COMMISSIONER OF CENTRAL EXCISE, NAGPUR versus M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.CE F G H

[2020] 4 S.C.R.

ACOMMISSIONER OF CENTRAL EXCISE, NAGPUR

M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD.& ANR.

(Civil Appeal Nos. 848-852 of 2009)

MARCH 06, 2020

[S.A. BOBDE, CJI, B. R. GAVAI AND SURYA KANT, JJ.]

Central Excise Act, 1944: s.3(1) and its proviso, s.5(1) andits proviso – Job work – Export Oriented Unit (EOU) – RespondentCis 100% EOU and engaged in manufacture/processing andclearance of Ferro Manganese and Silicon Manganese – Revenue’sallegation against the respondent was that the respondent wasindulging in the job work activity of conversion of raw materialsupplied by TISCO – As per agreement between Respondent andDTISCO, TISCO was to supply Manganese Ore and Coke/Coal freeof cost at its site and rest of the raw materials and consumablesrequired for conversion of Manganese Ore/Coke into SiliconManganese for TISCO was to be used by respondent from theirown purchases – Further, TISCO was to pay job charges torespondent – Show cause notice issued to the respondent on theEground that Circular No.67/98-Cus dated 14.9.1998, issued by theCBEC had permitted the EOUs to undertake job-work on behalf ofa DTA unit only in textile, readymade garments, agro-processingand granite sectors and by another Circular No.74/99 dated5.11.1999, the said facility was extended in aquaculture, animalFhusbandry, electronics hardware and software sectors and the sectorin which respondent-assessee had carried out the job-works wasnot covered by either of the Circulars and, as such, the said job-works were in violation of EXIM Policy – Show cause notice calledupon the respondent -assessee to show cause, as to why the saidSilicon Manganese should not be charged to full Central ExciseGduty as per the proviso to s.3(1) of the Central Excise Act, 1944 bydenying the benefit of Notification No.8/97 dated 1.3.1997 – Inresponse to the show cause notices, it was submitted by respondentthat the removals in the DTA were in accordance with the permissiongranted by the Development Commissioner and, as such, there wasHno ground for denial of the concessional rate of duty laid down inthe said Exemption notification – Held: Under paragraph 9.17(b)of the EXIM Policy 1997-2002, the EOU/EPZ units are entitled toundertake job-work for export, on behalf of DTA units, with thepermission of Assistant Commissioner of Customs, provided the goodsare exported direct from the EOU/EPZ units and for such exports,the DTA units will be entitled for refund of duty paid on the inputsby way of Brand Rate of duty drawback – It is not in dispute that alltransactions between the respondent and TISCO were entered intoafter obtaining necessary permission from the DevelopmentCommissioner – The combined reading of paragraph 9.9(b) of theEXIM Policy and the Circulars issued by the Board, particularly,Circular dated 22.5.2000 showed that the respondent was entitledto carry out the job-work on behalf of TISCO on payment of dutyas provided under Exemption Notification of 1997 – In view ofparagraph 10 of Circular no.49/2000- Cus dated 22.5.2000, thefacility of undertaking job-work by EOU/EPZ units which wasrestricted to specific sectors was amended and the said facility wasextended to all sectors – It also provided that DTA units shall beentitled to brand rate of duty draw back – Notification No.21/97-C.E. dated 11.4.1997 specifically provides grant of exemption tothe EOUs from payment of duties, which are in excess of what isleviable under sub-section (1) of s.3 on like goods, produced ormanufactured in India – Exemption Notification specificallymentions, that the goods produced or manufactured by an 100%EOU, which are allowed to be sold in India in accordance withpara 9.9(b) of the EXIM Policy, the proviso would be inapplicablethereby, requiring the duties to be paid, as are required to be paidunder sub-Section (1) of s.3 of the said Act – Undisputedly, in theinstant case, the goods were produced and manufactured by therespondent, an 100% EOU; they were manufactured wholly fromthe raw materials produced or manufactured in India and, allowedto be sold in India in accordance with the provisions of paragraph9.9(b) of the EXIM Policy – Thus the conditions of NotificationNo.21/97-C.E. were satisfied – Therefore, respondent was entitledto carry out the job work for TISCO and entitled to exemption frompayment of duty – Revenue’s appeal was rightly dismissed byCESTAT.

DEF

AInterpretation of Statutes: Excise Act – It is settled principlein excise classification that the definition of one statute having adifferent object, purpose and scheme cannot be appliedmechanically to another statute – It is also equally well settled thatthe first principle of interpretation of plain and literal interpretationhas to be adhered to – Therefore, the narrower scope of the termB‘sale’ as found in the Sale of Goods Act, 1930 cannot be applied inthe instant case – The term ‘sale’ and ‘purchase’ under the CentralExcise Act, 1944, if construed literally, it would give wider scopeand also include transfer of possession for valuable considerationunder the definition of the term ‘sale’.CDismissing the appeals, the Court

HELD: 1.1 There is no merit in the contention of theRevenue that since in the transaction between the respondentand TISCO, there was no transfer of property in goods, the samecannot be termed as ‘sale’ and therefore would not be coveredDunder paragraph 9.9 (b) of the EXIM Policy. The perusal of thedefinition of “sale and purchase” clause (h) of Section 2 of theCentral Excise Act, 1944 makes it clear that when there is atransfer of possession of goods in the ordinary course of trade orbusiness either for cash or for deferred payment or any otherEvaluable consideration, the same would be covered by the terms‘sale’ and ‘purchase’ within the meaning of the Central ExciseAct, 1944. Undisputedly, in this case, there is transfer ofManganese Ore by TISCO to the respondent for the purposesof processing the same and converting it into Silicon Manganese.Undisputedly, the same is also for valuable consideration. [ParasF18, 19, 20][130-B-C, E-F]1.2 It is settled principle in excise classification that thedefinition of one statute having different object, purpose andscheme cannot be applied mechanically to another statute. Theconditions or restrictions contemplated by one statute having aGdifferent object and purpose should not be lightly and mechanicallyimported and applied to fiscal statute. It is also equally wellsettled that the first principle of interpretation of plain and literalinterpretation has to be adhered to. Therefore, the narrowerscope of the term ‘sale’ as found in the Sale of Goods Act, 1930Hcannot be applied in the present case. The term ‘sale’ and

COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.

