1 IN THE HIGH COURT OF KARNATAKA AT …judgmenthck.kar.nic.in/judgmentsdsp/bitstream/123456789/...1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 30 th DAY OF JULY 2014

1

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 30th DAY OF JULY 2014

PRESENT

THE HON’BLE MR.JUSTICE N.KUMAR

AND

THE HON’BLE MR.JUSTICE B.MANOHAR

C.E.A.Nos.29 & 59/2012 c/w.C.E.A.Nos.31/12, 34/12, 35/12,

36/12, 27/14, 12/12, 5/14, 28/14, 6/14, 4/2014, 31/2014

and 30/2012

C.E.A.Nos.29 & 59/2012

BETWEEN:

The Commissioner

Of Central Excise & Service Tax, Large Taxpayers Unit,

J.S.S.Towers, 100 ft. Ring Road,

Banashankari III Stage, Bangalore – 560 085. …APPELLANT

(By Sri.N.R.Bhaskar, CGSC)

AND:

M/s.Fosroc Chemicals (India) Pvt. Ltd.,

No.38, 12th Cross, III Floor, ‘PSR ID’, CBI Road,

Ganganagar North, P.O.Box No.2053,

Bangalore -560 032. …RESPONDENT

******

R

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These appeals are filed under Section 35G of the Central

Excise Act, 1944 arising out of order dated 8.2.2012 passed in Final Order No.94/2012 and 105/2012 dated 9.2.2012 praying

to allow this appeal and set aside the Final Order No.94/2012 dated 8.2.2012 (in common Final Order No.85 to 99/2012

dated 8.2.2012) and 105/2012 dated 9.2.2012 and etc.

C.E.A.No.31/2012

BETWEEN:

Commissioner of Central Excise,

Bangalore – 1. C.R.Building,

Queen’s Road, Bangalore – 01. …APPELLANT

(By Sri.Jeevan.J.Neeralgi, Adv.,)

AND:

M/s.Impact Safety Glass Works Pvt. Ltd., Sy.No.23, Old Madras Road,

Avalahalli, Bangalore – 560 068. …RESPONDENT

(By Sri.B.N.Gururaj, Adv.,)

******

This appeal is filed under section 35G of the Central Excise Act, 1944 arising out of Order dated 8.2.2012 passed in

Final Order No.96/2012 praying that this Hon’ble Court may be pleased to decide the substantial questions of law stated

therein and set aside the final order No.96/2012 dated 8.2.2012 passed by the CESTAT, South Zonal Bench,

Bangalore and allow the appeal, in the interest of justice and

equity.

3

C.E.A.No.34/2012

BETWEEN:

The Commissioner of Central Excise,

Bangalore – III

Commissionerate, P.B.No.5400,

C.R.Building, Queen’s Road,

Bangalore – 01. …APPELLANT


AND:

M/s.V 3 Engineers Pvt. Ltd., No.6/1, 6/2, 6/5, 7/1, Deganahalli,

Nelamangala (Taluk), Bangalore Rural District – 562 123. …RESPONDENT

(By Sri.B.G.Chidananda Urs, Adv.,)

******

This appeal is filed under section 35G of the Central

Excise Act, 1944 arising out of Order dated 8.2.2012 passed in Final Order No.85-99/2012 praying to decide the substantial

questions of law stated therein and set aside the final order No.85-99/2012 dated 8.2.2012 passed by the CESTAT,

Bangalore and uphold the demand as per order in original No.01/2009 dated 27.4.2009.

C.E.A.No.35/2012

BETWEEN:

The Commissioner of Central Excise, Bangalore – III

Commissionerate,

4

P.B.No.5400,




AND:

M/s.Power Plus (Bangalore) Pvt. Ltd., Plot No.4, Kadabagere (Off Magadi

Main Road), Dasanapura Hobli, Bangalore. …RESPONDENT

(By Sri.Harish.V.S., Adv., for DNS Law House)

******



questions of law as framed therein and set aside the final order No.85-99/2012 dated 8.2.2012 passed by the CESTAT,

Bangalore and uphold the demand as per order in original No.14-15/2009 dated 12.10.2009/14.10.2009.

