[Order per : P.G. Chacko, Member (J) (Oral)]. - This appeal is against an order passed by the Commissioner in adjudication of two show cause notices covering the period January-December, 2001. The impugned order confirmed the entire demand of duty raised in the show cause notices and imposed a penalty of Rs. 15 lakhs on the assessee under Rule 173Q of the erstwhile Central Excise Rules, 1944 and Rule 25 of the erstwhile Central Excise (No. 2) Rules, 2001.
2.The appellants are a 100% Export Oriented Undertaking (EOU) engaged in the manufacture of various optical instruments, components, assemblies and sub-assemblies falling under Chapter 90 of the CETA schedule. For the manufacture of these goods, during the material period they imported various raw materials, consumables, spares and accessories without payment of duty under Notification No. 53/97-Cus., dated 3-6-1997 (as amended) and also procured indigenous goods without payment of duty claiming the benefit of Notification No. 1/95-C.E., dated 4-1-1995 (as amended). They cleared their products by way of exports in discharge of export obligation under the EOU scheme and by way of sales to domestic tariff area (DTA) with permission from the Development Commissioner MEPZ, Chennai. The demand of duty in this case is on their clearances to DTA for the period January-December, 2001, which were effected by availing exemption under Notifications 2/95-C.E., dated 1-4-1995, 39/96-Cus., dated 23-7-1996 and 51/96-Cus., dated 23-7-1996. Relevant particulars of these clearances are tabulated below :
| S. No. | Category of Customers | Period | Value of goods cleared Rs. | Exemption availed under Notification |
| 01 | Defence Research Development Organisation (DRDO) | Jan.-Mar., 2001 | 1,35,000 | No. 2/95-C.E., dated 4-1-95 read with Notification No. 39/96-Cus., dated 23-7-96 |
| 02 | Public Funded Research Institutions (PFRIs) | Jan.-Mar., 2001 & Apr.-Dec., 2001 | 76,38,058 | No. 2/95-C.E., dated 4-1-95 read with Notification No. 51/96-Cus., dated 23-7-96 |
| 1,55,98,500 |
| 03 | District Forest Officer, Erode | Jan.-Mar., 2001 | 85,000 | No. 39/96-Cus., dated 23-7-96 |
| 04 | Thermal Power Station, Tuticorin | Jan.-Mar., 2001 | 1,55,000 | No. 39/96-Cus., dated 23-7-96 |
| 05 | Others (DTA) clearance on payment of duty | Jan.-Mar., 2001 | 1,16,000 | No. 2/95-C.E., dated 4-1-95 |
3.The Department demanded duty on the above clearances on the following grounds :-
(a) that the value of DTA clearances exceeded 50% of FOB value of physical exports in violation of Clause (b) of 3rd proviso in Notification No. 2/95-C.E., dated 4-1-1995 during the above two financial years (2000-01 & 2001-02);
(b) that for the clearances to DRDO, Thermal Power Corporation and District Forest Officer, Erode, the assessee was not eligible for exemption claimed under Notification No. 39/96-Cus., dated 23-7-96, as the said Notification was applicable only to the goods imported into India not to the goods manufactured in India; and
(c) that for the clearance to Public Funded Research Institutions (like LEOS, Bangalore, BARC, Mumbai etc.), the assessee was not eligible for the exemption claimed under Notification No. 51/96-Cus., dated 23-7-96 as the said Notification was applicable only to the goods imported into India not to the goods manufactured in India.
The assessee, in their replies to the show cause notices, contended, inter alia, that in respect of goods manufactured by EOU and cleared to DTA, duty was leviable in terms of the first proviso to Section 3(1) of the Central Excise Act, and accordingly, the amount of duty to be collected on such clearances should be equivalent to the aggregate of duties of customs leviable under the Customs Act on like goods if imported into India and, further, that in quantification of such aggregate of duties, the effective rates of duty as applicable should be considered. The assessee also contended that, in respect of goods cleared to PFRIs in DTA, the benefit of exemption under Notification No. 51/96-Cus., should be given while determining the duty liability under the first proviso to Section 3(1). It was also contended that the clearances made to Tamil Nadu Electricity Board’s Thermal Power Station and Tamil Nadu Forest Department’s District Forest Office were covered by Notification No. 39/96-Cus., as these clearances should be treated as “imports” by the State Government. The clearances made to Defence Research Development Organisation (DRDO) under the Ministry of Defence, Government of India were against valid permissions issued by the Development Commissioner under Para 9.9(b) of the Exim Policy, 1997-2002 and the same were also covered by Notification No. 39/96-Cus. Thus the assessee considered all the DTA clearances to be exempt from payment of duty. They also pointed out that the proceedings initiated against them for recovering duty, for an earlier period, on identical grounds were dropped by the Commissioner of Central Excise. Trichy and that the Department accepted the decision of the said Commissioner. In an alternative plea, the assessee claimed abatement of duty from sale price in terms of Section 4(4)(d)(ii) of the Central Excise Act for the purpose of determination of assessable value of the goods. Case law was cited in support of the contentions. Ld. Commissioner rejected the assessee’s arguments and confirmed the demand of duty against them and imposed penalty on them. Hence this appeal.
