# COMMISSIONER OF CENTRAL EXCISE, NAGPUR v. M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR

- **Citation:** [2020] 4 S.C.R. 116
- **Court:** Supreme Court of India
- **Decided:** 2020-03-06
- **Case number:** Civil Appeal Nos. 848-852 of 2009
- **Bench:** S.A. Bobde, B. R. Gavai, Surya Kant
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-central-excise-nagpur-v-m-s-universal-ferro-allied-chemicals-34412
- **Pages:** 30

## Headnote

Central Excise Act, 1944: s.3(1) and its proviso, s.5(1) and
its proviso - Job work - Export Oriented Unit (EOU) - Respondent
is 100% EOU and engaged in manufacture/processing and
clearance of Ferro Manganese and Silicon Manganese - Revenue's
allegation against the respondent was that the respondent was
indulging in the job work activity of conversion of raw material
supplied by TISCO - As per agreement between Respondent and
TISCO, TISCO was to supply Manganese Ore and Coke/Coal free
of cost at its site and rest of the raw materials and consumables
required for conversion of Manganese Ore/Coke into Silicon
Manganese for TISCO was to be used by respondent from their
own purchases - Further, TISCO was to pay job charges to
respondent - Show cause notice issued to the respondent on the
ground that Circular No.67/98-Cus dated 14.9.1998, issued by the
CBEC had permitted the EOUs to undertake job-work on behalf of
a DTA unit only in textile, readymade garments, agro-processing
and granite sectors and by another Circular No.74/99 dated
5.11.1999, the said facility was extended in aquaculture, animal
husbandry, electronics hardware and software sectors and the sector
in which respondent-assessee had carried out the job-works was
not covered by either of the Circulars and, as such, the said jobworks were in violation of EXIM Policy - Show cause notice called
upon the respondent -assessee to show cause, as to why the said
Silicon Manganese should not be charged to full Central Excise
duty as per the proviso to s.3(1) of the Central Excise Act, 1944 by
denying the benefit of Notification No.8/97 dated 1.3.1997 - In
response to the show cause notices, it was submitted by respondent
that the removals in the DTA were in accordance with the permission
granted by the Development Commissioner and, as such, there was
116
[2020] 4 S.C.R. 116
A
B
C
D
E
F
G
H
117
no ground for denial of the concessional rate of duty laid down in
the said Exemption notification - Held: Under paragraph 9.17(b)
of the EXIM Policy 1997-2002, the EOU/EPZ units are entitled to
undertake job-work for export, on behalf of DTA units, with the
permission of Assistant Commissioner of Customs, provided the goods
are exported direct from the EOU/EPZ units and for such exports,
the DTA units will be entitled for refund of duty paid on the inputs
by way of Brand Rate of duty drawback - It is not in dispute that all
transactions between the respondent and TISCO were entered into
after obtaining necessary permission from the Development
Commissioner - The combined reading of paragraph 9.9(b) of the
EXIM Policy and the Circulars issued by the Board, particularly,
Circular dated 22.5.2000 showed that the respondent was entitled
to carry out the job-work on behalf of TISCO on payment of duty
as provided under Exemption Notification of 1997 - In view of
paragraph 10 of Circular no.49/2000- Cus dated 22.5.2000, the
facility of undertaking job-work by EOU/EPZ units which was
restricted to specific sectors was amended and the said facility was
extended to all sectors - It also provided that DTA units shall be
entitled to brand rate of duty draw back - Notification No.21/97C.E. dated 11.4.1997 specifically provides grant of exemption to
the EOUs from payment of duties, which are in excess of what is
leviable under sub-section (1) of s.3 on like goods, produced or
manufactured in India - Exemption Notification specifically
mentions, that the goods produced or manufactured by an 100%
EOU, which are allowed to be sold in India in accordance with
para 9.9(b) of the EXIM Policy, the proviso would be inapplicable
thereby, requiring the duties to be paid, as are required to be paid
under sub-Section (1) of s.3 of the said Act - Undisputedly, in the
instant case, the goods were produced and manufactured by the
respondent, an 100% EOU; they were manufactured wholly from
the raw materials produced or manufactured in India and, allowed
to be sold in India in accordance with the provisions of parag

## Text

_Characters 0–39,816 of 69,217. This is a partial read: ask again with offset=39816 for what follows._

A
B
C
D
E
F
G
H
116
SUPREME COURT REPORTS
[2020] 4 S.C.R.
COMMISSIONER OF CENTRAL EXCISE, NAGPUR
v.
M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD.
& ANR.
(Civil Appeal Nos. 848-852 of 2009)
MARCH 06, 2020
[S.A. BOBDE, CJI, B. R. GAVAI AND SURYA KANT, JJ.]
