Rajasthan High Court - Jodhpur
Mukesh Modi vs C.C.E.Commissionerate Jaipur-2 on 21 February, 2025
Author: Pushpendra Singh Bhati
Bench: Pushpendra Singh Bhati
[2025:RJ-JD:5825-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Central/excise Appeal No. 126/2009
Mukesh Modi, aged about 48 years, Son of Shri H.S. Modi, r/o
9A, Polo Ground Udaipur, Director of M/s. Jain Grani Marmo Pvt.
Limited, Near Charak Upvan, Village Amberi, P.O. Badgaon, N.H.
No.8, Udaipur - 313011 (Rajasthan)
----Appellant
Versus
The Commissioner, Central Excise Commissionerate, Jaipur-II,
Government of India, Ministry of Finance and Company Affairs,
Revenue Department, New Central Revenue Building, Statue
Circle, C-Scheme, Jaipur.
----Respondent
Connected With
D.B. Central/excise Appeal No. 127/2009
M/s Jain Grani Marmo Pvt. Ltd., Near Charak Upvan, Village
Amberi, P.O. Badgaon, N.H. No.8, Udaipur - 313011 (Rajasthan)
----Appellant
Versus
The Commissioner, Central Excise Commissionerate, Jaipur-II,
Government of India, Ministry of Finance and Company Affairs,
Revenue Department, New Central Revenue Building, Statue
Circle, C-Scheme, Jaipur.
----Respondent
For Appellant(s) : Mr. M.S. Singhvi, Senior Advocate
assisted by Mr. Abhishek Mehta
For Respondent(s) : Mr. Kuldeep Vaishnav
HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI
HON'BLE MR. JUSTICE MUNNURI LAXMAN
Judgment
Reportable
Reserved on 15/01/2025
Pronounced on 21/02/2025
Per Dr. Pushpendra Singh Bhati, J:
1. These Customs Appeals under Section 130 of the Customs
Act, 1962 (hereinafter referred to as 'Act of 1962') have been
preferred, claiming the following reliefs:
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Appeal No. 126/2009:
"It is, therefore, most respectfully prayed that this
appeal may kindly be accepted, the impugned judgment of
Customs, Excise and Service Tax Appellate Tribunal, New
Delhi dated 17.02.2009 passed in Appeal No.C/473/2006 in
so far as it upholds part of the order of the Commissioner,
Central Excise Commissionerate, Jaipur-II dated
17.04.2006 may kindly be set aside, the appeal filed by the
appellant before the Customs, Excise and Service Tax
Appellate Tribunal, New Delhi may kindly be ordered to be
allowed in toto and the order passed by the Commissioner,
Central Excise Commissionerate, Jaipur-II dated
17.04.2006 may kindly be set aside.
In the alternative, the respondent be directed to
grant set off to the company in respect of the duties paid
by it while effecting DTA sales for computing the duties
under the impugned order dated 17.04.2006.
Any other appropriate order or direction, which this
Hon'ble Court considers just and proper in the facts and
circumstances of this case, may kindly be passed in favour
of the appellant."
Appeal No. 127/2009:
"It is, therefore, most respectfully prayed that this
appeal may kindly be accepted, the impugned judgment of
Customs, Excise and Service Tax Appellate Tribunal, New
Delhi dated 17.02.2009 passed in Appeal No.C/473/2006 in
so far as it upholds part of the order of the Commissioner,
Central Excise Commissionerate, Jaipur-II dated
17.04.2006 may kindly be set aside, the appeal filed by the
appellant before the Customs, Excise and Service Tax
Appellate Tribunal, New Delhi may kindly be ordered to be
allowed in toto and the order passed by the Commissioner,
Central Excise Commissionerate, Jaipur-II dated
17.04.2006 may kindly be set aside.
In the alternative, the respondent be directed to
grant set off to the company in respect of the duties paid
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by it while effecting DTA sales for computing the duties
under the impugned order dated 17.04.2006.
Any other appropriate order or direction, which this
Hon'ble Court considers just and proper in the facts and
circumstances of this case, may kindly be passed in favour
of the appellant."
