Bombay High Court
Eco Valley Farms & Foods Limited vs The Commissioner Of Central ... on 14 December, 2012
Bench: J.P. Devadhar, M.S. Sanklecha
cexa46-12-judg
agk IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CENTRAL EXCISE APPEAL NO.46 OF 2012
ECO Valley Farms & Foods Limited,
an existing company within the
meaning of the Companies Act, 1956
having its registered office and
factory at GAT No.323/331, Village
Bakori, Taluka Haveli, Pune - 412 207 ..Appellant.
Versus
The Commissioner of Central Excise,
Pune III Commissionerate, having its
office at 1st Floor, ICE House, 41-A,
Sassoon Road, Opposite Wadia College,
Pune - 411 001 ..Respondent.
Mr.V Sridharan, Senior Counsel with Mr.Prakash Shah, Mr.Jas Sanghavi
i/by PDS Legal for the appellant.
Mr.Pradeep Jetly with Mr.Jitendra B. Mishra for the respondent.
CORAM : J.P. Devadhar & M.S. Sanklecha, JJ.
Reserved on : 25th October 2012.
Pronounced on : 14th December 2012.
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ORAL JUDGMENT : (Per J.P. Devadhar, J.)
1. Although the appellant - assessee has raised several
questions in this appeal, in our view, the question that really falls for
consideration is this :-
"Once the Commissioner of Central Excise (A)
holds that if the excise duty payable on fresh mushrooms
under Section 3(1) of the Central Excise Act, 1944 read
with the Schedule to the Central Excise Tariff Act, 1985 is
Nil, then, the excise duty payable on DTA clearances of
fresh mushrooms by a 100% EOU covered under the
proviso to Section 3(1) of the Central Excise Act, 1944
shall also be Nil, then, is it open to the Assessing Officer
to issue notice under Section 11A of the Central Excise
Act, 1944 and confirm the demand of duty contrary to
the decision of the Commissioner of Central Excise (A) ?
2. The appeal is admitted on the above question and taken up
for hearing by consent of both the parties.
3. The facts relevant for the purposes of this appeal are that
the assessee had established a 100% Export Oriented Unit ('EOU')
under the EOU Scheme framed by the Government, at Haveli, District
Pune, inter alia for the purpose of cultivation, manufacture and export
of fresh / processed mushrooms. Under the EOU Scheme framed by the
Government, the assessee subject to conditions could import capital
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goods duty free to the extent permitted by the Development
Commissioner, by availing exemption under Exemption Notification
No.13/81-cus dated 9th February 1981 / 53/03-cus dated 31st March
2003 or 53/97-cus dated 3rd June 1997, as the case may be.
Alternatively, the assessee could procure indigenous capital goods duty
free by availing exemption notification under notification No.1/95-CE
dated 4th January 1995 or 22/03-CE dated 31st March 2003. Under the
100% EOU Scheme, the assessee was obliged to export the entire
quantity of processed fresh mushrooms and could effect clearances of
processed / fresh mushrooms in the domestic tariff area ('DTA') only the
extent permitted by the Development Commissioner on achieving the
Net Foreign Exchange Percentage Earning ('NFEP').
4. Admittedly, the assessee has imported capital goods
required for the unit by availing the duty exemption under the
notifications prevailing at the relevant time. Admittedly, the assessee
has not imported raw materials and in respect of the raw materials
procured domestically for the purpose of manufacturing the processed /
fresh mushrooms the assessee has not availed any exemption.
5. The 100% EOU set up by the assessee commenced
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production with effect from 1st April 1997. The dispute in the present
case, relates to the duty liability in respect of DTA clearances of fresh
mushrooms effected by the assessee.
6. Section 3(1) of the Central Excise Act, 1944 ('1944 Act' for
short) provides that the excise duty on excisable goods shall be levied
and collected at the rates specified in the Schedule to the Central Excise
Tariff Act, 1985 ('1985 Act'). However, the proviso to Section 3(1) of
the 1944 Act provides that in respect of DTA clearances of excisable
goods processed / manufactured by a 100% EOU, the excise duty shall
be levied and collected at the rate equivalent to the aggregate of the
duties of customs which would be leviable under the Customs Act, 1962
or any other law for the time being in force on like articles imported in
to India. The rate of customs duty on the imported articles is prescribed
under the Customs Tariff Act, 1975 ('1975 Act').
