IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 8182-8185 OF 2003 Commnr. Of Central Excise, Nagpur Appellant(s)

VERSUS Morarjee Brembana Ltd. Respondent(s)

WITH CIVIL APPEAL NO. 9178 OF 2003 AND CIVIL APPEAL NO. 288 OF 2007

O R D E R

In C.A.No. 8182-8185/2003 The respondent/assessee herein is engaged in the manufacturing of cotton fabrics falling under Chapter Heading 52.07 of the Schedule to the central Excise Tariff Act, 1985. It is hundred per cent Export Oriented Unit (EOU). The respondent had been clearing the goods i.e. cotton fabric in Domestic Tariff Area (DTA) taking benefit of Notification No.8/97-CE dated 1.3.1997 which gives certain exemptions from the payment of excise duty.

Signature Not Verified Digitally signed by The Department perceived that the aforesaid Suman Wadhwa Date: 2015.04.08 Reason:

Notification No.8/97 dated 1.3.1997 is not applicable in the instant case and instead of that, Notification no.2/95-CE dated 4.1.95 is the Notification which would be applicable. On this basis show cause notices were issued to the respondent demanding excise duty in a sum of Rs.2,36,22,334/- and levy of penalty was also proposed. After adjudication Order-in-Original dated 13.10.2000 was passed by the CCE confirming the aforesaid demand and imposing the penalty of Rs.48 lakhs. We may mention here that the period involved was from May 1998 to February 2000 and 3rd December 1998 to 22nd August 2000 in the show cause notices. The respondent filed appeal against the aforesaid order of the Commissioner before the CEGAT, Mumbai. It is clear from the above that issue pertained to the applicability of Notification nos. 2/95 or 8/97. As noted above, as per the respondent/assessee it is Notification no. 8/97 which is applicable whereas the Revenue took the position that Notification no.2/95 is applicable in the instant case. The Order-in-Original also decided that the Notification No.2/95 would be applicable. Therefore, in the appeal filed by the respondent, it took the plea that Notification 8/97 is applicable and the finding of the Commissioner that Notification 2/95 was applicable was erroneous.

Pertinently, during the pendency of the said appeals, the respondent filed miscellaneous application wherein it sought to raise certain additional grounds. One of the grounds was that even if Notification 8/97 is applicable, valuation of the goods should be worked out under Rule 7 of the Customs Valuation Rules, 1988. This miscellaneous application was opposed by the Department by filing its objections, inter alia, stating that it was not the issue raised in reply to the show cause notices and was not the subject matter of the Order-in-Original. Further, it was not a pure question of law and therefore, the respondent should not be allowed to raise this additional ground. It appears that the aforesaid miscellaneous application was heard along with the main appeal, inasmuch as it is decided in the impugned order itself passed by the CEGAT. The CEGAT has allowed the respondent to raise the aforesaid ground and thereafter recorded its finding/opinion thereupon as well. In this manner, vide impugned judgment dated 14.2.200 rendered by the Tribunal, it has decided two issues. The first issue was as to which Notification would be applicable. That issue has been decided against the respondent and the Order-in-Original of the Commissioner holding that Notification No.2/95 is applicable, is upheld.

Thereafter, the Tribunal discussed the issue of valuation and recorded a finding that in the present case it was not possible to determine the transaction value in terms of Rule 4. Rule 3 of the Customs Valuation Rules provides that if the transaction value would be determined under Rule 4 then the valuation has to be determined in accordance with Rules 5 to 8 sequentially. Going by the aforesaid provision the Tribunal discussed the applicability of Rules 5 and 6 and opined that even these rules would not apply in the given situat