C.E.A.No.36/2012

BETWEEN:

The Commissioner of Central Excise, Bangalore – III

Commissionerate, P.B.No.5400,




5

AND:

M/s.Power Plus (Bangalore) Pvt. Ltd.,

Plot No.4, Kadabagere (Off Magadi Main Road), Dasanapura Hobli,

Bangalore. …RESPONDENT

(By Sri.Harish.V.S., Adv., for DNS Law House)

******



questions of law as framed therein and set aside the final order No.85-99/2012 dated 8.2.2012 passed by the CESTAT,

Bangalore and uphold the demand as per order in original

No.14-15/2009 dated 12.10.2009/14.10.2009

C.E.A.No.27/2014

BETWEEN:


Bangalore – III Commissionerate,

P.B.No.5400, C.R.Building,



AND:

M/s.S.P.Fabricators Pvt. Ltd.,

No.10, Makali Village,

Opp. Himalaya Drug Co, Dasanapura Hobli,

6

Bangalore – 562 123. …RESPONDENT

(By Sri.Harish.R. & Neethu James, Adv.,)

******

This appeal is filed under section 35G of the Central Excise Act, 1944 arising out of Order dated 24.6.2013 passed

in Final Order No.25516/2013 praying to allow the appeal of the appellant and decide the question of law as framed above

and etc.,

C.E.A.No.12/2012

BETWEEN:


Bangalore – I Commissionerate,



(By Sri.Jeevan.J.Neeralagi, Adv.,)

AND:

M/s.Ashirwad Pipes Pvt. Ltd.,

No.4-B, Attibele Indl. Area, Hosur Road,

Bangalore. …RESPONDENT

(Served)

******


Excise Act, 1944 arising out of Order dated 30.9.2011 passed

in Final Order No.643/2011 praying to decide the substantial questions of law as framed therein and set aside the final

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order No.643/2011 dated 30.9.2011 passed by the CESTAT,

South Zonal Bench, Bangalore and allow the appeal in the interest of justice and equity.

C.E.A.No.5/2014

BETWEEN:

The Commissioner of Central Excise, Bangalore – II,

Commissionerate, Central Revenue Building,


(By Sri.Chandrashekara Reedy.M.V., Adv.,)

AND:

M/s.Universal Power Transformers Pvt. Unit III, A 313 and A 314, 7th Main Road,

2nd Stage, Peenya Indl. Estate,

Bangalore- 560 058. …RESPONDENT

(By Sri.K.S.Ravishankar, Adv.,)

******


Excise Act, 1944 arising out of Order dated 28.6.2013 passed in Final Order No.25596/2013 praying to allow the above

appeal by duly setting aside the Final Order No.25596/2013 dated 28.6.2013 passed by Customs, Excise and Service Tax

Appellate Tribunal, South Zone Bench, Bangalore in central Excise Appeal No.E/1968/2010 or pass any such order as this

Court deems fit and proper in the circumstances of the case with cost on grounds of justice and equity.

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C.E.A.No.28/2014

BETWEEN:


Bangalore II Commissionerate,

Central Revenue Building, Bangalore – 560 001. …APPELLANT

(By Sri.Chandrashekara Reddy.M.V., Adv.,)

AND:

M/s.Electrogear,

No.45, 1st Cross, 1st Stage, Peenya Indl. Area,

Bangalore – 58. …RESPONDENT

******


Excise Act, 1944 arising out of Order dated 5.8.2013 passed in

Final Order No.25792/2013 praying to allow the above appeal by duly setting aside the final order No.25792/2013 dated

5.8.2013 passed by the CESTAT, Bangalore in Central Excise Appeal No.E/677/2011 and pass any such order as this Court

deems fit the proper in the circumstances of the case with cost on grounds of justice and equity.

C.E.A.No.6/2014

BETWEEN:

Commissioner of Central Excise, Bangalore – II

Commissionerate, C.R.Building,


(By Sri.M.V.Chandrashekar Reddy, Adv.,)

9

AND:

M/s.L & T Komatsu Ltd.,

Bangalore Works, Byatarayanapura,

Bellary Road, Bangalore – 92. …RESPONDENT

(By Sri.T.Suryanarayana, Adv.,)

******

This appeal is filed under section 35G of the Central Excise Act, 1944 arising out of Order dated 28.6.2013 passed

in Final Order No.25597/2013 praying to allow the above appeal by duly setting aside the Final Order No.25597/2013

dated 28/06/2013 passed by the Customs, Excise and Service

Tax Appellate Tribunal, South Zone Bench, Bangalore in CEA No.E/1766/2010 or pass any such order as this Court deems

fit and proper in the circumstances of the case with cost on grounds of justice and equity.

