2020 INSC 0657
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION 
CIVIL APPEAL NOS. 848­852 OF 2009
COMMISSIONER OF CENTRAL 
EXCISE, NAGPUR   ...APPELLANT(S)
VERSUS
M/S UNIVERSAL FERRO & ALLIED
CHEMICALS LTD. & ANR.   .... RESPONDENT(S)
J U D G M E N T  
1. Being   aggrieved   by   the   judgments   and   orders   dated
21.10.2005   and   7.7.2006   passed   by   the   Customs,   Excise,
Service Tax Appellate Tribunal, West Zonal Bench at Mumbai
(hereinafter   referred   to   as   “CESTAT”)   thereby,   allowing   the
appeals filed by the respondent – Assessee and its Chairman
being   Appeal   Nos.E­2691­2693/03   arising   out   of   Order­in­
Original No.14­20 of 2003 dated 23.6.2003, Order­in­Original

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No.21   of   2003   dated   23.6.2003   and   Appeal   No.   E/1976/04
arising   out   of   Order­in­Original   Nos.19­20/2004   dated
15.3.2004   and   dismissing   the   appeal   filed   by   the   Revenue
being Appeal No. E/1607/06­Mum arising out of order of the
Commissioner   (Appeals),   Customs   &   Central   Excise,   Nagpur
dated   14.2.2006   in   Appeal   No.   SVS/91/NGP­B/2006,   the
Revenue is before this Court.
2. The   facts   in   brief   giving   rise   to   the   present   appeals
are as under:
  The respondent – Universal Ferro & Allied Chemicals
Ltd.,   Maneck   Nagar,   Tumsar   (hereinafter   referred   to   as
“UFAC”)   is   100%   Export   Oriented   Unit   (“EOU”   for   short)
approved   by   the   Secretariat   for   Industrial   Approvals,
Department   of   Industrial   Development   in   the   Ministry   of
Industry,   Government   of   India.     UFAC   was   engaged   in   the
manufacture/processing   and   clearance   of   Ferro   Manganese
and   Silicon   Manganese   falling   under   Chapter   72   of   the
Schedule   to   the   Central   Excise   Tariff   Act,   1985.     UFAC
cleared   these   items   for   export   as   well   as   in   Domestic   Tariff

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Area (hereinafter referred to as “DTA”) on payment of Central
Excise duty.  
3. The   Central   Intelligence   Unit   of   the   Central   Excise
Headquarters   visited   the   unit   of   UFAC   on   19.9.2001   on
getting   information   from   the   Central   Excise   Audit   party   that
UFAC being an EOU was indulging in the job­work activity of
conversion of raw material supplied by M/s Tata Iron & Steel
Company   Ltd.,   Jamshedpur   (hereinafter   referred   to   as
“TISCO”).     In   the   view   of   the   Revenue,   the   same   was   not
allowed   in   terms   of   EXIM   Policy   of   1997­2002   (hereinafter
referred to as “EXIM Policy”)
4. During   the   course   of   scrutiny   of   the   records,   the
officers   noticed,   that   UFAC   was   having   a   Memorandum   of
Agreement   dated   28.12.1999   with   TISCO   for   conversion   of
Manganese   Ore/Coke  into  prime   Silicon   Manganese.    As  per
the   agreement,   TISCO   was   to   supply   Manganese   Ore   and
Coke/Coal   free   of   cost   at   its   site   at   Maneck   Nagar.     Rest   of
the   raw   materials   and   consumables   i.e.   Quartzite,   Charcoal,
Carbon   paste,   Dolomite,   Fluxes,   Refractories   and

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Transformer   Oil   required   for   the   conversion   of   Manganese
Ore/Coke   into   Silicon   Manganese   for   TISCO   was   to   be   used
by   UFAC   from   their   own   purchases   obtained   under   CT­3   as
and   where   applicable.     As   per   the   agreement,   UFAC   was   to
charge   job   charges   to   TISCO   at   the   rate   of   Rs.14,090/­   per
metric tonne (“PMT” for short) which was inclusive of cost of
material   added   by   UFAC.     The   job   work   charges   were   to   be
recovered   from   TISCO   on   commercial   invoices.     In   the
invoices, Silicon Manganese was to be charged at the rate of
Rs.20,623/­   PMT   which   also   included   cost   of   ingredients
supplied   by   TISCO.     The   said   invoices   were   prepared   under
erstwhile Rule 100­E of the Central Excise Rules.  
5. The   activities   of   the   UFAC   had   come   to   a   standstill
for   some   period   and   it   re­started   its   production   in   August,
1999   and   was   declared   a   sick   company   by   the   Board   for
Industrial   and   Financial   Reconstruction   (BIFR)   under   the
provisions   of   the   Sick   Industrial   Companies   (Special
Provisions)   Act,   1985   (SICA) .     It   is   not   in   dispute   that   the
UFAC carried out conversion of the raw materials supplied by

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TISCO, on TISCO making the payment of conversion charges
of   Rs.14,090/­   PMT   of   Silicon   Manganese.     However,   while
dispatching the Silicon Manganese to TISCO, excise duty was
paid on the value of Rs.20,623/­ PMT which included cost of
raw   materials   supplied  by   TISCO   as   well   as  the   inputs   used
by UFAC from their own purchases.  
6. The   Commissioner,   Central   Excise   &   Customs,
Nagpur,   issued   a   show   cause   notice   to   the   UFAC   dated
9.10.2001 in respect of the Silicon Manganese cleared during
September 2000.  It was stated in the said show cause notice,
that   the   Circular   No.67/98­Cus   dated   14.9.1998,   issued   by
the   Central   Board   of   Excise   &   Customs,   New   Delhi
(hereinafter   referred   to   as   “the   Board”)   had   permitted   the
EOUs to undertake job­work on behalf of a DTA unit only in
textile,   readymade   garments,   agro­processing   and   granite
sectors   and   by   another   Circular   No.74/99   dated   5.11.1999
the said facility was extended to EOUs to undertake job­work
on   behalf   of   a   DTA   unit   in   aquaculture,   animal   husbandry,
electronics   hardware   and   software   sectors.     The   show   cause

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notice therefore stated, that the sector in which respondent –
Assessee   had   carried   out   the   job­works   was   not   covered   by
either of the Circulars and, as such, the said job­works were
in   violation   of   EXIM   Policy.     The   show   cause   notice   called
upon the respondent – Assessee to show cause,   as to why the
said Silicon Manganese should not be charged to full Central
Excise   duty  as   per  the   proviso  to   Section   3(1)   of   the   Central
Excise   Act,   1944   (hereinafter   referred   to   as   “the   Act”)   by
denying   the   benefit   of   Notification   No.8/97   dated   1.3.1997
(hereinafter referred to as “the said Exemption Notification”).    
7. The show cause notice also called upon the   UFAC   to
show  cause,  as   to   why   the   central  excise  duty  amounting   to
Rs.23,08,443/­   short   paid   on   Silicon   Manganese   cleared   in
DTA during  September  2000,   should not be recovered under
Section  11­A  of the Act.  It also called upon to show cause, as
to   why   the   goods   i.e.   296   MT   Silicon   Manganese   valued   at
Rs.61,04,408/­   cleared   in   DTA   during   the   aforesaid   period
(i.e.   September   2000)   should   not   be   held   liable   for
confiscation.     The   said   show   cause   notice   also   required   to

