Tropical Clothing Co Pvt Ltd V. Union of India

SCA/10899/2016

AI Insights

The case involves Tropical Clothing Co Pvt Ltd, which challenged the orders of the Tribunal that remanded their case to ascertain the rural status of their manufacturing unit and rejected their application for rectification of mistakes. The Tribunal initially found the order-in-original unsustainable but remanded the matter for further verification of the rural status, which was crucial for applying simplified export procedures and exemptions. The High Court examined whether the Tribunal's remand was justified and whether the appellant was entitled to exemptions under the relevant notifications and circulars, particularly focusing on the rural location of the manufacturing unit and the actual export of goods without following the standard procedures.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 701737 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 22-11-2018
• Assessment Year: misc
• Other Referred Cases: Eves Fashions vs. CCE, Delhi [2006(205) ELT 619 (Tri.Del.)], SRD Nutrients Pvt. Ltd. v. Commissioner of Central Excise, Guwahati [2017(355) E.L.T. 481(S.C.)], Honda Siel Power Products Ltd. v. Commissioner of Income Tax, Delhi [2008(221) E.L.T. 11(S.C.)]
• Laws Referred To: Central Excise Rules, 2002, Notification No. 42/2001-CE(NT) dated 26.6.2001, Notification No. 8/2003-CE dated 01.03.2003, Board Circular No. 947/08/2011 dated 21.6.2011, Circular No. 705/21/2003-CX dated 08.04.2003
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: KRUTIK PARIKH; DHAVAL VYAS
• Assessee Lawyers: PRAKASH SHAH; DHAVAL SHAH
• Keywords: Export of Readymade Garments; Manufacture of Excisable Goods; Rectification of Mistake Application; SSI exemption; Simplified Export Procedures
• Section: 18; 19; 19(2)

Judgement Text

"C/SCA/10899/2016 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 10899 of 2016 With R/TAX APPEAL NO. 676 of 2016 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE S.R.BRAHMBHATT and HONOURABLE MR.JUSTICE UMESH TRIVEDI ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2 To be referred to the Reporter or not ? NO 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? NO ========================================================== TROPICAL CLOTHING CO PVT LTD Versus UNION OF INDIA ========================================================== Appearance: MR PRAKASH SHAH, ADVOCATE WITH MR DHAVAL SHAH(2354) ADVOCATE for the PETITIONER(s) No. 1 MR KRUTIK PARIKH, AGP for the RESPONDENT(s) No. 3 MR DHAVAL D VYAS(3225) for the RESPONDENT(s) No. 2 NOTICE SERVED(4) for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE S.R.BRAHMBHATT and HONOURABLE MR.JUSTICE UMESH TRIVEDI Date : 22/11/2018 ORAL JUDGMENT Page 1 of 15 C/SCA/10899/2016 JUDGMENT (PER : HONOURABLE MR.JUSTICE S.R.BRAHMBHATT) 1. In both these matters essentially there is challenge to the orders passed by Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as “Tribunal” for the sake of brevity) dated 13.10.2015 and 29.4.2016 in the proceedings of appeal and Rectification of Mistake Application respectively, whereunder though the Tribunal held that order- in-original dated 27.2.2014 cannot be sustained for the reasons recorded in the order, however, in the interest of public exchequer, the Tribunal chose it fit to remand the matter to the authorities to ascertain as to whether Village `Antalia’ where the premises of the appellant is located was falling under the rural area so as to be eligible and justified in adopting the procedure and seeking exemption. The said order was perceived to be containing error and hence the appellant preferred Rectification of Mistake Application, inter- alia, bringing it to the notice of the Tribunal that the Tribunal in terms observed that the order-in-original could not be sustained, and when the factum of actual export was not disputed in any manner, the remand order was erroneous and requires to be rectified. The said application came to be rejected vide order dated 29.4.2016 which gave rise to filing of Special Civil Application. 2. This Court on 31.8.2016 passed the order in Tax Appeal No. 676 of 2016 which is required to be reproduced as under: “Learned advocate appearing for the appellant has submitted that as the order in question touches upon the jurisdiction aspect and as could be seen from the observations in para-7, the Page 2 of 15 C/SCA/10899/2016 JUDGMENT order of admission was wholly uncalled for and hence, the writ petition on the subject matter being Special Civil Application No. 10899 of 2016 is filed and is listed today after the notice is duly served upon the concerned. However, as there is no reply filed in that matter, let this matter also be heard along with that Special Civil Application. Orders accordingly. Let there be a notice for final hearing returnable on 21.9.2016. We are consciously not admitting the matter, though convinced qua admission of the matter, in order to avoid the separate consideration. Let the respondents be called upon to file reply, if any, on the contentions made in this Appeal as well as Special Civil Application pending before this Court. Both the matters may come up for hearing on 21.9.2016 as there is already an interim order passed in Special Civil Application, that order will continue and at present, there is no requirement to pass any further order in this Appeal.” 