejects shall be subject to payment of duties as applicable to sale under paragraph 9.9(b) of the EXIM Policy. Under paragraph 9.9(b) of the EXIM Policy, DTA sale upto 50% of the FOB value of exports is also permitted subject to payment of applicable duties and fulfilment of minimum Net Foreign Exchange earning as a Percentage of exports (NFEP) as prescribed in Appendix-1 of the Policy. Under paragraph 9.17 (b), the EOU/EPZ units are also entitled to undertake job-work for export, on behalf of DTA units, with the permission of Assistant Commissioner of Customs, provided the goods are exported direct from the EOU/EPZ units and for such exports, the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback. It can thus clearly be seen, that paragraph 9.9(b) and paragraph 9.17(b) of the EXIM Policy operate in totally different fields. [Paras 27-30][132-F-H; 133-A-B]
3.1 The order-in-original states that since the respondent has not exported the final product of Manganese raw material received by it from TISCO, it had violated the provisions of paragraph 9.17 (b) and 9.9(b) of the EXIM Policy. In view of paragraph 10 of the Circular no.49/2000-Cus dated 22.5.2000, the facility of undertaking job-work by EOU/EPZ units which was restricted to specific sectors has been amended and the said facility has been extended to all sectors. It has also been provided, that DTA units shall be entitled to brand rate of duty draw back. Similarly, paragraph 11 of the Circular dated 22.5.2000 also provides, that the facility which was given to EOU/EPZ to undertake job-work on behalf of DTA units in textiles, readymade garments and granite sectors which was subsequently extended to the EOU/EPZ units in aquaculture, animal husbandry, hardware and software sectors vide Circular dated 5.11.1999, was extended to EOU/EPZ units in all sectors. It has further been provided, that DTA units shall be entitled to avail of the brand rate of duty drawback for such job-work undertaken by EOUs/EPZ units concerned. It also provides, that earlier circulars issued by the Board stood modified to the said extent. Failure on the part of the Commissioner, who passed the order-in-original, to notice the Circular dated 22.5.2000 has resulted in passing an erroneous order. [Paras 31, 33, 34][133-D; 134-C-F]
3.2 It is not in dispute that all transactions between the respondent and TISCO have been entered into after the necessary permission was obtained from the Development Commissioner. The combined reading of paragraph 9.9(b) of the EXIM Policy, the Circulars issued by the Board, particularly, the Circular dated 22.5.2000 and reply to the query of the Customs Authorities by the Development Commissioner would clearly show, that the respondent was entitled to carry out the job-work on behalf of TISCO on payment of duty as provided under Exemption Notification of 1997. [Paras 36, 38][135-F; 136-C-D]
4.1 The next submission for the Revenue was that under proviso to sub-section (1) of Section 3 of the Central Excise Act, 1944, an EOU is liable to pay duty on the goods brought to a DTA, as if the goods were produced and manufactured outside India and were imported into India as per the provisions of the Customs Act, 1962 and that under Section 5A of the Central Excise Act, 1944, the Central Government has no power to grant exemption from payment of duty to an EOU. A perusal of subsection (1) of Section 3 of the Act would show, that sub-section
(1) of Section 3 provides for levy and collection of duty of excise in such manner as may be prescribed to be called the Central Value Added Tax (CENVAT) on all excisable goods, which are produced or manufactured in India as, and at the rates, set forth in the Fourth Schedule. However, the said sub-section (1) of Section 3 excludes the applicability thereof, to the goods produced or manufactured in special economic zones. The proviso to subsection (1) of Section 3 of the Act is applicable to the excisable goods, which are produced or manufactured by a 100% exportoriented undertaking when such goods are brought to any other place in India. It provides, that in such a case, an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 or any other law for the time being in force, on like goods produced or manufactured outside India if imported into India and where the said duties of customs are chargeable by reference to their value, the value of such excisable goods shall, notwithstanding anything contained in any other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975. [Paras 40, 42][137-D-E; 138-G-H; 139-A-B]
4.2 Sub-Section (1) of Section 5A of the Act provides, that if the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions, to be fulfilled before or after removal, as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon. The proviso thereto provides, that unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured in a free trade zone or a special economic zone and brought to any other place in India; or by a 100% EOU and brought to any other place in India. [Para 44][139-D-F]