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show cause, as to why penalty should not be imposed on the
UFAC  under Rule  209  of the Central Excise Rules, 1944 read
with Section  38­A   of the Act. 
8. In   all,   ten   (10)   show   cause   notices   of   various   dates,
last   being   2.12.2003   for   the   identical   charges   for   different
periods  (i.e. from March 2000 to May 2003)  were issued.  
9. In   response   to   the   show   cause   notices,   UFAC   had
submitted its written replies stating therein, that in the show
cause   notices   no   violation   of   Central   Excise   Law   has   been
alleged.  It was submitted, that the  removals in the DTA   were
in   accordance   with   the   permission   granted   by   the
Development   Commissioner   and,   as   such,   there   was   no
ground   for   denial   of   the   concessional   rate   of   duty   laid   down
in the said   Exemption notification.    It was further submitted,
that   since   the   issue   was   based   on   the   interpretation   of   the
provisions of EXIM Policy, it was necessary to obtain ruling of
the   Development   Commissioner   on   the   issue.     It   was
submitted,   that   since   the   Development   Commissioner   had
clarified   that   the   removals   made   by   UFAC   to   TISCO   were   in

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accordance with the permission under the EXIM Policy, there
was no occasion to proceed further.  
10. However, the Commissioner while passing the order­
in­original   came   to   a   finding   that   the   conversion   work
performed   by   UFAC   was   nothing   but   the   job   work   and   that
the   said   job   work   done   by   an   EOU   was   governed   by   para
9.17(b) of the EXIM Policy.  He found, that under para 9.17(b)
of the EXIM Policy, an EOU was permitted to do job work for
a   DTA   unit   only   for   the   purposes   of   exporting   the   finished
goods   directly   from   EOU.     However,   since   after   the   job   work
the finished goods were not exported by the EOU but cleared
to   a   DTA   unit   for   home   consumption,   the   UFAC   had
contravened the provisions of the EXIM Policy.  He  also came
to   a   finding,  that   the  sector   in   which   UFAC   had  undertaken
the job work was not covered by the  Circular dated 14.9.1998
and as extended by another  Circular dated 5.11.1999, issued
by the   Board.     He also came to a conclusion that since there
was no sale of the goods but only return of the goods after job
work,   it   was   not   a   sale   and,   as   such,   contrary   to   the

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provisions   of   the   EXIM   Policy.       He,   therefore,   vide   order
dated   23.6.2003   confirmed   the   demand   for
Rs.11,56,08,497/­   along   with   interest.     He   also   imposed
penalty   of   Rs.50   lakhs   on   UFAC.       He   further   held,   that   the
goods   i.e.   15792.85   MTs   of   Silicon   Manganese   valued   at
Rs.32,31,30,000/­   were   liable   for   confiscation.     However,
since   the   said   goods   were   not   available   for   confiscation,
redemption   fine   of   Rs.50   lakhs   in   lieu   of   confiscation   was
imposed.   Two   more   similar   orders   confirming   demand   as
raised   under   subsequent   show   cause   notices   were   also
passed   vide   order   dated   23.6.2003   and   15.3.2004.     In   the
second   order   dated   23.6.2003   being   Order­in­Original   No.21
of 2003,   personal penalty of   Rs. 5 lakh   was also imposed on
the Chairman of UFAC, Dhunjishaw M. Naterwala.     
11. Being   aggrieved   thereby,   the   UFAC   as   well   as   the
Chairman   of   UFAC ,   Dhunjishaw   M.   Naterwala   preferred
appeals before the learned CESTAT.  
12. The   Commissioner   (Appeals)   had   set   aside   the
demand raised by the Revenue in respect of duty free carbon

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paste   procured   by   UFAC   under   the   CT­3   certificate   in   terms
of   Notification   No.1/95­CE   dated   4.1.1995   for   use   in   the
conversion   process   of   Manganese   ore.     Being   Aggrieved
thereby,   the   Revenue   filed   appeal   before   the   CESTAT   being
Appeal   No.E/1607/2006.     By   the   impugned   judgment   dated
21.10.2005,   the   demand   orders   against   UFAC   were   reversed
by   the   CESTAT.     Also,   the   CESTAT   dismissed   the   Revenue’s
Appeal   No.   E/1607/2006   by   order   dated   7.7.2006,   referring
to   its   order   and   judgment   dated   21.10.2005   in   UFAC’s
appeal,  
Hence, the present appeals.  
13. We   have   heard   Shri   K.   Radhakrishnan,   learned
Senior   Counsel   appearing   for   the   appellant­   Revenue   and
Shri   M.H.   Patil,   learned   counsel   appearing   on   behalf   of   the
respondent – UFAC.   
14. The   main   contention   raised   by   Shri   Radhakrishnan,
learned   Senior   Counsel   on   behalf   of   the   Revenue   is   that,   in
view of proviso to sub­section (1) of Section 3 of the Act, the
duty   which   is   liable   to   be   levied   and   collected   on   any
excisable   goods   manufactured   by   a   100%   EOU   and   brought

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to any other place in India shall be leviable as per the duties
of Customs, which are leviable under the Customs Act, 1962
on   like   goods   produced   and   manufactured   outside   India,   if
imported   into   India.     It   is   contended,   that   the   proviso   to
Section   5A   of   the   said   Act   specifically   provides,   that   no
exemption   granted   under   Section   5A   shall   apply   to   the
excisable   goods   which   are   produced   or   manufactured   by   a
100%   EOU   and   brought   to   any   other   place   in   India.     He
further   submits,   that   in   the   transaction   between   the   UFAC
and   TISCO,   there   is   no   transfer   of   property   in   goods   to   the
UFAC   and,   as   such,   it   cannot   be   considered   to   be   a   sale
under Section 4 of the Sale of Goods Act, 1930.   The learned
Senior   Counsel   therefore   submits,   that   the   order   passed   by
the   CESTAT   deserves   to   be   set   aside   and   the   orders­in­
original   passed   by   the   Commissioner   (Appeals)   need   to   be
maintained.   
15. It   is   further   contended   by   Shri   Radhakrishnan,
learned Senior Counsel, that the words “allowed to be sold in
India” in clause (ii) of proviso to sub­section (1) of Section 5A