C.E.A.No.4/2014

BETWEEN:


Bangalore I Commissionerate, C.R.Building,

Queens Road, Bangalore – 560 001. …APPELLANT


AND:

M/s.Pushpak Fabricators, Sy.No.14/1, Kallabalu Village,

Jigani Hobli, Anekal Taluk,

10

Bangalore (Rural) – 562 106. …RESPONDENT

******

This appeal is filed under Section 35G of the Central Excise Act, arising out of order dated 16.08.2013 passed in

Final Order No.26509/2013 praying to decide the substantial questions of law in favour of the appellant and set aside he

final order No.26509/2013 dated 16.8.2013 passed by the CESTAT, South Zonal Bench, Bangalore.

C.E.A.No.31/2014

BETWEEN:


Mysore Commissionerate,

Vinaya Marga, Siddharatha Nagar,

Mysore – 570 011. …APPELLANT


AND:

M/s.Bhoruka Aluminium Ltd., No.1, K.R.S.Road, Metagalli,

Mysore – 570 016. …RESPONDENT

******

This appeal is filed under Section 35G of the Central

Excise Act, arising out of order dated 16.09.2013 passed in Final Order No.26588/2013 praying to decide the substantial

questions of law in favour of the appellant and set aside he final order No.26588/2013 dated 16.9.2013 passed by the

CESTAT, South Zonal Bench, Bangalore and allow the appeal

in the interest of justice and equity.

11

C.E.A.No.30/2012

BETWEEN:


Bangalore – 1 C.R.Building,


(By Sri.Jeevan.Neeralgi, Adv.,)

AND:

M/s.Veena Industries,

Site No.3/14, Srinivasa Colony, Begur Road, Honga Sandram,

Bangalore – 560 068. …RESPONDENT

******

This appeal is filed under Section 35G of the Central

Excise Act, arising out of order dated 08.02.2013 passed in

Final Order No.93/2012 praying to decide the substantial

questions of law in favour of the appellant and set aside he

final order No.93/2012 dated 8.2.2012 passed by the CESTAT,

South Zonal Bench, Bangalore in the interest of justice and

equity.

These appeals coming on for Admission this day,

N.KUMAR, J., delivered the following:

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J U D G M E N T

In all these appeals, the common question of law

that arises for consideration is,

Whether the amendment to the Cenvat

Credit Rules 2004, by substituting

clause(i) of sub-rule (6) of Rule 6 of

Cenvat Credit Rules 2004 by way of

notification No.50/2008-C.E (N.T.) dated

31.12.2008 is prospective in operation

or retrospective?

Therefore, all these cases are taken up together and

disposed of by this common order.

2. For proper understanding, we have set out the

facts in CEA.No.29 and 59 of 2012.

3. The assessee M/s.Fosroc Chemicals (India)

Pvt. Ltd., is having its registered office at “PSR ID” #38,

III Floor, 12th Cross, CBI Road, Ganganagar North,

13

Bangalore-560032. They are having their manufacturing

units – one at Kuluvanahalli Post in Nelamangala Taluk,

Bangalore and other at Ankleshwar, Gujarat. They are

manufacturers of Admixtures, resin products and powder

products falling under tariff headings 38244010,

38244090, 34031900, 32141000 etc., of Central Excise

Tariff Act, 1985. The assessee was availing Cenvat Credit

of the duty paid on inputs used in both dutiable and

exempted final products cleared by them but were not

maintaining separate accounts for receipt, consumption

and inventory of the inputs as required under Rule 6(2) of

the Cenvat Credit Rules, 2004. The assessee had cleared

their final products to SEZ developers without payment of

duty against letters of undertaking (LUT) during the

period from January 2006 to December 2008 (Ankleshwar

Unit) and June 2006 to December 2008 (Bangalore Unit).

During the course of verification of the returns of the

assessee it was seen that the assessee had not exercised

14

an option to pay an amount equivalent to credit

attributable to inputs used in the manufacture of goods

cleared to SEZ Developers, nor had paid an amount equal

to 10% of the total price, excluding sales tax and other

taxes. Therefore, the assessee was issued show-cause

notice by the Additional Commissioner and the

Commissioner, LTU, Bangalore, demanding payment.

After receipt of the explanation, the demand was

confirmed under the provisions of section 11AC of the

Central Excise Act, 1944 read with Rule 15(2) of the

Cenvat Credit Rules 2004 along with interest and penalty.

Aggrieved by the said order, the assessee preferred

appeal before the CESTAT, Bangalore. The appeal was

allowed by the Tribunal relying upon the decision of the

Bench in SUJANA METAL PRODUCTS vs. CCE, Hyderabad

(2011(273) ELT 112 (Tribunal Bangalore) by holding that

it squarely covered the issue in favour of the respondent.

The Tribunal held that the said amendment to Rule 6(6)

15

by Notification No.50/2008-CE is clarificatory in nature

and therefore retrospective. As such, the assessee is

entitled to the said benefit. Aggrieved by the said order,

the revenue has preferred these appeals.