Central Excise Act, 1944: s.3(1) and its proviso, s.5(1) and
its proviso - Job work - Export Oriented Unit (EOU) - Respondent
is 100% EOU and engaged in manufacture/processing and
clearance of Ferro Manganese and Silicon Manganese - Revenue's
allegation against the respondent was that the respondent was
indulging in the job work activity of conversion of raw material
supplied by TISCO - As per agreement between Respondent and
TISCO, TISCO was to supply Manganese Ore and Coke/Coal free
of cost at its site and rest of the raw materials and consumables
required for conversion of Manganese Ore/Coke into Silicon
Manganese for TISCO was to be used by respondent from their
own purchases - Further, TISCO was to pay job charges to
respondent - Show cause notice issued to the respondent on the
ground that Circular No.67/98-Cus dated 14.9.1998, issued by the
CBEC had permitted the EOUs to undertake job-work on behalf of
a DTA unit only in textile, readymade garments, agro-processing
and granite sectors and by another Circular No.74/99 dated
5.11.1999, the said facility was extended in aquaculture, animal
husbandry, electronics hardware and software sectors and the sector
in which respondent-assessee had carried out the job-works was
not covered by either of the Circulars and, as such, the said jobworks were in violation of EXIM Policy - Show cause notice called
upon the respondent -assessee to show cause, as to why the said
Silicon Manganese should not be charged to full Central Excise
duty as per the proviso to s.3(1) of the Central Excise Act, 1944 by
denying the benefit of Notification No.8/97 dated 1.3.1997 - In
response to the show cause notices, it was submitted by respondent
that the removals in the DTA were in accordance with the permission
granted by the Development Commissioner and, as such, there was
116
[2020] 4 S.C.R. 116
A
B
C
D
E
F
G
H
117
no ground for denial of the concessional rate of duty laid down in
the said Exemption notification - Held: Under paragraph 9.17(b)
of the EXIM Policy 1997-2002, the EOU/EPZ units are entitled to
undertake job-work for export, on behalf of DTA units, with the
permission of Assistant Commissioner of Customs, provided the goods
are exported direct from the EOU/EPZ units and for such exports,
the DTA units will be entitled for refund of duty paid on the inputs
by way of Brand Rate of duty drawback - It is not in dispute that all
transactions between the respondent and TISCO were entered into
after obtaining necessary permission from the Development
Commissioner - The combined reading of paragraph 9.9(b) of the
EXIM Policy and the Circulars issued by the Board, particularly,
Circular dated 22.5.2000 showed that the respondent was entitled
to carry out the job-work on behalf of TISCO on payment of duty
as provided under Exemption Notification of 1997 - In view of
paragraph 10 of Circular no.49/2000- Cus dated 22.5.2000, the
facility of undertaking job-work by EOU/EPZ units which was
restricted to specific sectors was amended and the said facility was
extended to all sectors - It also provided that DTA units shall be
entitled to brand rate of duty draw back - Notification No.21/97C.E. dated 11.4.1997 specifically provides grant of exemption to
the EOUs from payment of duties, which are in excess of what is
leviable under sub-section (1) of s.3 on like goods, produced or
manufactured in India - Exemption Notification specifically
mentions, that the goods produced or manufactured by an 100%
EOU, which are allowed to be sold in India in accordance with
para 9.9(b) of the EXIM Policy, the proviso would be inapplicable
thereby, requiring the duties to be paid, as are required to be paid
under sub-Section (1) of s.3 of the said Act - Undisputedly, in the
instant case, the goods were produced and manufactured by the
respondent, an 100% EOU; they were manufactured wholly from
the raw materials produced or manufactured in India and, allowed
to be sold in India in accordance with the provisions of paragraph
9.9(b) of the EXIM Policy - Thus the conditions of Notification
No.21/97-C.E. were satisfied - Therefore, respondent was entitled
to carry out the job work for TISCO and entitled to exemption from
payment of duty - Revenue's appeal was rightly dismissed by
CESTAT.
COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.
M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.
A
B
C
D
E
F
G
H
118
SUPREME COURT REPORTS
[2020] 4 S.C.R.
Interpretation of Statutes: Excise Act - 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 - It is also equally well settled that
the first principle of interpretation of plain and literal interpretation
has to be adhered to - Therefore, the narrower scope of the term
'sale' as found in the Sale of Goods Act, 1930 cannot be applied in
the instant case - The term 'sale' and 'purchase' under the Central
Excise Act, 1944, if construed literally, it would give a wider scope
and also include transfer of possession for valuable consideration
under the definition of the term 'sale'.
Dismissing the appeals, the Court
HELD: 1.1 There is no merit in the contention of the
Revenue that since in the transaction between the respondent
and TISCO, there was no transfer of property in goods, the same
cannot be termed as 'sale' and therefore would not be covered
under paragraph 9.9 (b) of the EXIM Policy. The perusal of the
definition of "sale and purchase" clause (h) of Section 2 of the
Central Excise Act, 1944 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 the terms
'sale' and 'purchase' within the meaning of the Central Excise
Act, 1944. Undisputedly, in this case, there is a transfer of
Manganese Ore by TISCO to the respondent for the purposes
of processing the same and converting it into Silicon Manganese.