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of   the   Act   have   been   substituted   by   words   “brought   to   any
other place in India” with effect from 11.5.2001.  He therefore
submits,   that   in   view   of   change   in   law   from   11.5.2001,   the
statutory force of the said Exemption Notification is lost from
11.5.2001.     In   his   submission,   the   said   Exemption
Notification   would   stand   impliedly   repealed   with   effect   from
11.5.2001.     He   relies   on   the   judgments   of   this   Court   in   the
cases of (1)  M. Karunanidhi  vs.  Union of India & Anr. 1
; (2)
Dharangadhra   Chemical   Works   vs.   Dharangadhar
Municipality   and   Anr. 2
;   and   (3)   Ratan   Lal   Adukia   vs.
Union of India 3
.  He further submits, that the terms “allowed
to be sold in India” and “brought to any other place in India”
have   been   considered   by   this   Court   in   the   cases   of   Siv
Industries   Ltd.   vs.   Commissioner   of   Central   Excise   &
Customs 4
 and  Sarla Performance Fibers Limited and ors.
vs.  Commissioner of Central Excise, Surat­II 5
 and as such,
1  (1979) 3 SCC 431
2  (1985) 4 SCC 92
3  (1989) 3 SCC 537
4  (2000) 3 SCC 367 
5  (2016) 11 SCC 635

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the   UFAC   would   be   liable   to   pay   duty   as   if   the   goods   were
imported into India. 
16. Shri   M.H.   Patil,   on   the   contrary   submits,   that   the
case   of   the   present   appellant   is   covered   by   paragraph   9.9(b)
of the EXIM Policy and not by   paragraph 9.17(b)   of the EXIM
Policy.  He further submits, that all the transactions made by
UFAC   were   made   only   after   the   valid   permissions   were
granted   by   the   Joint   Development   Commissioner,   SEEPZ.
Learned   counsel   further   submits,   though   initially   vide
Circular   dated   14.9.1998   (No.67/98­Cus)   the   permission   to
undertake   job   work   to   EOU/EPZ   from   the   DTA   units   was
restricted only to units in textile, readymade garments, agro­
processing   and   granite   sectors   and   subsequently   vide
Circular dated 5.11.1999   (No.74/99­Cus)   it was extended to
certain   other   units;   by   a   subsequent   Circular   dated
22.5.2000 (No.49/000­Cus), the said facility was extended to
all the sectors.  He submits, that this fact has not been taken
into   consideration   by   the   Authority   passing   the   Orders­in­
Original.     It   is   submitted   that   the   Sponsoring   Authority   i.e.

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the   Development   Commissioner,   SEEPZ   had   clarified   the
position that the activity which was carried out by the UFAC
was permissible under  paragraph 9.9(b)  of the EXIM Policy.  
17. To counter the submission that there is no transfer of
property   in   goods,   Shri   Patil   submits,   that   the   ‘sale’   and
‘purchase’ in the present case will have to be construed with
reference   to   the   definition   of   ‘sale’   and   ‘purchase’   under   the
Central   Excise   Act   and   not   under   the   Sale   of   Goods   Act,
1930.   Lastly, Shri Patil submits, that UFAC is entitled to the
benefits   of   said   Exemption   Notification   and,   as   such,   the
findings   as   recorded   by   the   learned   CESTAT   warrant   no
interference. 
18. We   shall   first   deal   with   the   submission   of   Shri   K.
Radhakrishnan,   learned   Senior   Counsel   appearing   for   the
Revenue,   to   the   effect   that   since   in   the   transaction   between
UFAC   and   TISCO   there   is   no   transfer   of   property   in   goods,
the same cannot be termed as ‘sale’ and therefore would not
be covered under paragraph 9.9 (b) of the EXIM Policy.   Shri

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Radhakrishnan, in that respect, would rely on the provisions
of the Sale of Goods Act, 1930. 
19. We   do   not   find   any   merit   in   the   submission   of   Shri
Radhakrishnan in this regard.  It will be relevant to note that
clause   (h)   of   Section   2   of   the   Central   Excise   Act,   1944
specifically   defines   the   terms   ‘sale’   and   ‘purchase’.     Section
2(h) of the Act reads thus:
“2(h) “sale”   and   “purchase”,   with   their
grammatical   variations   and   cognate
expressions,   mean   any   transfer   of
the   possession   of   goods   by   one
person   to   another   in   the   ordinary
course of trade or business for cash
or   deferred   payment   or   other
valuable consideration;”
20. The perusal of the definition makes it clear that when
there   is   a   transfer   of   possession   of   goods   in   the   ordinary
course   of   trade   or   business   either   for   cash   or   for   deferred
payment or any other valuable consideration, the same would
be   covered   by   the   terms   ‘sale’   and   ‘purchase’   within   the
meaning   of   the   Central   Excise   Act,   1944.     Undisputedly,   in
the   present   case,   there   is   a   transfer   of   Manganese   Ore   by

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TISCO   to   UFAC   for the purposes of processing the same and
converting it into  Silicon Manganese.  Undisputedly, the same
is also for a valuable consideration.
  
21. In   this   respect,   it   will   be   apposite   to   refer   to   the
judgment   of   this   Court   in   the   case   of   Commissioner   of
Central   Excise,   New   Delhi   vs.   Connaught   Plaza
Restaurant Private Limited, New Delhi 6
  wherein this Court
observed thus:
  “46.   We   are   unable   to   persuade   ourselves   to
agree with the submission. It is a settled principle
in   excise   classification   that   the   definition   of   one
statute   having   a   different   object,   purpose   and
scheme   cannot   be   applied   mechanically   to
another   statute.   As   aforesaid,   the   object   of   the
Excise   Act   is   to   raise   revenue   for   which   various
goods   are   differently   classified   in   the   Act.   The
conditions   or   restrictions   contemplated   by   one
statute   having   a   different   object   and   purpose
should   not   be   lightly   and   mechanically   imported
and   applied   to   a   fiscal   statute   for   non­levy   of
excise   duty,   thereby   causing   a   loss   of   revenue.
[See   Medley   Pharmaceuticals   Ltd.   v.   CCE   and
Customs   [(2011) 2 SCC 601] (SCC p. 614, para 31)
and   CCE   v.   Shree   Baidyanath   Ayurved   Bhavan
Ltd.   [(2009) 12 SCC  419] ]  The provisions of  PFA,
dedicated   to   food   adulteration,   would   require   a
technical   and   scientific   understanding   of   “ice­
cream” and thus, may require different standards
for   a   good   to   be   marketed   as   “ice­cream”.   These
provisions   are   for   ensuring   quality   control   and
6   (2012) 13 SCC 639

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have  nothing   to  do  with   the  class of   goods which
are subject to excise duty under a particular tariff
entry   under   the   Tariff   Act.   These   provisions   are
not   a   standard   for   interpreting   goods   mentioned
in the Tariff Act, the purpose and object of which
is completely different.”
22. This   Court   has   held,   that   it   is   a   settled   principle   in
excise classification that the definition of one statute having a
different   object,   purpose   and   scheme   cannot   be   applied
mechanically   to   another   statute.   It   has   further   been   held,
that   the   conditions   or   restrictions   contemplated   by   one
statute   having   a   different   object   and   purpose   should   not   be
lightly   and   mechanically   imported   and   applied   to   a   fiscal
statute. 
 
