Case: Sarla Performance Fibers Limited and Ors Vs. Commissioner of Central Excise

the two-Judge Bench referred to the decision in SIV Industries Ltd. (supra) and opined that:- "A similar issue fell for consideration of this Court in SIV Industries Ltd. (supra) In that case, the assessee was a 100% EOU. Later on, they sought permission to withdraw from 100% EOU Scheme, for which the Ministry accorded the necessary permission. However, some of the goods lying in the unit were removed prior to the debonding. A dispute arose regarding the rate of duty payable on such sales. The plea taken by the assessee was that they were liable to pay duty under Section 3(1) of the Act together with customs duty on the imported raw material used in the manufacture of said finished goods, lying in the stock whereas the stand of the Revenue was that excise duty under the proviso to Section 3(1) of the Act was payable on the finished goods with no customs duty being leviable on the raw materials used in the manufacture of finished goods. Thus, the bone of contention in that case was also with regard to the interpretation of the expression "allowed to be sold in India" appearing in the said proviso. Interpreting the said expression, this Court held that the expression "allowed to be sold in India" used in the proviso to Section 3(1) of the Act is applicable only to sales made in DTA up to 25% of the production by 100% EOUs, which are allowed to be sold into India as per the provisions of the Exim Policy. No permission was required to sell the goods manufactured by 100% EOU lying with it at the time the approval is accorded to debond. The Court opined that the goods having been sold without permission of the Central Government to debond the unit, the duty on the goods sold by the assessee was leviable under main Section 3(1) of the Act." [Emphasis added] 34. It is necessary to state here that after so stating the Court also noted that after pronouncement of the decision in SIV Industries Ltd. (supra), the circular was issued on 13.02.2002 clarifying the position. Interpreting the said circular, the Court held:- "19. As aforesaid, according to the Exim Policy 1992-1997 read with Appendix XXXIII of the Handbook of Procedures, an EOU may sell 50% of its production in value terms into a DTA only on issuance of a removal authorisation by the Development Commissioner.20. In the instant case, admittedly at the time of sales of shrimps and shrimp seeds by the assessee in DTA, the Development Commissioner had not issued the requisite removal authorisation. Therefore, in view of the dictum of this Court in SIV Industries Ltd. (supra ), with which we are in respectful agreement, and the afore-extracted circular issued by the Board following the said decision, excise duty on such sales is chargeable under main Section 3(1) of the Act." [Emphasis added] 35. The impugned order, as is manifest, relies on the Larger Bench decision. It is to be noted that after the judgment in NCC Blue Water Products Ltd. (supra) the said decision was brought to the notice of the tribunal but it has opined that parent judgment in SIV Industries Ltd. (supra) was distinguished by the Larger Bench and further the circular dated 05.01.2004 was not taken note of by this Court in the subsequent judgment. On a careful scrutiny of the authority in NCC Blue Water Products Ltd. (supra), we are of the considered opinion that it concurs with the view expressed in SIV Industries Ltd. (supra). The circular dated 05.01.2004 came into existence after the Larger Bench decision in Himalaya International Ltd. (supra). We have already stated that there was no justification for distinguishing the decision in SIV Industries Ltd. (supra). The Technical Member who authored the judgment after the decision in NCC Blue Water Products Ltd. (supra) was brought to the notice of the tribunal has absolutely improperly noted that the circular dated 05.01.2004 was not brought to the notice of this Court. The Court in NCC Blue Water Products Ltd. case had not based its conclusion on the basis of the circular dated 13.02.2002. It is clear as day that it has concurred with the ratio laid down in SIV Industries Ltd. (supra). It has been clearly opined that the expression "allowed to be sold in India" used in proviso to Section 3(1) of the Act would be applicable only to sales made in DTA of the production by 100% EOUs, which are allowed to be sold into India as per the provisions of the Exim Policy.36. The said authority has also made it clear that the circular issued in 2002 is in consonance with the authority in SIV Industries Ltd. (supra). Thus, the view expressed by NCC Blue Water Products Ltd. (supra) has given the stamp of approval to the circular. It is a binding precedent on all the courts and the tribunals under Article 141 of the Constitution of India. The Larger Bench of the Tribunal, as stated earlier, could not have distinguished the judgment in SIV Industries Ltd. (supra). The later circular issued on 05.01.2004 on which reliance was placed by the revenue before the tribunal which has been taken note of in the impugned judgment is clearly indicative of an erroneous approach. The decision in NCC Blue Water Products Ltd. (supra) was bound to be followed and the tribunal could not have stated that 2004 circular was not taken note of. The tribunal should have appropriately appreciated that this Court was interpreting the statutory provision and it is also worthy to note that after the judgment delivered in SIV Industries Ltd. (supra) an amendment was brought into the provision. Therefore, the transaction prior to the date of amendment would be governed by SIV Industries Ltd. (supra) which has been followed in NCC Blue Water Products Ltd. (supra). Be it clarified that we are not concerned with the amended provision in this case.37. In view of the aforesaid analysis, the

