Summary
The Supreme Court upheld excise relief for UFAC’s conversion of TISCO’s materials and clearance of the finished goods into the Domestic Tariff Area under valid permissions. The Excise Act’s wider definition of sale applied, and the policy provisions governing permitted domestic clearances differed from those for direct exports. The specific EOU exemption remained effective despite the 2001 statutory amendment, and all its material conditions were satisfied.
Issues
- Whether conversion and return of goods for consideration constituted sale under the Excise Act.
- Whether permitted domestic job-work clearances qualified for the specific EOU exemption.
- Whether the 2001 amendment impliedly repealed that exemption.
Provisions considered
- Section 2(h), Central Excise Act, 1944Its transfer-of-possession definition of sale governed rather than the narrower Sale of Goods Act concept. (¶¶ 19, 20, 23)
- Sections 3(1) proviso and 5A(1), including its proviso, Central Excise Act, 1944The normal EOU duty rule remained subject to a notification specifically granting exemption to those goods. (¶¶ 41, 42, 44, 46, 48, 51, 55)
- Paragraphs 9.9(b) and 9.17(b), Export and Import Policy, 1997–2002Permitted domestic sales and direct-export job work operated in different fields; the authorised domestic clearances fell within paragraph 9.9(b). (¶¶ 25, 26, 28, 29, 30, 35, 38)
- EOU exemption, Central Excise Notification No. 8/97, as amended by No. 21/97The finished goods were made in an EOU wholly from Indian raw materials and permitted to be sold domestically under the policy. (¶¶ 49, 50, 51, 52)
Held
- Transfer of possession in the ordinary course of business for valuable consideration falls within section 2(h). The narrower requirement of transfer of property under the Sale of Goods Act could not be imported to exclude these transactions. (¶¶ 19, 20, 21, 22, 23)
- Paragraph 9.17(b), governing job work for direct export, did not displace paragraph 9.9(b), governing permitted domestic clearances. The Commissioner overlooked the circular of 22 May 2000 extending the job-work facility to all sectors and the sponsoring authority’s clarification permitting these operations. (¶¶ 25, 26, 30, 32, 33, 34, 35, 36, 37, 38)
- Section 5A did not prohibit specific EOU exemptions. Reading it otherwise would erase the statutory qualification allowing a notification specifically to provide relief. Notification 8/97 specifically covered such goods, and UFAC satisfied its EOU-production, Indian-raw-material and authorised-domestic-sale conditions. (¶¶ 41, 44, 46, 48, 49, 50, 51, 52)
- Replacing the statutory phrase concerning permitted sales with the phrase concerning goods brought elsewhere in India created no conflict with the specific exemption and did not impliedly repeal it. The authorities concerning debonding did not defeat these authorised clearances within the permissible limits. (¶¶ 53, 54, 55, 56, 57, 58)
Result
Revenue’s appeals dismissed; the CESTAT orders reversing the demands and rejecting the connected Revenue appeal sustained.