23. It is also equally well settled that the first principle of
interpretation   of   plain   and   literal   interpretation   has   to   be
adhered to.  We are therefore of the considered view, that the
narrower   scope   of   the   term   ‘sale’   as   found   in   the   Sale   of
Goods Act, 1930 cannot be applied in the present case.   The
term ‘sale’ and ‘purchase’ under the Central Excise Act, 1944,
if   construed   literally,   it   would   give   a   wider   scope   and   also

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include   transfer   of   possession   for   valuable   consideration
under the definition of the term ‘sale’.   
24. The   next   issue   that   requires   consideration   is   as   to
whether   under   the   EXIM   Policy,   UFAC   was   entitled   to   carry
out   the   job­work   for   TISCO   and   whether   it   was   entitled   to
exemption   from   payment   of   duty   under   the   Exemption
Notification.  
25. It   will   be   relevant   to   refer   to   the   relevant   clauses   of
Chapter   9   of   the   EXIM   Policy.     As   per   para   9.1   of   the   said
EXIM   Policy,   units   undertaking   to   export   their   entire
production   of   goods   may   be   set   up   under   the   EOU   Scheme.
As   per   para   9.9,   the   entire   production   of   EOU   units   is
required to be exported subject to the following:
“(a) Unless specifically prohibited in the LOP/LOI,
rejects   may   be   sold   in   the   Domestic   Tariff   Area
(DTA),   on   prior   intimation   to   the   Customs
authority.     Such   sales   shall   be   counted   against
DTA sale entitlement under paragraph 9.9(b) of the
Policy.   Sale of rejects shall be subject to payment
of duties as applicable to sale under para 9.9(b).
(b) DTA   sale   upto   50%   of   the   FOB   value   of
exports   may   be   made   subject   to   payment   of
applicable duties and fulfilment of minimum NFEP
prescribed in Appendix 1 of the Policy…..”

19
26. It will also be relevant to refer to para 9.17 (b) of the
EXIM Policy, which reads thus:
“(b) EOU/EPZ   units   may   undertake   job­work   for
export,   on   behalf   of   DTA   units,   with   the
permission of Assistant Commissioner of Customs,
provided   the   goods   are   exported   direct   from   the
EOU/EPZ units.   For such exports, the DTA units
will   be   entitled   for   refund   of   duty   paid   on   the
inputs by way of Brand Rate of duty drawback.”
27. It can therefore be seen, that under para 9.9(a) of the
EXIM Policy, EOU is entitled to sell the rejects in the DTA on
prior   intimation   to   the   Customs   authorities.     Such   sales   are
to be counted against DTA sale entitlement under paragraph
9.9(b) of the EXIM Policy.  The sale of rejects shall be subject
to   payment   of   duties   as   applicable   to   sale   under   paragraph
9.9(b) of the EXIM Policy.  
28. Under paragraph 9.9(b) of the EXIM Policy, DTA sale
upto   50%   of   the   FOB   value   of   exports   is   also   permitted
subject   to   payment   of   applicable   duties   and   fulfilment   of
minimum   Net   Foreign   Exchange   earning   as   a   Percentage   of
exports (NFEP)  as prescribed in Appendix­1 of the Policy.  

20
29. Under   paragraph   9.17   (b),   the   EOU/EPZ   units   are
also   entitled   to   undertake   job­work   for   export,   on   behalf   of
DTA units, with the permission of Assistant Commissioner of
Customs,   provided   the   goods   are   exported   direct   from   the
EOU/EPZ   units   and   for   such   exports,   the   DTA   units   will   be
entitled for refund of duty paid on the inputs by way of Brand
Rate of duty drawback.  
30. It can thus clearly be seen, that paragraph 9.9(b) and
paragraph   9.17(b)   of   the   EXIM   Policy   operate   in   totally
different fields.    Under paragraph 9.9 (b), an EOU is entitled
to sell upto 50% of the FOB value of exports to DTA subject to
payment   of   applicable   duties   and   fulfilment   of   minimum
NFEP   as   prescribed   in   Appendix­I   of   the   Policy,   whereas
under   paragraph   9.17(b),   an   EOU   is   entitled   to   undertake
job­work   for   export,   on   behalf   of   DTA   units,   with   the
permission   of   Assistant   Commissioner   of   Customs,   provided
the   goods   are   exported   direct   from   the   EOU/EPZ   units.     In
such   type   of   exports,   the   DTA   units   would   be   entitled   for

21
refund   of   duty   paid   on   the   inputs   by   way   of   Brand   Rate   of
duty drawback.  
31. The order­in­original states that since the UFAC has
not   exported   the   final   product   of   Manganese   raw   material
received   by   it   from   TISCO,   it   had   violated   the   provisions   of
paragraph   9.17   (b)   and   9.9(b)   of   the   EXIM   Policy.     We   will
have to examine the correctness of the said finding.  For that,
it   will   also   be   relevant   to   examine   as   to   whether   under
paragraph   9.9   (b)   of   the   EXIM   Policy,   an   EOU   is   entitled   to
carry a job­work on behalf of another unit in DTA.  
32. The order­in­original refers to Circular No.67/98­cus
dated 14.9.1998 and Circular No.74/99­cus dated 5.11.1999.
However,   the   Commissioner,   it   appears,   that   while   passing
the   order   has   not   noticed   the   subsequent   Circular
No.49/2000­Cus dated 22.5.2000.   It will be relevant to refer
to paragraph 10 and 11 of the said Circular dated 22.5.2000.
“10. Under para 9.17(d), the EOU/EPZ units in
specific   sectors   were   allowed   to   undertake   job
work   for   export   on   behalf   of   DTA   units.   This
paragraph   has   been   amended   to   extend   this
facility  to all sectors. It has also  been provided

22
that DTA units shall be entitled to brand rate of
duty draw back. 
11.     The   EOU   /EPZ   units   in   textiles,   ready
made   garments   and   granite   sectors   were
allowed to undertake job work on behalf of DTA
units   by   Board’s   Circular   69/98­Cus.,   dated
14 th
  September   1998.   This   facility   was
subsequently   extended   to   the   EOU/EPZ   units
in   aquaculture,   animal   husbandry,   hardware,
software   sector   vide   Board’s   Circular   No.
74/99­Cus., dated 5 th
 Nov., 1999.     Now, it has
been decided to extend this facility to EOU/EPZ
units   in   all   sectors.   Further,   it   has   been
decided  that  the  DTA  units  shall   be  entitled  to
avail   of   the   brand   rate   of   duty   drawback   for
such job­work undertaken by EOUs/EPZ units
concerned.   Board’s   Circulars   67/98­Cus.,
dated   14­9­1998   and   74/99­Cus.,   dated         5­
11­1999 stand modified to the above extent .”
(emphasis supplied) 
33. In   view   of   paragraph   10   of   the   Circular   dated
22.5.2000,   the   facility   of   undertaking   job­work   by   EOU/EPZ
units   which   was   restricted   to   specific   sectors   has   been
amended   and   the   said   facility   has   been   extended   to   all
sectors.     It   has   also   been   provided,   that   DTA   units   shall   be
entitled   to   brand   rate   of   duty   draw   back.       Similarly,
paragraph   11   of   the   Circular   dated   22.5.2000   also   provides,
that   the   facility   which   was   given   to   EOU/EPZ   to   undertake