Undisputedly, the same is also for a valuable consideration. [Paras
18, 19, 20][130-B-C, E-F]
1.2 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. The
conditions or restrictions contemplated by one statute having a
different object and purpose should not be lightly and mechanically
imported and applied to a fiscal statute. It is also equally well
settled that the first principle of interpretation of plain and literal
interpretation has to be adhered to. Therefore, the narrower
scope of the term 'sale' as found in the Sale of Goods Act, 1930
cannot be applied in the present case. The term 'sale' and
A
B
C
D
E
F
G
H
119
'purchase' under the Central Excise Act, 1944, if construed
literally, it would give a wider scope and also include transfer of
possession for valuable consideration under the definition of the
term 'sale'. [Paras 22, 23][131-E-G]
2. Under para 9.9(a) of the EXIM Policy, EOU is entitled to
sell the rejects in the DTA on prior intimation to the Customs
authorities. Such sales are to be counted against DTA sale
entitlement under paragraph 9.9(b) of the EXIM Policy. The sale
of rejects shall be subject to payment of duties as applicable to
sale under paragraph 9.9(b) of the EXIM Policy. Under paragraph
9.9(b) of the EXIM Policy, DTA sale upto 50% of the FOB value
of exports is also permitted subject to payment of applicable duties
and fulfilment of minimum Net Foreign Exchange earning as a
Percentage of exports (NFEP) as prescribed in Appendix-1 of
the Policy. Under paragraph 9.17 (b), the EOU/EPZ units are also
entitled to undertake job-work for export, on behalf of DTA units,
with the permission of Assistant Commissioner of Customs,
provided the goods are exported direct from the EOU/EPZ units
and for such exports, the DTA units will be entitled for refund of
duty paid on the inputs by way of Brand Rate of duty drawback. It
can thus clearly be seen, that paragraph 9.9(b) and paragraph
9.17(b) of the EXIM Policy operate in totally different fields.
[Paras 27-30][132-F-H; 133-A-B]
3.1 The order-in-original states that since the respondent
has not exported the final product of Manganese raw material
received by it from TISCO, it had violated the provisions of
paragraph 9.17 (b) and 9.9(b) of the EXIM Policy. In view of
paragraph 10 of the Circular no.49/2000-Cus dated 22.5.2000,
the facility of undertaking job-work by EOU/EPZ units which was
restricted to specific sectors has been amended and the said
facility has been extended to all sectors. It has also been provided,
that DTA units shall be entitled to brand rate of duty draw back.
Similarly, paragraph 11 of the Circular dated 22.5.2000 also
provides, that the facility which was given to EOU/EPZ to
undertake job-work on behalf of DTA units in textiles, readymade
garments and granite sectors which was subsequently extended
to the EOU/EPZ units in aquaculture, animal husbandry, hardware
and software sectors vide Circular dated 5.11.1999, was extended
COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.
M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.
A
B
C
D
E
F
G
H
120
SUPREME COURT REPORTS
[2020] 4 S.C.R.
to EOU/EPZ units in all sectors. It has further been provided,
that DTA units shall be entitled to avail of the brand rate of duty
drawback for such job-work undertaken by EOUs/EPZ units
concerned. It also provides, that earlier circulars issued by the
Board stood modified to the said extent. Failure on the part of
the Commissioner, who passed the order-in-original, to notice
the Circular dated 22.5.2000 has resulted in passing an erroneous
order. [Paras 31, 33, 34][133-D; 134-C-F]
3.2 It is not in dispute that all transactions between the
respondent and TISCO have been entered into after the necessary
permission was obtained from the Development Commissioner.
The combined reading of paragraph 9.9(b) of the EXIM Policy,
the Circulars issued by the Board, particularly, the Circular dated
22.5.2000 and reply to the query of the Customs Authorities by
the Development Commissioner would clearly show, that the
respondent was entitled to carry out the job-work on behalf of
TISCO on payment of duty as provided under Exemption
Notification of 1997. [Paras 36, 38][135-F; 136-C-D]
4.1 The next submission for the Revenue was that under
proviso to sub-section (1) of Section 3 of the Central Excise Act,
1944, an EOU is liable to pay duty on the goods brought to a
DTA, as if the goods were produced and manufactured outside
India and were imported into India as per the provisions of the
Customs Act, 1962 and that under Section 5A of the Central
Excise Act, 1944, the Central Government has no power to grant
exemption from payment of duty to an EOU. A perusal of subsection (1) of Section 3 of the Act would show, that sub-section
(1) of Section 3 provides for levy and collection of duty of excise
in such manner as may be prescribed to be called the Central
Value Added Tax (CENVAT) on all excisable goods, which are
produced or manufactured in India as, and at the rates, set forth
in the Fourth Schedule. However, the said sub-section (1) of
Section 3 excludes the applicability thereof, to the goods produced
or manufactured in special economic zones. The proviso to subsection (1) of Section 3 of the Act is applicable to the excisable
goods, which are produced or manufactured by a 100% exportoriented undertaking when such goods are brought to any other
A
B
C
D
E
F
G
H
121
place in India. It provides, that in such a case, an amount equal 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 goods produced or manufactured outside India if
imported into India and where the said duties of customs are
chargeable by reference to their value, the value of such excisable
goods shall, notwithstanding anything contained in any other
provision of this Act, be determined in accordance with the
provisions of the Customs Act, 1962 and the Customs Tariff Act,
1975. [Paras 40, 42][137-D-E; 138-G-H; 139-A-B]
4.2 Sub-Section (1) of Section 5A of the Act provides, that
if the Central Government is satisfied that it is necessary in the
public interest so to do, it may, by notification in the Official
Gazette, exempt generally either absolutely or subject to such
conditions, to be fulfilled before or after removal, as may be
specified in the notification, excisable goods of any specified
description from the whole or any part of the duty of excise leviable
thereon. The proviso thereto provides, that unless specifically
provided in such notification, no exemption therein shall apply to
excisable goods which are produced or manufactured in a free
trade zone or a special economic zone and brought to any other
place in India; or by a 100% EOU and brought to any other place
in India. [Para 44][139-D-F]
4.3 The interpretation made by the Revenue that a
combined reading of proviso to sub-section (1) of Section 3 of
the Act and proviso to sub-section (1) of Section 5A of the Act,
would not entitle the Central Government to grant any exemption
to an EOU when it brings the goods to any other place in India
(i.e. DTA) and the duty that would be leviable would be as if the
said goods were imported in India, if accepted, then the words
"unless specifically provided in such notification" in sub-section
(1) of Section 5A will have to be ignored and the said words would
be rendered otiose. 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. The harmonious
construction of sub-Section (1) of Section 5A of the Act and the
proviso thereto would be, that an EOU which brings the excisable
goods to any other place in India would not be entitled for a general
COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.