7. During the period from April 1997 to December 1998 no
excise duty was levied on the DTA clearances of fresh mushrooms
effected by the assessee after obtaining permission from the
Development Commissioner as it was considered that the fresh
mushrooms were not excisable. However, by four show-cause notices
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dated 4th January 1999, 11th May 1999, 31st August 1999 and 12th
December 1999 issued under Section 11A of the 1944 Act, the assessee
was called upon to show cause as to why excise duty equivalent to
customs duty should not be levied and collected in respect of the DTA
clearances of fresh mushrooms effected during the period from 1 st June
1998 to 30th November 1999 on the ground that fresh mushrooms
classifiable under Chapter 7 heading No.0701.00 were liable to pay Nil
rate of duty under the Central Excise Tariff but as per the proviso to
Section 3(1) of the 1944 Act, in respect of DTA clearances of fresh
mushrooms, the assessee, a 100% EOU was liable to pay excise duty
equivalent to the aggregate of the duties of customs that would be
leviable on the imported fresh mushrooms.
8. The assessee replied to the said show-cause notices by
contending that fresh mushrooms were not covered under heading
0701.00 and, hence, were not excisable goods under the 1985 Act and,
therefore, demanding duty by invoking the proviso to Section 3(1) of
the 1944 Act does not arise. Alternatively it was contended that even if
it is construed that fresh mushrooms were excisable goods, since the
rate of excise duty on fresh mushroom under the 1985 Act being 'nil',
no excise duty equivalent to customs duty could be demanded on fresh
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mushrooms cleared in DTA by the assessee. The Assessing Officer (AO)
accepted the contention of the assessee and by his order dated 16 th
November 1999 dropped the proceedings initiated against the assessee
under the aforesaid four show-cause notices.
9. The Revenue sought review of the aforesaid order dated 16 th
November 1999 and accordingly filed an appeal before the
Commissioner of Central Excise (A) against the order dated 16th
November 1999. By an order dated 27th May 2004 the Commissioner of
Central Excise (A) dismissed the appeal filed by the Revenue by holding
firstly, that the fresh mushrooms were not covered under heading
0701.00 of the Central Excise Tariff and, hence, fresh mushrooms being
not excisable no duty could be demanded on clearance of the fresh
mushrooms and secondly, even if it was assumed that fresh mushrooms
were covered under Chapter 7 of the Central Excise Tariff, since excise
duty on mushrooms covered under heading 0701.00 or under heading
0702.00 of the Central Excise Tariff being Nil, excise duty in respect of
DTA clearances of fresh mushrooms effected by the assessee shall also
be Nil and, therefore, the AO was not justified in demanding excise duty
equivalent to the aggregate of the duties of customs leviable on fresh
mushrooms imported in to India. Thus, according to the Commissioner
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of Central Excise (A) liability to pay excise duty equivalent to customs
duty on DTA clearances of fresh mushrooms effected by the assessee, a
100% EOU would arise only if some duty was actually payable on fresh
mushrooms under the Central Excise Tariff. In other words, according
to the Commissioner of Central Excise (A), excise duty equivalent to
customs duty under the proviso to Section 3(1) of the 1944 Act was not
payable in respect of DTA clearances of excisable fresh mushrooms, if
the rate of duty on fresh mushroom was Nil under the Central Excise
Tariff. The said decision has been accepted by the Revenue and
subsequent DTA clearances of fresh mushrooms have been allowed
without demanding excise duty equivalent to customs duty payable on
imported mushrooms.
10. By the Central Excise Tariff (Amendment) Act 2004 ('2004
Act'), the six digit entries in the Schedule to the 1985 Act were
rearranged into eight digit entries so as to update the entries in the
Central Excise Tariff with the entries in the Schedule to the Customs
Tariff Act, 1975. The said 2004 Act came into force with effect from
28th February 2005. By a notification No.1/2005 CE dated 24th
February 2005 the Revenue clarified that the 2004 amendment brought
out only the technical changes and not substantive changes in the
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Central Excise Tariff and, therefore, all the existing notifications would
continue to apply even after the 2004 Act. By a circular No.808/2005
dated 25th February 2005, the Trade was further informed that the
existing entries in the First and Second Schedule to the 1985 Act can be
said to be re-enacted by the 2004 Act.