23
job­work   on   behalf   of   DTA   units   in   textiles,   readymade
garments   and   granite   sectors   which   was   subsequently
extended   to   the   EOU/EPZ   units   in   aquaculture,   animal
husbandry,   hardware   and   software   sectors   vide   Circular
dated   5.11.1999,   was   extended   to   EOU/EPZ   units   in   all
sectors.  It has further been provided, that DTA units shall be
entitled  to  avail of the brand rate of  duty  drawback for  such
job­work undertaken by EOUs/EPZ units concerned.   It also
provides,   that   earlier   circulars   issued   by   the   Board   stood
modified to the said extent.  
34. We find, that failure on the part of the Commissioner,
who passed the order­in­original, to notice the Circular dated
22.5.2000   has   resulted   in   passing   an   erroneous   order.       It
also appears, that after the show cause notice was issued to
UFAC, the Commissioner had sought a clarification from the
Sponsoring   Authority   i.e.   the   Development   Commissioner,
SEEPZ   vide   communication   dated   6.11.2001.     It   will   be
relevant   to   refer   to   the   communication   dated   28.11.2001
addressed   by   Joint   Development   Commissioner   to   the

24
Additional Commissioner (CIU), Office of the Commissioner of
Customs  and  Central   Excise,  Nagpur,  relevant  part  of  which
reads thus:.
“Sub:   Manufacture   of   goods   of   DTA   Unit   by   an
EOU   on   conversion   basis   –   Provisions   of   Para
9.17(b)   of   the   EXIM   Policy   1997­2002   –
Correspondence   regarding.   M/s   Universal
Ferro Ltd., Tumsar
*********
Kindly   refer   to   letter   C.No.
II(39)/25/CIU/2001,   dated   6 th
  November,   2001,
addressed   to   Development   Commissioner,   SEEPZ
SEZ.   Ministry of Commerce has clarified that the
EXIM   Policy   permits   the   kind   of   operation   being
undertaken   by   the   unit   and   it   should   be
permitted.” 
35. UFAC   had   also   sought   a   clarification   to   this   effect
from the Sponsoring Authority.   It will be relevant to refer to
the communication dated 23.10.2001, addressed by the Joint
Development   Commissioner,   SEEPZ,   relevant   part   of   which
reads as under:
  “Kindly   refer   to   your   query   regarding   DTA
sale. The position clarified to Central Excise,
Nagpur, is as follows: ­
‘The   general   question   raised   was
whether   while   selling   in   DTA   under   DTA

25
sale permission  issued in  terms of  Para  9.9
(b)   of   the   EXIM   Policy,   a   unit   can   take
supply   of   raw   material   from   a   Company   in
the DTA and give back the finished product
(its   approved   as   per   LOP   and   also   covered
by the DTA sale permission).
The unit is free to procure raw material
in   terms   of   Para   9.2   of   Policy.   The   raw
material   is   meant   for   production   either
export   or   clearance   under   valid   DTA
permission.   The   unit   may   convert   the   RM
into   its   approved   product   and   clear   the
same   against   valid   DTA   sale   permission
(under   para   9.9(b)   after   paying   applicable
duty   on   assessable   value   of   finished
product,   i.e.   value   of   RM   +   conversion
charges.   There   is   no   bar   on   this   activity
under the EXIM Policy. ’”
(emphasis supplied)
36. It   is   not   in   dispute   that   all   transactions   between
UFAC   and   TISCO   have been entered into after the necessary
permission   was   obtained   from   the   Development
Commissioner.       As   a   matter   of   fact,   the   order­in­original
itself mentions thus:
  “The  M/s. UFAC   was  a  100%  EOU  engaged  in  the
manufacture   of   Ferro   Manganese   &   Silico
Manganese and clearances thereof for export as well
as   in   DTA   on   payment   of   Central   Excise   duty.   The
unit   was   also   doing   job   work   for   M/s   TISCO   in
respect   of   Silico   Manganese   on   the   basis   of
Memorandum of Agreement dated 28.12.99 entered
into with M/s. TISCO. These clearances of the goods

26
manufactured   on   the   basis   of   job   work   had   been
effected   on   payment   of   duty   vide   Notification
no.8/97­Central   Excise   dated   1.3.97   against
permission   for   DTA   sales   granted   by   the
Development   Commissioner   SEEPZ,   Mumbai   from
time to time.”
37. It   could   thus   be   clearly   seen,   that   the   Original
Authority   itself   has   found   that   clearance   of   the   goods
manufactured  on   the  basis  of  job­work had  been  effected  on
payment of duty vide Exemption Notification of 1997 against
permission   for   DTA   sales   granted   by   the   Development
Commissioner, SEEPZ, Mumbai from time to time.  
38. The   combined   reading   of   paragraph   9.9(b)   of   the
EXIM Policy , the Circulars issued by the Board, particularly,
the   Circular   dated   22.5.2000   and   reply   to   the   query   of   the
Customs   Authorities   by   the   Development   Commissioner,
SEEPZ   would   clearly   show,   that   the   UFAC   was   entitled   to
carry out the job­work on behalf of  TISCO  on payment of duty
as provided under  Exemption Notification  of 1997.  
39. In this respect, it will also be apposite to refer to the
Circular   dated   6.5.2003   (No.38/2003­Cus)   issued   by   the

27
Board which would further  clarify   the position,  relevant  part
of which reads thus:  
  “I   am   directed   to   say   that   cases   have   been
brought to the notice of the Board that in case of
stock transfer of goods to a DTA unit, EOUs were
not   being   allowed   the   benefit   of   payment   of
concessional   duty   under   notification   No.   2/95   –
Central   Excise,   dated   4­1­1995   even   though   the
EOU   had   a   valid   DTA   sale   permission   and   had
earned   the   DTA   sale   entitlement   as   provided
under   paragraph   6.8   of   the   Exim   Policy   2002­
2007   (Paragraph   9.9   of   the   Exim   Policy   1997­
2002)   and   fulfil   other   conditions   specified   in
aforesaid notification. The benefit of concessional
rate of duty was being denied on the ground that
stock transfer of goods is not a sale and thus, not
eligible   for   concessional   rate   of   duty   in   terms   of
the above notification. 
2.     The   matter   has   been   examined   by   the
Board.   Notification   2/95   –   C.E.,   dated   1­4­1995
provided   for   50%   exemption   on…..   “ goods
allowed   to   be   sold   in   India   under   and   in
accordance   with   the   provisions   of   sub­
paragraphs   (a),   (b),   (d)   and   (h)   of   para   6.8
(earlier   para   9.9)   of   the   Exim   Policy ”….   The
notification,   therefore,   allowed   concessional   duty
only   when   goods   were   sold   into   DTA   in
accordance   with   para   6.8   (or   9.9)   of   the   policy.
What is covered in para 6.8 (or  9.9) of the policy
has   been   clarified   by   Ministry   of   Commerce   in
Appendix   14­IH   of   the   Handbook   of   procedures,
2002   –   2007   (Appendix   42   of   the   Hand   Book   of
Procedures   Vol   –   I   –   1997   ­   2002)   that   it   covers
any   clearance   to   another   DTA   unit.   Thus   it   is