4. The question that arises for our consideration

in these appeals are,

Whether the Third amendment of 2008

to the Cenvat Credit Rules, 2004,

extending the benefit of exemption from

reversal of Cenvat credit on inputs used

for manufacture in case of excisable

goods, removed without payment of

duty which are either cleared to a unit in

a special economic zone or to a

developer of a special economic zone for

their authorized operation, is to be

construed as prospective in operation or

retrospective?

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5. Rule 6 of Cenvat Credit Rules 2004 which

provide the said benefit prior to amendment reads as

under:

“6. Obligation of manufacturer of

dutiable and exempted goods and

provider of taxable and exempted

services.-

…………………………

Sub-rule (6) clause (i) reads as under:

Sub-rule (6). The provisions of sub-rules

(1), (2), (3) and (4) shall not be applicable in

case the excisable goods removed without

payment of duty are either-

(i) cleared to a unit in a special

economic zone.”

6. As is clear from the aforesaid provision, the

benefit of non-reversal/maintenance of separate

inventory was extended when the excisable goods were

cleared to a “unit” in a special economic zone. The said

17

benefit was not extended when the excisable goods

removed without payment of duty or cleared to a

“developer” of a special economic zone for their

authorized operation. However, in exercise of the powers

conferred by section 37 of the Central Excise Act, 1944 (1

of 1944) and section 94 of the Finance Act, 1994 (32 of

1994), the Central Government amended the Cenvat

Credit Rules, 2004 by issue of a notification as under:-

Notification: 50/2008-C.E. (N.T.)

dated 31-Dec-2008

Cenvat Credit Rules, 2004 – Third

amendment of 2008

In exercise of the powers conferred by

section 37 of the Central Excise Act, 1944 (1

of 1944) and section 94 of the Finance Act,

1994 (32 of 1994), the Central Government

hereby makes the following rules further to

amend the CENVAT Credit Rules, 2004,

namely:-

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1. (1) These rules may be called the

CENVAT Credit (Third Amendment) Rules,

2008.

(2) They shall come into force on the

date of their publication in the Official

Gazette.

2. In the CENVAT Credit Rules, 2004,

in rule 6, in sub-rule (6), for clause (i), the

following clause shall be substituted, namely:-

“(i) cleared to a unit in a special

economic zone or to a developer of a special

economic zone for their authorized

operations; or”.

Therefore, from 31.12.2008 the date of notification, the

said benefit was also extended to excisable goods cleared

to a “developer” of a special economic zone for their

authorised operation.

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7. The contention of the revenue is, that the

statutory provision of the notification referred to supra

became effective from 31.12.2008 as per para 1(2) of the

notification issued by the Government of India and

therefore, the finding of the Tribunal that the notification

is effective retrospectively from 10.9.2004 is beyond the

scope of statutory provision and therefore, the impugned

order is liable to be set-aside.

8. Per contra, the learned counsel appearing for

the assessee supported the impugned order.

9. What is the effect of “substitution” of a

provision in the place of an existing one is no more

res-integra. The Constitution Bench of the Hon’ble Apex

Court in the case of SHAMARAO V. PARULEKAR vs.

THE DISTRICT MAGISTRATE, THANA, BOMBAY &

Others reported in AIR 1952 SC page 324, dealing

20

with the scope of substitution of a provision by way of

amendment held as under:-

“When a subsequent Act amends an

earlier one in such a way as to

incorporate itself or a part of itself into

the earlier, then the earlier Act must

thereafter be read and construed

(except where that would lead to a

repugnancy, inconsistency or absurdity)

as if the altered words had been written

into the earlier Act with pen and ink and

the old words scored out so that there is

no need to refer to the amending Act at

all.”

10. Yet another Constitution Bench of the Hon’ble

Supreme Court in the case of SHYAM SUNDER &

Others vs. RAM KUMAR & Another reported in AIR

2001 SC page 2472, while dealing with the question

whether a substituted provision necessarily means the

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amended provision is retrospective in nature has held as

under:

“A substituted section in an Act is the

product of an amending Act and all the

effects and consequences that follow in

the case of an amending Act the same

would also follow in the case of a

substituted section in an Act.”

11. In fact, the Division Bench of this Court in the

case of SHA CHUNNILAL SOHANRAJ VS. T.

GURUSHANTAPPA reported in 1972(1) MYS.L.J.

PAGE 327 DB has held as under:

“When an amending Act has stated that

the old sub-section has been substituted

by the new sub-section the inference is

that the Legislature intended that the

substituted provision should be deemed

to have been part of the Act from the

very inception.”