‘purchase’ under the Central Excise Act, 1944, if construedliterally, it would give wider scope and also include transfer ofpossession for valuable consideration under the definition of theterm ‘sale’. [Paras 22, 23][131-E-G]

2. Under para 9.9(a) of the EXIM Policy, EOU is entitled tosell the rejects in the DTA on prior intimation to the Customsauthorities. Such sales are to be counted against DTA saleentitlement under paragraph 9.9(b) of the EXIM Policy. The saleof rejects shall be subject to payment of duties as applicable tosale under paragraph 9.9(b) of the EXIM Policy. Under paragraph9.9(b) of the EXIM Policy, DTA sale upto 50% of the FOB valueof exports is also permitted subject to payment of applicable dutiesand fulfilment of minimum Net Foreign Exchange earning as aPercentage of exports (NFEP) as prescribed in Appendix-1 ofthe Policy. Under paragraph 9.17 (b), the EOU/EPZ units are alsoentitled 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 unitsand for such exports, the DTA units will be entitled for refund ofduty paid on the inputs by way of Brand Rate of duty drawback. Itcan thus clearly be seen, that paragraph 9.9(b) and paragraph9.17(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 respondenthas not exported the final product of Manganese raw materialreceived by it from TISCO, it had violated the provisions ofparagraph 9.17 (b) and 9.9(b) of the EXIM Policy. In view ofparagraph 10 of the Circular no.49/2000-Cus dated 22.5.2000,the facility of undertaking job-work by EOU/EPZ units which wasrestricted to specific sectors has been amended and the saidfacility 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 alsoprovides, that the facility which was given to EOU/EPZ toundertake job-work on behalf of DTA units in textiles, readymadegarments and granite sectors which was subsequently extendedto the EOU/EPZ units in aquaculture, animal husbandry, hardwareand software sectors vide Circular dated 5.11.1999, was extended

Ato EOU/EPZ units in all sectors. It has further been provided,that DTA units shall be entitled to avail of the brand rate of dutydrawback for such job-work undertaken by EOUs/EPZ unitsconcerned. It also provides, that earlier circulars issued by theBoard stood modified to the said extent. Failure on the part ofthe Commissioner, who passed the order-in-original, to noticeBthe Circular dated 22.5.2000 has resulted in passing an erroneousorder. [Paras 31, 33, 34][133-D; 134-C-F]

3.2 It is not in dispute that all transactions between therespondent and TISCO have been entered into after the necessarypermission was obtained from the Development Commissioner.CThe combined reading of paragraph 9.9(b) of the EXIM Policy,the Circulars issued by the Board, particularly, the Circular dated22.5.2000 and reply to the query of the Customs Authorities bythe Development Commissioner would clearly show, that therespondent was entitled to carry out the job-work on behalf ofDTISCO on payment of duty as provided under ExemptionNotification of 1997. [Paras 36, 38][135-F; 136-C-D]

4.1 The next submission for the Revenue was that underproviso 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 aEDTA, as if the goods were produced and manufactured outsideIndia and were imported into India as per the provisions of theCustoms Act, 1962 and that under Section 5A of the CentralExcise Act, 1944, the Central Government has no power to grantexemption from payment of duty to an EOU. perusal of sub-section (1) of Section 3 of the Act would show, that sub-sectionF(1) of Section 3 provides for levy and collection of duty of excisein such manner as may be prescribed to be called the CentralValue Added Tax (CENVAT) on all excisable goods, which areproduced or manufactured in India as, and at the rates, set forthin the Fourth Schedule. However, the said sub-section (1) ofGSection 3 excludes the applicability thereof, to the goods producedor manufactured in special economic zones. The proviso to sub-section (1) of Section 3 of the Act is applicable to the excisablegoods, which are produced or manufactured by 100% export-oriented undertaking when such goods are brought to any other

COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.

place in India. It provides, that in such case, an amount equal tothe aggregate of the duties of customs which would be leviableunder the Customs Act, 1962 or any other law for the time beingin force, on like goods produced or manufactured outside India ifimported into India and where the said duties of customs arechargeable by reference to their value, the value of such excisablegoods shall, notwithstanding anything contained in any otherprovision of this Act, be determined in accordance with theprovisions 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, thatif the Central Government is satisfied that it is necessary in thepublic interest so to do, it may, by notification in the OfficialGazette, exempt generally either absolutely or subject to suchconditions, to be fulfilled before or after removal, as may bespecified in the notification, excisable goods of any specifieddescription from the whole or any part of the duty of excise leviablethereon. The proviso thereto provides, that unless specificallyprovided in such notification, no exemption therein shall apply toexcisable goods which are produced or manufactured in freetrade zone or special economic zone and brought to any otherplace in India; or by 100% EOU and brought to any other placein India. [Para 44][139-D-F]4.3 The interpretation made by the Revenue that acombined reading of proviso to sub-section (1) of Section 3 ofthe Act and proviso to sub-section (1) of Section 5A of the Act,would not entitle the Central Government to grant any exemptionto 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 thesaid 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 wouldbe rendered otiose. It is settled principle of law that whileinterpreting provision due weightage will have to be given toeach and every word used in the statute. The harmoniousconstruction of sub-Section (1) of Section 5A of the Act and theproviso thereto would be, that an EOU which brings the excisablegoods to any other place in India would not be entitled for general

CDE

Aexemption notification unless it is so specifically provided in sucha 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. dated11.4.1997 would amply make it clear, that the Central Governmentafter being satisfied that it was necessary in the public interestBso to do, thereby exempted the finished products, rejects andwaste or scrap which was produced or manufactured in hundredper cent export-oriented undertaking or free trade zone whollyfrom the raw materials produced or manufactured in India andallowed to be sold in India under and in accordance with theprovisions of sub-paragraphs (a), (b), (c), (d) and (f) of paragraphC9.9 or of paragraph 9.20 of the EXIM Policy, from so much of theduty of excise leviable thereon under Section 3 of the CentralExcise Act, 1944, as is in excess of an amount equal to theaggregate of the duties of excise leviable under the said Section3 of the Central Excise Act or under any other law for the timeDbeing in force on like goods, produced or manufactured in Indiaother than in 100% EOU or free trade zone, if sold in India.Since the said Exemption Notification specifically mentions, thatthe goods produced or manufactured by an 100% EOU, whichare allowed to be sold in India in accordance with para 9.9(b) ofthe EXIM Policy, the proviso would be inapplicable thereby,Erequiring the duties to be paid, as are required to be paid undersub-Section (1) of Section 3 of the said Act. Undisputedly, in theinstant case, the transaction between the respondent and TISCOsatisfies all the three conditions. The goods are produced andmanufactured by the respondent, an 100% export-oriented unit;Fthey are manufactured wholly from the raw materials producedor manufactured in India and, thirdly, they have been allowed tobe sold in India in accordance with the provisions of paragraph9.9(b) of the EXIM Policy. [Paras 50-52][142-C-G; 143-C]

5.2 If there are inconsistencies in two statutes, the laterGwould prevail is well placed. This Court in Deep Chand vs. Stateof Uttar Pradesh has laid down the following principles to ascertainwhether there is repugnancy or not: “(1) Whether there is directconflict between the two provisions; (2) Whether the legislature

intended to lay down an exhaustive code in respect of the subjectmatter replacing the earlier law; (3) Whether the two laws occupythe same field.” There would not be any conflict in the amendedprovisions of clause (ii) of the proviso to sub-section (1) of Section5A of the Act and the said Exemption Notification. In any case,by the 2001 Amendment, the legislature has not laid down anyexhaustive code in respect of the subject matter in replacing theearlier law. It appears, that the said Amendment has beenincorporated to bring the said clause (ii) of sub-Section (1) ofSection 5A in sync with the words used in clause (i) of the provisoto sub-section (1) of Section 5A of the Act and the words used inthe proviso to sub-section (1) of Section 3 of the Act. In that viewof 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) 3SCC 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 Chandv. 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; SarlaPerformance Fibers Limited and Ors. v. Commissionerof Central Excise, Surat-II (2016) 11 SCC 635 : [2016]7 SCR 201 – held inapplicable.