2. At the outset, Mr. M.S. Singhvi, learned Senior Counsel
assisted by Mr. Abhishek Mehta, appearing on behalf of the
appellant-company, has pointed out that a Coordinate Bench of
this Hon'ble Court, vide orders dated 11.01.2010, while confirming
the interim order, restraining the respondents from passing final
order, had admitted the present appeals on the following
substantial question of law:
"Whether the revenue authorities can question the
permission granted by the DGFT or his delegate to a 100%
EOU for effecting sale in DTA and thereby disentitling such
EOU to the exemption available to it under the notification
No.52/03-CUS?"
3. Learned Senior Counsel for the appellants (appellant-
company and its director-Mr. Mukesh Modi) while briefing the
factual matrix of the case, submitted that the appellant-company,
registered private limited company, was a 100% Export Oriented
Unit (EOU) and engaged in the business of manufacture of marble
slabs, tiles and dressed marble blocks at Udaipur.
3.1. The appellant-company applied for and was granted Letter of
Permission (LoP) by the competent authority, to switch over as an
EOU, in the year 2000 and that the aforesaid LoP, included the
permission for serpentine slabs and tiles.
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3.2. The LoP was based upon the Circular dated 10.06.2002
issued by the Director General of Foreign Trade (DGFT), clarifying
that the exports of dressed serpentine marble blocks should be
taken into consideration for discharge of export obligation of an
advance licensee issued for the dressed marble block. The
permissions were accordingly issued and were renewed from time
to time.
3.3. That on 03.08.2005, a show cause notice was issued to the
appellant-company and its Director- Mr. Mukesh Modi, alleging
therein that the appellant-company has contravened the
provisions contained in the Notification No. 52/03-Cus dated
31.03.2003, Notification No. 23/03-CE dated 31.03.2003,
Paragraphs 6.1, 6.2(b), and 6.8 of the Export and Import Policy of
2002-2007 (hereinafter referred to as the "EXIM Policy, 2002-
2007"), Paragraphs 6.1, 6.2(b), and 6.8 of the Foreign Trade
Policy 2004-2009 (hereinafter referred to as "FTP 2004-2009")
and Rules 6 and 17 of the Central Excise Rules, 2002 (hereinafter
referred as the 'Rules of 2002').
3.4. The crux of the allegations against the appellant-company
was that it had undertaken the DTA sales of the goods produced/
manufactured by the company out of the marble blocks imported
by it by enjoying the exemption from the import duty, without
making the exports from out of the goods produced/manufactured
by such imports.
3.5. Learned Senior Counsel also submitted that the reason given
by the respondent in the aforesaid show cause notice was that the
DTA Sales were permissible out of the goods
[2025:RJ-JD:5825-DB] (5 of 20) [EXCIA-126/2009]
produced/manufactured by imported goods only, if the EOU
concerned has made exports from the goods
produced/manufactured by the same imported goods first and
were required to conform to the conditions of the FTP and EXIM
Policy and other notifications in connection therewith.
3.6. Learned Senior Counsel has drawn the attention of this Court
towards para 6.8 of the EXIM Policy 2002-2007, which reads as
under:
"6.8. DTA Sale of Finished Products /Rejects/Waste/
Scrap/Remnants/By-products
The entire production of EOU / EHTP / STP / BTP units shall
be exported subject to following:
(a) Unless specifically prohibited in the LOP, rejects may be
sold in the Domestic Tariff Area (DTA) on payment of
duties as applicable to sale under paragraph 6.8 (b) on
prior intimation to the Customs authorities. Such sales
shall be counted against DTA sale entitlement under
paragraph 6.8(b). Sale of rejects upto 5% of FOB value of
exports shall not be subject to achievement of NFE.
(b) Units, other than gems and jewellery units, may sell
goods upto 50% of FOB value of exports subject to
fulfillment of positive NFE on payment of applicable duties.
Sales made to a private bonded warehouse set up under
the policy shall also be taken into account for the purpose
of arriving at FOB value of exports by EOUs provided
payment for such sales made from EEFC account. No DTA
sale shall be permissible in respect of motor cards,
alcoholic liquors, books and tea (except instant tea) and
books or by a packaging/labeling/segragation/refrigeration
unit and such other items as may be notified from time to
time.
(c) Gems and jewellery units may sell upto 10% of FOB
value of exports of the preceding year in DTA subject
fulfillment of positive NFE as prescribed in the policy. In
respect of sales of plain jewellery, the recipient shall pay
[2025:RJ-JD:5825-DB] (6 of 20) [EXCIA-126/2009]
concessional rate of duty to the customs in Indian rupees
as applicable to sale from nominated agencies. In respect
of studded jewellery, duty shall be payable in Indian
rupees as notified by Customs.