3. Being aggrieved and dissatisfied with the order passed by the Tribunal dated 13.10.2015 remanding the matter as well as the order dated 29.4.2016 rejecting the Rectification of Mistake Application, the present proceedings have been preferred as stated above. Thus both these matters have been heard together and are being disposed of by this common judgment and order. 4. Facts in brief could be gathered from the memo and annexures to the appeal as well as to the Special Civil Application deserves to be set out as under: 4.1 The appellants are a unit situated in Village `Antalia’, Billimora in District Navsari, Gujarat and are engaged in the manufacture of readymade garments bearing brand name or Page 3 of 15 C/SCA/10899/2016 JUDGMENT trade-name of another person i.e. M/s. Marks and Spencer. 95% of their goods are exported to their overseas buyer M/s. Marks & Spencer and their local clearance of readymade garments does not exceed 5% of their export turn-over during a year. The issue to be decided was whether the allegations levelled in the show cause notices, regarding contravention of procedures, conditions and provisions specified under Rule 18/Rule 19 of the Central Excise Rules, 2002, read with Notification No. 42/2001-CE(NT) dated 26.6.2001 by the appellants for export of excisable goods are proper or otherwise, and whether; owing to such omission, suppression, lapses and contraventions by the appellant, the demands of duty, fine and penalty confirmed by the adjudicating authority are legal and justified, and sustainable or not. The appellants claimed that they are an SSI Unit exporting the readymade branded garments, hence they are not required to follow the procedure for export of excisable goods as specified in Notification No. 42/2002-CE(NT) dated 26.6.2001 under Rule 18 and 19(2) of the Central Excise Rules, 2002 in light of Board Circular No. 947/08/2011 dated 21.6.2011 and Circular No.705/21/2003-CX dated 08.04.2003, extending the simplified procedure in respect of exports of readymade garments. The adjudicating authority denied the benefit of Simplified Export Procedures on the ground that the appellants are not entitled to SSI exemption under Notification No.8/2003-CE dated 01.03.2003, in view of the Para 4 of the notification and the appellants are manufacturing readymade garments and affixing brand name of buyers. Consequently, holding that the duty is leviable on th said goods, he confirmed the demand of duty with interest and imposed penalty and redemption fine as stated above. Page 4 of 15 C/SCA/10899/2016 JUDGMENT 5. Learned counsel appearing of the appellant invited the court’s attention to the observations of the Tribunal in the order dated 13.10.2015 recorded in para 6, 7 and 8, and submitted that the Tribunal came to the conclusion qua non- sustainability of the order-in-original dated 27.2.2014 passed by the respondent authority, it unfortunately chose to remand the matter only on issue of `Antalia’ premises – manufacturing unit of the petitioner falls within the rural area or not. When the said issue had not been in issue which is required to be gone into in light of the pleadings of the respective parties it would be unequivocal for the Tribunal and hence the application once moved by filing Rectification of Mistake Application and appropriate rectification was sought which was also unfortunately came to be rejected by the Tribunal. 5.1 Learned counsel for the appellant invited court’s attention to the observations made by the Tribunal when the Tribunal was pleased to grant exemption from pre-depositing for maintaining the appeal vide order dated 9.7.2014 is extensively read and it was submitted that the said order does refer to the Co-ordinate Bench observations in case of Eves Fashions vs. CCE, Delhi [2006(205) ELT 619 (Tri.Del.)] and thereafter paragraph 3 was also quoted in the said order which read as under: “3. The duty have been confirmed against the appellants who are engaged in the manufacture and export of ready-made garments on the ground that while exporting the goods, they failed to follow the procedure laid down in the Page 5 of 15 C/SCA/10899/2016 JUDGMENT notification No.42/01-C.E.