M. Karunanidhi v. Union of India & Anr. (1979) 3 SCC431 : [1979] 3 SCR 254; Dharangadhra ChemicalWorks v. Dharangadhar Municipality and Anr. (1985)4 SCC 92 : [1985] 2 Suppl. SCR 757; Ratan Lal Adukiav. Union of India (1989) 3 SCC 537 : [1989] 3 SCR440 – referred to.

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From the Judgment and Order No. A/1838-1841/WZB/2005-C-III dated 21.10.2005 passed in Appeal Nos. E/2691 to 2693/03 & E-C1976/04-Mum and Order No. A/1526/WZB/06-C-III/EB dated07.07.2006 passed in Appeal No.E/1607/06-Mum of the Customs, Excise,Service Tax Appellate Tribunal, West Zone Bench, Mumbai.

K. Radhakrishnan, Ashok K. Srivastava, Sr. Advs., Ms. ArunaGupta, B. Krishna Prasad, Lalit Sankhla, Advs. for the Appellant.

DM.H. Patil, Sandeep Narain, Ms. Padmavati Patil (for M/s S.Narain & Co.), Advs. for the Respondents.

The following Judgment of the Court was delivered:

JUDGMENT

1. Being aggrieved by the judgments and orders dated 21.10.2005Eand 7.7.2006 passed by the Customs, Excise, Service Tax AppellateTribunal, West Zonal Bench at Mumbai (hereinafter referred to as“CESTAT”) thereby, allowing the appeals filed by the respondent –Assessee and its Chairman being Appeal Nos.E-2691-2693/03 arisingout of Order-in-Original No.14-20 of 2003 dated 23.6.2003, Order-in-FOriginal No.21 of 2003 dated 23.6.2003 and Appeal No. E/1976/04 arisingout of Order-in-Original Nos.19-20/2004 dated 15.3.2004 and dismissingthe appeal filed by the Revenue being Appeal No. E/1607/06-Mum arisingout of order of the Commissioner (Appeals), Customs & Central Excise,Nagpur dated 14.2.2006 in Appeal No. SVS/91/NGP-B/2006, theRevenue is before this Court.G2. The facts in brief giving rise to the present appeals are asunder:

The respondent – Universal Ferro & Allied Chemicals Ltd.,Maneck Nagar, Tumsar (hereinafter referred to as “UFAC”) is 100%Export Oriented Unit (“EOU” for short) approved by the Secretariat forH

Industrial Approvals, Department of Industrial Development in theMinistry of Industry, Government of India. UFAC was engaged in themanufacture/processing and clearance of Ferro Manganese and SiliconManganese falling under Chapter 72 of the Schedule to the Central ExciseTariff Act, 1985. UFAC cleared these items for export as well as inDomestic Tariff Area (hereinafter referred to as “DTA”) on paymentof Central Excise duty.

3. The Central Intelligence Unitof the Central Excise Headquartersvisited the unit of UFAC on 19.9.2001 on getting information from theCentral Excise Audit party that UFAC being an EOU was indulging inthe job-work activity of conversion of raw material supplied by M/s TataIron & Steel Company Ltd., Jamshedpur (hereinafter referred to as“TISCO”). In the view of the Revenue, the same was not allowed interms of EXIM Policy of 1997-2002 (hereinafter referred to as “EXIMPolicy”)

4. During the course of scrutiny of the records, the officers noticed,that UFAC was having Memorandum of Agreement dated 28.12.1999with TISCO for conversion of Manganese Ore/Coke into prime SiliconManganese. As per the agreement, TISCO was to supply ManganeseOre and Coke/Coal free of cost at its site at Maneck Nagar. Rest of theraw materials and consumables i.e. Quartzite, Charcoal, Carbon paste,Dolomite, Fluxes, Refractories and Transformer Oil required for theconversion of Manganese Ore/Coke into Silicon Manganese for TISCOwas to be used by UFAC from their own purchases obtained underCT-3 as and where applicable.As per the agreement, UFAC was tocharge job charges to TISCO at the rate of Rs.14,090/- per metric tonne(“PMT” for short) which was inclusive of cost of material added byUFAC. The job work charges were to be recovered from TISCO oncommercial invoices. In the invoices, Silicon Manganese was to becharged at the rate of Rs. 20,623/- PMT which also included cost ofingredients supplied by TISCO. The said invoices were prepared undererstwhile Rule 100-E of the Central Excise Rules.

5. The activities of the UFAC had come to standstill for someperiod and it re-started its production in August, 1999 and was declareda sick company by the Board for Industrial and Financial Reconstruction(BIFR) under the provisions of the Sick Industrial Companies (SpecialProvisions) Act, 1985 (SICA). It is not in dispute that the UFAC carriedout conversion of the raw materials supplied by TISCO, on TISCO

Amaking the payment of conversion charges of Rs. 14,090/- PMT ofSilicon Manganese. However, while dispatching the Silicon Manganeseto TISCO, excise duty was paid on the value of Rs. 20,623/- PMT whichincluded cost of raw materials supplied by TISCO as well as the inputsused by UFAC from their own purchases.

B6. The Commissioner, Central Excise & Customs, Nagpur, issueda show cause notice to the UFAC dated 9.10.2001 in respect of theSilicon Manganese cleared during September 2000. It was stated in thesaid show cause notice, that the Circular No.67/98-Cus dated 14.9.1998,issued by the Central Board of Excise & Customs, New Delhi (hereinafterreferred to as “the Board”) had permitted the EOUs to undertakeCjob-work on behalf of DTA unit only in textile, readymade garments,agro-processing and granite sectors and by another Circular No. 74/99dated 5.11.1999 the said facility was extended to EOUs to undertakejob-work on behalf of DTA unit in aquaculture, animal husbandry,electronics hardware and software sectors. The show cause noticeDtherefore stated, that the sector in which respondent – Assessee hadcarried out the job-works was not covered by either of the Circularsand, as such, the said job-works were inviolation of EXIM Policy. Theshow cause notice called upon the respondent – Assessee to showcause,as to why the said Silicon Manganese should not be charged tofull Central Excise duty as per the proviso to Section 3(1) of the CentralEExcise Act, 1944 (hereinafter referred to as “the Act”) by denying thebenefit of Notification No. 8/97 dated 1.3.1997 (hereinafter referred toas “the said Exemption Notification”).7. The show cause notice also called upon the UFAC to showcause, as to why the central excise duty amounting to Rs. 23,08,443/-Fshort paid on Silicon Manganese cleared in DTA during September2000,should not be recovered under Section 11-A of the Act. It alsocalled upon to show cause, as to why the goods i.e. 296 MT SiliconManganese valued at Rs. 61,04,408/- cleared in DTA during the aforesaidperiod (i.e. September 2000) should not be held liable for confiscation.GThe said show cause notice also required to show cause, as to whypenalty should not be imposed on the UFAC under Rule 209 of theCentral Excise Rules, 1944 read with Section 38-Aof the Act.

8. In all, ten (10) show cause notices of various dates, last being2.12.2003 for the identical charges for different periods (i.e. from MarchH2000 to May 2003) were issued.

9. In response to the show cause notices, UFAC had submittedits written replies stating therein, that in the show cause notices no violationof Central Excise Law has been alleged. It was submitted, that theremovals in the DTA were in accordance with the permission grantedby the Development Commissioner and, as such, there was no groundfor denial of the concessional rate of duty laid down in the said Exemptionnotification. It was further submitted, that since the issue was based onthe interpretation of the provisions of EXIM Policy, it was necessary toobtain ruling of the Development Commissioner on the issue. It wassubmitted, that since the Development Commissioner had clarified thatthe removals made by UFAC to TISCO were in accordance with thepermission under the EXIM Policy, there was no occasion to proceedfurther.