(d) Scrap/waste/remnants arising out of production
process or in connection therewith may be sold in the DTA
as er the Standard Input-Output norms notified under the
Duty Exemption Scheme on payment of duties as
applicable under paragraph 6.8(b) within the overall ceiling
of 50% of FOB value of exports. Such sales shall not,
however, be subject to achievement of positive NFE. Sale
of waste/scrap/remnants by units not entitled to DTA sale
or sales beyond the DTA sale entitlement, shall be on
payment of full duties.
(e) There shall be no duties/taxes on
scrap/waste/remnants in case the same are destroyed with
the permission of Customs authorities.
(f) EOU/EHTP/STP units may be permitted to sell finished
products, which are freely importable under the Policy in
the DTA against payment of full duties provided they have
achieved the positive NFE as per the policy.
Such sales may also be permitted in exceptional cases
without achievement of positive NFE.
(g) For services, including software units, sale in the DTA
in any mode, including on-line data communication, shall
be permissible up to 50% of FOB value of exports and/or
50% of foreign exchange earned, where payment of such
services is received free foreign exchange.
(h) By-products included in LOP may also be sold in the
DTA subject to achievement of positive NFE on payment of
applicable duties within the overall entitlement of
paragraph 6.8(b). Sale of by-products by units not entitled
to DTA sales or beyond the entitlements of paragraph
6.8(b) shall also be permissible on payment of full duties.
NOTE: In the case of units manufacturing electronics
hardware and software, the NFE and DTA sale entitlement
shall be reckoned separately for hardware and software."
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The said para 6.8(a) was amended firstly on 13.5.2005 and thereafter
on 31.8.2005. The amended 6.8(a) reads as under:
"(a) "Units, other than gems and jewellery units, may sell
goods up to 50% of FOB value of exports subject to
fulfillment of positive NFE on payment of concessional
duties. Within the entitlement of DTA sale, the unit may
sell in DTA its products similar to the goods, which are
exported or expected to be exported from the units. [No
DTA sale at concessional duty shall be permissible in
respect of major cars, alcoholic liquors, tea (except instant
tea), pepper & pepper products marble and such other
items as may be notified from time to time. Such DTA sale
shall also not be permissible to units engaged in the
activities of packaging/labelling/segregation / refrigeration/
compacting/micronisation/pulverization/granulation/
conversion of monohydrate form of chemical to anhydrous
form or vice versa].
Sales made to a unit in SEZ shall also be taken into
account for the purpose of arriving at FOB value of export
by EOU provided payment of such sales are made from
EEFC Account. Sale to DTA would also be subject to
mandatory requirement of registration of pharmaceutical
products (including bulk drugs)."
4. Learned Senior Counsel in support of his case, submitted
that other notices were also issued, including the show cause
notice dated 03.08.2005. Another show cause notice dated
08.11.2005 was also issued to the appellant-company and its
director- Mr. Mukesh Modi(appellant), as to why it(appellant-
company) should not be held liable to pay the demand equal to
the customs and central excise duty leviable on the imported
marble blocks and block/slabs cleared in DTA. He further
submitted that appropriate replies to the aforesaid notices dated
03.08.2005 and 08.11.2005, were submitted on 14.10.2005 and
[2025:RJ-JD:5825-DB] (8 of 20) [EXCIA-126/2009]
04.01.2006, respectively, however, the demands were raised by
the respondents to the tune of Rs. 2,97,07,986/- for the customs
duty & Rs.1,91,75,007/- towards the excise duty.
4.1. Learned Senior Counsel also submitted that the appellant-
company and its director (appellant- Mr. Mukesh Modi) filed
separate appeals against the order dated 17.04.2006 before the
learned Customs, Excise & Service Tax Appellate Tribunal, New
Delhi (hereinafter referred to as 'CESTAT'), which were registered
as Customs Appeal No.472-473 of 2006, whereupon the same
were partly allowed vide the impugned order dated 17.02.2009
and the demand in respect of central excise duty has been held to
be invalid however the liability regarding the customs duty and the
penalties were upheld.