28
not open to the Department to interpret the Exim
Policy   in   any   other   manner   than   what   has   been
mentioned in Appendix 14 – IH (or 42). The word
DTA   sale   has   been   loosely   used   in   the   Exim
Policy   and   there   is   no   definition   of   DTA   sale   in
the Policy. Appendix 14­IH (or 42) clarifies that it
not   only   covers   transfers   through   sales   to   DTA
units  but  also  through   other   means.  It  would  be
illogical   to   contend   that   the   concession   is
available   if   the   goods   are   transferred   on   sale   to
an independent unit but it would not be available
when   removed   on   stock   transfer   to   another
division / unit of the same company.” 
40. We   will  now   deal   with   the   next   submission   made  by
Shri K. Radhakrishnan, learned Senior Counsel, to the effect
that   under   proviso   to   sub­section   (1)   of   Section   3   of   the
Central Excise Act, 1944, an  EOU  is liable to pay duty on the
goods   brought   to   a   DTA,   as   if   the   goods   were   produced   and
manufactured outside India and were imported into India as
per  the   provisions   of  the  Customs Act,  1962 and   that  under
Section   5A   of   the   Central   Excise   Act,   1944,   the   Central
Government has  no power  to grant exemption from  payment
of duty to an  EOU . 

29
41. To consider the submission, it will be relevant to refer
to the relevant part of Sections 3 and 5A of the Central Excise
Act, 1944, which read thus: 
“3.   Duty specified in the Fourth Schedule to
be   levied .­(1)   There   shall   be   levied   and
collected in such manner as may be prescribed
a   duty   of   excise   to   be   called   the   Central   Value
Added   Tax   (CENVAT)   on   all   excisable   goods
(excluding   goods   produced   or   manufactured   in
special  economic  zones)  which  are produced  or
manufactured in India as, and at the rates, set
forth in the Fourth Schedule:
Provided   that   the   duty   of   excise   which   shall
be   levied   and   collected   on   any   excisable   goods
which   are   produced   or   manufactured   by   a
hundred   per   cent   export­oriented   undertaking
and   brought   to   any   other   place   in   India,   shall
be   an   amount   equal   to   the   aggregate   of   the
duties   of   customs   which   would   be   leviable
under   the   Customs   Act,   1962   (52   of   1962)   or
any other law for the time being in force, on like
goods   produced   or   manufactured   outside   India
if   imported   into   India,   and   where   the   said
duties   of   customs   are   chargeable   by   reference
to their value, the value of such excisable goods
shall,   notwithstanding   anything   contained   in
any   other   provision   of   this   Act,   be   determined
in   accordance   with   the   provisions   of   the
Customs Act, 1962 and the Customs Tariff Act,
1975 (51 of 1975).”
***
5A.   Power   to   grant   exemption   from   duty   to
excise .­(1)   If   the   Central   Government   is

30
satisfied   that   it   is   necessary   in   the   public
interest   so   to   do,   it   may,   by   notification   in   the
Official   Gazette,   exempt   generally   either
absolutely   or   subject   to   such   conditions   (to   be
fulfilled   before   or   after   removal)   as   may   be
specified   in   the   notification,   excisable   goods   of
any specified description from the whole or any
part of the duty of excise leviable thereon:
Provided   that,   unless   specifically   provided   in
such   notification,   no   exemption   therein   shall
apply to excisable goods which are produced or
manufactured­
(i) In   a   free   trade   zone   or   a   special
economic   zone   and   brought   to   any   other
place in India; or
(ii) by   a   hundred   per   cent   export­oriented
undertaking  and brought to any other  place
in India.
Explanation­In this proviso, “free trade zone”,
“special economic Zone” and “hundred per cent
export­oriented   undertaking”   shall   have   the
same   meanings   as   in   Explanation   2   to   sub­
section (1) of Section 3.”
42. A   perusal   of   sub­section   (1)   of   Section   3   of   the   Act
would show, that sub­section (1) of Section 3 provides for levy
and   collection   of   duty   of   excise   in   such   manner   as   may   be
prescribed   to   be   called   the   Central   Value   Added   Tax
(CENVAT)   on   all   excisable   goods,   which   are   produced   or

31
manufactured   in   India   as,   and   at   the   rates,   set   forth   in   the
Fourth   Schedule.     However,   the   said   sub­section   (1)   of
Section   3   excludes   the   applicability   thereof,   to   the   goods
produced   or   manufactured   in   special   economic   zones.     The
proviso to sub­section (1) of Section 3 of the Act is applicable
to the excisable goods, which are produced or  manufactured
by a 100% export­oriented undertaking when such goods are
brought to any other place in India.  It provides, that in such
a   case,   an   amount   equal   to   the   aggregate   of   the   duties   of
customs   which   would   be   leviable   under   the   Customs   Act,
1962   or   any   other   law   for   the   time   being   in   force,   on   like
goods   produced   or   manufactured   outside   India   if   imported
into   India   and   where   the   said   duties   of   customs   are
chargeable   by   reference   to   their   value,   the   value   of   such
excisable goods shall, notwithstanding anything contained in
any  other  provision of this Act, be determined in accordance
with   the   provisions   of   the   Customs   Act,   1962   and   the
Customs Tariff Act, 1975.  

32
43. Relying on the proviso to sub­section (1) of Section 3
of   the   Act,   it   is   the   contention   of   Shri   Radhakrishnan   that
since   UFAC   has   supplied   the   goods   to   TISCO,   which   is   any
other place in India, it will be liable to pay the import duty as
if the goods were imported in India. 
44. However,  for   considering  the   said  submission,  it   will
also   be   necessary   to   refer   to   Section   5A   of   the   Act,   which   is
already   reproduced   above.     Sub­Section   (1)   of   Section   5A   of
the   Act   provides,   that   if   the   Central   Government   is   satisfied
that it is necessary in the public interest so to do, it may, by
notification   in   the   Official   Gazette,   exempt   generally   either
absolutely or subject to such conditions, to be fulfilled before
or   after   removal,   as   may   be   specified   in   the   notification,
excisable goods of any specified description from the whole or
any   part   of   the   duty   of   excise   leviable   thereon.     The   proviso
thereto   provides,   that   unless   specifically   provided   in   such
notification,   no   exemption   therein   shall   apply   to   excisable
goods   which   are   produced   or   manufactured   in   a   free   trade
zone   or   a   special   economic   zone   and   brought   to   any   other