10. However, the Commissioner while passing the order-in-originalcame to finding that the conversion work performed by UFAC wasnothing but the job work and that the said job work done by an EOU wasgoverned by para 9.17(b) of the EXIM Policy. He found, that underpara 9.17(b) of the EXIM Policy, an EOU was permitted to do job workfor DTA unit only for the purposes of exporting the finished goodsdirectly from EOU. However, since after the job work the finished goodswere not exported by the EOU but cleared to DTA unit for homeconsumption, the UFAC had contravened the provisions of the EXIMPolicy. He also came to finding, that the sector in which UFAC hadundertaken the job work was not covered by the Circular dated 14.9.1998and as extended by another Circular dated 5.11.1999, issued by the Board.He also came to conclusion that since there was no sale of the goodsbut only return of the goods after job work, it was not sale and, assuch, contrary to the provisions of the EXIM Policy. He, therefore, videorder dated 23.6.2003 confirmed the demand for Rs.11,56,08,497/- alongwith interest. He also imposed penalty of Rs.50 lakhs on UFAC. Hefurther held, that the goods i.e. 15792.85 MTs of Silicon Manganesevalued at Rs. 32,31,30,000/-were liable for confiscation. However, sincethe said goods were not available for confiscation, redemption fine ofRs. 50 lakhs in lieu of confiscation was imposed. Two more similar ordersconfirming demand as raised under subsequent show cause notices werealso passed vide order dated 23.6.2003 and 15.3.2004. In the secondorder dated 23.6.2003 being Order-in-Original No.21 of 2003, personalpenalty of Rs. 5 lakh was also imposed on the Chairman of UFAC,Dhunjishaw M. Naterwala.

A11. Being aggrieved thereby, the UFAC as well as the Chairmanof UFAC, Dhunjishaw M. Naterwala preferred appeals before thelearned CESTAT.

12. The Commissioner (Appeals) had set aside the demand raisedby the Revenue in respect of duty free carbon paste procured by UFACBunder the CT-3 certificate in terms of Notification No.1/95-CE dated4.1.1995 for use in the conversion process of Manganese ore. BeingAggrieved thereby, the Revenue filed appeal before the CESTAT beingAppeal No.E/1607/2006. By the impugned judgment dated 21.10.2005,the demand orders against UFAC were reversed by the CESTAT. Also,the CESTAT dismissed the Revenue’s Appeal No. E/1607/2006 by orderCdated 7.7.2006, referring to its order and judgment dated 21.10.2005 inUFAC’s appeal,

Hence, the present appeals.

13. We have heard Shri K. Radhakrishnan, learned Senior CounselDappearing for the appellant- Revenue and Shri M.H. Patil, learned counselappearing on behalf of the respondent – UFAC.

14. The main contention raised by Shri Radhakrishnan,learnedSenior Counsel on behalf of the Revenue is that, in view of proviso tosub-section (1) of Section 3 of the Act, the duty which is liable to beElevied and collected on any excisable goods manufactured by 100%EOU and brought to any other place in India shall be leviable as per theduties of Customs, which are leviable under the Customs Act, 1962 onlike goods produced and manufactured outside India, if imported intoIndia. It is contended, that the proviso to Section 5A of the said Actspecifically provides, that no exemption granted under Section 5A shallFapply to the excisable goods which are produced or manufactured by a100% EOU and brought to any other place in India. He further submits,that in the transaction between the UFAC and TISCO, there is no transferof property in goods to the UFAC and, as such, it cannot be consideredto be sale under Section 4 of the Sale of Goods Act, 1930. The learnedGSenior Counsel therefore submits, that the order passed by the CESTATdeserves to be set aside and the orders-in-original passed by theCommissioner (Appeals) need to be maintained.

15. It is further contended by Shri Radhakrishnan, learned SeniorCounsel, that the words “allowed to be sold in India” in clause (ii) ofproviso to sub-section (1) of Section 5A of the Act have been substitutedH

by words “brought to any other place in India” with effect from 11.5.2001.He therefore submits, that in view of change in law from 11.5.2001, thestatutory force of the said Exemption Notification is lost from 11.5.2001.In his submission, the said Exemption Notification would stand impliedlyrepealed with effect from 11.5.2001. He relies on the judgments of thisCourt in the cases of (1) M. Karunanidhi vs. Union of India & Anr.[1];(2) Dharangadhra Chemical Works vs. Dharangadhar Municipalityand Anr.[2]; and (3) Ratan Lal Adukia vs. Union of India[3]. He furthersubmits, that the terms “allowed to be sold in India” and “brought to anyother place in India” have been considered by this Court in the cases ofSiv Industries Ltd. vs. Commissioner of Central Excise & Customs[4]and Sarla Performance Fibers Limited and ors. vs. Commissionerof Central Excise, Surat-II[5] and as such, the UFAC would be liable topay duty as if the goods were imported into India.

16. Shri M.H. Patil, on the contrary submits, that the case of thepresent appellant is covered by paragraph 9.9(b) of the EXIM Policyand not by paragraph 9.17(b) of the EXIM Policy. He further submits,that all the transactions made by UFAC were made only after the validpermissions were granted by the Joint Development Commissioner,SEEPZ. Learned counsel further submits, though initially vide Circulardated 14.9.1998 (No.67/98-Cus) the permission to undertake job workto EOU/EPZ from the DTA units was restricted only to units in textile,readymade garments, agro-processing and granite sectors andsubsequently vide Circular dated 5.11.1999 (No.74/99-Cus) it wasextended to certain other units; by subsequent Circular dated 22.5.2000(No.49/000-Cus), the said facility was extended to all the sectors. Hesubmits, that this fact has not been taken into consideration by the Authoritypassing the Orders-in-Original. It is submitted that the SponsoringAuthority i.e. the Development Commissioner, SEEPZ had clarified theposition that the activity which was carried out by the UFAC waspermissible under paragraph 9.9(b) of the EXIM Policy.

17. To counter the submission that there is no transfer of propertyin goods, Shri Patil submits, that the ‘sale’ and ‘purchase’ in the presentcase will have to be construed with reference to the definition of ‘sale’

1 (1979) 3 SCC 4312 (1985) 4 SCC 923 (1989) 3 SCC 5374 (2000) 3 SCC 3675 (2016) 11 SCC 635

Aand ‘purchase’ under the Central Excise Act and not under the Sale ofGoods Act, 1930. Lastly, Shri Patil submits, that UFAC is entitled to thebenefits of said Exemption Notification and, as such, the findings asrecorded by the learned CESTAT warrant no interference.