11. Even after the aforesaid realignment of the entries in the
Schedule to the 1985 Act by the 2004 Act, the Central Excise authorities
continued to allow DTA clearances of fresh mushrooms without levying
excise duty, because, as in the past, even after the 2004 Act, the excise
duty on fresh mushrooms was 'Nil' and in terms of the order passed by
the Commissioner of Central Excise (A) on 27 th May 2004, if excise duty
on fresh mushrooms was Nil, then, in respect of DTA clearances effected
by the assessee covered under the proviso to Section 3(1) of the 1944
Act would also be Nil.
12. However, by a show-cause notice dated 28th December 2007
issued under Section 11A of the 1944 Act, the AO sought to recover
excise duty equivalent to the customs duty leviable on the imported
mushrooms amounting to Rs.1,76,21,021/- in respect of DTA clearances
of fresh mushrooms effected by the assessee during the period from 1 st
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December 2006 to 30th November 2007 by invoking the proviso to
Section 3(1) of the 1944 Act. According to the AO, fresh mushrooms
became excisable on being specifically covered under Entry 07095100
in Chapter 7 of the 1985 Act, with effect from 28 th February 2005 and
though the excise duty payable under that entry was Nil, in respect of
DTA clearances of fresh mushrooms, excise duty was payable at the rate
equivalent to the customs duty in terms of the proviso to Section 3(1) of
the 1944 Act. The assessee objected to the issuance of the show-cause
notice on the ground that the issue was covered by the decision of the
Commissioner of Central Excise (A) dated 27th May 2004.
13. Even before adjudicating the aforesaid show-cause notice
dated 28th December 2007, the AO issued another show-cause notice in
December 2008 demanding excise duty equivalent to customs duty
amounting to Rs.1,38,85,706/- in respect of DTA clearances of fresh
mushrooms effected during the period from 1 st December 2007 to 22nd
June 2008 on the same grounds as specified in the earlier show-cause
notice dated 28th December 2007. The assessee once again objected to
the issuance of the said show-cause notice on the ground that the issue
was covered against the Revenue by the decision of Commissioner of
Central Excise (A) dated 27th May 2004.
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14. However, by an order-in-original dated 27 th February 2009,
the AO confirmed the demand of Rs.3.15 crores raised under the
aforesaid two show-cause notices with penalty amounting to Rs.3.11
crores. Appeal filed by the assessee against the order-in-original dated
27th February 2009 was dismissed by the CESTAT on 31st May 2011.
Being aggrieved by the aforesaid order of CESTAT the assessee has filed
the present appeal under Section 35G of the 1944 Act.
15. Mr.Sridharan, learned Senior Advocate appearing on behalf
of the assessee submitted that so long as the decision of Commissioner
of Central Excise (A) dated 27 th May 2004 to the effect that excise duty
equivalent to customs duty was not payable in respect of the DTA
clearances of fresh mushrooms effected by the assessee was holding the
field, the AO in respect of subsequent DTA clearances could not have
demanded excise duty equivalent to the customs duty and, therefore,
the impugned duty demand confirmed with penalty is liable to be
quashed and set aside. He submitted that the Commissioner of Central
Excise (A) in the aforesaid order dated 27 th May 2004 had specifically
held that even if fresh mushrooms were covered under the 1985 Act,
the excise duty on fresh mushrooms being Nil, the Revenue in respect of
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DTA clearances of fresh mushrooms effected by the assessee could not
demand excise duty equivalent to customs duty under the proviso to
Section 3(1) of the 1944 Act. Mr.Sridharan further submitted that
Section 3(1) of the 1944 Act refers to levy and collection of excise duty
on excisable goods and if the levy is Nil, then, there would be no
collection of duty and in such a case Section 3(1) of the 1944 Act would
not apply and consequently the proviso to Section 3(1) also would not
apply. In any event, counsel for the assessee submitted that the
Revenue is barred from changing its stand retrospectively and,
therefore, the decision of the AO could be applied prospectively and not
retrospectively. Alternatively, it is submitted that since the Revenue is
changing its stand retrospectively, the 100% EOU unit of the assessee
should be permitted / treated to have been relieved from the EOU
Scheme with effect from 1st December 2006, so that with effect from 1st
December 2006, the unit of the assessee ceases to be a 100% EOU and
the clearances effected from that day would be liable for Nil rate of
duty under the Central Excise Tariff and consequently no demand
would be enforceable against the assessee. In support of the above
contentions, several decisions were relied upon by the counsel for the
assessee.
