Customs, Excise and Gold Tribunal - Delhi
Commr. Of C. Ex. vs Marutham Textiles (P) Ltd. on 28 February, 2003
Equivalent citations: 2003(153)ELT219(TRI-DEL)
ORDER P.G. Chacko, Member (J)
1. The common issue in these appeals of the Revenue, referred to us by the South Zonal Bench (Chennai) of the Tribunal is whether, under Notification No. 1/93-CE., dated 28-2-93 as amended by Notifications 59/94-CE., dated 1-3-94 and 90/94-CE., dated 25-4-94, the value of cotton yarn cleared on payment of duty by a small-scale manufacturer from 25-4-1994 has to be included in the aggregate value of Rs. 30 lacs of first clearances for the purpose of exemption under the SSI Exemption Scheme. On this or like issue, there are conflicting decisions by coordinate Benches of this Tribunal. The following decisions held that the first clearances to aggregate to the value limit for exemption would include only those clearances which were made from the date on which the small-scale manufacturer started availing exemption under the scheme:-
(1) Watts Electronics (P) Ltd. v. CCE, Kochi - 1994 (70) E.L.T. 127 (Tri.)
(2) CCE, Coimbatore v. Sri Kumaran Spinners (P) Ltd. - 1998 (24) RLT 86 (CEGAT)
(3) CCE, Coimbatore v. S.M. Textiles (P) Ltd, - 2001 (135) E.L.T. 260 (Tribunal).
In Watts Electronics, it was held that the clearances of the specified goods only from the date (5-8-1991) on which the assessee started availing the benefit of SSI exemption under Notification No. 175/86-CE. would be included in the first clearances aggregating to the value limit of Rs. 75 lacs for exemption and that the duty-paid clearances from 1-4-91 to 4-8-91 could not be included. In the case of Sri Kumaran Spinners, the value of clearances of cotton yarn only from 23-5-1994, the date from which the assessee availed the benefit of SSI exemption under Notification No. 1/93-C.E. as amended, was held to be includible in the first clearances up to Rs. 30 lacs for the purpose of exemption. The Revenue's contention that the clearances from 25-4-1994, the date on which the goods came to be specified for the exemption, should be included in the first clearances for exemption was rejected. The decision was to the same effect in the case of S. M. Textiles also.
2. A contrary view is seen to have been taken in the following cases :-
(1) CCE v. Global Remedies Pvt. Ltd. - Order No. 604/94 in Appeal No. E/382/91-MAS.
(2) Garlon Polyfab Industries Ltd. v. CCE - 2001 (120) E.L.T. 439 (Tribunal) (3) Central Pulp Mills Ltd. v. CCE, Baroda - 2001 (130) E.L.T. 642 (Tribunal).
3. The present respondents are SSI units engaged in the manufacture of cotton yarn. They were eligible to operate under Notification No. 1/93-C.E. ibid. Their product (cotton yarn) came to be specified under the notification by way of amending Notification No. 90/94-C.E. ibid. Notification No. 1/93-C.E. exempted the "specified goods" cleared for home consumption on or after the first day of April in any financial year. It prescribed full exemption in the case of "first clearance of the specified goods up to an aggregate value not exceeding Rs. 30 lacs". The respondents cleared cotton yarn on payment of duty from 1-4-1994 to some date (which varies from party to party) beyond 25-4-94 and thereafter (after filing classification list opting to avail the exemption under Notification No. 1/93-C.E. as amended) made clearances up to a value of Rs. 30 lacs without payment of duty. For instance M/s. Marutham Textiles (P) Ltd., the respondents in Appeal No. E/2607/97-D, cleared cotton yarn on payment of duty from 1-4-94 to 19-5-94 and thereafter made clearances up to a value of Rs. 30 lacs without payment of duty. The Department issued a show cause notice proposing to include the duty-paid clearances also in the "first clearances of aggregate value of Rs. 30 lacs" and demand duty on the clearances in excess of this limit. The original authority held that the value of duty-paid clearances made prior to 25-4-1994 need not be taken into account for determining the exemption limit of Rs. 30 lacs. In the Department's appeal against the lower authority's decision, the Commissioner (Appeals) held that the assessee was entitled to make duty-free clearances up to the value of Rs. 30 lacs from the date they actually started availing the benefit of Notification No. 1 /93-C.E.
