The Commissioner of Central Excise vs Bannai Amman Sugars Ltd.

R. Sudhakar, J.

This appeal is filed by the Department challenging the Final Order No. 242 of 2009, dated 06.03.2009 passed by the Customs, Excise and Service Tax Appellate Tribunal, South Regional Bench at Chennai, by raising the following questions of law:

"1. Whether the said items namely imported resin, Tenax paste and Hardener are raw materials or consumables?

Whether the benefit of the Notification 23/2003 as amended can be extended or not to the subject items?"

The assessee/ first respondent is engaged in the manufacture of polished granite slabs and monuments and exporting the same to their overseas buyers. For the manufacture of polished granites, they were using imported goods such as steel grits and tenax paste. They are also clearing rejects of such manufactured polished granites into DTA on payment of Central Excise duty. Since the unit have used imported raw materials, a show cause notice was issued stating that the assessee had failed to discharge the aggregate of all duties (Customs & Excise). The case of the Department is that these goods had to be classified as imported raw materials and not imported consumables. In response to the show cause notice the assessee replied denying the allegation and defined these goods as imported consumables. The assessee claimed that as per Notifications 8/97 and 23/2003, they are entitled for exemption of duty.

The Adjudicating Authority was of the view that since the tenax paste has been used only as raw materials and as such the assessee is not eligible for exemption, since the final product is not manufactured wholly from the raw materials produced or manufactured in India. The Adjudicating Authority was also of the view that the assessee had not used wholly indigenous raw material and also used imported raw material, the benefit of exemption stipulated in the above two notifications could not be extended to the assessee. Accordingly, the Adjudicating Authority confirmed the duty demanded in the show cause notice under Section 11 of the Central Excise Act and also levied interest under Section 11AB of the Central Excise Act.

Aggrieved by the same, the assessee preferred an appeal before the Commissioner (Appeals), who confirmed the order of the Adjudicating Authority, thereby dismissed the appeal.

As against the order of the Commissioner (Appeals), the assessee pursued the matter before the Tribunal. The Tribunal following the decisions of the Tribunal in the case of Gem Granites Vs. CC, Seaport (Import) Chennai reported in 2007 (216) ELT 153 (Tri. Chennai) and Century Denim & Others Vs. CCE, Indore reported in 2008 (06) LCX 0044 allowed the appeal holding that resin and Hardener in question are consumables different from raw materials and the use of imported consumables will not disentitle an EOU to the benefit of the said notification.

Aggrieved by the said order of the Tribunal, the Revenue is before this Court raising the above-mentioned substantial questions of law.

We have heard the learned Standing Counsel appearing for the Revenue and the learned counsel appearing for the first respondent/assessee and perused the order passed by the Tribunal and other documents.

At the outset, the learned counsel for the first respondent objected to the maintainability of the appeal before this Court on the above questions of law raised by the department. It is the plea of the learned counsel for the first respondent that Section 35G of the Central Excise Act, 1944 provides that an appeal on the issue relating to rate of duty of excise or value of goods for purposes of assessment would not lie before this Court. He placed strong reliance on the decision of the Supreme Court in Navin Chemicals Mfg. and Trading Co. Ltd. Vs. Collector of Customs, , wherein it is held as under:

"11. It will be seen that sub-section (5) uses the said expression determination of any question having a relation to the rate of duty or to the value of goods for the purposes of assessment and the Explanation thereto provides a definition of it for the purposes of this sub-section. The Explanation says that the expression includes the determination of a question relating to the rate of duty; to the valuation of goods for purposes of assessment; to the classification of goods under the Tariff and whether or not they are covered by an exemption notification; and whether the value of goods for purposes of assessment should be enhanced or reduced having regard to certain matters that the said Act provides for. Although this Explanation expressly confines the definition of the said expression to sub-section (5) of Section 129-D, it is proper that the said expression used in the other parts of the said Act should be interpreted similarly. The statutory definition accords with the meaning we have given to the said expression above. Questions relating to the rate of duty and to the value of goods for purposes of assessment are questions that squarely fall within the meaning of the said expression. A dispute as to the classification of goods and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment. Whether the value of goods for purposes of assessment is required to be increased or decreased is a question that relates directly and proximately to the value of goods for purposes of assessment. The statutory definition of the said expression indicates that it has to be read to limit its application to cases where, for the purposes of assessment, questions arise directly and proximately as to the rate of duty or the value of the goods.

This, then, is the test for the purposes of determining whether or not an appeal should be heard by a Special Bench of CEGAT, whether or not a reference by CEGAT lies to the High Court and whether or not an appeal lies directly to the Supreme Court from a decision of CEGAT: does the question that requires determination have a direct and proximate relation, for the purposes of assessment, to the rate of duty applicable to the goods or to the value of the goods."

(emphasis supplied)

The present appeal is filed under Section 35G of the Central Excise Act, 1944 and it is apposite to refer to Section 35G(1) of the Central Excise Act, 1944, which reads as under:

"Section 35G. Appeal to High Court.�(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law."

(emphasis supplied)

In the present case, the core issue decided by the Tribunal involves interpretation of Notification No. 23/03-CE dated 31.3.2003, whereby it was notified that the goods manufactured wholly from imported raw materials and cleared by an EOU to DTA are exempted from the duty of excise equal to that leviable on such goods manufactured and cleared by other DTA units. The Department denied the said exemption. Hence, the issue that arises for consideration is what will be the rate of duty that is payable by the first respondent, but for the notification in question. Therefore, the objection of the learned counsel for the first respondent is sustained.

The above said view of this Court is fortified by a decision of the Gujarat High Court in Commissioner of Central Excise Vs. JBF Industries Ltd., , wherein it is held as under:

"10. In the light of the aforesaid judicial pronouncements, it is apparent that the question as to the applicability of a notification or a circular which has a bearing on the determination of the rate of duty is a question which has a direct and proximate relationship to the rate of duty and to the value of goods for purposes of assessment. In the circumstances, the present appeal which relates to the applicability of the above referred circular, relates directly to the determination of rate of duty for the purpose of assessment and as such, in the light of the provisions of Section 35G read with Section 35L of the Act, this Court has no jurisdiction to entertain the appeal."

(emphasis supplied)

For the foregoing reasons, we hold that this appeal is not maintainable and accordingly, the same is dismissed giving liberty to the appellant to pursue the matter before the appropriate forum. No costs.