M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.
A
B
C
D
E
F
G
H
122
SUPREME COURT REPORTS
[2020] 4 S.C.R.
exemption notification unless it is so specifically provided in such
a notification. [Paras 45, 46, 48][139-G-H; 140-A; 141-D-E]
5.1 The bare reading of Notification No.21/97-C.E. dated
11.4.1997 would amply make it clear, that the Central Government
after being satisfied that it was necessary in the public interest
so to do, thereby exempted the finished products, rejects and
waste or scrap which was produced or manufactured in a hundred
per cent export-oriented undertaking or a free trade zone wholly
from the raw materials produced or manufactured in India and
allowed to be sold in India under and in accordance with the
provisions of sub-paragraphs (a), (b), (c), (d) and (f) of paragraph
9.9 or of paragraph 9.20 of the EXIM Policy, from so much of the
duty of excise leviable thereon under Section 3 of the Central
Excise Act, 1944, as is in excess of an amount equal to the
aggregate of the duties of excise leviable under the said Section
3 of the Central Excise Act or under any other law for the time
being in force on like goods, produced or manufactured in India
other than in a 100% EOU or a free trade zone, if sold in India.
Since the said Exemption Notification specifically mentions, that
the goods produced or manufactured by an 100% EOU, which
are allowed to be sold in India in accordance with para 9.9(b) of
the EXIM Policy, the proviso would be inapplicable thereby,
requiring the duties to be paid, as are required to be paid under
sub-Section (1) of Section 3 of the said Act. Undisputedly, in the
instant case, the transaction between the respondent and TISCO
satisfies all the three conditions. The goods are produced and
manufactured by the respondent, an 100% export-oriented unit;
they are manufactured wholly from the raw materials produced
or manufactured in India and, thirdly, they have been allowed to
be sold in India in accordance with the provisions of paragraph
9.9(b) of the EXIM Policy. [Paras 50-52][142-C-G; 143-C]
5.2 If there are inconsistencies in two statutes, the later
would prevail is well placed. This Court in Deep Chand vs. State
of Uttar Pradesh has laid down the following principles to ascertain
whether there is repugnancy or not: "(1) Whether there is direct
conflict between the two provisions; (2) Whether the legislature
A
B
C
D
E
F
G
H
123
intended to lay down an exhaustive code in respect of the subject
matter replacing the earlier law; (3) Whether the two laws occupy
the same field." There would not be any conflict in the amended
provisions of clause (ii) of the proviso to sub-section (1) of Section
5A of the Act and the said Exemption Notification. In any case,
by the 2001 Amendment, the legislature has not laid down any
exhaustive code in respect of the subject matter in replacing the
earlier law. It appears, that the said Amendment has been
incorporated to bring the said clause (ii) of sub-Section (1) of
Section 5A in sync with the words used in clause (i) of the proviso
to sub-section (1) of Section 5A of the Act and the words used in
the proviso to sub-section (1) of Section 3 of the Act. In that view
of the matter, the said contention is without substance. [Para 54,
55, 57][143-E-G; 144-A-B]
Hardeep Singh v. State of Punjab and Others (2014) 3
SCC 92 : [2014] 2 SCR 1 - followed.
Commissioner of Central Excise, New Delhi v.
Connaught Plaza Restaurant Private Limited, New Delhi
(2012) 13 SCC 639 : [2012] 11 SCR 365; Deep Chand
v. State of Uttar Pradesh AIR 1959 SC 648 : [1959]
Suppl. SCR 8 - relied on.
Siv Industries Ltd. v. Commissioner of Central Excise &
Customs (2000) 3 SCC 367 : [2000] 2 SCR 231; Sarla
Performance Fibers Limited and Ors. v. Commissioner
of Central Excise, Surat-II (2016) 11 SCC 635 : [2016]
7 SCR 201 - held inapplicable.
M. Karunanidhi v. Union of India & Anr. (1979) 3 SCC
431 : [1979] 3 SCR 254; Dharangadhra Chemical
Works v. Dharangadhar Municipality and Anr. (1985)
4 SCC 92 : [1985] 2 Suppl. SCR 757; Ratan Lal Adukia
v. Union of India (1989) 3 SCC 537 : [1989] 3 SCR
440 - referred to.