4.Heard both sides. Ld. Counsel for the appellants referred to Stay Order No. 151/2004, dated 26-3-2004 passed by this Bench in the present appeal, since reported in (Tri.) = 2004 (63) RLT 183 (CESTAT-Chennai), and relied on the prima facie view taken therein. Counsel pointed out that the Commissioner of Central Excise (Trichy) had already dropped a similar demand of duty against the appellants as per Order No. 6/2001, dated 25-7-2001 [ (Settlement-Commission)] and that the Department accepted the said order and, therefore, there could be no valid defence for the impugned order. There was no dispute of the fact that duty liability on DTA clearances of 100% EOU was governed by the proviso to Section 3(1) of the Central Excise Act. According to this proviso, the excise duty to be levied and collected on such clearances should be an amount equal to the aggregate of duties of Customs leviable under the Customs Act or any other law for the time being in force on like goods if imported into India. But any duty under the Customs Act could be levied only at such rate as specified in the Tariff read with any Notification issued under Section 25 of the said Act. In the instant case, ld. Counsel pointed out, the goods cleared to public funded research institutions were exempt from payment of duty under Notification No. 51/96-Cus., and those cleared to Defence Research Development Organisation (DRDO) were exempt under Notification No. 39/96-Cus. The appellants were also eligible for partial exemption of their DTA clearances from payment of duty of excise under Notification No. 2/95-C.E. No part of the DTA clearances was chargeable to duty, Counsel argued. In this connection, it was further submitted that the benefit of exemption under Notification No. 2/95-C.E., had been wrongly denied to the assessee by the Commissioner on the ground of their having claimed the benefit of the Customs Notifications. Where more than one Notification were applicable, it was the assessee’s option to choose the one which granted higher benefit. It was in accordance with this settled principle that the assessee chose to take the benefit of the Customs Notifications in preference to the Central Excise Notification. The denial of the benefit of the Customs Notifications to the DTA clearances in question was not sustainable in view of case law. In this connection, reliance was placed on the Tribunal’s decision in Akar Tools Ltd. v. CCE - (Tri.-Mum.), wherein the benefit of exemption under Notification No. 13/86-Cus., as amended by Notification No. 83/90-Cus., was extended to DTA clearances from a 100% EOU. The Counsel claimed that the Department had accepted the Tribunal’s decision in Akar Tools (Supra) and hence was not justified in taking a stand inconsistent therewith. It was now not open to the Revenue to say that the Customs Notifications would not be reckoned in determining duty liability on DTA clearances from EOU. Ld. Counsel also referred to certain Exim Policy clarifications and submitted that, as clarified in the Ministry of Finance Circular No. 29/2003-Cus., dated 3-4-2003, Central Excise duties would be leviable on clearances by EOU to DTA, in terms of the proviso to Section 3(1) of the Central Excise Act read with relevant exemption Notifications. It was also clarified in the same Circular that such clearances would be treated as “deemed exports” of the EOU. Counsel argued that, in terms of these clarifications, the benefit of exemption under the Customs Notifications would be available to the goods cleared by the appellants to DTA.
5.It was also argued that Order No. 6/2001, dated 25-7-2001 of the Commissioner of Central Excise, Trichy, in favour of the same assessee holding that the benefit of exemption under the Customs Notifications were available to their DTA clearances for an earlier period operated as res judicata against the Revenue in the instant case. In an alternative plea, ld. Counsel submitted that the appellants were entitled to abatement of duty from sale price of the goods cleared to DTA, in terms of Section 4(4)(d)(ii) of the Central Excise Act. This benefit was wrongly denied to them by the Commissioner on the premise that it was not admissible prior to 14-5-2003 (the date on which an ‘explanation’ was added to Section 4(1) of the Central Excise Act by the Finance Act, 2003). It was contended that the benefit of abatement of duty from sale price was available to the assessee even under the pre-existing provisions of Section 4(4)(d)(ii) as held by the Tribunal’s Larger Bench in the case of Srichakra Tyres Ltd. v. CCE - since affirmed by the Supreme Court. Ld. Counsel also challenged the penalty imposed on the assessee by the Commissioner.