33
place   in   India;   or   by   a   hundred   per   cent   export­oriented
undertaking and brought to any other place in India.  
45. It   is   the   submission   of   Shri   Radhakrishnan   that   a
combined reading of proviso to sub­section (1) of Section 3 of
the Act and proviso to sub­section (1) of Section 5A of the Act,
would   not   entitle   the   Central   Government   to   grant   any
exemption   to   an  EOU   when   it   brings   the   goods   to   any   other
place   in   India   (i.e.   DTA)   and   the   duty   that   would   be   leviable
would be as if the said goods were imported in India.  
46. We   are   of   the   considered   view,   that   if   such   an
interpretation   is   accepted,   the   words   “unless   specifically
provided in such notification” in sub­section (1) of Section 5A
will have to be ignored and the said words would be rendered
otiose.  It is a settled principle of law that while interpreting a
provision   due   weightage   will   have   to   be   given   to   each   and
every word used in the statute.
47. In this respect, we may gainfully refer to the following
observations   of   the   Constitution   Bench   of   this   Court   in   the
case of  Hardeep Singh  vs.  State of Punjab and others 7
:
7   (2014) 3 SCC 92

34
“42.   To   say   that   powers   under   Section   319
CrPC   can   be   exercised   only   during   trial   would
be reducing the impact of the word “inquiry” by
the court. It is a settled principle of law that an
interpretation   which   leads   to   the   conclusion
that   a   word   used   by   the   legislature   is
redundant,   should   be   avoided   as   the
presumption   is   that   the   legislature   has
deliberately and consciously used the words for
carrying   out   the   purpose   of   the   Act.   The   legal
maxim   a   verbis   legis   non   est   recedendum   which
means,   “from   the   words   of   law,   there   must   be
no departure” has to be kept in mind.
43.   The   court   cannot   proceed   with   an
assumption   that   the   legislature   enacting   the
statute has committed a mistake and where the
language   of   the   statute   is   plain   and
unambiguous,   the   court   cannot   go   behind   the
language of the statute so as to add or subtract
a word playing the role of a political reformer or
of   a   wise   counsel   to   the   legislature.   The   court
has   to   proceed   on   the   footing   that   the
legislature intended what it has said and even if
there   is   some   defect   in   the   phraseology,   etc.,   it
is   for   others   than   the   court   to   remedy   that
defect.   The   statute   requires   to   be   interpreted
without doing any violence to the language used
therein.   The   court   cannot   rewrite,   recast   or
reframe the legislation for the reason that it has
no power to legislate.
44.   No word in a statute has to be construed
as   surplusage.   No   word   can   be   rendered
ineffective   or   purposeless.   Courts   are   required

35
to   carry   out   the   legislative   intent   fully   and
completely.   While   construing   a   provision,   full
effect   is   to   be   given   to   the   language   used
therein,   giving   reference   to   the   context   and
other provisions of the statute. By construction,
a   provision   should   not   be   reduced   to   a   “dead
letter”   or   “useless   lumber”.   An   interpretation
which   renders   a   provision   otiose   should   be
avoided   otherwise   it   would   mean   that   in
enacting   such   a   provision,   the   legislature   was
involved   in   “an   exercise   in   futility”   and   the
product   came   as   a   “purposeless   piece”   of
legislation   and   that   the   provision   had   been
enacted   without   any   purpose   and   the   entire
exercise   to   enact   such   a   provision   was   “most
unwarranted   besides   being   uncharitable”.
(Vide   Patel   Chunibhai   Dajibha   v.   Narayanrao
Khanderao   Jambekar   [AIR   1965   SC
1457]   ,   Martin   Burn   Ltd.   v.   Corpn.   of
Calcutta   [AIR   1966   SC   529]   ,   M.V.
Elisabeth   v.   Harwan   Investment   and   Trading   (P)
Ltd.   [1993   Supp   (2)   SCC   433   :   AIR   1993   SC
1014]   ,   Sultana   Begum   v.   Prem   Chand
Jain   [(1997) 1 SCC 373] ,   State of Bihar   v.   Bihar
Distillery  Ltd.   [(1997) 2 SCC  453 : AIR 1997  SC
1511]   ,   Institute   of   Chartered   Accountants   of
India   v.   Price   Waterhouse   [(1997)   6   SCC   312]
and   South   Central   Railway   Employees   Coop.
Credit   Society   Employees'   Union   v.   Registrar   of
Coop.   Societies   [(1998)   2   SCC   580   :   1998   SCC
(L&S) 703 : AIR 1998 SC 703] .)”
48. We therefore find, that the interpretation as sought to
be   placed   by   Shri   Radhakrishnan   would   render   the   term

36
“unless   specifically   provided   in   such   notification”   in   sub­
section   (1)   of   Section   5A   otiose   or   useless.     Such   an
interpretation   would   not   be   permissible.     We   find,   that   the
harmonious   construction   of   sub­Section   (1)   of   Section   5A   of
the Act and the proviso thereto would be, that an EOU which
brings the   excisable  goods  to   any   other   place  in   India  would
not be entitled for a general exemption notification unless it is
so specifically provided in such a notification.  
49. In   this   respect,   it   will   be   relevant   to   refer   to
Exemption   Notification   of   1997   as   amended   by   Notification
No.21/97­C.E. dated 11.4.1997, relevant part of which reads
thus: 
“Effective   rate   of   duty   on   certain   goods
produced   in   FTZ   or   EOU.   –   In   exercise   of   the
powers conferred by sub­section (1) of section 5A
of   the   Central   Excise   Act,   1944   (1   of   1944),   the
Central   Government,   being   satisfied   that   it   is
necessary   in   the   public   interest   so   to   do,   hereby
exempts   the   finished   products,   rejects   and
waste   or   scrap   specified   in   the   Schedule   to   the
Central   Excise   Tariff   Act,   1985   (5   of   1986)   and
produced   or   manufactured,   in   a   hundred   per
cent   export­oriented   undertaking   or   a   free   trade
zone   wholly   from   the   raw   materials   produced   or
manufactured in India, and allowed to be sold in
India   under   and   in   accordance   with   the

37
provisions   of   sub­paragraphs   (a),   (b),   (c),   (d)   and
(f)   of   paragraph   9.9   or   of   paragraph   9.20   of   the
Export   and   Import   Policy,   1 st
  April,   1997   –   31 st
March, 2002, from so much of the duty of excise
leviable   thereon   under   section   3   of   the   Central
Excise   Act,   1944   (1   of   1944),   as   is   in   excess   of
an   amount   equal   to   the   aggregate   of   the
duties   of   excise   leviable   under   the   said
Section   3   of   the   Central   Excise   Act   or   under
any   other   law   for   the   time   being   in   force   on
like   goods,   produced   or   manufactured   in   India
other   than   in   a   hundred   percent   export­oriented
undertaking or a free trade zone, if sold in India.”
50. The   bare   reading   of   the   aforesaid   Notification   would
amply make it clear, that the Central Government after being
satisfied that it was necessary in the public interest so to do,
thereby exempted the finished products, rejects and waste or
scrap which was produced or manufactured in a hundred per
cent   export­oriented   undertaking   or   a   free   trade   zone   wholly
from   the   raw   materials   produced   or   manufactured   in   India
and allowed to be sold in India under and in accordance with
the   provisions   of   sub­paragraphs   (a),   (b),   (c),   (d)   and   (f)   of
paragraph 9.9 or of paragraph 9.20 of the EXIM Policy, from
so much of the duty of excise leviable thereon under Section
3   of   the   Central   Excise   Act,   1944,   as   is   in   excess   of   an