4. In these appeals before us, the Revenue has accepted the non-includibility of duty-paid clearances from 1-4-1994 to 24-4-1994 but challenges the decision to exclude the duty-paid clearances of the period from 25-4-1994 to 19-5-1994 or other dates, as the case may be, from reckoning in the computation of the aggregate value of Rs. 30 lacs under the notification.
5. Heard both sides.
6. Ld. SDR, Shri A.S. Bedi submitted that, once the product (cotton yarn) came to be specified for the purpose of exemption under Notification No. 1/93-C.E., the notification with all its conditions became operative and all the clearances made by the SSI unit from the date of specification would, in chronological order, go into reckoning for the purpose of arriving at the limit of aggregate value of clearances for the purpose of exemption. Cotton yarn came to be "specified goods" for the purpose of exemption under Notification No. 1/93-C.E., w.e.f. 25-4-1994, the date on which Notification No. 90/94-CE. was issued. Small-scale manufacturers of cotton yarn were automatically governed by the exemption Notification No. 1/93-C.E. If any such manufacturer wanted to pay duty on his product at full tariff rate by foregoing the benefit of exemption, it was open to him to opt out of the Exemption Scheme under Para 5 of Notification No. 1/93-C.E. as amended by Notification No. 59/94-C.E., dated 1-3-1994. None of the present respondents opted out of the Exemption Scheme at any point of time and, therefore, the Notification No. 1/93-C.E. was applicable to them right from the date on which their product (cotton yarn) came to be specified for the purpose of the exemption. That date was 25-4-94 and, therefore, the condition pertaining to "first clearances" also operated with effect from that date. The DR, in this connection, relied on the Board's Circular No. 2/91-CX. 3, dated 4-1-91 as also on the judgment of the M.P. High Court in B.K. Rubber Industries (P) Ltd. v. Union of India--1993 (68) E.L.T. 575 (M.P.). He submitted that the Notification No. 1/93-C.E. did not envisage exercise of option by small-scale manufacturers to work thereunder. On the other hand, the option was given to them to forego the benefit of exemption. In the instant case, therefore, whether or when the respondents might have filed classification lists opting to operate under the Exemption Scheme was inconsequential. The Exemption Scheme automatically operated in respect of cotton yarn w.e.f. 25-4-94. Therefore, all the duty-paid clearances of cotton yarn effected by the respondents from 25-4-1994 would form part of the first clearances for the purpose of computation of the aggregate value limit of Rs. 30 lacs for exemption. Ld. DR also cited certain decisions of the Supreme Court and this Tribunal to establish that any exemption notification, unless therein provided to the contrary, would take effect from the date of publication of the notification in the Official Gazette.
7. Ld. Consultant, Shri V. Bethanasamy submitted that his clients were not aware of promulgation of the Notification No. 90/94-C.E. and, therefore, had continued to pay duty of excise on cotton yarn at tariff rate. On coming to know about the notification, they filed classification lists opting to work under the Exemption Scheme of Notification No. 1/93-C.E. (as amended) and started clearing their product without payment of duty by availing the exemption. Ld. Consultant argued that it was only from the date on which they opted to work under the scheme that the conditions of the notification became applicable to them and, therefore, the clearances of cotton yarn prior to the date of filing classification list could not be taken into account for computing the aggregate value of clearances of Rs. 30 lacs for exemption. Only those clearances which were made without payment of duty from the date of filing classification list would be reckoned in chronological order to arrive at the limit of aggregate clearance value of Rs. 30 lacs. The Consultant relied on the reasoning spelt out in the cases of Watts Electronics (supra), Sri Kumaran Spinners (supra), etc.
