TATA TEA LIMITED Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) The appellants are a 100% export -oriented undertaking [EOU] approved by the competent authority in the Ministry of Industry, Government of India, in the year 1992, for the manufacture and export of Instant Tea Powder and Aqueous Tea Aroma. The EOU scheme which had obligated them to export the entire production of the said goods for a period of ten years from the date of commencement of commercial production, permitted them to make duty -free imports and/or indigenous procurement of capital goods, raw materials, etc., required for the manufacture of the goods. The exemption from payment of Customs duty on imported items and that from payment of Central Excise duty on the items indigenously procured were provided under separate notifications issued by the Central Government under the respective provisions of the Customs Act and the Central Excise Act. The relevant Central Excise notification providing for exemption in respect of capital goods, raw materials, etc., procured indigenously by an EOU, for the period (1 -1 -2000 to 21 -5 -2000) relevant to the instant case, is Notification No. 1/95 -C.E., dated 4 -1 -95 as amended from time to time. The notification exempted the excisable goods specified in Annexure -I thereto, when brought into a 100% EOU in connection with the manufacture and packaging of export products, from the Basic Excise Duty (leviable under Section 3 of the Central Excise Act) and the Additional Excise Duty leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Annexure -I to the Notification was amended from time to time. Only two of the entries in the Annexure are relevant to the dispute in this case. These entries, at Serial Nos. 3 and 7 of the Annexure, for the period 4 -1 -95 to 14 -9 -98, are as under : -

(2.) The appellants had, after complying with Rule 192 of the Central Excise Rules, procured Furnace Oil from Indian market without payment of duty under bond executed with the jurisdictional Assistant Commissioner in terms of Notification No. 1/95 -C.E., dated 4 -1 -95 (as amended) and used the same as fuel for boilers which generated steam which was, in turn, used for the manufacture of Instant Tea Powder. The department issued to them two show cause notices, the first one dated 3 -2 -2001 read with corrigendum dated 1 -3 -2001 demanding Central Excise duty of Rs. 98,40,888/ - for the period 1 -1 -96 to 31 -3 -2000 and the second one dated 23 -3 -2001 demanding duty of Rs. 5,63,030/ - for the period 1 -4 -2000 to 21 -5 -2000, on the Furnace Oil procured and used as above. The demand of duty was based on the allegation that the exemption under Notification No. 1/95 -C.E. was not available to furnace oil used as fuel in boilers. The show cause notices invoked the larger period of limitation under the proviso to Section 11A(1) of the Central Excise Act to raise the demand of duty by alleging that the appellants had, with intent to evade payment of duty on the furnace oil, misdeclared that the furnace oil was 'used as fuel in the manufacture of instant tea'. The party denied the allegations and contested the demand of duty by pleading that furnace oil used in the boilers was a 'consumable' and hence eligible for the exemption under the Notification as also by contending that the demand was barred by limitation. In the common order passed by the Commissioner in adjudication of the two show cause notices, it was held that the exemption under the Notification was not available to furnace oil and hence the appellants were liable to pay duty. The demand for the period up to 31 -12 -1999 was, however, held to be time -barred.

(3.) Heard both the sides. The learned Counsel for the appellants referred to the process of manufacture of Instant Tea Powder and submitted that furnace oil used as fuel in boilers for generating steam for the manufacture of the tea powder was squarely covered by the entry 'consumables' in Annexure -I to the Notification; that the entries in the said Annexure had to be liberally construed so as to give full effect to the EOU scheme; that, in answer to queries of the Central Excise Range Superintendent, the appellants had clarified through letter dated 12 -8 -94 that furnace oil was a consumable used in connection with the manufacture of Instant tea powder meant for export; that such clarification was accepted by the department; that this position was acknowledged in the impugned order itself; that the Commissioner erred in relying on the Amending Notification No. 31/98 to deny the benefit of the clear provisions of Notification No. 1/95; and that the applicability of the entry 'Consumables' to furnace oil was not affected by anything contained in any of the Amending Notifications. Without prejudice to the above submissions, Counsel also argued that the amendment of entry '3C' in Annexure -I to Notification 1/95 -C.E., brought about by Notification No. 40/2000 -C.E., was clarificatory and therefore the furnace oil used by the EOU in their boilers would be squarely covered by the entry for the entire period.