18. We shall first deal with the submission of Shri K. Radhakrishnan,Blearned Senior Counsel appearing for the Revenue, to the effect thatsince in the transaction between UFAC and TISCO there is no transferof property in goods, the same cannot be termed as ‘sale’ and thereforewould not be covered under paragraph 9.9 (b) of the EXIM Policy. ShriRadhakrishnan, in that respect, would rely on the provisions of the Saleof Goods Act, 1930.C19. We do not find any merit in the submission of ShriRadhakrishnan in this regard. It will be relevant to note that clause (h) ofSection 2 of the Central Excise Act, 1944 specifically defines the terms‘sale’ and ‘purchase’. Section 2(h) of the Act reads thus:

D“2(h) “sale” and “purchase”, with their grammatical variationsand cognate expressions, mean any transfer of the possession ofgoods by one person to another in the ordinary course of trade orbusiness for cash or deferred payment or other valuableconsideration;”

E20. The perusal of the definition makes it clear that when there isa transfer of possession of goods in the ordinary course of trade orbusiness either for cash or for deferred payment or any other valuableconsideration, the same would be covered by the terms ‘sale’ and‘purchase’ within the meaning of the Central Excise Act, 1944.Undisputedly, in the present case, there is transfer of Manganese OreFby TISCO to UFAC for the purposes of processing the same andconverting it into Silicon Manganese. Undisputedly, the same is also fora valuable consideration.

21. In this respect, it will be apposite to refer to the judgment ofthis Court in the case of Commissioner of Central Excise, New DelhiGvs. Connaught Plaza Restaurant Private Limited, New Delhi[6 ]whereinthis Court observed thus:

“46. We are unable to persuade ourselves to agree with thesubmission. It is settled principle in excise classification that the

H6 (2012) 13 SCC 639

definition of one statute having different object, purpose andscheme cannot be applied mechanically to another statute. Asaforesaid, the object of the Excise Act is to raise revenue forwhich various goods are differently classified in the Act. Theconditions or restrictions contemplated by one statute having adifferent object and purpose should not be lightly and mechanicallyimported and applied to fiscal statute for non-levy of exciseduty, thereby causing loss of revenue. [See MedleyPharmaceuticals Ltd. v. CCE and Customs [(2011) 2 SCC 601](SCC p. 614, para 31) and CCE v. Shree Baidyanath AyurvedBhavan Ltd. [(2009) 12 SCC 419] ] The provisions of PFA,dedicated to food adulteration, would require technical andscientific understanding of “ice-cream” and thus, may requiredifferent standards for good to be marketed as “ice-cream”.These provisions are for ensuring quality control and have nothingto do with the class of goods which are subject to excise dutyunder particular tariff entry under the Tariff Act. These provisionsare not standard for interpreting goods mentioned in the TariffAct, the purpose and object of which is completely different.”

22. This Court has held, that it is settled principle in exciseclassification that the definition of one statute having different object,purpose and scheme cannot be applied mechanically to another statute.It has further been held, that the conditions or restrictions contemplatedby one statute having different object and purpose should not be lightlyand mechanically imported and applied to fiscal statute.

23. It is also equally well settled that the first principle ofinterpretation of plain and literal interpretation has to be adhered to. Weare therefore of the considered view, that the narrower scope of theterm ‘sale’ as found in the Sale of Goods Act, 1930 cannot be applied inthe present case. The term ‘sale’ and ‘purchase’ under the CentralExcise Act, 1944, if construed literally, it would give wider scope andalso include transfer of possession for valuable consideration under thedefinition of the term ‘sale’.

24. The next issue that requires consideration is as to whetherunder the EXIM Policy, UFAC was entitled to carry out the job-workfor TISCO and whether it was entitled to exemption from payment ofduty under the Exemption Notification.

ABCDE

25. It will be relevant to refer to the relevant clauses of Chapter 9of the EXIM Policy. As per para 9.1 of the said EXIM Policy, unitsundertaking to export their entire production of goods may be set upunder the EOU Scheme. As per para 9.9, the entire production of EOUunits is required to be exported subject to the following:

B“(a) Unless specifically prohibited in the LOP/LOI, rejects maybe sold in the Domestic Tariff Area (DTA), on prior intimation tothe Customs authority. Such sales shall be counted against DTAsale entitlement under paragraph 9.9(b) of the Policy. Sale ofrejects shall be subject to payment of duties as applicable to saleunder para 9.9(b).C

(b) DTA sale upto 50% of the FOB value of exports may bemade subject to payment of applicable duties and fulfilment ofminimum NFEP prescribed in Appendix 1 of the Policy…..”

26. It will also be relevant to refer to para 9.17 (b) of the EXIMDPolicy, which reads thus:

“(b) EOU/EPZ units may undertake job-work for export, on behalfof DTA units, with the permission of Assistant Commissioner ofCustoms, provided the goods are exported direct from the EOU/EPZ units. For such exports, the DTA units will be entitled forErefund of duty paid on the inputs by way of Brand Rate of dutydrawback.”

27. It can therefore be seen, that under para 9.9(a) of the EXIMPolicy, EOU is entitled to sell the rejects in the DTA on prior intimationto the Customs authorities. Such sales are to be counted against DTAFsale entitlement under paragraph 9.9(b) of the EXIM Policy. The sale ofrejects shall be subject to payment of duties as applicable to sale underparagraph 9.9(b) of the EXIM Policy.

28. Under paragraph 9.9(b) of the EXIM Policy, DTA sale upto50% of the FOB value of exports is also permitted subject to payment ofapplicable duties and fulfilment of minimum Net Foreign ExchangeGearning as Percentage of exports (NFEP) as prescribed in Appendix-1 of the Policy.

29. Under paragraph 9.17 (b), the EOU/EPZ units are also entitledto undertake job-work for export, on behalf of DTA units, with thepermission of Assistant Commissioner of Customs, provided the goodsH

are exported direct from the EOU/EPZ units and for such exports, theDTA units will be entitled for refund of duty paid on the inputs by way ofBrand Rate of duty drawback.

30. It can thus clearly be seen, that paragraph 9.9(b) and paragraph9.17(b) of the EXIM Policy operate in totally different fields. Underparagraph 9.9 (b), an EOU is entitled to sell upto 50% of the FOB valueof exports to DTA subject to payment of applicable duties and fulfilmentof minimum NFEP as prescribed in Appendix-I of the Policy, whereasunder paragraph 9.17(b), an EOU is entitled to undertake job-work forexport, on behalf of DTA units, with the permission of AssistantCommissioner of Customs, provided the goods are exported direct fromthe EOU/EPZ units. In such type of exports, the DTA units would beentitled for refund of duty paid on the inputs by way of Brand Rate ofduty drawback.

31. The order-in-original states that since the UFAC has notexported the final product of Manganese raw material received by itfrom TISCO, it had violated the provisions of paragraph 9.17 (b) and9.9(b) of the EXIM Policy. We will have to examine the correctness ofthe said finding. For that, it will also be relevant to examine as to whetherunder paragraph 9.9 (b) of the EXIM Policy, an EOU is entitled to carrya job-work on behalf of another unit in DTA.

32. The order-in-original refers to Circular No.67/98-cus dated14.9.1998 and Circular No.74/99-cus dated 5.11.1999. However, theCommissioner, it appears, that while passing the order has not noticedthe subsequent Circular No.49/2000-Cus dated 22.5.2000. It will berelevant to refer to paragraph 10 and 11 of the said Circular dated22.5.2000.

“10. Under para 9.17(d), the EOU/EPZ units in specific sectorswere allowed to undertake job work for export on behalf of DTAunits. This paragraph has been amended to extend this facility toall sectors. It has also been provided that DTA units shall be entitledto brand rate of duty draw back.