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16. On the other hand, Mr.Jetly, learned counsel appearing on
behalf of the Revenue submitted that fresh mushrooms were not
covered under the 1985 Act as originally enacted and it is only by the
2004 amendment to 1985 Act with effect from 28 th February 2005,
fresh mushrooms have been specifically included in Chapter Heading
07095100 of the 1985 Act. Therefore, the decision of Commissioner of
Central Excise (A) dated 27th May 2004 rendered when the fresh
mushrooms were not excisable would have no bearing after 28 th
February 2005 when fresh mushrooms became excisable. Accordingly,
Mr.Jetly submits that in view of the change in law, the AO was justified
in demanding the excise duty equivalent to customs duty leviable on
imported mushrooms, in respect of DTA clearances of fresh mushrooms
effected by the assessee during the period from 1st December 2006.
17. Mr.Jetly further submitted that under Section 11A of the
1944 Act the Central Excise Officer is empowered to recover duties not
levied or not paid or short levied or short paid or erroneously refunded
within one year from the relevant date as defined in Section 11 of the
1944 Act. In the present case, the two show-cause notices in question
were issued within the time limit as envisaged in Section 11A of the
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1944 Act and, hence, it cannot be said that the duty is being demanded
retrospectively as contended on behalf of the assessee.
18. Relying on the decisions of the Apex Court in the case of
Plasmac Machine Mfg Co Pvt Limited V/s. CCE reported in 1991 (51)
E.L.T. 161 (S.C.), ITW Signode Ind. Limited V/s. CCE reported in
2003 (158) E.L.T. 403 (S.C.) and Union of India V/s. Jain Shudh
Vanaspati Limited reported in 1996 (86) E.L.T. 460 (S.C.). Mr.Jetly
further submitted that the power to raise a demand includes the
inherent power to review the past assessment and that the excise
authorities are not estopped from taking a view different from the view
taken in the earlier period. He further submitted that once the assessee
has chosen to get out of EOU Scheme from a particular date and the
same has been allowed with effect from 2nd September 2008 it is not
open to the assessee thereafter to seek debonding from an anterior date
with effect from 1st December 2006 on ex-post facto basis. Accordingly,
it is submitted on behalf of the Revenue that the demand raised and
confirmed by the authorities below by invoking the normal period of
limitation are in accordance with law and, hence, the appeal is liable to
be dismissed.
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19. We have carefully considered the rival submissions.
20. The first question to be considered herein is, whether fresh
mushrooms were excisable goods under the Schedules to the 1985 Act
prior to the 2004 (Amendment) Act or whether fresh mushrooms
became excisable for the first time with effect from 28 th February 2005,
after the 2004 amendment to the 1985 Act ?
21.
Chapter 7 of the 1985 Act as it stood prior to the 2004
(Amendment) Act to the extent relevant read thus :
Chapter 7
EDIBLE VEGETABLES AND ROOTS AND TUBERS
Notes : 1) In this Chapter, the word "vegetables" includes edible
mushrooms, truffles, olives, capers, marrows,
pumpkins, aubergines, sweet corn (zea mays var.
saccharata), fruits of genus capsicum or of the genus
pimenta, feenl, parsley, chervil, tarragon, cress and
sweet marjoram (Majorana hortensis or origanum
majorana)
2) --------------
3) --------------
Heading Sub- Description of goods Rate of duty
No. heading
No.
07.01 0701.00 Dried Vegetables, including potatoes Nil.
onions & mushrooms, whole, cut,
sliced, broken or im powder, but not
further prepared; dried leguminous
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vegetables, including peas and beans,
shelled, whether or not skinned or
split
07.02 0702.00 Other edible vegetables, roots and Nil
tubers.
