Whether cut flowers manufactured by 100% EOU and cleared to DTA are liable to duty?

PJ/CASE LAW/2015-16/2807

Case:-COMMISSIONER OF CENTRAL EXCISE, PUNE-I VERSUS HORIZON FLORA INDIA LTD.

Citation:-2015 (323) E.L.T. 177 (Tri. - Mumbai)

Brief facts:-Common issue is involved in these appeals therefore are being taken up together.
The respondent is a 100% EOU clearing cut flowers to Domestic Tariff Area without payment of duty. Show cause notices were issued demanding duty in respect of the cut flower to DTA. The Adjudicating Authority confirmed the demand and imposed the penalties. The respondent filed appeals before the Commissioner (Appeals) and by common impugned order after relied upon the decision of the Tribunal in the case of Cosco Blossoms Pvt. Ltd.v. Commissioner of Customs reported in 2004 (164)E.L.T.423 (Tribunal)held that demand of duty is not sustainable in respect of cut flowers grown by 100% EOU and cleared for DTA as cut flowers are non-excisable.

Appellant’s contention:-Revenue filed these appeals challenging the impugned order passed by Commissioner (Appeals). Revenue relied upon the decision of the Tribunal in the case of L.R. Brothers, Indo Flora Ltd.v. Commissioner of Customs, Meerut reported in 2009 (235)E.L.T.324 (Tri.-Del.)to submit that the Tribunal after taking into consideration the decision of Cosco Blossoms Pvt. Ltd. relied upon by the Commissioner (Appeals) in the impugned order held that cut flowers manufactured by 100% EOU cleared to DTA are liable to duty.

Respondent’s contention:- The contention of respondent is that the Revenue is challenging the impugned order on the ground that as the cut flowers are not liable to duty therefore the respondents are liable to pay duty on inputs which are procured without payment of duty as per the provisions of Notification No. 126/94-Cus., dated 3-6-1994. Therefore the present appeals are beyond the scope of show cause notice.

