SC reiterates: Definition of one statute having a different object, purpose & scheme cannot be applied mechanically to another statute (Read Judgment)

On 6^th March’2020, the Supreme Court Bench comprising of Chief Justice of India S.A BOBDE, Justice B.R. Gavai & Justice Surya Kant in the case of Commissioner of Central Excise, Nagpur vs. M/s Universal Ferro & Allied Chemicals Ltd. & Anr., while disposing the appeal ruled that one statue having a different object, purpose and scheme cannot be applied mechanically to another statue.

FACTS:

The respondent (UFAC) is extremely 100% Export Oriented Unit (EOU) approved by the Secretariat for industrial approvals. The respondent was engaged in the manufacture/processing and clearance of Ferro Manganese and Silicon Manganese falling under the Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985.

The Central Intelligence Unit of the Central Excise Headquarters visited the unit of UFAC on getting information from the Central Excise Audit party that UFAC being an EOU was indulging in the job work activity of conversion of raw material.

In the view of the revenue, the same was not allowed in terms of EXIM Policy (1997-2002).

SCRUTINY of RECORDS

It was noticed by the officer that UFAC having a MOA with TISCO for conversion of Manganese ore/Coke into Prime Silicon Manganese. 

SHOW CAUSE NOTICE

The Commissioner, Central Excise & Customs, issued a show cause notice to the UFAC dated 9.10.2001Z in respect of the Silicon Manganese cleared during September 2000.

It was stated in the Show cause notice that:

1.  in the Circular issued by the Central Board of Excise & Customs, had permitted that EOUs to undertake job-work on behalf of DTA unit only in textile, readymade, garments, agro processing and grantile sectors.
2.  by another circular, it was extended to EOUs to undertake job-work on behalf of DTA unit in aquaculture, animal husbandry, electronics hardware and software sectors.
3. the sector in which respondent- Assessee had carried out the job works was not covered by either of the circulars.
4. as to why the said Silicon Manganese should not be charged to full Central Excise duty.

WRITTEN REPLY BY UFAC

UFAC submitted it’s written replies, stating:

1. no violation of Central Excise has been alleged.
2. that the removal in the DTA was in accordance with the permission granted by the development Commissioner.

ORDER BY COMMISSIONER

The Commissioner, while passing the order came to a finding:

1. UFAC had contravened the provisions of the EXIM policy.
2. That the sector, in which UFAC had undertaken the job work was not covered by the Circular dated 14.9.1998.

Certain orders was passed by the Commissioner:

1. Confirmed the order for Rs 11,56,08,497/- along with interest.
2. Imposed Penalty of Rs 50 lakhs on UFAC.
3. That the goods of Silicon Manganese were liable for confiscation.
4. Personal Penalty of Rs. 5 Lakh was also imposed on the Chairman of UFAC.

APPEAL BEFORE CUSTOMS, EXCISE, SERVICE TAX APPELLATE TRIBUNAL

The Commissioner order was set aside.

SUPREME COURT

Supreme Court held that:

1. It is a settled principle in excise classification that the definition of one statute having a different object, purpose and scheme cannot be applied mechanically to another statute.
2. It is a settled principle of law that while interpreting a provision due weightage will have to be given to each and every word used in the statute.
3. Clause(h) of Section 2 of Central Excise Act, 1944 specifically defined the terms ‘sale’ and ‘purchase’. The definition makes it clear that when there is a transfer of possession of goods in the ordinary course of trade or business either for cash or for deferred payment or any other valuable consideration, the same would be covered by terms ‘sale’ and ‘purchase’ within the meaning of the Central Excise Act, 1944.
4. Failure on the part of the Commissioner, who passed the order-in-original, has resulted in passing an erroneous order.
5. Central Notifications provides grant of exemption to the EOUs from the payment of duties, which are in excess of what is leviable under sub-section (1) of section 3 of Central Excise Act, 144 on like goods, produced or manufactured in India.
6. That, transaction between the UFAC and TISCO satisfies all the three conditions:

1. The goods are produced and manufactured by UFAC,100% export- oriented unit.
2. They are wholly manufactured wholly from the raw materials produced or manufactured in India.
3. They have been allowed to be sold in India in accordance with the provisions of paragraph 9.9(b) of the EXIM Policy.

Supreme Court stated that CESTAT had not committed any error in reversing the order and dismissed the appeal.

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