6.Ld. JCDR admitted that the Commissioner of Central Excise, Trichy had taken a view in favour of the same assessee for another period. The said Commissioner had proceeded on the premises that duty was leviable under Section 12 of the Customs Act on the goods sold by 100% EOU to DTA. Accordingly, he held that Notifications Nos. 51/96-Cus. and 39/96-Cus., were applicable to DTA clearances. The said commissioner further held that Notification No. 2/95-C.E., was not applicable. JCDR submitted that the view taken by the Commissioner (Trichy) was contrary to the view taken by the Tribunal’s Larger Bench in the case of Himalaya International v. CCE - (Tri.-LB), wherein it was held that, in respect of clearances to DTA by EOU, only the proviso to Section 3(1) of the Central Excise Act was applicable. Referring to ld. Counsel’s plea of res judicata, ld. JCDR argued that the rule of res judicata was not applicable to quasi-judicial authorities, and, therefore, the order of the Commissioner of Central Excise, Trichy was not liable to be followed as a binding precedent by the Respondent-Commissioner. In this connection, reliance was placed on the Karnataka High Court’s judgment in West Coast Paper Mills v. Superintendent of Central Excise - (Kar.), wherein it was held that the principle of res judicata was not applicable to adjudication proceedings before Revenue authorities. JCDR also relied on the Tribunals decision in CC, Chennai v. Hewlett Packard Ltd. - , wherein it was observed that the principle of res judicata did not apply in taxation matters. He also relied on the Apex Court’s judgment in Swaraj Mazda Ltd. v. CCE, Chandigarh - (S.C.), wherein it was held that the Tribunal was not precluded from deciding a question on merits on account of an earlier decision for an earlier period. Adverting, again, to the main issue, ld. JCDR pointed out that the case of Akar Tools cited by ld. Counsel was distinguishable inasmuch as, in that case, the issue was different and the same pertained to countervailing duty. It was pointed out that the wording of the proviso to Section 3(1) of the Central Excise Act did not admit of an argument that, in the quantification of duty leviable on DTA clearances of EOU, exemption Notifications issued under Section 25 of the Customs Act should be taken into account. The said proviso did not contain the expression “read with any Notification”, which was present only in Notification No. 2/95-C.E. It was, again, the argument of ld. JCDR that, in any case, a conditional Notification was not to be taken into consideration while computing the quantum of duty to be levied under the proviso to Section 3(1). Notifications Nos. 39/96-Cus. and 51/96-Cus., were both conditional in the sense that these were importer-specific. Therefore, the Notifications were not to be taken into account in the computation of duty leviable under the above proviso. In this connection, JCDR relied on Para 11 of the Supreme Court’s judgment in Hyderabad Industries Ltd. v. UOI - (S.C.). With regard to the appellants’ claim under Notification No. 2/95-C.E., ld. JCDR submitted that they were not entitled to the benefit of this Notification as they had opted out of it before the adjudicating authority. In this connection, he relied on the Tribunal’s decision in G.C.U.L. Ltd. v. CCE, Delhi-III - (Tri.-Del.), wherein the benefit of Notification No. 2/95-C.E., was denied to the assessee (100% EOU) on the ground that any claim for such benefit had not been raised by them earlier. Ld. JCDR pointed out that the civil appeal filed by M/s. G.C.U.L. Ltd. against the Tribunal’s decision was dismissed by the Supreme Court vide (S.C.). The Review Petition filed by them against the Supreme Court’s judgment was also dismissed by the Court vide (S.C.).
7.In his rejoinder, ld. Counsel elaborately referred to Notification No. 2/95-C.E., and submitted that it was clear from the expression “any other Notification” used in proviso (2) to the said Notification that Custom Notifications were also to be taken into account while computing the quantum of duty to be levied on goods cleared to DTA by 100% EOU. Ld. Counsel also countered the JCDR’s argument that any conditional Notification was not to be considered in such quantification of duty, by submitting that it was a conditional Notification which was taken into account by the Tribunal in the case of Akar Tools. According to ld. Counsel, the end-use condition of Notification No. 83/90-Cus., which was considered in the case of Akar Tools was on par with the condition stipulated under Notification No. 51/96-Cus., that the goods should be supplied to and used by a public funded research institution.