11. The EOU /EPZ units in textiles, ready made garments andgranite sectors were allowed to undertake job work on behalf ofDTA units by Board’s Circular 69/98-Cus., dated 14[th] September1998. This facility was subsequently extended to the EOU/EPZunits in aquaculture, animal husbandry, hardware, software sector

Avide Board’s Circular No. 74/99-Cus., dated 5[th] Nov., 1999. Now,it has been decided to extend this facility to EOU/EPZ units in allsectors. Further, it has been decided that the DTA units shall be-entitled to avail of the brand rate of duty drawback for such jobwork undertaken by EOUs/EPZ units concerned. Board’sCirculars 67/98-Cus., dated 14-9-1998 and 74/99-Cus., datedB5-11-1999 stand modified to the above extent.”

(emphasis supplied)

33. In view of paragraph 10 of the Circular dated 22.5.2000, thefacility of undertaking job-work by EOU/EPZ units which was restrictedCto specific sectors has been amended and the said facility has beenextended to all sectors. It has also been provided, that DTA units shallbe entitled to brand rate of duty draw back. Similarly, paragraph 11 ofthe Circular dated 22.5.2000 also provides, that the facility which wasgiven to EOU/EPZ to undertake job-work on behalf of DTA units intextiles, readymade garments and granite sectors which was subsequentlyDextended to the EOU/EPZ units in aquaculture, animal husbandry,hardware and software sectors vide Circular dated 5.11.1999, wasextended 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 drawbackfor such job-work undertaken by EOUs/EPZ units concerned. It alsoEprovides, that earlier circulars issued by the Board stood modified to thesaid extent.

34. We find, that failure on the part of the Commissioner, whopassed the order-in-original, to notice the Circular dated 22.5.2000 hasresulted in passing an erroneous order. It also appears, that after theFshow cause notice was issued to UFAC, the Commissioner had soughta clarification from the Sponsoring Authority i.e. the DevelopmentCommissioner, SEEPZ vide communication dated 6.11.2001. It will berelevant to refer to the communication dated 28.11.2001 addressed byJoint Development Commissioner to the Additional Commissioner (CIU),Office of the Commissioner of Customs and Central Excise, Nagpur,Grelevant part of which reads thus:.

“Sub: Manufacture of goods of DTA Unit by an EOU on conversionbasis – Provisions of Para 9.17(b) of the EXIM Policy 1997-2002– Correspondence regarding. M/s Universal Ferro Ltd., Tumsar

Kindly refer to letter C.No. II(39)/25/CIU/2001, dated 6[th]November, 2001, addressed to Development Commissioner,SEEPZ SEZ. Ministry of Commerce has clarified that the EXIMPolicy permits the kind of operation being undertaken by the unitand it should be permitted.”

35. UFAC had also sought clarification to this effect from theSponsoring Authority. It will be relevant to refer to the communicationdated 23.10.2001, addressed by the Joint Development Commissioner,SEEPZ, relevant part of which reads as under:

“Kindly refer to your query regarding DTA sale. The positionclarified to Central Excise, Nagpur, is as follows: -

‘The general question raised was whether while selling in DTAunder DTA sale permission issued in terms of Para 9.9 (b) of theEXIM Policy, unit can take supply of raw material from aCompany in the DTA and give back the finished product (itsapproved as per LOP and also covered by the DTA salepermission).

The unit is free to procure raw material in terms of Para 9.2 ofPolicy. The raw material is meant for production either export orclearance under valid DTA permission. The unit may convert theRM into its approved product and clear the same against validDTA sale permission under para 9.9(b) after paying applicableduty on assessable value of finished product, i.e. value of RM +conversion charges. There is no bar on this activity under theEXIM Policy.’”

(emphasis supplied)

36. It is not in dispute that all transactions between UFAC andTISCO have been entered into after the necessary permission wasobtained from the Development Commissioner. As matter of fact, theorder-in-original itself mentions thus:

“The M/s. UFAC was 100% EOU engaged in the manufactureof Ferro Manganese & Silico Manganese and clearances thereoffor export as well as in DTA on payment of Central Excise duty.The unit was also doing job work for M/s TISCO in respect ofSilico Manganese on the basis of Memorandum of Agreementdated 28.12.99 entered into with M/s. TISCO. These clearances

Aof the goods manufactured on the basis of job work had beeneffected on payment of duty vide Notification no.8/97 - CentralExcise dated 1.3.97 against permission for DTA sales granted bythe Development Commissioner SEEPZ, Mumbai from time totime.”

B37. It could thus be clearly seen, that the Original Authority itselfhas found that clearance of the goods manufactured on the basis of job-work had been effected on payment of duty vide Exemption Notificationof 1997 against permission for DTA sales granted by the DevelopmentCommissioner, SEEPZ, Mumbai from time to time.

C38. The combined reading of paragraph 9.9(b) of the EXIM Policy,the Circulars issued by the Board, particularly, the Circular dated22.5.2000 and reply to the query of the Customs Authorities by theDevelopment Commissioner, SEEPZ would clearly show, that the UFACwas entitled to carry out the job-work on behalf of TISCO on paymentof duty as provided under Exemption Notification of 1997.D

39. In this respect, it will also be apposite to refer to the Circulardated 6.5.2003 (No.38/2003-Cus) issued by the Board which wouldfurther clarify the position, relevant part of which reads thus:

“I am directed to say that cases have been brought to the noticeEof the Board that in case of stock transfer of goods to DTA unit,EOUs were not being allowed the benefit of payment ofconcessional duty under notification No. 2/95 – Central Excise,dated 4-1-1995 even though the EOU had valid DTA salepermission and had earned the DTA sale entitlement as providedunder paragraph 6.8 of the Exim Policy 2002-2007 (ParagraphF9.9 of the Exim Policy 1997-2002) and fulfil other conditionsspecified in aforesaid notification. The benefit of concessionalrate of duty was being denied on the ground that stock transfer ofgoods is not sale and thus, not eligible for concessional rate ofduty in terms of the above notification.

2. The matter has been examined by the Board. Notification2/95 – C.E., dated 1-4-1995 provided for 50% exemption on…..“goods allowed to be sold in India under and in accordancewith the provisions of sub-paragraphs (a), (b), (d) and (h) ofpara 6.8 (earlier para 9.9) of the Exim Policy”…. Thenotification, therefore, allowed concessional duty only when goods

were sold into DTA in accordance with para 6.8 (or 9.9) of thepolicy. What is covered in para 6.8 (or 9.9) of the policy has beenclarified by Ministry of Commerce in Appendix 14-IH of theHandbook of procedures, 2002 – 2007 (Appendix 42 of the HandBook of Procedures Vol – I – 1997 - 2002) that it covers anyclearance to another DTA unit. Thus it is not open to theDepartment to interpret the Exim Policy in any other manner thanwhat has been mentioned in Appendix 14 – IH (or 42). The wordDTA sale has been loosely used in the Exim Policy and there is nodefinition of DTA sale in the Policy. Appendix 14-IH (or 42)clarifies that it not only covers transfers through sales to DTAunits but also through other means. It would be illogical to contendthat the concession is available if the goods are transferred onsale to an independent unit but it would not be available whenremoved on stock transfer to another division / unit of the samecompany.”40. We will now deal with the next submission made by Shri K.Radhakrishnan, learned Senior Counsel, to the effect that under provisoto sub-section (1) of Section 3 of the Central Excise Act, 1944, an EOUis liable to pay duty on the goods brought to DTA, as if the goods wereproduced and manufactured outside India and were imported into Indiaas per the provisions of the Customs Act, 1962 and that under Section5A of the Central Excise Act, 1944, the Central Government has nopower to grant exemption from payment of duty to an EOU.

