M/S. SIV INDUSTRIES LTD. versus COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS

Citation: [2000] 2 S.C.R. 231 · Decided: 10-03-2000 · Supreme Court of India · Bench: D.P. WADHWA · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

Mis. SIV INDUSTRIES LTD. 
A 
v. 
COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS 
MARCH 10, 2000 
[D.P. WADHWAANDRUMAPAL, JJ.] 
B 
Central Excise and Salt Act, 1944-Section 3( 1 )-De bonding of unit 
from 100% EOU Scheme-Levy of excise duty on the finished goods lying 
in stock, on the date of debonding and cleared for Domestic Tariff Area-
Whether under section 3( 1) or proviso to section 3(1) read with section 12 
C 
Customs Act, 1962-Held, duty is leviable under Section 3(1) of the Act. 
Proviso to S. 3( 1 )-De bonding of unit form 100% EOU, whether deemed 
to be permission to sell in India-Held, debonding and permission to sell in 
India are two different things having no connection with each other-No 
permission is required to sell goods manufactured by 100% EOU lying with 
D 
it at the time approval is granted to debond-Policy of Government under 
which EOU scheme came into operation and Import Export policy discussed. 
Central Excises Rules-Chapter V-A (Rules 100-A to 100-H)-Held, 
not applicable where EOU is outside EOU scheme after unit is debonded. 
The appellant, a 100% EOU had sought permission for debonding 
its unit from 100% EOU, for which it was granted permission in principle 
by the Ministry, vide its letter dated October 18, 1993 followed by letter 
dated November 3, 1993 subject to fulfilment of certain conditions, which 
was duly fulfilled by the appellant, including the deposit of duties of 
customs and excise on the basis of provisional assessment made by Assist-
ant Collector o~ Central Excise. Once the debonding of the unit was 
· permitted, finished goods manufactured earlier could be cleared for Do-
mestic Tariff Area (DTA) on levy of duty of Central Excise. On February 
2, 1994, a formal letter was issued by the Government of India debonding 
the appellant's unit and permitting it to operate as a DTA unit. 
E 
F 
G 
The assessee claimed that excise duty was payable on the finished 
goods under section 3(1) of the Act together with customs duty on the 
imported raw materials used in the manufacture of said finished goods 
lying in stock; rate of excise duty was the rate prevalent at the time when 
goods were sold in India on the date when the 100% EOU was debonded, 
H 
231 
232 
SUPREME COURT REPORTS 
(2000) 2 S.C.R. 
A 
which would be the date for removal for sale in India and not from the 
date of their manufacture. 
The Assistant Collector of Central Excise by its order dated March 
31, 1994, did not agree with the stand taken by the assessee. He, however, 
agreed with the assessee to the extent that the date of debonding was to be . 
B 
. taken as November 15, 1993, when the assessee paid the applicable duties 
and not February 2, 1997, when formal letter of debonding was issued by 
the Ministry. On appeal, the Collector of Central Excise decided the issue 
in favour of the assessee. CEGAT by its order dated November 5, 1997 
allowed the appeal of Revenue holding that proviso to Section 3(1) of the 
C 
Act was applicabler Hence, the present appeal. 
D 
E 
F 
G 
H 
Allowing the appeal, this Court 
HELD : 1. CEGAT was not right in holding that duty is Ieviable in 
terms of proviso to section 3(1) of the Central Excises & Salt Act. On 
debonding, levy of excise duty on finished goods earlier manufactured in 
100% EOU and cleared for Domestic Tariff Area, will be under Section 
3(1) of the Act. [245-E] 
2.1. Condition for sale of 25% of the finished products by EOU and 
sale of finished stock by a debonded lOO'fo EOU on date of debonding are 
different. In view of the EOU scheme as modified from time to time and 
amendment 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 upto 25 % of production by 100 % EOU in DTA and with 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. After debonding, it is open to the EOU, which is now like any 
other manufacturing unit in India, to sell the goods in In~. or export it by 
following the normal procedure. [243-D; 242-G; 243-B] 
2.2. Debonding and permission to sell in India are two different 
aspects, which functions are exercised by two different authorities consti-
tuted for two different purposes, having no connection with one another. 
Permission to sell in India has to be in accordance with the provisions of 
the export-import policy and con

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