8.We have given careful consideration to the rival submissions. Two issues were considered by the lower authority. The first issue considered by it was whether the quantum of DTA clearances during the period of dispute was in excess of the assessee’s entitlement. We find that this issue was abandoned by the Commissioner himself, with the result that the Department’s allegation that the assessee’s DTA clearances were in excess of their entitlement stood rejected. The second issue framed by the lower authority was whether the exemption under Notification No. 51/96-Cus. and Notification No. 39/96-Cus., was available to the assessee’s clearances to DTA. On this issue, we note, the Commissioner of Central Excise, Trichy in his Order No. 6/2001, dated 25-7-2001 held in favour of the same assessee and this decision has been accepted by the Department. Ld. Counsel has argued that the decision of the Commissioner, Trichy is a binding precedent. This argument has been rebutted by ld. JCDR on the basis of case law. We are inclined to accept the JCDR’s argument that the principle of res judicata is not applicable to quasi-judicial proceedings, particularly, in Revenue matters. In this connection, the Karnataka High Court’s ruling in West Coast Paper Mills (Supra), which was relied on by this Bench in the case of Hewlett Packard Ltd. (Supra), is binding on us. Accordingly, we think, the challenge to the impugned order passed by the respondent-Commissioner needs to be examined on its merits.
9.Both sides have agreed that the appellants’ duty liability has to be determined in terms of the proviso to Section 3(1) of the Central Excise Act. The duty payable is the aggregate of duties of Customs leviable on like goods when imported into India. Now, the question is whether, in the computation of aggregate of duties of Customs leviable on like goods when imported into India, exemption Notifications Nos. 39/96-Cus. & 51/96-Cus., should be taken into account. In the case of Akar Tools (Supra), a coordinate Bench of this Tribunal took into account exemption Notification No. 83/90-Cus., dated 20-3-1990 in determining as to whether any duty of excise was leviable on waste and scrap manufactured and cleared to DTA by the assessee (100% EOU) during the period of dispute. The said Notification had exempted such scrap, when imported into India for use in electric arc furnace or induction furnace, from so much of the duty of customs leviable thereon as in excess of the amount calculated at the rate of 20% ad valorem. Following the Supreme Court’s judgment rendered in Goodyear India Ltd. v. CC, Bombay - (S.C.), the Tribunal held that the rate of duty had to be calculated after granting the assessee the benefit of exemption under Notification No. 83/90. There is nothing on record to indicate that the Tribunal’s decision in Akar Tools (Supra) was set aside by any competent Court. Notification No. 83/90 considered in that case was a conditional Notification which granted exemption from payment of basic customs duty on waste & scrap of iron and steel when imported into India for use in electric arc furnace or induction furnace. Notifications Nos. 39/96-Cus. and 51/96-Cus., being considered in the instant case are also conditional Notifications. It is pertinent to note that there is similarity between the conditions under Notifications 83/90 and 51/96 inasmuch as both relate to end-use of goods. The goods (waste & scrap) under Notification 83/90 were to be used for melting in furnace and the goods supplied to PFRI etc. under Notification No. 51/96 were to be used for research purposes. Even otherwise, any difference in the nature of conditions prescribed in the Notifications, is not a valid factor for distinguishing the instant case from the case of Akar Tools. The relevant point is that a conditional Notification was reckoned by this Tribunal for quantifying the duty to be levied on goods cleared by a 100% EOU to DTA. We are inclined to follow the ratio of the decision in Akar Tools for holding that Notification Nos. 39/96-Cus. and 51/96-Cus., are liable to be taken into account while computing the duty to be levied in terms of the proviso to Section 3(1) of the Central Excise Act on the goods cleared by the appellants to DTA during the period of dispute as long as it is not the Revenue’s case that the conditions under the Notifications were not satisfied in the facts of this case. Though, as pointed by ld. JCDR, the order passed by the Commissioner of Central Excise, Trichy in favour of the same assessee for another period cannot operate as res judicata for the proceedings of the respondent-Commissioner, it, nevertheless, needs to be mentioned that the Revenue in the instant case has been incapacitated to take a contra view inasmuch as they have not appealed against the above order.
10.Insofar as Notification No. 2/95-C.E. is concerned, we find, it has been conceded at the bar, in view of the Tribunal’s decision in G.C.U.L case affirmed by the Supreme Court, that the benefit of this Notification cannot be claimed at this stage. Hence we need not examine the applicability of this Notification to the appellants’ case.
11.For the reasons recorded, we hold that the appellants were not liable to pay duty on the subject clearances of goods to DTA. Hence no other issue survives.
12.In the result, the impugned order is set aside and this appeal is allowed.
(Order pronounced in open Court on 6-1-2005)