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12. Recently, the Hon’ble Apex Court in the case

of GOVERNMENT OF INDIA VS. INDIAN TOBACCO

ASSOCIATION reported in 2005(187) ELT PAGE 162

(SC), while dealing with the exemption notification which

was issued by way of substitution, held as under:-

“15. The word ‘substitute’ ordinarily

would mean ‘to put (one) in place of

another’, or ‘to replace’. In Black’s Law

Dictionary, Fifth Edition, at page 1281,

the word ‘substitute’ has been defined to

mean ‘To put in the place of another

person or thing’, or ‘to exchange’. In

Collins English Dictionary, the word

‘substitute’ has been defined to mean ‘to

serve or cause to serve in place of

another person or thing’; ‘to replace (an

atom or group in a molecule) with

(another atom or group)”; or ‘a person

or thing that serves in place of another,

such as a player in a game who takes

the place of an injured colleague’.

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16. By reason of the aforementioned

amendment no substantive right has

been taken away nor any penal

consequence has been imposed. Only

an obvious mistake was sought to be

removed thereby.

17. There cannot furthermore be any

doubt whatsoever that when a person is

held to be eligible to obtain the benefits

of an exemption notification, the same

should be liberally construed.”

13. The Parliament has enacted the Special

Economic Zones Act 2005 (The SEZ Act for short) to

provide for the establishment, development and

management of the Special Economic Zones for the

promotion of exports and for matters connected

therewith or incidental thereto. Section 53 of the Act

declares that a special economic zone shall, on and from

the appointed day, be deemed to be a territory outside

the customs territory of India for the purposes of

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undertaking the authorized operations. The word

“export” has been defined under Act at section 2(m).

According to the definition of the word export, vide

Section 2(m) (ii) “export” means supplying goods or

providing services, from the Domestic Tariff Area to a

Unit or Developer. Such exports were exempted from

duty of Central Excise under Section 26 of the SEZ Act,

2005 and consequently application of Cenvat Credit

Rules. Section 151 of the Special Economic Zones Act

2005, overrides the provision of all other laws for the

time being in force, notwithstanding anything inconsistent

therein with the provision of the Special Economic Zones

Act, 2005. This section therefore overreaches and

eclipses the provisions of any other law containing

provisions contrary to the SEZ Act, 2005. Though the

definition of the word “export” in the SEZ Act, in

Sec.2(m) included supply of goods to a “Unit” or

“Developer”, in clause (i) of sub-rule (6) of Rule 6 of the

25

Cenvat Credit Rules, 2004 the word “Developer” was

conspicuously missing and only “unit” was included

before the 2008 amendment. It is in that context the

aforesaid amendment by Notification No.50/2008 CE

(N.T) dated 31.12.2008 was brought in, to clarify the

doubt. As the said amendment is clarificatory in nature,

that is the reason why it was brought by way of

“substitution”. The effect of the said “substitution” is that

the Cenvat Rules 2004 are to be read and construed as if

the altered words had been written into the Rules of 2004

with pen and ink and the words “to a developer of the

SEZ for their authorized operation” was there from the

inception. This is the understanding of the Government

as is also clear from the circular issued by the CBEC

bearing No.29/2006-Cus., dated 27.12.2006 wherein

clause 4 reads as under:-

“4. In the light of the aforesaid

provisions, with effect from 14.3.2006,

26

Chapter XA of the Customs Act, 1962,

the SEZ Rules, 2003, the SEZ (Customs

Procedure) Regulations, 2003, and the

exemption Notification No.58/2003-C.E.,

dated 22.7.2003 regarding the supply of

goods to SEZ units & SEZ developers

have become redundant. Consequently

the supplies from DTA to a SEZ unit, or

to SEZ developers for their authorized

operations inside a SEZ notified under

sub-section (1) of Section 4 of the Act,

may be treated as in the nature of

exports.”

Therefore, it is clear, the said amendment has to be

construed as retrospective in nature and the benefit of

Rule 6(6)(1) as amended in 2008 has to be extended to

the goods cleared to a “developer” of a Special Economic

Zone for their authorized operations. Therefore, we do

no see any merit in these appeals.

27

The substantial question of law is answered in

favour of the assessees and against the revenue.

Accordingly, the appeals are dismissed.

Sd/-

JUDGE

Sd/-

JUDGE Bss.

Documents

1 IN THE HIGH COURT OF KARNATAKA AT …judgmenthck.kar.nic.in/judgmentsdsp/bitstream/123456789/...1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 30 th DAY OF JULY 2014