41. To consider the submission, it will be relevant to refer to therelevant part of Sections 3 and 5A of the Central Excise Act, 1944,which read thus:

“3. Duty specified in the Fourth Schedule to be levied.-(1)There shall be levied and collected in such manner as may beprescribed duty of excise to be called the Central Value AddedTax (CENVAT) on all excisable goods (excluding goods producedor manufactured in special economic zones) which are producedor manufactured in India as, and at the rates, set forth in theFourth Schedule:

Provided that the duty of excise which shall be levied andcollected on any excisable goods which are produced ormanufactured by hundred per cent export-oriented undertakingand brought to any other place in India, shall be an amount equal

ABC

Ato the aggregate of the duties of customs which would be leviableunder the Customs Act, 1962 (52 of 1962) or any other law forthe time being in force, on like goods produced or manufacturedoutside India if imported into India, and where the said duties ofcustoms are chargeable by reference to their value, the value ofsuch excisable goods shall, notwithstanding anything contained inBany other provision of this Act, be determined in accordance withthe provisions of the Customs Act, 1962 and the Customs TariffAct, 1975 (51 of 1975).”

C5A. Power to grant exemption from duty to excise.-(1) Ifthe Central Government is satisfied that it is necessary in thepublic 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 thenotification, excisable goods of any specified description from theDwhole or any part of the duty of excise leviable thereon:

Provided that, unless specifically provided in suchnotification, no exemption therein shall apply to excisable goodswhich are produced or manufactured-

E(i) In free trade zone or special economic zone andbrought to any other place in India; or

(ii) by hundred per cent export-oriented undertaking andbrought to any other place in India.

Explanation-In this proviso, “free trade zone”, “specialFeconomic Zone” and “hundred per cent export-orientedundertaking” shall have the same meanings as in Explanation 2 tosub-section (1) of Section 3.”

42. perusal of sub-section (1) of Section 3 of the Act wouldshow, that sub-section (1) of Section 3 provides for levy and collectionGof duty of excise in such manner as may be prescribed to be called theCentral Value Added Tax (CENVAT) on all excisable goods, which areproduced or manufactured in India as, and at the rates, set forth in theFourth Schedule. However, the said sub-section (1) of Section 3 excludesthe applicability thereof, to the goods produced or manufactured in specialeconomic zones. The proviso to sub-section (1) of Section 3 of the ActHis applicable to the excisable goods, which are produced or manufacturedby 100% export-oriented undertaking when such goods are brought toany other place in India. It provides, that in such case, an amount equalto the aggregate of the duties of customs which would be leviable underthe Customs Act, 1962 or any other law for the time being in force, onlike goods produced or manufactured outside India if imported into Indiaand where the said duties of customs are chargeable by reference totheir value, the value of such excisable goods shall, notwithstandinganything contained in any other provision of this Act, be determined inaccordance with the provisions of the Customs Act, 1962 and the CustomsTariff Act, 1975.

43. Relying on the proviso to sub-section (1) of Section 3 of theAct, it is the contention of Shri Radhakrishnan that since UFAC hassupplied the goods to TISCO, which is any other place in India, it will beliable to pay the import duty as if the goods were imported in India.

44. However, for considering the said submission, it will also benecessary to refer to Section 5A of the Act, which is already reproducedabove. Sub-Section (1) of Section 5A of the Act provides, that if theCentral Government is satisfied that it is necessary in the public interestso to do, it may, by notification in the Official Gazette, exempt generallyeither absolutely or subject to such conditions, to be fulfilled before orafter removal, as may be specified in the notification, excisable goods ofany specified description from the whole or any part of the duty of exciseleviable thereon. The proviso thereto provides, that unless specificallyprovided in such notification, no exemption therein shall apply to excisablegoods which are produced or manufactured in free trade zone or aspecial economic zone and brought to any other place in India; or by ahundred per cent export-oriented undertaking and brought to any otherplace in India.

45. It is the submission of Shri Radhakrishnan that combinedreading of proviso to sub-section (1) of Section 3 of the Act and provisoto sub-section (1) of Section 5A of the Act, would not entitle the CentralGovernment to grant any exemption to an EOU when it brings the goodsto any other place in India (i.e. DTA) and the duty that would be leviablewould be as if the said goods were imported in India.

46. We are of the considered view, that if such an interpretation isaccepted, the words “unless specifically provided in such notification” insub-section (1) of Section 5A will have to be ignored and the said words

DEF

Awould be rendered otiose. It is settled principle of law that whileinterpreting provision due weightage will have to be given to each andevery word used in the statute.

47. In this respect, we may gainfully refer to the followingobservations of the Constitution Bench of this Court in the case ofBHardeep Singh vs. State of Punjab and others[7]:

“42. To say that powers under Section 319 CrPC can be exercisedonly during trial would be reducing the impact of the word “inquiry”by the court. It is settled principle of law that an interpretationwhich leads to the conclusion that word used by the legislatureCis redundant, should be avoided as the presumption is that thelegislature has deliberately and consciously used the words forcarrying out the purpose of the Act. The legal maxim verbislegis non est recedendum which means, “from the words of law,there must be no departure” has to be kept in mind.D43. The court cannot proceed with an assumption that thelegislature enacting the statute has committed mistake and wherethe language of the statute is plain and unambiguous, the courtcannot go behind the language of the statute so as to add or subtracta word playing the role of political reformer or of wise counselto the legislature. The court has to proceed on the footing that theElegislature intended what it has said and even if there is somedefect in the phraseology, etc., it is for others than the court toremedy that defect. The statute requires to be interpreted withoutdoing any violence to the language used therein. The court cannotrewrite, recast or reframe the legislation for the reason that it hasFno power to legislate.

44. No word in statute has to be construed as surplusage.No word can be rendered ineffective or purposeless. Courts arerequired to carry out the legislative intent fully and completely.While construing provision, full effect is to be given to theGlanguage used therein, giving reference to the context and otherprovisions of the statute. By construction, provision should notbe reduced to “dead letter” or “useless lumber”. An interpretationwhich renders provision otiose should be avoided otherwise itwould mean that in enacting such provision, the legislature was

involved in “an exercise in futility” and the product came as a“purposeless piece” of legislation and that the provision had beenenacted without any purpose and the entire exercise to enact sucha provision was “most unwarranted besides being uncharitable”.(Vide Patel Chunibhai Dajibha v. Narayanrao KhanderaoJambekar [AIR 1965 SC 1457], Martin Burn Ltd. v. Corpn. ofCalcutta [AIR 1966 SC 529], M.V. Elisabeth v. HarwanInvestment and Trading (P) Ltd. [1993 Supp (2) SCC 433 : AIR1993 SC 1014], Sultana Begum v. Prem Chand Jain [(1997) 1SCC 373], State of Bihar v. Bihar Distillery Ltd. [(1997) 2 SCC453 : AIR 1997 SC 1511], Institute of Chartered Accountantsof India v. Price Waterhouse [(1997) 6 SCC 312] and SouthCentral Railway Employees Coop. Credit Society Employees’Union v. Registrar of Coop. Societies [(1998) 2 SCC 580 : 1998SCC (L&S) 703 : AIR 1998 SC 703] .)”