(emphasis supplied)
22. In view of chapter note 1 to Chapter 7 of the 1985 Act
(prior to its amendment by 2004 Act), it is crystal clear that edible
mushrooms, whether dried or fresh, were covered under Chapter 7 of
the 1985 Act. Dried mushrooms were covered under Chapter Heading
07.01 and fresh mushrooms were covered under 07.02 of the Central
Excise Tariff. The expression 'other edible vegetables' in Chapter
Heading 07.02 read with chapter note 1 in Chapter 7 would make it
clear that mushrooms other than dried mushrooms viz. fresh
mushrooms were covered under Chapter Heading 07.02 of the Central
Excise Tariff. Rate of excise duty payable on dried mushrooms under
Chapter Heading 07.01 as well as the rate of excise duty on fresh
mushrooms under Chapter Heading 07.02 were Nil.
23. In the proceedings initiated in the year 1999, the specific
case of the Revenue was that the fresh mushrooms were excisable
under Chapter 7 of the 1985 Act. Whether fresh mushrooms were
covered under heading 07.01 or 07.02 has no relevance, because in
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either case the rate of duty was Nil, but according to the Revenue, once
the fresh mushrooms were found to be excisable, then, under the
proviso to Section 3(1) of the 1944 Act, the assessee was liable to pay
excise duty equivalent to customs duty payable on imported fresh
mushrooms. That argument of the Revenue was rejected by the
Commissioner of Central Excise (A) by holding that even if fresh
mushrooms were excisable and covered under Chapter 7 of the Central
Excise Tariff, in view of the Nil rate of duty, the Revenue was not
justified in demanding excise duty equivalent to customs duty in respect
of DTA clearances of fresh mushrooms effected by the assessee. Thus,
the Commissioner of Central Excise (A) while accepting the contention
of the Revenue that fresh mushrooms were excisable, held that in view
of the Nil rate of duty, the Revenue was not justified in demanding duty
equivalent to customs duty in respect of DTA clearances of fresh
mushrooms effected by the assessee, a 100% EOU. Therefore, the
argument of the Revenue that the fresh mushrooms were not excisable
prior to the 2004 amendment to the 1985 Act is unsustainable.
24. Moreover, the argument of the Revenue that by the 2004
amendment to the 1985 Act, fresh mushrooms were made excisable for
the first time with effect from 28 th February 2005 is also unsustainable,
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because, the said amendment was brought about with a view to convert
the existing six digit entries in the schedule to the 1985 Act to eight
digit entries on par with the entries in the schedule to the Customs
Tariff Act and not with a view to bring in new goods within the purview
of excise. This was further clarified by issuing notification No.1 of
2005-CE dated 24th February 2005 and Trade Circular No.808/2005
dated 25th February 2005, wherein it is stated that by the 2004
amendment merely a technical change of transition from six digit to
eight digit classification is brought about and no substantive change is
brought about. The fact that fresh mushrooms classified in the general
category under heading 07.02 of the Central Excise Tariff prior to the
2004 amendment have been classified specifically under entry
07095100 in Chapter 7 of the Central Excise Tariff after the 2004
amendment, it cannot be inferred that fresh mushrooms became
excisable for the first time after the 2004 amendment to the 1985 Act.
In any event, prior to the 2004 amendment, the Revenue had initiated
proceedings to demand duty on the footing that fresh mushrooms were
excisable and the Commissioner of Central Excise (A) had held that
even though the fresh mushrooms were excisable, in view of the Nil
rate of duty on fresh mushrooms, the Revenue was not justified in
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demanding excise duty equivalent to customs duty under the proviso to
Section 3(1) of the 1944 Act. Therefore, the argument of the Revenue
that fresh mushrooms became excisable only after the 2004 amendment
to the 1985 Act with effect from 28th February 2005 cannot be accepted.
25. The question, then to be considered is, whether the AO was
bound by the decision of Commissioner of Central Excise (A) rendered
prior to the 2004 amendment to the 1985 Act in respect of the DTA
clearances of fresh mushrooms effected after the amendment of the
1985 Act by the 2004 Act ?
26. It is well established principle of judicial discipline that the
orders passed by the higher appellate authorities must be followed
unreservedly by the subordinate authorities. Once the decision given by
the higher appellate authority is accepted by the Revenue, then, it is not
open to the AO to doubt the correctness of the order passed by the
appellate authority and must follow the appellate order.