(N.T.), dated 26.6.2001 as much as, they did not furnish the bond, letter of undertaking etc. But, in our view this ground is not sustainable for confirmation of duty and penalty against the appellants. So far as, export of the ready-made garment by them, is concerned, that is not in dispute and no lapse on the part of the appellants in that export, has been alleged or proved. Learned Counsel has brought to our notice a Board’s circular dated 8.4.2003 vide which the procedure for the export of ready-made garments was simplified and under that simplified procedure they were only required to furnish, duly attested photocopy of the shipping bill, duty custom’s attested copy of the bill of lading and foreign exchange remittance certificate. All these documents were submitted by the appellants and no fault had been found in the same. Therefore, no violation of the terms of notification No.42/01 can be said to had been committed by them, while exporting ready-made garments, during the period of in dispute, for denying the benefit of Rule 19 of the Central Excise Rules, 2002, in respect of export of goods without payment of duty. In our view, impugned order confirming duty with penalty against the appellants cannot be sustained and is set aside. The stay application as well as the appeal of the appellants, stand disposed of with consequential relief, if any, as per law.” 5.2 These observations ought to have been appropriately appreciated by the Tribunal and the Tribunal ought to have quashed and set aside the order without any further remanding the matter as the judgment and order of the Co- ordinate Bench are being conceded and to be binding upon the Tribunal. 5.3 In support of the aforesaid submissions, the learned counsel for the appellant has relied upon the following Page 6 of 15 C/SCA/10899/2016 JUDGMENT decisions: (1) SRD NUTRIENTS PVT. LTD. v. COMMISSIONER OF CENTRAL EXCISE, GUWAHATI [2017(355) E.L.T. 481(S.C.)]. (2) HONDA SIEL POWER PRODUCTS LTD. v. COMMISSIONER OF INCOME TAX, DELHI [2008(221) E.L.T. 11(S.C.)] 5.4 Learned counsel for the appellant further contended that the entire controversy even as per the order-in-original was on account of erroneous notion on the part of the authorities that the petitioner was required to follow the procedure as prescribed which is known as ARE-1 as prescribed under Notification No. 42/01 dated 26.6.2001 and this was not applicable to the exempted units manufacturing the exempted goods and they were required to be governed by simplified procedure. The ready-made garments manufacturers took up the issue, and as a result thereof, in their case also, the exemption came to be extended vide Circular dated 8.4.2003 which in an unequivocal terms indicated that simplified procedure has to be extended to the ready-made garments manufacturer sector. The relevant portion of the circular is required to be set out as under: “Circular: 705/21/2003-CX. dated 08-Apr.2003. Readymade garments – Simplified procedure for exports Page 7 of 15 C/SCA/10899/2016 JUDGMENT Government of India Ministry of Finance (Department of Revenue), Central Board of Excise & Customs, New Delhi. Subject: Simplified Central Excise Procedure for export of readymade garments – Regarding I am directed to refer to instructions contained in Part-III Chapter VII of Central Excise Manual prescribing Simplified Export Procedure for exempted units. This procedure inter alia envisages that the goods meant for export can be cleared on the invoices instead of regular ARE-1] or other similar documents of the manufacturer- exporters containing particulars of description of goods, name and address of the buyer, destination, value, date and time of removal of goods, etc. Further, such persons are allowed to maintain a simple record of quantity and value of production and clearances. This procedure is applicable to units which are fully exempted from payment of duty by a notification granting exemption based on value of clearance for home consumption. 2. In this connection, representations have been received from the Association of exporters of readymade garments to extend the said procedure to readymade garment units which are primarily exporting almost all of their production but are now required to pay duty on rejects/wastes generated during the export production following exclusion of readymade garments (Chapter 61 & 62) from the purview of Notification Nos. 8/2003- C.E. and 9/2003-C.E. both dated 1-3-2003. The Association has also brought to the notice of the Board the delay likely to take place in the grant of registration in view of the large number of units now seeking Registration on account of withdrawal of the SSI exemption benefits. 