KETAN POTTERY WORKS AND ORS. Vs. UNION OF INDIA AND ORS.
LAWS(GJH)-2016-2-212
HIGH COURT OF GUJARAT
Decided on February 04,2016

Ketan Pottery Works And Ors. Appellant
VERSUS
Union of India And Ors. Respondents

JUDGEMENT

Akil Abdul Hamid Kureshi, J. - (1.) Petitioners have challenged a portion of Notification No. of 2003 dated 01.03.2003 (hereinafter to be referred as 'the said notification'). The petitioners have also prayed for a declaration that they would be entitled to full exemption limit of Rs. 150 lakhs in a financial year under the said notification without including in such limit the value of clearances made by the petitioners for export of goods to Nepal. The petitioners have challenged Order -in -Original as at Annexure -I and the Appellate Order as at Annexure -J to the petition on the basis of such declaration.
(2.) Brief facts may be noted from Special Civil Application No. 13382 of 2015 as under: "The petitioners are small scale industrial units and are engaged in the manufacture of ceramic and pottery items. The Government of India issued the said notification on 01.03.2003 granting exemption to first clearances of specified goods up to the value of Rs. 150 lakhs and full exemption to captive consumption for manufacturers having clearances not exceeding Rs. 4 crores in the preceding financial year. Under such notification, the Government of India exempted clearances specified in column (2) of the Table contained therein for home consumption of excisable goods of the description specified in the annexure appended to the notification from so much of the aggregate of the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985, and the special duty of excise specified thereon in the Second Schedule to the said Central Excise Tariff Act, 1985 as is in excess of the amount calculated at the rate specified in the corresponding entry in Column (3) of the said Table. Relevant portion of this notification reads as under: "....In exercise of the powers conferred by sub -section (1) of Sec. 5A of the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the Central Excise Act) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 8/2002 -Central Excise, dated the 1st March, 2002, published in the Gazette of India vide number G.S.R.129(E), dated the 1st March, 2002, the Central Government, being satisfied that it is necessary in the public interest to do so, hereby exempts clearances, specified in column (2) of the Table below (hereinafter referred to as the said Table) for home consumption of excisable goods of the description specified in the Annexure appended to this notification (hereinafter referred to as the specified goods), from so much of the aggregate of, - (i) the duty of excise specified thereon in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the First Schedule); and (ii) the special duty of excise specified thereon in the Second Schedule to the said Central Excise Tariff Act, 1985 (hereinafter referred to as the Second Schedule), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (3) of the said Table: Provided that nothing contained in this notification shall apply to a manufacturer who has availed the exemption under notification No. , dated the 31st July, 2001, published in the Gazette of India vide number G.S.R.565(E), dated the 31st July, 2001, in the same financial year: Provided further that exemption contained in this notification shall not apply to goods which are chargeable to nil rate of duty or are exempt from the whole of the duty of excise leviable thereon. TABLE ..... .... .... "(3) For the purposes of determining the first clearances up to an aggregate value not exceeding one hundred and fifty lakh rupees made on or after the 1st day of April in any financial year, mentioned against serial No. 1 of the said Table, the following clearances shall not be taken into account, namely, - (a) clearances, which are exempt from the whole of the excise duty leviable thereon (other than an exemption based on quantity or value of clearances) under any other notification or on which no excise duty is payable for any other reason; (b) clearances bearing the brand name or trade name of another person, which are ineligible for the grant of this exemption in terms of paragraph 4; (c) clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods...... " ..... ..... ..... "Explanation, - For the purposes of this notification, ..... ..... ..... "(G) "Clearances for home consumption", wherever referred to in this notification, shall include clearances for export to Bhutan and Nepal..... " In terms of the said notification, thus, an SSI Unit will be exempt from payment of excise duty upto clearances of Rs. 150 lakhs, subject to the conditions mentioned therein. As per para 3 of the said notification, for the purpose of determining the first clearances upto the said value of Rs. 150 lakhs, the clearances which are exempt from the whole of excise duty leviable thereon under any other notification or on which no excise duty is payable for any other reason, would not be taken into account. This would thus cover all exports made by a manufacturer. However, the explanation at the end of this notification in clause (G) provided that clearances for home consumption wherever referred to in this notification shall include clearances for export to Bhutan and Nepal. By implication, thus, the exclusion of clearances for export provided in para 3 of the said notification would not apply in case of the clearances for export to either Bhutan or Nepal.
(3.) This exclusion had a history, namely, special bilateral trade relations between India and Nepal flowing from various treaties. In particular, our attention was drawn to the Indo -Nepal Treaty of October 2009 in which it was agreed by the two countries that the Government of India would allow the Government of Nepal payment of the excise and other duties collected by the Government of India on goods produced in India and exported to Nepal, subject to certain conditions. Relevant portion of the Treaty reads as under: "III. With Reference to Article III 1. The Government of India will allow the Government of Nepal payment of the excise and other duties collected by the Government of India on goods produced in India and exported to Nepal provided that: (I) Such payment shall not exceed the import duties and like charges levied by the Government of Nepal on similar goods imported from any other country, and (ii) the Government of Nepal shall not collect from the importer of the said Indian goods so much of the import duty and like charges as is equal to the payment allowed by the Government of India...";


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