48. We therefore find, that the interpretation as sought to be placedby Shri Radhakrishnan would render the term “unless specifically providedin such notification” in sub-section (1) of Section 5A otiose or useless.Such an interpretation would not be permissible. We find, that theharmonious construction of sub-Section (1) of Section 5A of the Act andthe proviso thereto would be, that an EOU which brings the excisablegoods to any other place in India would not be entitled for generalexemption notification unless it is so specifically provided in such anotification.

49. In this respect, it will be relevant to refer to ExemptionNotification of 1997 as amended by Notification No.21/97-C.E. dated11.4.1997, relevant part of which reads thus:

“Effective rate of duty on certain goods produced in FTZor EOU. – In exercise of the powers conferred by sub-section(1) of section 5A of the Central Excise Act, 1944 (1 of 1944), theCentral Government, being satisfied that it is necessary in thepublic interest so to do, hereby exempts the finished products,rejects and waste or scrap specified in the Schedule to theCentral Excise Tariff Act, 1985 (5 of 1986) and produced ormanufactured, in hundred per cent export-oriented undertakingor free trade zone wholly from the raw materials produced ormanufactured in India, and allowed to be sold in India under andin accordance with the provisions of sub-paragraphs (a), (b), (c),

ABC

A(d) and (f) of paragraph 9.9 or of paragraph 9.20 of the Exportand Import Policy, 1[st] April, 1997 – 31[st] March, 2002, from somuch of the duty of excise leviable thereon under section 3 of theCentral Excise Act, 1944 (1 of 1944), as is in excess of anamount equal to the aggregate of the duties of exciseleviable under the said Section 3 of the Central Excise ActBor under any other law for the time being in force on likegoods, produced or manufactured in India other than in hundredpercent export-oriented undertaking or free trade zone, if soldin India.”

50. The bare reading of the aforesaid Notification would amplyCmake it clear, that the Central Government after being satisfied that itwas necessary in the public interest so to do, thereby exempted thefinished products, rejects and waste or scrap which was produced ormanufactured in hundred per cent export-oriented undertaking or afree trade zone wholly from the raw materials produced or manufacturedDin India and allowed to be sold in India under and in accordance with theprovisions of sub-paragraphs (a), (b), (c), (d) and (f) of paragraph 9.9 orof paragraph 9.20 of the EXIM Policy, from so much of the duty ofexcise 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 ofexcise leviable under the said Section 3 of the Central Excise Act orEunder any other law for the time being in force on like goods, producedor manufactured in India other than in hundred per cent export-orientedundertaking or free trade zone, if sold in India.

51. It could thus be seen, that the said notification specificallyprovides grant of exemption to the EOUs from the payment of duties,Fwhich are in excess of what is leviable under sub-section (1) of Section3 of the Central Excise Act, 1944 on like goods, produced or manufacturedin India. In our considered view, since the said Exemption Notificationspecifically mentions, that the goods produced or manufactured by an100% EOU, which are allowed to be sold in India in accordance withGpara 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. The conditions which can beculled out for enabling to get the benefit of the said Exemption Notificationare as under:

COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.

M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.

(i)The finished products, rejects and waste or scrap specifiedin the Schedule to the Central Excise Tariff Act, 1985 shouldbe produced or manufactured in the 100% export-orientedundertaking or free trade zone;

(ii) The said finished products should be manufactured whollyfrom the raw materials produced or manufactured in India;B

(iii) They are allowed to be sold in India under and in accordancewith the provisions of sub-paragraphs (a), (b), (c), (d) and (f)of paragraph 9.9 or of paragraph 9.20 of the EXIM Policy.

52. Undisputedly, in the present case, the transaction betweenUFAC and TISCO satisfies all the three conditions. The goods areproduced and manufactured by UFAC, an 100% export-oriented unit;they are manufactured wholly from the raw materials produced ormanufactured in India and, thirdly, they have been allowed to be sold inIndia in accordance with the provisions of paragraph 9.9(b) of the EXIMPolicy.

53. We will now consider the submission of Shri Radhakrishnan,learned Senior Counsel, that in view of substitution of the words “allowedto be sold in India” by “brought to any other place in India”, the saidExemption Notification shall stand impliedly overruled/repealed.

54. No doubt, that the reliance placed by the learned Senior Counselon the judgments of this Court to the effect that if there are inconsistenciesin two statutes, the later would prevail is well placed. This Court inDeep Chand vs. State of Uttar Pradesh[8 ]has laid down the followingprinciples 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 exhaustivecode in respect of the subject matter replacing the earlier law;

(3) Whether the two laws occupy the same field.”

The said view has been consistently followed by this Court incatena of judgments.

55. We do not find, that there would be any conflict in the amendedprovisions of clause (ii) of the proviso to sub-section (1) of Section 5A of

8 AIR 1959 SC 648

Athe Act and the said Exemption Notification. In any case, by the 2001Amendment, the legislature has not laid down any exhaustive code inrespect of the subject matter in replacing the earlier law. It appears, thatthe 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 theBwords used in the proviso to sub-section (1) of Section 3 of the Act. Inthat view of the matter, we find, that the said contention is withoutsubstance.

56. Insofar as the reliance placed by the learned Senior Counselon the judgment of this Court in the case of Siv Industries Ltd. (supra)Cso as to distinguish the terms “allowed to be sold in India” and “broughtto any other place in India” is concerned, we find, that the said judgmentwould rather support the case of the respondent – Assessee. It wouldbe relevant to refer to the following observation in paragraph 18 of thesaid judgment, which reads thus:

D“Thus it is apparent that debonding and permission to sell in Indiaare two different things having no connection with each other. Italso becomes apparent that in view of the EOU Scheme asmodified from time to time and corresponding amendments toSection 3 of the Act the expression “allowed to be sold in India”Ein the proviso to Section 3(1) of the Act is applicable only to salesmade up to 25% of production by 100% EOU in DTA and withthe permission of the Development Commissioner. No permissionis required to sell goods manufactured by 100% EOU lying with itat the time approval is granted to debond.”

57. It is to be noted that the case that fell for consideration beforeFthis Court was with regard to debonding. What this Court has held is,that no permission is required to sell goods manufactured by 100% EOUlying with it, at the time approval is granted to debond. It has been held,that the expression “allowed to be sold in India” in the proviso to Section3(1) of the Act was applicable only to sales made upto 25% of productionGby 100% EOU in DTA and with the permission of the DevelopmentCommissioner. Admittedly, in the present case, the sales made by UFACto TISCO are within the permissible limits and with the permission ofthe Development Commissioner.

58. The view taken by this Court in the case of SarlaHPerformance Fibers Limited (supra) is similar view, taken following

COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.

the decision of this Court in Siv Industries Ltd. (supra). As such, thesaid judgment also is of no assistance to the case of the appellant.

59. In that view of the matter, we do not find, that the CESTAThas committed any error in reversing the orders-in-original passed bythe Commissioner. The appeals are, therefore, dismissed.

Devika Gujral

Appeals dismissed.