4.2. Learned Senior Counsel further submitted that question
involved herein is essentially with respect to the interpretation of
the scope of Notification No.52/03-CUS dated 31.03.2003, as in
terms of circulars dated 28.11.1995 & 31.01.2005, the
Commissioner was bound to refer the matter to the Board before
initiating any action against the appellant-company.
4.3. Learned Senior Counsel also submitted that the action has
been initiated in contravention of the Circular No. 93/2000-Cus
dated 21.11.2000, wherein it is provided that the unit was eligible
to clear the goods in DTA to the extent of the permission given by
the Development Commissioner on payment of applicable duties.
4.3.1. Learned Senior Counsel further submitted that once
such permission for DTA Sales was granted by the competent
authority i.e. the Development Commissioner, neither Customs nor
[2025:RJ-JD:5825-DB] (9 of 20) [EXCIA-126/2009]
the Excise authorities can question the same for the purpose of
excise duties.
4.3.2. Learned Senior Counsel also submitted that each
category of goods, which were to be exported, sold/supplied in
DTA or transfer to other SEZ/EOU/EHTP/STP/BTP units constitute
one class. He further submitted that this was supported by the
Handbook of Procedures which has been issued by the
respondent.
4.3.3. Learned Senior Counsel further submitted that the sale
made by the appellant-company in DTA was permissible and
hence, the exemption was applicable upon them.
4.4. Learned Senior Counsel also submitted that even if
Notification No. 52/03-cus dated 31.03.2003, is held to be
applicable only in the event the goods disposed of in DTA are
'similar' to the one which have been exported by 100% EOU, then
too, the findings recorded by the Learned CESTAT were erroneous
in holding that serpentine blocks, slabs and tiles are different from
marble blocks, slabs and tiles. Learned Senior Counsel has also
drawn the attention of this Court to the expert report of the
Directorate of Mines and Geology, showing that there is no
difference in serpentine (popularly known as the green marble)
and the white/coloured marble, along with other material record
that has been placed on record.
4.5. Learned Senior Counsel further submitted that the Customs
Circular No.07/2006 dated 13.01.2006 gives out the clarification
regarding 'similar goods' for the purpose of effecting sales in DTA,
which is reproduced as hereunder:-
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"DTA Sale:
3. The paragraph 6.8(a) of the FTP provides that
EOU/EHTP/STP may sell goods upto 50% of FOB value of
exports in DTA on payment of concessional duty subject to
fulfillment of positive NFE. It also provides that within the
entitlement of DTA sale, the unit has to sell in DTA its
products similar to the goods, which are exported or
expected to be exported. There has been doubt as to what
constitutes 'similar goods'. Further, when the units are not
required to take any permission for DTA sale under
paragraph 6.39.9., it is felt necessary to provide definition
of "similar goods" to bring clarity and uniformity. Therefore,
it has been decided that the definition of 'similar goods'
would be based on the definition of similar goods as
provided in the Customs Valuation (Determination of Price
of Imported Goods) Rules, 1988. The term "similar goods"
means "goods which is although not alike in all respects,
have like characteristics and like component materials which
enable them to perform the same functions and to be
commercially interchangeable with the goods which have
been exported or expected to be exported having regard to
the quality, reputation and the existence of trade mark and
produced in the same unit by the same person who
produced the export goods. The Board's Circular No.85/95
dated 26-7-95 issued in this regard stands rescinded."
4.5.1. Learned Senior Counsel also submitted that while
determining the issue of similarity between the two
goods/products, the functional as well as commercial distinction
was also required to be considered.
4.5.2. Learned Senior Counsel further submitted that commercial
utility and use of the white marble and green marble was the
same, and that both the marbles were used for finishing of
premises, flooring and walls in domestic as well as commercial
[2025:RJ-JD:5825-DB] (11 of 20) [EXCIA-126/2009]
buildings. Attention of this Court has been drawn towards the
relevant extract from Notification No.52/2003-CUS dated
31.03.2003, which is reproduced as hereunder:
• Used for the purpose of manufacture of finished goods,
• Even if not exported, are allowed to be sold in Domestic
Tariff Area in accordance with the Export and Import Policy
and subject to such other limitations and conditions as may
be specified in this behalf by Development Commissioner, on
payment of appropriate duty of excise leviable thereon under
section 3 of the Central Excise Act, 1944, (Thus, Custom
duty is not applicable at all.)