4.3 The interpretation made by the Revenue that a combined reading of proviso to sub-section (1) of Section 3 of the Act and proviso to sub-section (1) of Section 5A of the Act, would not entitle the Central Government to grant any exemption to an EOU when it brings the goods to any other place in India (i.e. DTA) and the duty that would be leviable would be as if the said goods were imported in India, if accepted, then the words “unless specifically provided in such notification” in sub-section
(1) of Section 5A will have to be ignored and the said words would be rendered otiose. It is a settled principle of law that while interpreting a provision due weightage will have to be given to each and every word used in the statute. The harmonious construction of sub-Section (1) of Section 5A of the Act and the proviso thereto would be, that an EOU which brings the excisable goods to any other place in India would not be entitled for a general exemption notification unless it is so specifically provided in such a notification. [Paras 45, 46, 48][139-G-H; 140-A; 141-D-E]
5.1 The bare reading of Notification No.21/97-C.E. dated 11.4.1997 would amply make it clear, that the Central Government after being satisfied that it was necessary in the public interest so to do, thereby exempted the finished products, rejects and waste or scrap which was produced or manufactured in a hundred per cent export-oriented undertaking or a free trade zone wholly from the raw materials produced or manufactured in India and allowed to be sold in India under and in accordance with the provisions of sub-paragraphs (a), (b), (c), (d) and (f) of paragraph
9.9 or of paragraph 9.20 of the EXIM Policy, from so much of the duty of excise leviable thereon under Section 3 of the Central Excise Act, 1944, as is in excess of an amount equal to the aggregate of the duties of excise leviable under the said Section
3 of the Central Excise Act or under any other law for the time being in force on like goods, produced or manufactured in India other than in a 100% EOU or a free trade zone, if sold in India. Since the said Exemption Notification specifically mentions, that the goods produced or manufactured by an 100% EOU, which are allowed to be sold in India in accordance with para 9.9(b) of the EXIM Policy, the proviso would be inapplicable thereby, requiring the duties to be paid, as are required to be paid under sub-Section (1) of Section 3 of the said Act. Undisputedly, in the instant case, the transaction between the respondent and TISCO satisfies all the three conditions. The goods are produced and manufactured by the respondent, an 100% export-oriented unit; they are manufactured wholly from the raw materials produced or manufactured in India and, thirdly, they have been allowed to be sold in India in accordance with the provisions of paragraph 9.9(b) of the EXIM Policy. [Paras 50-52][142-C-G; 143-C]
5.2 If there are inconsistencies in two statutes, the later would prevail is well placed. This Court in Deep Chand vs. State of Uttar Pradesh has laid down the following principles to ascertain whether there is repugnancy or not: “(1) Whether there is direct conflict between the two provisions; (2) Whether the legislature intended to lay down an exhaustive code in respect of the subject matter replacing the earlier law; (3) Whether the two laws occupy the same field.” There would not be any conflict in the amended provisions of clause (ii) of the proviso to sub-section (1) of Section 5A of the Act and the said Exemption Notification. In any case, by the 2001 Amendment, the legislature has not laid down any exhaustive code in respect of the subject matter in replacing the earlier law. It appears, that the said Amendment has been incorporated to bring the said clause (ii) of sub-Section (1) of Section 5A in sync with the words used in clause (i) of the proviso to sub-section (1) of Section 5A of the Act and the words used in the proviso to sub-section (1) of Section 3 of the Act. In that view of the matter, the said contention is without substance. [Para 54, 55, 57][143-E-G; 144-A-B]
Hardeep Singh v. State of Punjab and Others (2014) 3 SCC 92 : [2014] 2 SCR 1 - followed.
Commissioner of Central Excise, New Delhi v.
Connaught Plaza Restaurant Private Limited, New Delhi (2012) 13 SCC 639 : [2012] 11 SCR 365; Deep Chand v. State of Uttar Pradesh AIR 1959 SC 648 : [1959] Suppl. SCR 8 – relied on.
Siv Industries Ltd. v. Commissioner of Central Excise & Customs (2000) 3 SCC 367 : [2000] 2 SCR 231; Sarla Performance Fibers Limited and Ors. v. Commissioner of Central Excise, Surat-II (2016) 11 SCC 635 : [2016]
7 SCR 201 – held inapplicable.
M. Karunanidhi v. Union of India & Anr. (1979) 3 SCC
431 : [1979] 3 SCR 254; Dharangadhra Chemical
Works v. Dharangadhar Municipality and Anr. (1985)
4 SCC 92 : [1985] 2 Suppl. SCR 757; Ratan Lal Adukia v. Union of India (1989) 3 SCC 537 : [1989] 3 SCR
440 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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