Case Law Reference
[1979] 3 SCR 254
referred to
Para 15
[1985] 2 Suppl. SCR 757
referred to
Para 15
[1989] 3 SCR 440
referred to
Para 15
COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.
M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.
A
B
C
D
E
F
G
H
124
SUPREME COURT REPORTS
[2020] 4 S.C.R.
[2000] 2 SCR 231
held inapplicable
Para 15
[2016] 7 SCR 201
held inapplicable
Para 15
[2012] 11 SCR 365
relied on
Para 21
[2014] 2 SCR 1
followed
Para 47
[1959] Suppl. SCR 8
relied on
Para 54
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 848852 of 2009.
From the Judgment and Order No. A/1838-1841/WZB/2005-CIII dated 21.10.2005 passed in Appeal Nos. E/2691 to 2693/03 & E1976/04-Mum and Order No. A/1526/WZB/06-C-III/EB dated
07.07.2006 passed in Appeal No.E/1607/06-Mum of the Customs, Excise,
Service Tax Appellate Tribunal, West Zone Bench, Mumbai.
K. Radhakrishnan, Ashok K. Srivastava, Sr. Advs., Ms. Aruna
Gupta, B. Krishna Prasad, Lalit Sankhla, Advs. for the Appellant.
M.H. Patil, Sandeep Narain, Ms. Padmavati Patil (for M/s S.
Narain & Co.), Advs. for the Respondents.
The following Judgment of the Court was delivered:
JUDGMENT
1. Being aggrieved by the judgments and orders dated 21.10.2005
and 7.7.2006 passed by the Customs, Excise, Service Tax Appellate
Tribunal, West Zonal Bench at Mumbai (hereinafter referred to as
"CESTAT") thereby, allowing the appeals filed by the respondent -
Assessee and its Chairman being Appeal Nos.E-2691-2693/03 arising
out of Order-in-Original No.14-20 of 2003 dated 23.6.2003, Order-inOriginal No.21 of 2003 dated 23.6.2003 and Appeal No. E/1976/04 arising
out of Order-in-Original Nos.19-20/2004 dated 15.3.2004 and dismissing
the appeal filed by the Revenue being Appeal No. E/1607/06-Mum arising
out of order of the Commissioner (Appeals), Customs & Central Excise,
Nagpur dated 14.2.2006 in Appeal No. SVS/91/NGP-B/2006, the
Revenue is before this Court.
2. The facts in brief giving rise to the present appeals are as
under:
The respondent - Universal Ferro & Allied Chemicals Ltd.,
Maneck Nagar, Tumsar (hereinafter referred to as "UFAC") is 100%
Export Oriented Unit ("EOU" for short) approved by the Secretariat for
A
B
C
D
E
F
G
H
125
Industrial Approvals, Department of Industrial Development in the
Ministry of Industry, Government of India. UFAC was engaged in the
manufacture/processing and clearance of Ferro Manganese and Silicon
Manganese falling under Chapter 72 of the Schedule to the Central Excise
Tariff Act, 1985. UFAC cleared these items for export as well as in
Domestic Tariff Area (hereinafter referred to as "DTA") on payment
of Central Excise duty.
3. The Central Intelligence Unitof the Central Excise Headquarters
visited the unit of UFAC on 19.9.2001 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 supplied by M/s Tata
Iron & Steel Company Ltd., Jamshedpur (hereinafter referred to as
"TISCO"). In the view of the Revenue, the same was not allowed in
terms of EXIM Policy of 1997-2002 (hereinafter referred to as "EXIM
Policy")
4. During the course of scrutiny of the records, the officers noticed,
that UFAC was having a Memorandum of Agreement dated 28.12.1999
with TISCO for conversion of Manganese Ore/Coke into prime Silicon
Manganese. As per the agreement, TISCO was to supply Manganese
Ore and Coke/Coal free of cost at its site at Maneck Nagar. Rest of the
raw materials and consumables i.e. Quartzite, Charcoal, Carbon paste,
Dolomite, Fluxes, Refractories and Transformer Oil required for the
conversion of Manganese Ore/Coke into Silicon Manganese for TISCO
was to be used by UFAC from their own purchases obtained under
CT-3 as and where applicable.As per the agreement, UFAC was to
charge job charges to TISCO at the rate of Rs.14,090/- per metric tonne
("PMT" for short) which was inclusive of cost of material added by
UFAC. The job work charges were to be recovered from TISCO on
commercial invoices. In the invoices, Silicon Manganese was to be
charged at the rate of Rs. 20,623/- PMT which also included cost of
ingredients supplied by TISCO. The said invoices were prepared under
erstwhile Rule 100-E of the Central Excise Rules.
5. The activities of the UFAC had come to a standstill for some
period and it re-started its production in August, 1999 and was declared
a sick company by the Board for Industrial and Financial Reconstruction
(BIFR) under the provisions of the Sick Industrial Companies (Special
Provisions) Act, 1985 (SICA). It is not in dispute that the UFAC carried
out conversion of the raw materials supplied by TISCO, on TISCO
COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.