27. The above view is based on the decision of the Apex Court
in the case of Jindal Dye Intermediate Limited V/s. Collector of
Customs reported in 2006 (197) E.L.T. 471 (S.C.), wherein the Apex
Court inter alia held thus :
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"16. The said decision in Jayant R Patel (supra) of the
Madras Bench of the Tribunal was followed in Commissioner of
Customs, Chennai V. Salem Stainless Steel reported in 2001
(131) E.L.T. 30 against which the Revenue did not file any appeal
in this Court. Similarly, the decisions taken by different Benches
of the Tribunal on the same lines as the Madras Bench of the
Tribunal in the case of Jayant R Patel (supra), in Commissioner v.
Alfa Exim & Sandeep Impex Private Limited reported in 1997
(95) E.L.T. 366 (T); Commissioner of Customs. Mumbai v. Aditya
International Pvt. Ltd. Reported in 2001 (135) E.L.T. 667; and
Jay Engineering Works Ltd. v. Commissioner of Customs, Chennai
reported in 2003 (162) E.L.T. 680 (T-Bang.) were not appealed
against by the Revenue.
17. Since the Customs Department has accepted the above
judgments and the same has become final, the Revenue is
precluded from taking a different stand in the present appeals as
per law laid down by this Court in a catena of cases. See
Collector of Central Excise, Pune v. Tata Engineering &
Locomotives Co Limited reported in (2003) 11 SCC 193; Berger
Paints India Limited v. Commissioner of Income Tax, Calcutta
reported in (2004) 12 SCC 42; Birla Corporation Limited v.
Commissioner of Central Excise reported in (2005) 6 SCC 95 =
2005 (186) E.L.T. 266 (S.C.); and Jayaswals Neco Limited v.
Commissioner of Central Excise, Nagpur reported in 2006 (195)
E.L.T. 142 (S.C.)."
28. Similarly, the Apex Court in the case of Union of India V/s.
Kamlakshi Finance Corporation Limited reported in 1991 (55) E.L.T.
433 (S.C.) held inter alia thus :
"6. .................. The high Court has, in our view, rightly
criticised this conduct of the Assistant Collectors and the
harassment to the assessee caused by the failure of these officers
to give effect to the orders of authorities higher to them in the
appellate hierarchy. It cannot be too vehemently emphasized that
it is of utmost importance that, in disposing of the quasi-judicial
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issues before them, revenue officers are bound by the decisions of
the appellate authorities. The order of the Appellate Collector is
binding on the Assistant Collectors working within his
jurisdiction and the order of the Tribunal is binding upon the
Assistant Collectors and the Appellate Collectors who function
under the jurisdiction of the Tribunal. The principles of judicial
discipline require that the orders of the higher appellate
authorities should be followed unreservedly by the subordinate
authorities. The mere fact that the order of the appellate
authority is not "acceptable" to the department - in itself an
objectionable phrase - and is the subject-matter of an appeal can
furnish no ground for not following it unless its operation has
been suspended by a competent Court. If this healthy rule is not
followed, the result will only be undue harassment to assesees and
chaos in administration of tax laws."
29. In the case of Commissioner of Central Excise, Mumbai
V/s. Bigen Industries Limited reported in 2006 (197) E.L.T. 305
(S.C.), the Apex Court inter alia held thus :
"10. The adjudicating authority as well as the Commissioner
(Appeals) have proceeded on the basis as if the order passed by
the Trade Mark Registry registering the trade mark in favour of
the assessee is erroneous and of no consequence. The Tribunal is
right in observing that once the trade mark has been registered
in the name of the assessee by the statutory authority
authorized to do so recognizing the assessee to be the sole
proprietor of the trade mark for India, the adjudicating
authority as well as the Commissioner (Appeals) erred in
denying the benefit of the notification under consideration. This
apart, the earlier decision of the Tribunal in Bigen Industries
(supra) between the parties on the same facts for the period
from 12th August 1989 to 25th August 1989 having attained
finality, as the Revenue did not file any further appeal, the
Revenue is precluded from taking a different stand in the present
appeals as per law laid down by this Court in a catena of cases.