3. Board has examined the matter. It is observed that the Simplified Export Procedure is presently applicable to the exempted units. However, since the readymade garment manufacturers are primarily exporting almost all of their production and the clearances of rejects and waste to home consumption is minimal, it shall be Page 8 of 15 C/SCA/10899/2016 JUDGMENT in the interest of the exports to extend the Simplified Export Procedure to readymade garments sector. Accordingly, Board has decided to extend the Simplified Export Procedure to readymade garments sector (not to other sectors) by making the procedure applicable to such units which are primarily exporting and the clearances of waste and rejects for home consumption on payment of duty does not exceed 5% of their export turnover during the year. 4. As regards Registration of the said units, Board has decided that penal action on account of clearances of such units for home consumption on payment of duty pending grant of registration may not be initiated for the time being and in the intervening period formalities like declaration of stocks and record keeping, etc may not be subjected to mandatory requirements. In this regard reference may also be made to Board’s Circular 703/19/2003-CX., dated 25th March, 2003, (F.No. B3/1/2003-TRU) [2003 (153) E.L.T. 21]. While allowing this relaxation, the Board’s concern is that export clearances are not hampered on technical grounds. 5. Board’s instructions contained in the Central Excise Manual as specified above, stands modified to the above extent. 6. Trade and field formations may please be acknowledged. 7. Hindi version will follow.” 5.5 It was further submitted that the exemption contained in the said notification shall not apply to the specified goods bearing a brand name or trade name, whether registered or not, of another person, except in the cases mentioned thereunder, and the item no.(c) of the said notification which will indicate that the specified goods are manufactured in a Page 9 of 15 C/SCA/10899/2016 JUDGMENT factory located in a rural area. The said para would also be enumerated as under: “4. The exemption contained in this notification shall not apply to specified goods bearing a brand name or trade name, whether registered or not, of another person, except in the following cases : (a) Where the specified goods, being in the nature of components or parts of any machinery or equipment or appliances, are cleared for use as original equipment in the manufacture of the said machinery or equipment or appliances by following the procedure laid down in the Central Excise [Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001: Provided that manufacturers, whose aggregate value of clearances of the specified goods for use as original equipment does not exceed rupees one hundred lakhs in the financial year 2002-2003 as calculated in the manner specified in paragraph 1, may submit a declaration regarding such use instead of following the procedure laid down in the said Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001: (b) where the specified goods bear a brand name or trade name of - (i) the Khadi and Village Industries Commission; or (ii) a State Khadi and Village Industry Board; or (iii) the National Small Industries Corporation; or (iv) a State Small Industries Development Corporation; or (v) a State Small Industries Corporation; (c) where the specified goods are manufactured in a factory located in a rural area.” Page 10 of 15 C/SCA/10899/2016 JUDGMENT 5.6 Learned counsel for the appellant further submitted that in any eventuality the said aspect is not disputed at all as noted by the Tribunal and reflected in both the orders impugned and therefore the orders impugned are erroneous and required to be quashed and set aside. The aspect of the petitioner’s factory falling in a rural area is in fact now under gray area inasmuch as, in the proceedings of Special Civil Application, this Court on 30.8.2018 passed the order whereunder the concerned authority was called upon to indicate in unequivocal terms the location of the petitioner’s factory. The said order is required to be reproduced as under: “Heard learned counsels for the parties. Leave to join District Collector, Navsari as party respondent. Issue fresh notice to newly joined respondent returnable on 04.10.2018. The above notice is issued to the newly joined party for the limited purpose of verification of certificate date 28.03.2014 issued by the Resident Additional Collector, Navsari and the concerned officer to remain present along with file or to file a short affidavit in this regard. Direct service is permitted.” 5.7 Pursuant to the aforesaid order, the Mamlatdar has placed on record by way of affidavit which reads as under: “I, Sukhdevbhai Dubalbhai Chaudhary, Aged 52 years, as a Mamlatdar, Ta: Gandevi, Dist: Navsari, on behalf of respondent No.3 herein, do hereby solemnly affirm oath and state on as under that: 1. The present petitioner has challenged the order dated 29.04.2016 passed in Misc. Page 11 of 15 C/SCA/10899/2016 JUDGMENT Application No.E/ROM/10909/2015 in Appeal No. E/11955/2014 on the grounds raised in the petition. During the course of the hearing of the petition, it was argued by the petitioner that the factory of the petitioner is located within the jurisdiction of Antalia Gram Panchayat. 