Norms Committee have no power to prohibit the production of any particular product by an EOU under the EOU Scheme: Delhi HC sets aside Report of Norms Committee [Read Order]

The Delhi High Court set aside the report of the Norms Committee as they have no power to prohibit the production of any particular product by an Export Oriented Unit (‘EOU’) under the EOU Scheme. M/s Marble Art & Anr, the petitioner no.1 is a Partnership Firm with petitioner no.2 being one of the partners. It was claimed that the petitioner no.1 was a 100% Export Oriented Unit (‘EOU’) and was granted a Letter of Permission ( ‘LOP’) on 16.06.1999 by the Development Commissioner, Noida, Special Economic Zone, Noida, Uttar Pradesh. The said EOU was approved for the manufacture of marble and the downstream products of Marble, being - (a) Marble Slabs and Tiles, (b) Mosaics, (c) Borders, (d) Profiles, (e) Gauged Slate, and (f) other articles made of natural stone. It is claimed that the raw material utilized by petitioner no.1 is either imported or procured from the domestic market. The rough marble blocks are sawn into rough marble slabs of the standard thickness of 20mm as per ISI Specification No. IS:1130-1969. The downstream products mentioned above are manufactured from rough marble slabs of 20mm thickness. The petitioner claims that for putting the marble blocks into the shape and converting them into marble slabs, the marble blocks are sent by the petitioners to some other units on-job work basis after obtaining proper permission from the concerned authority, that is, the Deputy Commissioner of Central Excise and Customs. After the conversion of the marble blocks into the marble slabs, petitioner No. 1 further processes the same by either exporting the marble slabs or making Domestic Tariff Area (‘DTA’) sales of the same or manufacturing downstream products from such slabs. It was stated that under the EXIM Policy 1997-2002, EOUs were permitted to sell rejects as well as goods up to 50% of the FOB value of exports in the domestic market, subject to the payment of duty and fulfilment of minimum Net Foreign Exchange Earnings (‘NFE’). Over and above this limit, EOU could sell finished products, which were freely importable against payment of full duty. It was stated that the wastage norms in respect of items not covered by Appendix 41 are to be fixed by the Board of Approvals (‘BOA’). However, the Development Commissioner may fix ad hoc norms for six months and within that stipulated period, the norms shall be fixed by the BOA, which shall prevail. On an application the Development Commissioner, Noida Special Economic Zone, that is respondent no.3 fixed the ad hoc Wastage Norms for ‘sawing of marble blocks into marble slabs’ and as per Chapter Note 4 of Chapter 25 of Central Excise Tariff Act, 1985, allowing wastage over and above 30 sq. meter of marble slab received out of 1 cubic meter. of marble blocks of an irregular shape. The petitioner further claimed that without any authority, however, the Custom and Central Excise Department ( ‘Excise Department’) interfered with the fixation of the Wastage Norms, and vide letter dated 15.10.2007 by the Commissioner of Custom and Central Excise, Noida, intimated the Ministry of Commerce that if the latter was desirous of fixing Wastage Norms, then the Excise Department must be made a party to the process as it had the actual data. It was stated that if the norms are fixed without the involvement of the Excise Department, they would not be acceptable to the Excise Department. The petitioner claimed that the Excise Department has no role in the fixation of the wastage norms and, therefore, the above threat was completely unjustified. A single judge bench of Justice Navin Chawla observed that the Norms Committee refused to determine the Wastage Norms on the ground that the products sought to be manufactured by the petitioner would result in a high quantity of waste of raw materials. The Norms Committee further opined that such activities would not be commercially viable and, in any case, should not be allowed in the EU. “In the absence of any such power, the reason given by the Norms Committee would be ultra-vires the Scheme and cannot be sustained.”, the court held. While allowing the petition the court held that the Committee shall re-consider and fix the Wastage Norms for the products applied for by the petitioner, by the law and by the direction issued by the Court. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Norms Committee have no power to prohibit the production of any particular product by an EOU under the EOU Scheme: Delhi HC sets aside Report of Norms Committee [Read Order]

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