(See Collector of Central Excise, Pune v. Tata Engineering &
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Locomotives Co. Limited reported in (2003) 11 SCC 193; Berger
Paints India Limited v. Commissioner of Income Tax, Calcutta
reported in (2004) 12 SCC 42; Birla Corporation Limited v.
Commissioner of Central Excise reported in (2005) 6 SCC 95 =
2005 (186) E.L.T. 266 (S.C.); and Jayaswals Neco Limited v.
Commissioner of Central Excise, Nagpur reported in 2006 (195)
E.L.T. 142 (S.C.)".
30. In the present case, the specific case of the Revenue prior to
the 2004 amendment to the 1985 Act was that fresh mushrooms were
excisable under Chapter 7 of the 1985 Act and even though the rate of
excise duty on fresh mushrooms was Nil, as per the proviso to Section
3(1) of the 1944 Act in respect of DTA clearances of fresh mushrooms
effected by the assessee, a 100% EOU, the excise duty was payable
equivalent to the customs duty payable on imported fresh mushrooms.
The Commissioner of Central Excise (A) held that the fact that fresh
mushrooms were excisable would not entitle the Revenue to recover
duty, because, so long as the duty on fresh mushrooms under the
Central Excise Tariff was Nil, in respect of DTA clearances of fresh
mushrooms by a 100% EOU covered under the proviso to Section 3(1)
of the 1944 Act would also be Nil. That decision of the Commissioner
of Central Excise (A) dated 27th May 2004 was admittedly accepted by
the Revenue. Therefore, so long as the decision of the Commissioner of
Central Excise (A) dated 27th May 2004 was holding the field, all the
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adjudicating authorities including the Commissioner of Central Excise
were bound by the said decision passed by the Commissioner of Central
Excise (A) dated 27th May 2004. This view is supported by the decision
of this Court in the case of Prakash Construction & Engineering
Company V/s. Union of India reported in 1991 (56) E.L.T. 58 (Bom.).
31. The argument of the Revenue that the decision of the
Commissioner of Central Excise (A) dated 27 th May 2004 rendered prior
to the 2004 amendment to the 1985 Act would not be applicable after
the 2004 amendment to the 1985 Act is without any merit, because, as
noted earlier, fresh mushrooms were excisable prior to the 2004
amendment and continue to be excisable even after the 2004
amendment. Similarly, excise duty on fresh mushrooms prior to the
2004 amendment was Nil and even after the 2004 amendment
continues to be Nil. Therefore, the 2004 amendment to the 1985 Act
which brought out transition from six digit to eight digit classification
did not bring about any change in law regarding the excisability on
fresh mushrooms or dutiability on fresh mushrooms. In other words,
the fresh mushrooms were excisable prior to the 2004 amendment and
continue to be excisable subsequent to the 2004 amendment and,
therefore, the decision rendered by the Commissioner of Central Excise
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(A) on 27th May 2004 prior to the 2004 amendment was binding on the
adjudicating authorities including the Commissioner of Central Excise
even after the 2004 amendment to the 1985 Act.
32. Assuming that the adjudicating authority considered that
the decision of the Commissioner of Central Excise (A) which was
accepted by the Revenue required to be reconsidered, then, the proper
course for the adjudicating authority while passing the assessment in
respect of the subsequent clearances was to record his views on the
decision of the Commissioner of Central Excise (A) but pass an order in
consonance with the decision of Commissioner of Central Excise (A) so
that the higher authorities could take a re-look at the decision of
Commissioner of Central Excise (A) dated 27th May 2004. In other
words, until the decision of Commissioner of Central Excise (A) dated
27th May 2004 was reversed by a competent higher authority, the AO
was bound by the said decision and could not have taken a view
contrary to the view taken by the Commissioner of Central Excise (A).
33. The fact that Section 11A of the 1944 Act as amended by
the Finance Act 2000 empowers the Central Excise Officer to demand
excise duty for a period of one year prior to the issuance of show-cause
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notice even if duty was not paid on account of approved classification
list / price list / assessment order, it does not mean that the AO can
disregard the orders passed by the higher authorities. By amending
Section 11A, the legislature has empowered the AO to demand duty not
paid on account of erroneous approval of classification list / price list /
assessment order and the legislature has not empowered the AO to
demand duty if he considers that the duty was not paid or payable on
account of the erroneous order passed by the Appellate Authority or the
competent Court. Therefore, the AO was not justified in demanding
duty on DTA clearances of fresh mushrooms contrary to the decision of
the Commissioner of Central Excise (A) dated 27 th May 2004, especially
when the Revenue has accepted the said decision of Commissioner of
Central Excise (A).
