Case Note & Summary
The case involves an appeal by the Commissioner of Central Excise, Nagpur against the CESTAT order that allowed the appeals of M/s Universal Ferro & Allied Chemicals Ltd. (UFAC), a 100% Export Oriented Unit (EOU), and its Chairman. UFAC had entered into a Memorandum of Agreement with M/s Tata Iron & Steel Company Ltd. (TISCO) for conversion of Manganese Ore/Coke into Silicon Manganese. TISCO supplied raw materials free of cost, and UFAC added its own inputs. UFAC cleared the finished Silicon Manganese to TISCO in the Domestic Tariff Area (DTA) on payment of excise duty at a concessional rate under Notification No.8/97-CE. The Revenue issued show cause notices alleging that the job work was in violation of the EXIM Policy 1997-2002, as EOUs were permitted to do job work for DTA units only in specified sectors (textile, readymade garments, agro-processing, granite, aquaculture, animal husbandry, electronics hardware, software) and only for export purposes. The Commissioner confirmed the demand for Rs.11,56,08,497/-, imposed penalties, and ordered confiscation. The CESTAT reversed the orders, leading to the present appeal. The Supreme Court allowed the Revenue's appeal, holding that the job work undertaken by UFAC for TISCO was not permitted under the EXIM Policy, as the finished goods were cleared to a DTA unit for home consumption without export. The Court set aside the CESTAT order and restored the Commissioner's orders.
Headnote
A) Central Excise - Export Oriented Unit - Job Work - Section 3(1) proviso, Section 5A, Central Excise Act, 1944 - EXIM Policy 1997-2002, para 9.17(b) - The issue was whether an EOU could undertake job work for a DTA unit and clear the finished goods to the DTA unit without exporting them. The Supreme Court held that such activity is not permitted under the EXIM Policy, as para 9.17(b) allows job work only for export purposes. The clearance to DTA without export violates the policy, and the concessional duty under Notification No.8/97-CE is not available. (Paras 1-18) B) Central Excise - Exemption Notification - Implied Repeal - Section 5A, Central Excise Act, 1944 - The Revenue argued that the substitution of words 'allowed to be sold in India' with 'brought to any other place in India' in Section 5A(1) proviso from 11.5.2001 impliedly repealed Notification No.8/97-CE. The Court did not decide this issue as the appeal was allowed on other grounds. (Paras 15-18) C) Sale of Goods - Transfer of Property - Section 4, Sale of Goods Act, 1930 - The Revenue contended that the transaction between UFAC and TISCO was not a sale as there was no transfer of property in goods to UFAC. The Court noted this argument but did not base its decision solely on it. (Para 14)
Issue of Consideration
Whether a 100% Export Oriented Unit (EOU) can undertake job work for a Domestic Tariff Area (DTA) unit and clear the finished goods to the DTA unit without exporting them, and whether such clearance is eligible for concessional duty under Notification No.8/97-CE.
Final Decision
Appeals allowed; impugned orders of CESTAT set aside; orders-in-original passed by Commissioner restored.
Law Points
- Central Excise Act
- 1944
- Section 3(1) proviso
- Section 5A
- Section 11A
- EXIM Policy 1997-2002
- para 9.17(b)
- Notification No.8/97-CE
- Circulars dated 14.9.1998 and 5.11.1999
- Sale of Goods Act
- 1930
- Section 4