M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.
A
B
C
D
E
F
G
H
126
SUPREME COURT REPORTS
[2020] 4 S.C.R.
making the payment of conversion charges of Rs. 14,090/- PMT of
Silicon Manganese. However, while dispatching the Silicon Manganese
to TISCO, excise duty was paid on the value of Rs. 20,623/- PMT which
included cost of raw materials supplied by TISCO as well as the inputs
used by UFAC from their own purchases.
6. The Commissioner, Central Excise & Customs, Nagpur, issued
a show cause notice to the UFAC dated 9.10.2001 in respect of the
Silicon Manganese cleared during September 2000. It was stated in the
said show cause notice, that the Circular No.67/98-Cus dated 14.9.1998,
issued by the Central Board of Excise & Customs, New Delhi (hereinafter
referred to as "the Board") had permitted the EOUs to undertake
job-work on behalf of a DTA unit only in textile, readymade garments,
agro-processing and granite sectors and by another Circular No. 74/99
dated 5.11.1999 the said facility was extended to EOUs to undertake
job-work on behalf of a DTA unit in aquaculture, animal husbandry,
electronics hardware and software sectors. The show cause notice
therefore stated, that the sector in which respondent - Assessee had
carried out the job-works was not covered by either of the Circulars
and, as such, the said job-works were inviolation of EXIM Policy. The
show cause notice called upon the respondent - Assessee to show
cause,as to why the said Silicon Manganese should not be charged to
full Central Excise duty as per the proviso to Section 3(1) of the Central
Excise Act, 1944 (hereinafter referred to as "the Act") by denying the
benefit of Notification No. 8/97 dated 1.3.1997 (hereinafter referred to
as "the said Exemption Notification").
7. The show cause notice also called upon the UFAC to show
cause, as to why the central excise duty amounting to Rs. 23,08,443/-
short paid on Silicon Manganese cleared in DTA during September
2000,should not be recovered under Section 11-A of the Act. It also
called upon to show cause, as to why the goods i.e. 296 MT Silicon
Manganese valued at Rs. 61,04,408/- cleared in DTA during the aforesaid
period (i.e. September 2000) should not be held liable for confiscation.
The said show cause notice also required to show cause, as to why
penalty should not be imposed on the UFAC under Rule 209 of the
Central Excise Rules, 1944 read with Section 38-Aof the Act.
8. In all, ten (10) show cause notices of various dates, last being
2.12.2003 for the identical charges for different periods (i.e. from March
2000 to May 2003) were issued.
A
B
C
D
E
F
G
H
127
9. In response to the show cause notices, UFAC had submitted
its written replies stating therein, that in the show cause notices no violation
of Central Excise Law has been alleged. It was submitted, that the
removals in the DTA were in accordance with the permission granted
by the Development Commissioner and, as such, there was no ground
for denial of the concessional rate of duty laid down in the said Exemption
notification. It was further submitted, that since the issue was based on
the interpretation of the provisions of EXIM Policy, it was necessary to
obtain ruling of the Development Commissioner on the issue. It was
submitted, that since the Development Commissioner had clarified that
the removals made by UFAC to TISCO were in accordance with the
permission under the EXIM Policy, there was no occasion to proceed
further.
10. However, the Commissioner while passing the order-in-original
came to a finding that the conversion work performed by UFAC was
nothing but the job work and that the said job work done by an EOU was
governed by para 9.17(b) of the EXIM Policy. He found, that under
para 9.17(b) of the EXIM Policy, an EOU was permitted to do job work
for a DTA unit only for the purposes of exporting the finished goods
directly from EOU. However, since after the job work the finished goods
were not exported by the EOU but cleared to a DTA unit for home
consumption, the UFAC had contravened the provisions of the EXIM
Policy. He also came to a finding, that the sector in which UFAC had
undertaken the job work was not covered by the Circular dated 14.9.1998
and as extended by another Circular dated 5.11.1999, issued by the Board.
He also came to a conclusion that since there was no sale of the goods
but only return of the goods after job work, it was not a sale and, as
such, contrary to the provisions of the EXIM Policy. He, therefore, vide
order dated 23.6.2003 confirmed the demand for Rs.11,56,08,497/- along
with interest. He also imposed penalty of Rs.50 lakhs on UFAC. He
further held, that the goods i.e. 15792.85 MTs of Silicon Manganese
valued at Rs. 32,31,30,000/-were liable for confiscation. However, since
the said goods were not available for confiscation, redemption fine of
Rs. 50 lakhs in lieu of confiscation was imposed. Two more similar orders
confirming demand as raised under subsequent show cause notices were
also passed vide order dated 23.6.2003 and 15.3.2004. In the second
order dated 23.6.2003 being Order-in-Original No.21 of 2003, personal
penalty of Rs. 5 lakh was also imposed on the Chairman of UFAC,
Dhunjishaw M. Naterwala.
COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.
M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.
A
B
C
D
E
F
G
H
128
SUPREME COURT REPORTS
[2020] 4 S.C.R.
11. Being aggrieved thereby, the UFAC as well as the Chairman
of UFAC, Dhunjishaw M. Naterwala preferred appeals before the
learned CESTAT.