Reasoning of judgment:- Hon’ble Tribunal have gone through the show cause notice whereby duty is demanded in respect of cut flowers cleared to DTA by 100% EOU.
The Adjudicating Authority confirmed the demand however the Commissioner (Appeals) in the impugned order set aside the demand on the ground that the cut flowers are not excisable hence not liable to duty. Now the issue is whether the cut flowers are manufactured by 100% EOU and cleared to DTA are liable to duty, this issue came before the Tribunal in the case of L.R. Brothers, Indo Flora Ltd. (supra) relied upon the Revenue and the Tribunal held as under :-
“5. We have carefully considered the submissions made from both the sides. Irrespective of whether the DTA clearances of cut-flowers were in contravention of the EXIM Policy or otherwise, the cut-flowers being non-excisable, goods, their DTA clearance would attract, in terms of the provisions of Para 3(a) of the exemption Notification No. 123/94-Cus., only the Customs Duty involved on the inputs used in the production of the cut-flowers. The point of dispute is as to whether the Customs Duty payable on the inputs used in the production of the cut-flowers which had been cleared to DTA, is to be taken as an amount equal to Customs Duty chargeable on the import of cut-flowers, as such, or it should be the actual Customs Duty on the inputs used in the production of cut-flowers cleared to DTA.
5.1 Para 3(a) of the Notification No. 126/94-Cus. during the period of dispute read as under :-
“Notwithstanding anything contained in this notification the exemption contained herein shall also apply to the said goods which on importation into India are used for the purposes of production, manufacture or packaging of articles and such articles (including rejects, waste and scrap material arising in the course of production, manufacture or packaging of such articles), even if not exported out of India, are allowed to be sold in India under and in accordance with the Export-Import Policy and in such quantity and subject to such other limitation and conditions, as may be specified in this behalf by the Development Commissioner, on payment of duty of excise leviable thereon under Section 3 of the Central Excises and Salt Act, 1944 (1 of 1944) or where such articles (including rejects, waste and scrap material) are not excisable, on payment of Customs duty on the said goods used for the purpose of production, manufacture or packaging of such articles in an amount equal to the Customs duty leviable on such articles as if imported as such.”
5.1.1 With effect from 18-5-2001, by amending Notification No. 56/2001-Cus., the Notification No. 126/94-Cus. was amended and the old Para 3(a) was substituted by new Para 3(a). The new Para 3(a) reads as under :-
“Notwithstanding anything contained in this notification the exemption contained herein shall also apply to the said goods, which on importation into India are used for the purposes of production, manufacture or packaging of articles and such articles (including rejects, waste and scrap material arising in the course of production, manufacture or packaging of such articles), even if not exported out of India, are allowed to be sold in India under and in accordance with the Export-Import Policy and in such quantity and subject to such other limitation and conditions, as may be specified in this behalf by the Development Commissioner, on payment of duty of excise leviable thereon under Section 3 of the Central Excises and Salt Act, 1944 (1 of 1944) or where such articles (including rejects, waste and scrap material) are not excisable, Customs duty equal in amount to that leviable on the inputs obtained under this notification and used for the purpose of production, manufacture or packaging of such articles, which would have been paid, but for the exemption under this notification, shall be payable at the time of clearance of such articles.”
5.2 From reading of Para 3(a) of the Notification No. 126/94-Cus. as it existed during the period of dispute i.e. during period prior to 18-5-2001 and as it existed during period w.e.f. 18-5-2001, it is clear that during the period of dispute, the notification contained a machinery provision for determining, the Custom Duty chargeable on the inputs used in the production of non-excisable goods cleared to DTA and as per this machinery provision, the duty was to be in an amount equal to the Customs Duty chargeable on the finished goods, as if imported, as such. However, after the amendment of this Notification w.e.f. 18-5-2001, the duty on the inputs used in the production of non-excisable goods cleared to the DTA was to be calculated on actual basis. The amendment to the Notification No. 126/94-Cus. w.e.f. 18-5-2001 by the Notification No. 56/2001 can have only prospective effect and it cannot be given retrospective effect. In view of this, during the period of dispute, Customs duty on the inputs used in the production of cut-flowers cleared to DTA has to be calculated as per the provisions of the Notification, as it existed during that period.
The Tribunal’s judgment in the case of Vikram Ispat (supra) is not applicable to the fact of this case, as in the present case what is being charged in respect of DTA clearances of the cut-flowers is not the Customs Duty on the cut-flowers, but the Customs Duty on the inputs used in the production of those cut-flowers, which as per the provisions of Notification, as it existed at that time, was equal to the Customs Duty chargeable on the import of cut-flowers, as such. In the Tribunal’s judgment in case of Zygo Flowers Ltd. (supra) [2006 (196)E.L.T.431 (Tri.-Bang.)] and Cosco Blossoms Pvt. Ltd. (supra), the implications of the wording of Para 3(a) of the exemption notification during the period of dispute - “or where such articles (including rejects, waste and scrap material) are not excisable, on payment of Customs Duty on the said goods used for the purpose of production, manufacture or packaging of such articles in an amount equal to the Customs Duty leviable on such articles, as if imported, as such”, had not been considered. If the Appellant’s view accepted, the words “in an amount equal to the Custom Duty leviable on such articles, as if imported, as such” would become redundant. It is well settled principle of interpretation of statute that a statute has to be construed without adding any words to it or subtracting any words from it and an interpretation which makes a part of the statute redundant has to be avoided.
In view of the above discussion, they hold that the Customs Duty has been correctly charged in respect of DTA clearances of the cut-flowers and as such they find no infirmity in the impugned order. The appeal is accordingly dismissed”.
As the issue is now settled that cut flowers cleared to DTA by 100% EOU are liable to duty. Therefore, in view of the above decision of the Tribunal, the impugned orders are set aside and appeals filed by the Revenue are allowed and the orders passed by the Adjudicating Authority are restored.

Decision:-Appeals allowed.

Comment:-The gist of the case is that Customs duty is payable on the inputs gone into production of non-excisable goods cleared into DTA by 100% EOU. This view is supported by the decision given in the case of L.R. Brothers, Indo Flora Ltd.

Prepared by:- Monika Tak

Comments

PJ/CASE LAW/2015-16/2807

Post a Comment

Query