• Provided that where such finished goods are not excisable,
customs duty equal in amount to that leviable on the inputs
imported under this notification and used for the purpose of
manufacture of such finished goods, which would have been
paid but for the exemption under this notification shall be
payable at the time of clearance of such finished goods. (This
is applicable only in case of finished goods are not excisable.
In the case of the appellant, finished goods are excisable,
hence excise duty has been paid which much higher than
custom duty, therefore, this clause is not applicable.)"
4.6. Learned Senior Counsel also submitted that nowhere it has
been mentioned that serpentine was covered under HSN and ITC
(HS) by heading 25.16. He further submitted that few copies of
shipping bills issued by custom for export of polished Serpentine
slabs under heading 25.15 which proves that the Serpentine was
covered under the heading 25.15 under which marble was also
covered.
4.7. Learned Senior Counsel further submitted that there were
separate input/output norms for marble slabs/tiles and Serpentine
slabs/tiles however they both have same nomenclature. As per
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learned Senior Counsel, Marble and Serpentine both are called
Marble, though their chemical composition may change from rock
to rock as they are natural products. He further submitted that in
market, different types of marble of different textures are
available for use in flooring or construction however their uses are
same.
4.7.1. Learned Counsel further submitted that "Wealth of
India", which is a dictionary of Indian Raw Materials and Industrial
Product, mentions, "Serpentine marble".
4.7.2. Learned Senior Counsel also submitted that the DGFT
instruction dated 10.06.2002 clearly clarifies that Serpentine
should be treated as regular marble and export of dressed
Serpentine blocks should be taken into consideration for discharge
of export obligation of an advance license issued for dress marble
block; relevant extract whereof is reproduced as hereunder:
From Para 2:
"The Bureau has further clarified that as per the commercial
classification of marble adopted by the American Society for
Testing Material (ASTM), commercial marble may also be
classified, among others as Serpentine marble."
From Para 3:
"For the purpose of exports under Duty Exemption Scheme,
serpentine (green marble) block should be treated as
regular marble only and accordingly, SION entry No.A-1985,
Handbook of Procedures, Vol.2 (Part-I) would also cover
serpentine (green marble) blocks and also that exports of
dressed serpentine (green marble) block should be taking
into consideration for discharge of export obligation of an
advance licence issued for Dressed Marble Block."
[2025:RJ-JD:5825-DB] (13 of 20) [EXCIA-126/2009]
4.8. Learned Senior Counsel further submitted that as per the
price governed by the theory of demand and supply of any
commodity/product, Serpentine marble is sold even at higher rate
in comparison to white marble slab. Few copies of custom invoices
duly verified by the customs authorities @ USD at the time when
demand was more in comparison to supply. As per learned Senior
Counsel, white marble (Rajnagar) is also available in the same
range of Serpentine marble even today, and therefore, price factor
cannot become the basis for similarity.
4.9. Learned Senior Counsel also submitted that the Development
Commissioner is the final authority and LoP and LUT executed by
Development Commissioner is binding on all departments of the
Government of India.
4.10. Learned Senior Counsel further submitted that the
impugned Circular cannot be given retrospective effect as the
period of both the impugned SCNs are prior to date of SCNs. He
also submitted that the white marble and serpentine marble both
are having same characteristics and function i.e. used both in
flooring for construction.
4.11. Learned Senior Counsel further submitted that Board's
Circular No.67-2006-CUS dated 13.01.2006 is in reference to Para
6.39.9 of HBP wherein fast track clearance are permitted for DTA
sales to status holder without obtaining permission from
Development Commissioner. Therefore, as per learned Senior
Counsel, this Circular is not applicable in cases, wherein specific
permission is given by Development Commissioner. Further, this
circular is issued after the period covered under the SCN in
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question and also after the date of issuance of SCN and thus the
same is not the basis of the SCN as well as order in original under
appeal.
4.12. Learned Senior Counsel thus summarized his averments by
stating that the word "similar" cannot be given the meaning to the
word "same" or "identical" in the instant case. Since, there has
been no express intention of considering the two differently under
the proviso to the Rule 57 F(3), the word 'similar' should be given
wider interpretation and thus, the impugned order passed by the
learned CESTAT, as far as customs duty is concerned, is not
sustainable in the eyes of law.