12. The Commissioner (Appeals) had set aside the demand raised
by the Revenue in respect of duty free carbon paste procured by UFAC
under the CT-3 certificate in terms of Notification No.1/95-CE dated
4.1.1995 for use in the conversion process of Manganese ore. Being
Aggrieved thereby, the Revenue filed appeal before the CESTAT being
Appeal No.E/1607/2006. By the impugned judgment dated 21.10.2005,
the demand orders against UFAC were reversed by the CESTAT. Also,
the CESTAT dismissed the Revenue's Appeal No. E/1607/2006 by order
dated 7.7.2006, referring to its order and judgment dated 21.10.2005 in
UFAC's appeal,
Hence, the present appeals.
13. We have heard Shri K. Radhakrishnan, learned Senior Counsel
appearing for the appellant- Revenue and Shri M.H. Patil, learned counsel
appearing on behalf of the respondent - UFAC.
14. The main contention raised by Shri Radhakrishnan,learned
Senior Counsel on behalf of the Revenue is that, in view of proviso to
sub-section (1) of Section 3 of the Act, the duty which is liable to be
levied and collected on any excisable goods manufactured by a 100%
EOU and brought to any other place in India shall be leviable as per the
duties of Customs, which are leviable under the Customs Act, 1962 on
like goods produced and manufactured outside India, if imported into
India. It is contended, that the proviso to Section 5A of the said Act
specifically provides, that no exemption granted under Section 5A shall
apply to the excisable goods which are produced or manufactured by a
100% EOU and brought to any other place in India. He further submits,
that in the transaction between the UFAC and TISCO, there is no transfer
of property in goods to the UFAC and, as such, it cannot be considered
to be a sale under Section 4 of the Sale of Goods Act, 1930. The learned
Senior Counsel therefore submits, that the order passed by the CESTAT
deserves to be set aside and the orders-in-original passed by the
Commissioner (Appeals) need to be maintained.
15. It is further contended by Shri Radhakrishnan, learned Senior
Counsel, that the words "allowed to be sold in India" in clause (ii) of
proviso to sub-section (1) of Section 5A of the Act have been substituted
A
B
C
D
E
F
G
H
129
by words "brought to any other place in India" with effect from 11.5.2001.
He therefore submits, that in view of change in law from 11.5.2001, the
statutory force of the said Exemption Notification is lost from 11.5.2001.
In his submission, the said Exemption Notification would stand impliedly
repealed with effect from 11.5.2001. He relies on the judgments of this
Court in the cases of (1) M. Karunanidhi vs. Union of India & Anr.1;
(2) Dharangadhra Chemical Works vs. Dharangadhar Municipality
and Anr.2; and (3) Ratan Lal Adukia vs. Union of India3. He further
submits, that the terms "allowed to be sold in India" and "brought to any
other place in India" have been considered by this Court in the cases of
Siv Industries Ltd. vs. Commissioner of Central Excise & Customs4
and Sarla Performance Fibers Limited and ors. vs. Commissioner
of Central Excise, Surat-II5 and as such, the UFAC would be liable to
pay duty as if the goods were imported into India.
16. Shri M.H. Patil, on the contrary submits, that the case of the
present appellant is covered by paragraph 9.9(b) of the EXIM Policy
and not by paragraph 9.17(b) of the EXIM Policy. He further submits,
that all the transactions made by UFAC were made only after the valid
permissions were granted by the Joint Development Commissioner,
SEEPZ. Learned counsel further submits, though initially vide Circular
dated 14.9.1998 (No.67/98-Cus) the permission to undertake job work
to EOU/EPZ from the DTA units was restricted only to units in textile,
readymade garments, agro-processing and granite sectors and
subsequently vide Circular dated 5.11.1999 (No.74/99-Cus) it was
extended to certain other units; by a subsequent Circular dated 22.5.2000
(No.49/000-Cus), the said facility was extended to all the sectors. He
submits, that this fact has not been taken into consideration by the Authority
passing the Orders-in-Original. It is submitted that the Sponsoring
Authority i.e. the Development Commissioner, SEEPZ had clarified the
position that the activity which was carried out by the UFAC was
permissible under paragraph 9.9(b) of the EXIM Policy.
17. To counter the submission that there is no transfer of property
in goods, Shri Patil submits, that the 'sale' and 'purchase' in the present
case will have to be construed with reference to the definition of 'sale'
1 (1979) 3 SCC 431
2 (1985) 4 SCC 92
3 (1989) 3 SCC 537
4 (2000) 3 SCC 367
5 (2016) 11 SCC 635
COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.
M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.
A
B
C
D
E
F
G
H
130
SUPREME COURT REPORTS
[2020] 4 S.C.R.
and 'purchase' under the Central Excise Act and not under the Sale of
Goods Act, 1930. Lastly, Shri Patil submits, that UFAC is entitled to the
benefits of said Exemption Notification and, as such, the findings as
recorded by the learned CESTAT warrant no interference.
18. We shall first deal with the submission of Shri K. Radhakrishnan,
learned Senior Counsel appearing for the Revenue, to the effect that
since in the transaction between UFAC and TISCO there is no transfer
of property in goods, the same cannot be termed as 'sale' and therefore
would not be covered under paragraph 9.9 (b) of the EXIM Policy. Shri
Radhakrishnan, in that respect, would rely on the provisions of the Sale
of Goods Act, 1930.