2. In this regard the Hon’ble Court had passed an order dated 30.08.2018 wherein the present deponent was called upon to verify the certificate dated 28.03.2014 issued by the Resident Additional Collector, Navsari. In this regard it is submitted that the plots on which the factory premises of the petitioner is situated falls under the local limits of Village Antalia and hence it does not fall under any of the corporation limits. It is also submitted before the Hon’ble Court that the house tax for the erection of buildings is collected by the Gram Panchayat of Village Antalia. In this regard the relevant certificate that has been issued by the Mamlatdar as well as the Gram Panchayat and Billimora GIDC Industrial Association is annexed hereto and marked as Annexure-R1(Colly). 3. The present affidavit in reply may be construed as due compliance of the order dated 30.8.2018 passed by this Hon’ble Court in the present proceedings.” 5.8 Learned counsel appearing for the petitioner submitted that in view thereof from any angle when the petitioner’s exported goods were not excisable and they were exempted from the duty and therefore the impugned orders deserve to be quashed and set aside. 6. Learned counsel for the respondents submitted that the order in tax appeal clearly indicates that the impugned order passed by the Tribunal is based on the prima facie observations of the Tribunal and therefore even the factum of Page 12 of 15 C/SCA/10899/2016 JUDGMENT the actual export cannot be said to have been considered by the authority as sought to be canvassed by the learned counsel for the petitioner. 6.1 Learned counsel for the respondents further submitted that even otherwise also only prima facie observations have been made by the Tribunal in the impugned order and the matter is only remanded and the petitioner was in fact required to follow the procedure as observed and simplified export procedure as adopted by the petitioner was unequivocal and therefore the orders impugned may not be interfered with by this court. 6.2 Learned counsel for the respondents submitted that the observations made by the Tribunal while rejecting the rectification application also indicated that the observations qua actual export cannot be said to be an actual observation such as to classify the authority and therefore this court may not exercise the jurisdiction to interfere with the same. 6.3 Learned counsel for the respondents further submitted that when the procedure prescribed is not followed, the petitioner or the manufacturer would not be eligible for any exemption as sought to be canvassed by the learned counsel for the petitioner. 7. We have heard the learned counsel for the parties and also perused the papers. The following undisputed aspect is required to be considered. 1. The factum of actual export cannot be said to be an Page 13 of 15 C/SCA/10899/2016 JUDGMENT aspect in dispute at all as sought to be canvassed by the learned counsel for the respondents. The plain and simple reading not only of the order impugned in the appeal proceedings dated 13.10.2015 but the order passed in rectification of mistake application dated 29.4.2016 would also clearly indicate that the Tribunal proceeded on the clear aspect as canvassed and not disputed by the authorities that the goods have actually been exported. We are therefore of the view that the said aspect needs no further elaborate delving in needed. 2. The circular and the notification pressed into service unequivocally indicate that the petitioner would be entitled to exemption based upon the location of the manufacturing unit of the petitioner in which the specified goods were manufactured, and in the proceedings of Special Civil Application, when the competent authority has placed on record in unequivocal terms the aspect that the petitioner’s unit is located in rural area or is not located in the area which is prescribed in urban or mentioned areas then the entire controversy should rest and need not be probed further as would otherwise amounting to creating further complication, and thus, this court is of the considered view that the Tribunal also having recorded the unequivocal submission of the authorities qua the actual physical export and when having recorded its finding regarding unsustainability of the order-in-original dated 27.2.2014 the remanding of the matter in facile ground of public exchequer leaves much room to the comment upon. However we reserve our comments to be made in appropriate manner. Suffice it to say that the said ground did not warrant in remanding of the matter and hence Page 14 of 15 C/SCA/10899/2016 JUDGMENT we are of the view that the said order itself was not sustainable and requires to be quashed and set aside. Accordingly the impugned orders are quashed and set aside. The order made on rectification miscellaneous application would also govern by the aforesaid original order and therefore the same deserves to be quashed and set aside and accordingly it is quashed and set aside. The present petition and the tax appeal are accordingly disposed of. Rule is made absolute with no order as to costs. (S.R.BRAHMBHATT, J) (UMESH TRIVEDI, J) syed/ Page 15 of 15 "