5. Per contra, Mr. Kuldeep Vaishnav, learned counsel for the
respondent, while opposing the aforesaid submissions made on
behalf the appellants (appellant-company and its director-Mr.
Mukesh Modi) submitted that the appellant-company was having
status of an EOU and the said status was granted to them with the
object to increase export and to earn foreign exchange.
5.1. Learned counsel further submitted that the appellant-
company was supposed to procure raw material import/domestic
without payment of duty and export their product/finished goods.
Thus, for the succeeding period, they could have cleared limited
finished products to domestic market, as permitted.
5.2. Learned counsel also submitted that the appellant-company
intentionally misused the EOU Scheme, as it procured green
marble (serpentine) from domestic market at low rate and after
processing has exported the same; whereas it imported a high
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quality marble without payment of duty and after processing has
cleared the same in domestic market at concessional rates.
5.3. Learned counsel further submitted that the appellant-
company was required exporting of 'similar' goods as imported
and since it (appellant-company) have not exported the goods
manufactured from the imported goods, exemption of import duty
was not allowed and thus it was required to pay duty exempted at
the time of import.
5.4. Learned counsel with regard to the contention of the
appellant-company that it was permitted for the DTA sale,
submitted that the DTA sale permission was intended only in
respect of 'similar' goods exported, however the appellant-
company exported entirely serpentine/green marble and cleared in
DTA only white imported marble.
5.5. Learned counsel further submitted that the Circulars of DGFT
are not binding on Customs. Moreover, as per learned counsel, the
provisions are not ambiguous and are very much clear but the
appellant-company has intentionally misinterpreted the same to
avail unlawful benefit, whereas, the Customs authorities are
indisputably empowered to protect Excise/Customs duty evasion,
if any.
5.6. Learned counsel also submitted that the appellant-company
is trying to mislead this Court because in the market, there is
much difference in imported white marble and serpentine/green
domestic marble and that the value of imported white marble is
very much higher. He also submitted that the Laboratory
Certificate reflects that the Serpentine Marble is Green Marble.
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5.7. Learned counsel further submitted that the impugned order
dated 17.02.2009 reflects that the imported white marble blocks
have not been used for the intended purpose, and the appellant-
company was required to export finished goods manufactured out
of imported marble blocks.
5.8. Learned counsel also submitted that the appellant-company
was intentionally not maintaining separate records for production
and clearance of finished goods manufactured out of domestic and
imported marble. He further submitted that the appellant-
company has also not maintained proper records of DTA Sale; it
merely mentioned 'marble' in their records intentionally, whereas
in common trade parlance, they used to mention specific type of
marble in invoice/record.
5.9. Learned counsel further submitted that in its periodic return
(ER-2) submitted with the department, the appellant-company did
not mention whether the goods were manufactured out of
domestic marble or from imported marble. Further, as per learned
counsel, the appellant-company did not disclose that it was
exporting only indigenous (domestic) marble and obtained DTA
sale permission for marble and that it did not export the goods
manufactured out of imported goods.
5.10. Learned counsel also submitted that since the appellant-
company was not using similar goods in export and in domestic
sale, exemption (duty free procurement) under the Notification
No.52-2003-CUS dated 31.03.2003 was not available to it, as
even as per the said circular, the exemption is only for
manufactured articles/goods for export, whereas the appellant-
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company has not exported any goods manufactured out of
imported duty free raw material, which is an undisputed fact on
record. Furthermore, only those goods are to be cleared to DTA
which are similar to exported goods, but the appellant-company
has expoted altogether different items/goods and cleared in DTA
and has thus misused the exemption so allowed.
6. After hearing learned counsel for the parties as well as
perusing the record of the case, this Court finds that the limited
issue before this Court is pertaining to the customs duty as the
excise duty has already been set aside by the learned CESTAT vide
the impugned order dated 17.02.2009 and the same has not been
challenged by the respondent.
7. This Court finds that the finished goods to be exported as per
the LoP were marble slabs/tiles and granite tiles, whereas the
items of exports were expanded to include serpentine slabs/tiles,
dressed marble blocks and dressed serpentine blocks, along with
all types of natural stones in form of dressed blocks, slabs and
tiles, by the way of approval by the Development Commission
from time to time.