19. We do not find any merit in the submission of Shri
Radhakrishnan in this regard. It will be relevant to note that clause (h) of
Section 2 of the Central Excise Act, 1944 specifically defines the terms
'sale' and 'purchase'. Section 2(h) of the Act reads thus:
"2(h) "sale" and "purchase", with their grammatical variations
and cognate expressions, mean any transfer of the possession of
goods by one person to another in the ordinary course of trade or
business for cash or deferred payment or other valuable
consideration;"
20. The perusal of 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 the terms 'sale' and
'purchase' within the meaning of the Central Excise Act, 1944.
Undisputedly, in the present case, there is a transfer of Manganese Ore
by TISCO to UFAC for the purposes of processing the same and
converting it into Silicon Manganese. Undisputedly, the same is also for
a valuable consideration.
21. In this respect, it will be apposite to refer to the judgment of
this Court in the case of Commissioner of Central Excise, New Delhi
vs. Connaught Plaza Restaurant Private Limited, New Delhi6 wherein
this Court observed thus:
 "46. We are unable to persuade ourselves to agree with the
submission. It is a settled principle in excise classification that the
6 (2012) 13 SCC 639
A
B
C
D
E
F
G
H
131
definition of one statute having a different object, purpose and
scheme cannot be applied mechanically to another statute. As
aforesaid, the object of the Excise Act is to raise revenue for
which various goods are differently classified in the Act. The
conditions or restrictions contemplated by one statute having a
different object and purpose should not be lightly and mechanically
imported and applied to a fiscal statute for non-levy of excise
duty, thereby causing a loss of revenue. [See Medley
Pharmaceuticals Ltd. v. CCE and Customs [(2011) 2 SCC 601]
(SCC p. 614, para 31) and CCE v. Shree Baidyanath Ayurved
Bhavan Ltd. [(2009) 12 SCC 419] ] The provisions of PFA,
dedicated to food adulteration, would require a technical and
scientific understanding of "ice-cream" and thus, may require
different standards for a good to be marketed as "ice-cream".
These provisions are for ensuring quality control and have nothing
to do with the class of goods which are subject to excise duty
under a particular tariff entry under the Tariff Act. These provisions
are not a standard for interpreting goods mentioned in the Tariff
Act, the purpose and object of which is completely different."
22. This Court has held, that 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.
It has further been held, that the conditions or restrictions contemplated
by one statute having a different object and purpose should not be lightly
and mechanically imported and applied to a fiscal statute.
23. It is also equally well settled that the first principle of
interpretation of plain and literal interpretation has to be adhered to. We
are therefore of the considered view, that the narrower scope of the
term 'sale' as found in the Sale of Goods Act, 1930 cannot be applied in
the present case. The term 'sale' and 'purchase' under the Central
Excise Act, 1944, if construed literally, it would give a wider scope and
also include transfer of possession for valuable consideration under the
definition of the term 'sale'.
24. The next issue that requires consideration is as to whether
under the EXIM Policy, UFAC was entitled to carry out the job-work
for TISCO and whether it was entitled to exemption from payment of
duty under the Exemption Notification.
COMMISSIONER OF CENTRAL EXCISE, NAGPUR v.
M/S UNIVERSAL FERRO & ALLIED CHEMICALS LTD. & ANR.
A
B
C
D
E
F
G
H
132
SUPREME COURT REPORTS
[2020] 4 S.C.R.
25. It will be relevant to refer to the relevant clauses of Chapter 9
of the EXIM Policy. As per para 9.1 of the said EXIM Policy, units
undertaking to export their entire production of goods may be set up
under the EOU Scheme. As per para 9.9, the entire production of EOU
units is required to be exported subject to the following:
"(a) Unless specifically prohibited in the LOP/LOI, rejects may
be sold in the Domestic Tariff Area (DTA), on prior intimation to
the Customs authority. Such sales shall be counted against DTA
sale entitlement under paragraph 9.9(b) of the Policy. Sale of
rejects shall be subject to payment of duties as applicable to sale
under para 9.9(b).
(b) DTA sale upto 50% of the FOB value of exports may be
made subject to payment of applicable duties and fulfilment of
minimum NFEP prescribed in Appendix 1 of the Policy....."
26. It will also be relevant to refer to para 9.17 (b) of the EXIM
Policy, which reads thus:
"(b) EOU/EPZ units may undertake job-work for export, on behalf
of DTA units, with the permission of Assistant Commissioner of
Customs, provided the goods are exported direct from the EOU/
EPZ units. For such exports, the DTA units will be entitled for
refund of duty paid on the inputs by way of Brand Rate of duty
drawback."
27. It can therefore be seen, that under para 9.9(a) of the EXIM
Policy, EOU is entitled to sell the rejects in the DTA on prior intimation
to the Customs authorities. Such sales are to be counted against DTA
sale entitlement under paragraph 9.9(b) of the EXIM Policy. The sale of
rejects shall be subject to payment of duties as applicable to sale under
paragraph 9.9(b) of the EXIM Policy.
28.