LexM/S. L. R. BROTHERS INDO FLORA LTD. versus COMMISSIONER OF CENTRAL EXCISE
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A B C D E F G H 1043 M/S. L. R. BROTHERS INDO FLORA LTD. v. COMMISSIONER OF CENTRAL EXCISE (Civil Appeal No. 7157 of 2008) SEPTEMBER 01, 2020 [A. M. KHANWILKAR AND DINESH MAHESHWARI, JJ.] Customs Act, 1962 – Central Excise Act, 1944 – s.3 – Appellant, a 100% Export Oriented Unit (EOU) was engaged in production of cut flowers and flower buds – The 100% EOU is required to export all articles produced by it and was exempted from payment of customs duty on the imported inputs used during production of the exported articles vide exemption notification dated 03.06.1994 – Under the said notification, exemption on levy of customs duty was extended even to the inputs used in production of articles sold in domestic market – Thereafter, came amended notification dated 18.05.2001, by which the customs duty in case of non-excisable goods became leviable on inputs used for production, manufacturing or packaging, as if there was no exemption notification in place – The EXIM Policy 1997-2002 provided that a 100% EOU in floriculture sector was permitted to sell 50% of its produce in Domestic Tariff Area (DTA), subject to achieving positive net foreign exchange earning of 20% and upon the approval of the Development Commissioner – The appellant without obtaining the approval of the Development Commissioner and without maintaining the requisite net foreign exchange earning made DTA sales during 1998-99 to 2000-01 in contravention of the EXIM Policy – However, the appellant subsequently sought ex-post facto approval from Development Commissioner – The Additional Commissioner, Central Excise issued a show cause notice as to why customs duty, interest and penalty should not be imposed for the DTA sales made by the appellant in contravention of the EXIM Policy, that too after having availed exemptions under the exemption notification – The Additional Commissioner adjudged the show cause notice and held that the DTA sales were made without permission and in contravention of the EXIM Policy and therefore, customs duty is leviable upon the appellant for the said sales – The Appeal before the Commissioner was unsuccessful – In a further [2020] 10 S.C.R. 1043 1043 A B C D E F G H 1044 SUPREME COURT REPORTS [2020] 10 S.C.R. appeal before CESTAT, the order of the authorities below were confirmed – The Supreme Court framed two questions: (i) Whether customs duty can be charged on the non-excisable goods produced in India and sold in DTA by an EOU ?; and (ii) Whether the amendment notification dated 18.05.2001, purporting to amend the criteria for determination of duty on inputs, is prospective or retrospective in its application ? – Held: The DTA sales pertaining to excisable goods made in conformity with the conditions of the EXIM policy are exigible to excise duty, but once there is contravention of the condition(s) of the EXIM policy, irrespective of the goods produced being excisable or non-excisable, the benefit under the exemption notification is unavailable – In such a situation, the very goods would become liable to imposition of customs duty as if being imported goods – So, the demand in the present case, pertaining to the non-excisable goods (cut flowers) has rightly been made under the 1962 Act upon the imported inputs used in the production of goods sold in DTA in violation of condition(s) in the EXIM Policy – So far as the amendment notification is concerned, it is a settled proposition of law that all laws are deemed to apply prospectively unless either expressly specified to apply retrospectively or intended to have been done so by the legislature – An essential requirement for application of a legislation retrospectively is to show that the previous legislation had any omission or ambiguity or it was intended to explain an earlier act – In absence of the above ingredients, a legislation cannot be regarded as having retrospective effect – In the instant case, the amendment notification was not in clarificatory nature – Further, any ambiguity in regard to the date of application of the amendment thereto would necessarily have to be construed in favour of the State, unless shown otherwise by judicially acceptable parameters – Therefore, CESTAT has rightly upheld the levy of customs duty. Dismissing the appeal, the Court HELD: Whether customs duty can be charged on the non- excisable goods produced in India and sold in DTA by an EOU? 1. The DTA sales pertaining to excisable goods made in conformity with the conditions of the EXIM polic
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