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]we may refer to the authority in NCC Blue Water Products Ltd. (supra). In the said case, the tribunal has held that the duty of Central excise on shrimps and shrimp seeds produced and removed by the assessee-respondent, a 100% export-oriented unit (EOU), in the Domestic Tariff Area (DTA) without the approval of the Development Commissioner, would be payable under Section 3(1) of the Act and not under the proviso appended thereto. The two-Judge Bench taking note of the fact that during the period 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 per Note 1 of Section I of the First Schedule to the Customs Tariff Act, 1975, any reference in that section "to a particular genus or species of an animal, except where the context otherwise requires, includes a reference to the young of that genus or species" and, therefore, both live shrimps and shrimp seeds are classifiable under Sub-Heading 0306.23 of Chapter 3 of the First Schedule to the Customs Tariff Act, 1975. It was also urged that the tribunal committed an error in relying on the decision of this Court in SIV Industries Ltd. (supra) because unlike in that case the assessee had sought permission of the Development Commissioner, who in turn had advised them to approach the SIA for permission to clear shrimps and shrimp seeds which, in fact, was granted and, therefore, they were required to pay duty under proviso to Section 3(1) of the Act. It was also urged that under the Exim Policy, an EOU is obliged to make exports of the entire production itself and not through any otherCourt posed the followingcore question for our consideration, therefore, is whether the sales of shrimps and shrimp seeds by the assessee in DTA, without requisite permission from the Development Commissioner, are to be assessed to excise duty under Section 3(1) of the Act or under the proviso to the saidTo deal with the said question, the Court referred to Section 3 and it expressed understanding of the provision in the followingis manifest that all excisable goods produced or manufactured in India are exigible to duty of excise under Section 3 of the Act, the charging section, at the rates set forth in the Schedule to the Tariff Act. However, the proviso to the said section provides that the duties of excise on any excisable goods, which are produced or manufactured by a 100% EOU and allowed to be sold in India shall be an amount equal to the aggregate of the duties of customs which would be leviable under Section 12 of the Customs Act, 1962. As aforestated, the controversy at hand is whether in the absence of an order by the competent authority, allowing the assessee to sell the shrimp seeds and shrimps in India, excise duty on such sales could be levied and collected in terms of the proviso. To put it differently, the issue relates to the significance of the expression "allowed to be sold in India" as appearing in clause (ii) to the proviso to sub-section (1) of Section 3 of the Act.After so stating the two-Judge Bench referred to the decision in SIV Industries Ltd. (supra) and opinedsimilar issue fell for consideration of this Court in SIV Industries Ltd. (supra) In that case, the assessee was a 100% EOU. Later on, they sought permission to withdraw from 100% EOU Scheme, for which the Ministry accorded the necessary permission. However, some of the goods lying in the unit were removed prior to the debonding. A dispute arose regarding the rate of duty payable on such sales. The plea taken by the assessee was that they were liable to pay duty under Section 3(1) of the Act together with customs duty on the imported raw material used in the manufacture of said finished goods, lying in the stock whereas the stand of the Revenue was that excise duty under the proviso to Section 3(1) of the Act was payable on the finished goods with no customs duty being leviable on the raw materials used in the manufacture of finished goods. Thus, the bone of contention in that case was also with regard to the interpretation of the expression "allowed to be sold in India" appearing in the said proviso. Interpreting the said expression, this Court held that the expression "allowed to be sold in India" used in the proviso to Section 3(1) of the Act is applicable only to sales made in DTA up to 25% of the production by 100% EOUs, which are allowed to be sold into India as per the provisions of the Exim Policy. No permission was required to sell the goods manufactured by 100% EOU lying with it at the time the approval is accorded to debond. The Court opined that the goods having been sold without permission of the Central Government to debond the unit, the duty on the goods sold by the assessee was leviable under main Section 3(1) of the Act.The impugned order, as is manifest, relies on the Larger Bench decision. It is to be noted that after the judgment in NCC Blue Water Products Ltd. (supra) the said decision was brought to the notice of the tribunal but it has opined that parent judgment in SIV Industries Ltd. (supra) was distinguished by the Larger Bench and further the circular dated 05.01.2004 was not taken note of by this Court in the subsequent judgment. On a careful scrutiny of the authority in NCC Blue Water Products Ltd. (supra), we are of the considered opinion that it concurs with the view expressed in SIV Industries Ltd. (supra). The circular dated 05.01.2004 came into existence after the Larger Bench decision in Himalaya International Ltd. (supra). We have already stated that there was no justification for distinguishing the decision in SIV Industries Ltd. (supra). The Technical Member who authored the judgment after the decision in NCC Blue Water Products Ltd. (supra) was brought to the notice of the tribunal has absolutely improperly noted that the circular dated 05.01.2004 was not brought to the notice of this Court. The Court in NCC Blue Water Products Ltd. case had not based its conclusion on the basis of the circular dated 13.02.2002. It is clear as day that it has concurred with the ratio laid down in SIV Industries Ltd. (supra). It has been clearly opined that the expression "allowed to be sold in India" used in proviso to Section 3(1) of the Act would be applicable only to sales made in DTA of the production by 100% EOUs, which are allowed to be sold into India as per the provisions of the Exim Policy.36. The said authority has also made it clear that the circular issued in 2002 is in consonance with the authority in SIV Industries Ltd. (supra). Thus, the view expressed by NCC Blue Water Products Ltd. (supra) has given the stamp of approval to the circular. It is a binding precedent on all the courts and the tribunals under Article 141 of the Constitution of India. The Larger Bench of the Tribunal, as stated earlier, could not have distinguished the judgment in SIV Industries Ltd. (supra). The later circular issued on 05.01.2004 on which reliance was placed by the revenue before the tribunal which has been taken note of in the impugned judgment is clearly indicative of an erroneous approach. The decision in NCC Blue Water Products Ltd. (supra) was bound to be followed and the tribunal could not have stated that 2004 circular was not taken note of. The tribunal should have appropriately appreciated that this Court was interpreting the statutory provision and it is also worthy to note that after the judgment delivered in SIV Industries Ltd. (supra) an amendment was brought into the provision. Therefore, the transaction prior to the date of amendment would be governed by SIV Industries Ltd. (supra) which has been followed in NCC Blue Water Products Ltd. (supra). Be it clarified that we are not concerned with the amended provision in this case.