2016 Supreme(SC) 420

SUPREME COURT OF INDIA
DIPAK MISRA, SHIVA KIRTI SINGH, JJ.
Sarla Performance Fibers Limited Etc. – Appellants
Versus
Commissioner of Central Excise, Surat-II – Respondent
Civil Appeal Nos. 3555-3560 of 2012
Decided On : 03-06-2016

IMPORTANT POINT
Finished products sold by a debonded 100% EOU in DTA in excess of permission to “allowed to be sold” in India would be chargeable u/s 3(1) of the Excise Act and not its proviso.

Headnote:(a) Administration of justice – Judicial propriety – Binding precedent – Three Judge Bench interpreting in (2000) 3 SCC 367 the term ‘allowed to be sold’ in section 3 of Central Excise Act, 1944 prior to its amendment in 2001 – Consequently Circular dated 13.2.2002 issued – Later, a two Judge Bench in (2010) 12 SCC 761: 2010 (258) ELT 161 explaining the interpretation in the three Judge Bench and opining that the circular was in consonance with the said judgment – On identical facts in instant case pertaining to pre-amendment period, CESTAT distinguishing the three Judge Bench decision taking into consideration a later circular of 2004 and relying on a larger Bench decision of CESTAT – Not proper both the judgments being binding in the case. (Para 37)

       (2000) 3 SCC 367; (2010) 12 SCC 761: 2010 (258) ELT 161 – Relied upon

       (2003) 154 ELT 580 – Distinguished

       (b) Central Excise Act, 1944 – Section 3(1) – 100% EOU – “Allowed to sale in India” replaced with “brought to any other place” with effect from 11.05.2001 – Debonding and permission to sale in India – Conditions for sale of 25% of the finished products by EOU and sale of finished stock by a debonded 100% EOU on the date of debonding are different – Chapter V-A (sections 100-A to 100-H) of Central Excise Rules not applicable to debonded EOU – In case of debonded units duty would be chargeable u/s 3(1) and not its proviso – “Allowed to sale in India” 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 – Instantly, deboning allowed but no decision taken on application for permission to sale finished products in DTA – Held, duty chargeable u/s 3(1) and not its proviso. (Para 24, 25, 26, 36, 37)

       (2000) 3 SCC 367; (2010) 12 SCC 761: 2010 (258) ELT 161 – Relied upon

       1996 (86) ELT 472 (SC); 1999 (108) ELT 61 (Tribunal); 2005 (188) ELT 201 (Trib.-Mumbai); 2002 (141) ELT 3 (SC) – Referred

       (2003) 154 ELT 580 – Distinguished

       Facts of the case:

       The appellants had procured partial oriented yarn (POY) falling under Chapter 54 without payment of duty for the manufacture of various types of yarn, namely, polyester texturised yarn, nylon covered yarn and polyester covered yarn. A show cause notice requiring the appellant to explain why central excise duty of Rs.32,92,854/- should not be recovered on the texturised yarn allegedly removed by the appellants without payment of duty. The said show cause notice also required the appellants to explain why penalty should not be imposed under Section 11AC of the Central Excise Act, 1944 (for short, ‘the Act’). That apart, the show cause notice also sought to confiscate the nylon covered yarn valued at Rs.1,72,186/- and further to recover duty thereon of Rs.55,202.96.

       After the show cause notice was issued, the appellants made payment aggregating to Rs.14,89,349.00 as against the duty payable under Section 3(1) of the Act (after taking into account the cum-duty benefit) and Rs.11,19,775.00 payable in the event the benefit of Notification No. 2/05 was allowed.

       The Commissioner of Central Excise by his order-in-original (i) confiscated the seized nylon covered yarn weighing 245.980 kgs. valued at Rs.1,72,186/-and appropriated a sum of Rs.86,093/-which was given as bank guarantee; (ii) demanded Rs.55,202.96 as differential duty on the confiscated goods which were released provisionally before the adjudication; and (iii) confirmed the central excise duty amounting to Rs.32,92,854/-and ordered recovery of interest under Section 11AB and imposed a penalty of Rs.33,48,060/-on the appellants. The adjudicating authority also imposed penalties on various persons set out in the impugned order.

       The appellant preferred appeals before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The revenue also preferred an appeal before the tribunal. The tribunal disposed of the appeal of the appellants and dismissed the appeal of the revenue.

       After remit from High Court the tribunal held that duty is chargeable under proviso to Section 3(1) of Central Excise Act, 1944.

       The High Court declined to interfere.

       Finding of the Court:

       Appellants are liable to pay duty u/s 3(1) and not its proviso.

       Result: Appeal allowed.