8. This Court further finds that the anomaly arose because the
appellant-company as against import of white marble blocks,
exported consignment of marble slabs/tiles and granite slabs/tiles
made out of indigenous marble/granite blocks, with serpentine
slabs/tiles and dressed serpentine blocks, manufactured out of the
domestically procured serpentine blocks. Thus apparently, the
appellant-company was misusing the policy and the Notification to
treat both as 'similar' for getting the exemption as the imports
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were exclusively of white marble blocks, whereas only small part
of it were serpentine blocks, marble blocks made out of
domestically procured serpentine blocks.
9.. This Court also finds that the Custom Notification
No.52/2003-CUS dated 31.03.2003 provided that the goods
imported by 100% EOU or excisable goods domestically procured
by 100% EOU are exempted from customs duties, provided the
goods imported free of customs duty, were used in relation to
manufacture of finished goods for export.
10. This Court is conscious of the fact that the customs duty
exemption was made available only if the finished goods made out
of the duty free imported and domestically procured goods instead
of being exported are sold in DTA, as per the provisions of EXIM
Policy, 2002-2007.
11. This Court is of opinion that the serpentine stone procured
domestically, which is also known as 'green marble', cannot
complete the export obligation casted upon the present appellants
(the appellant-company and its director-Mr. Mukesh Modi) in the
garb of exporting a 'similar' product which is a dressed serpentine
block and serpentine slabs/tiles manufactured out of domestically
procured serpentine blocks.
12. This Court, on a close examination of the record, finds that
the white marble and serpentine blocks/slabs are not similar for
the purpose of getting the exemption in the custom duty.
References of expert reports that have been made by the
respondent, convince this Court as well as have been dealt with in
depth by the learned CESTAT, that the green marble/serpentine
[2025:RJ-JD:5825-DB] (19 of 20) [EXCIA-126/2009]
stone is very different from marble and is mostly domestically
procured and thus, is much cheaper than the imported marble
blocks, and any kind of exemption in the customs duty would be
detrimental to the policy of encouraging the exports.
13. The learned CESTAT has rightly held that the goods sold by
an EOU into DTA must be 'similar' to the goods exported, within
the meaning of the term 'similar' as defined in the Board's Circular
No.07/2006-Cus dated 13.01.2006.
14. This Court also observes that as per the EXIM Policy 2002-
2007, a 100% EOU manufacturing products A and B for export,
could have been sold into DTA one product, say A upto 75% of its
FOB value of exports within the overall DTA sale entitlement.
15. The Court further observes that adopting a broad
interpretation of the term 'similar' in the context of the present
excise appeal would undermine the legislative intent behind the
policy in question and at the same time have wide consequences
which can lead to unforeseen damage to the economy of the
nation. It is additionally noted that the term 'similar' is intended to
encompass goods of the same fundamental category, such as
slabs, tiles, marbles, and stones, and not those that are alike in
nature and intended for comparable/analogous uses. The origin
and application of serpentine marble and white marble are
undeniably distinct and they thus cannot, under any
circumstances, be regarded as identical.
15.1.This Court also finds that idea behind this condition was to
prevent the misuse of 100% EOU Scheme by duty free import of
costly materials for use exclusively in the manufacture of finished
[2025:RJ-JD:5825-DB] (20 of 20) [EXCIA-126/2009]
goods for DTA sale and meeting the export obligation by exporting
the finished goods made out of domestically procured cheap
material.
16. Thus, this Court agrees that the determination of the CESTAT
as made in the impugned order, that the condition for duty free
import by 100% EOU prescribed in the Notification No.52/2003-
Cus has not been fulfilled in respect of the imported marble blocks
and such exemption was not thus, permissible. Moreover, the
matter has been remanded back vide the impugned order, for the
purpose of de novo adjudication for re-determining the quantum
of customs duty demand within the normal limitation period and
re-determining the quantum of penalty upon the appellants under
Section 112(a) of the Customs Act, and therefore, the appellants
will have sufficient opportunity to agitate their factual matrix
before such authority.
17. In view of the above, this Court does not find it a fit case so
as to warrant any interference in the impugned order dated
17.02.2009 passed by the learned CESTAT. Accordingly, the
substantial question of law, as afore-quoted, is answered in favour
of the respondents and against the appellants.
18. Consequently, the present appeals are dismissed. All
pending applications stand disposed of.
(MUNNURI LAXMAN),J (DR. PUSHPENDRA SINGH BHATI),J
SKant/-
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