34. It is only on 31st May 2011 when the CESTAT held that even
if the rate of excise duty under the Central Excise Tariff on excisable
goods is Nil, under the proviso to Section 3(1) of the 1944 Act, excise
duty equivalent to customs duty would be payable on DTA clearances of
such excisable goods by a 100% EOU, the decision of the Commissioner
of Central Excise (A) dated 27th May 2004 ceased to have binding
effect. In other words, till 31st May 2011, the decision of the
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Commissioner of Central Excise (A) dated 27th May 2004 which was
accepted by the Revenue wad binding on all the adjudicating
authorities including the Commissioner of Central Excise. Therefore, in
the facts of the present case, the demand confirmed by order-in-original
dated 27th February 2009 being contrary to the decision of the
Commissioner of Central Excise (A) dated 27th May 2004, which was
holding the field and accepted by the Revenue, cannot be sustained.
35.
The CESTAT on 31st May 2011 while correctly interpreting
the proviso to Section 3(1) of the 1944 Act, ought to have held that so
long as the decision of the Commissioner of Central Excise (A) dated
27th May 2004 was holding the field, the adjudicating authorities were
bound by the said decision. In other words, the CESTAT ought to have
held that the interpretation of the proviso to Section 3(1) of the 1944
Act given by the Commissioner of Central Excise (A) on 27 th May 2004
which was accepted by the Revenue ought to have been followed by the
AO while passing the order-in-original dated 27th February 2009 and the
fact that the CESTAT on 31st May 2011 has disagreed with the decision
of the Commissioner of Central Excise (A) would not validate the order-
in-original passed on 27th February 2009. To put it simply, the CESTAT
ought to have held that the decision of the Commissioner of Central
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Excise (A) dated 27th May 2004, which was accepted by the Revenue
was binding on the AO and therefore the order-in-original passed by the
AO on 27th February 2009 contrary to the decision of the Commissioner
of Central Excise (A) dated 27th May 2004 was bad in law.
36. It is relevant to note that the dispute before the CESTAT was
not arising out of the order of the Commissioner of Central Excise (A)
dated 27th May 2004 and in fact that decision was accepted by the
Revenue. The dispute before the CESTAT related to the assessment
order passed on 27th February 2009 in respect of the DTA clearances
effected after the decision of the Commissioner of Central Excise (A)
dated 27th May 2004. Therefore, while it was open to the CESTAT to
disagree with the decision of the Commissioner of Central Excise (A)
dated 27th May 2004, the CESTAT ought to have held that the
adjudicating authority was bound by the decision of the Commissioner
of Central Excise (A) till it was set aside on 31 st May 2011 and
accordingly the CESTAT ought to have set aside the demands confirmed
by the AO on 27th February 2009.
37. Reliance placed by the counsel for the Revenue on the
decision of the Apex Court in the case of Plasmac Machine
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Manufacturing Company Private Limited (supra) is totally misplaced. In
that case, injection moulding machines manufactured by the assessee
which were in the past classified under Tariff Item No.68 were sought
to be classified in the year 1981-82 under Tariff Item 52 of the Central
Excise Tariff. In that context, it was held that there is no estoppel
against the statute and it is open to the excise officer to revise the
classification from one tariff heading in to another. It is relevant to note
that in that case the AO sought to take a view contrary to his own view
in the past, where as, in the present case, the AO is seeking to take a
view contrary to the view taken by the Commissioner of Central Excise
(A) on 27th May 2004 which is not permissible in law. Therefore, the
above decision has no applicable to the facts of the present case.
Similarly, the other decisions relied upon by the counsel for the
Revenue are also distinguishable on facts.
38. In the result, the appeal is allowed by answering the
question in the negative i.e. in favour of the assessee and against the
Revenue with no order as to costs.
(M.S. Sanklecha, J.) (J.P. Devadhar, J.)
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