38
amount equal to the aggregate of the duties of excise leviable
under   the   said   Section   3   of   the   Central   Excise   Act   or   under
any   other   law   for   the   time   being   in   force   on   like   goods,
produced or  manufactured in  India other  than  in a  hundred
per   cent   export­oriented   undertaking   or   a   free   trade   zone,   if
sold in India.  
51. It   could   thus   be   seen,   that   the   said   notification
specifically provides grant of exemption to the EOUs from the
payment   of   duties,   which   are   in   excess   of   what   is   leviable
under   sub­section   (1)   of   Section   3  of   the   Central  Excise   Act,
1944   on   like   goods,   produced   or   manufactured   in   India.     In
our   considered   view,   since   the   said   Exemption   Notification
specifically   mentions,   that   the   goods   produced   or
manufactured by an 100% EOU, which are allowed to be sold
in   India   in   accordance   with   para   9.9(b)   of   the   EXIM   Policy,
the   proviso   would   be   inapplicable   thereby,   requiring   the
duties   to   be   paid,   as   are   required   to   be   paid   under   sub­
Section (1) of Section 3 of the said Act.  The conditions which

39
can   be   culled   out   for   enabling   to   get   the   benefit   of   the   said
Exemption Notification are as under:
(i) The   finished   products,   rejects   and   waste   or   scrap
specified   in   the   Schedule   to   the   Central   Excise   Tariff
Act,   1985   should   be   produced   or   manufactured   in   the
100% export­oriented undertaking or a free trade zone;
(ii) The   said   finished   products   should   be   manufactured
wholly   from   the   raw   materials   produced   or
manufactured in India;
(iii) They   are   allowed   to   be   sold   in   India   under   and   in
accordance   with   the   provisions   of   sub­paragraphs   (a),
(b), (c), (d) and (f) of paragraph 9.9 or of paragraph 9.20
of the EXIM Policy.
52. Undisputedly,   in   the   present   case,   the   transaction
between   UFAC   and   TISCO   satisfies   all   the   three   conditions.
The   goods   are   produced   and   manufactured   by   UFAC,   an
100%   export­oriented   unit;   they   are   manufactured   wholly
from   the   raw   materials   produced   or   manufactured   in   India
and,   thirdly,   they   have   been   allowed   to   be   sold   in   India   in

40
accordance   with   the   provisions   of   paragraph   9.9(b)   of   the
EXIM Policy .
53. We   will   now   consider   the   submission   of   Shri
Radhakrishnan,   learned   Senior   Counsel,   that   in   view   of
substitution   of   the   words   “allowed   to   be   sold   in   India”   by
“brought   to   any   other   place   in   India”,   the   said   Exemption
Notification shall stand impliedly overruled/repealed.  
54. No   doubt,   that   the   reliance   placed   by   the   learned
Senior   Counsel   on   the   judgments   of   this   Court   to   the   effect
that   if   there   are   inconsistencies   in   two   statutes,   the   later
would  prevail  is well  placed.   This  Court  in   Deep   Chand   vs.
State   of   Uttar   Pradesh 8
  has   laid   down   the   following
principles to ascertain whether there is repugnancy or not:  
“(1) Whether   there   is   direct   conflict
between the two provisions; 
(2) Whether   the   legislature   intended   to
lay   down   an   exhaustive   code   in
respect   of   the   subject   matter
replacing the earlier law;
(3) Whether   the   two   laws   occupy   the
same field.”
8    AIR 1959 SC 648

41
The   said  view  has   been   consistently   followed   by  this
Court in catena of judgments. 
55. We   do   not   find,   that   there   would   be   any   conflict   in
the   amended   provisions   of   clause   (ii)   of   the   proviso   to   sub­
section   (1)   of   Section   5A   of   the   Act   and   the   said   Exemption
Notification.     In   any   case,   by   the   2001   Amendment,   the
legislature has  not  laid down any  exhaustive  code in  respect
of the subject matter in replacing the earlier law.   It appears,
that the said Amendment has been incorporated to bring the
said   clause   (ii)   of   sub­Section   (1)   of   Section   5A   in   sync   with
the words used in clause (i) of the proviso to sub­section (1) of
Section   5A   of   the   Act   and   the   words   used   in   the   proviso   to
sub­section   (1)   of   Section   3   of   the   Act.     In   that   view   of   the
matter,   we   find,   that   the   said   contention   is   without
substance. 
56. Insofar   as   the   reliance   placed   by   the   learned   Senior
Counsel   on   the   judgment   of   this   Court   in   the   case   of   Siv
Industries   Ltd.   (supra)   so   as   to   distinguish   the   terms
“allowed to be sold in India” and “brought to any other place

42
in India” is concerned, we find, that the said judgment would
rather   support   the   case   of   the   respondent   –   Assessee.     It
would   be   relevant   to   refer   to   the   following   observation   in
paragraph 18 of the said judgment, which reads thus:
“Thus   it   is   apparent   that   debonding   and
permission to sell in India are two different
things   having   no   connection   with   each
other.   It   also   becomes   apparent   that   in
view   of   the   EOU   Scheme   as   modified   from
time   to   time   and   corresponding
amendments   to   Section   3   of   the   Act   the
expression   “allowed   to   be   sold   in   India”   in
the   proviso   to   Section   3(1)   of   the   Act   is
applicable only to sales made up to 25% of
production by 100% EOU in DTA and with
the   permission   of   the   Development
Commissioner.   No   permission   is   required
to   sell   goods   manufactured   by   100%   EOU
lying with it at the time approval is granted
to debond.”
57. It   is   to   be   noted   that   the   case   that   fell   for
consideration before this Court was with regard to debonding.
What this Court has held is, that no permission is required to
sell   goods   manufactured   by   100%   EOU   lying   with   it,   at   the
time   approval   is   granted   to   debond.     It   has   been   held,   that
the expression “allowed to be sold in India” in the proviso to

43
Section 3(1) of the Act was applicable only to sales made upto
25%   of   production   by   100%   EOU   in   DTA   and   with   the
permission of the Development Commissioner.  Admittedly, in
the   present   case,   the   sales   made   by   UFAC   to   TISCO   are
within   the   permissible   limits   and   with   the   permission   of   the
Development Commissioner.
58. The   view   taken   by   this   Court   in   the   case   of   Sarla
Performance Fibers Limited  (supra) is a similar view, taken
following   the   decision   of   this   Court   in   Siv   Industries   Ltd.
(supra). As such, the said judgment also is of no assistance to
the case of the appellant. 
59. In   that   view   of   the   matter,   we   do   not   find,   that   the
CESTAT has  committed  any  error   in reversing  the  orders­in­
original   passed   by   the   Commissioner.     The   appeals   are,
therefore, dismissed. 
…....................CJI.
                             [S.A. BOBDE]
......................J.       
                                                  [B.R. GAVAI]

44
......................J.       
                                                  [SURYA KANT]
NEW DELHI;
MARCH 06, 2020