8. We have carefully examined the rival arguments. The essential facts of the case have already been stated by us and we need not reiterate them. We shall, however, extract the relevant part of Notification No. 1/93-C.E. hereunder :-
"In exercise of the powers conferred by Sub-section (1) of Section 5A of the Central Excises and Salt Act, 1944 (1 of 1944) (hereinafter referred to as the said Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the excisable goods of the description specified in the Annexure below and falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), (hereinafter referred to as the "specified goods"), and cleared for home consumption on or after the 1st day of April in any financial year, by a manufacturer from, -
(1) a factory, which is an undertaking registered with the Director of Industries in any State or the Development Commissioner (Small-Scale Industries) as a small-scale industry under the provisions of the Industries (Development and Regulation) Act, 1951 (65 of 1951),-
(a) in the case of first clearances of the specified goods up to an aggregate value not exceeding rupees thirty lakhs -
(i) in a case where a manufacturer avails of the credit of the duty paid on inputs used in the manufacture of the specified goods cleared for home consumption under Rule 57A of the Central Excise Rules, 1944 (hereinafter referred to as the said Rules), from so much of the duty of excise leviable thereon which is specified in the said Schedule [read with any relevant notification issued under Sub-rule (1) of Rule 8 of the said Rules or Sub-section (1) of Section 5A of the said Act, and in force for the time being] as is equivalent to an amount calculated at the rate of 10 per cent ad valorem;
(ii) in any other case from the whole of the duty of excise leviable thereon" (emphasis supplied).
Para (5) of the notification reads as under :-
"Notwithstanding the exemption contained in paragraph 1 of this notification, a manufacturer shall have an option for not availing of the benefit of the exemption contained in said paragraph and to pay duty of excise at the rate applicable to the specified goods but for the exemption contained in the said paragraph 1, subject to the condition that such manufacturer shall pay duty at the rate applicable but for aforesaid exemption on all subsequent clearances. of specified goods made after availing such option, in a financial year in which such date of option falls."
Notification No. 90/94-CE., dated 25-4-1994 added cotton yarn also to the list of excisable goods in the Annexure to Notification 1/93-C.E. No dispute survives as to whether the exemption provided under Notification No. 1/93-CE. was available to the respondents in respect of cotton yarn for any period prior to 25-4-1994 inasmuch as the Revenue has fairly conceded that Notification No. 1/93-C.E. did not apply to cotton yarn prior to 25-4-94. The legal position so conceded by the Revenue is in accordance with what was correctly held by two co-ordinate Benches of this Tribunal in CCE, Coimbatore v. Sellammal Spinners - 1998 (104) E.L.T. 685 (Tribunal) and CCE, Surat-II v. Shree Radhey Textiles - 2002 (143) E.L.T. 91 (Tribunal) and is also supported by the Hon'ble Supreme Court's ruling in Pankaj Jain Agencies v. Union of India - 1994 (72) E.L.T. 805 (S.C.) as followed in I.T.C. Ltd. v. CCE, Bombay - 1996 (86) E.L.T. 477 (S.C.).
9. The moot question to be settled by this Bench is whether full effect should be given to the scheme of exemption under Notification No. 1/93-C.E. (as amended) in respect of cotton yarn from 25-4-94 or from the dates on which the SSI units actually started availing the benefit of exemption by clearing the goods without payment of duty. If full effect is given to the scheme of exemption in respect of cotton yarn from 25-4-94, the date on which cotton yarn became "specified goods", then, for the purpose of computing the aggregate value of clearances of Rs. 30 lacs for exemption from payment of duty, clearances of the goods right from 25-4-1994 should be taken into account. The Apex Court's decisions cited above are relevant to this context as well. In Pankaj Jain Agencies (supra), one of the questions considered by their lordships was whether an Exemption Notification under the Customs Act, published in the Official Gazette on 13-2-1986 could be considered to have become operative and enforceable against the importer in Bombay only from the date on which the notification was made available in Bombay. The court ruled that the notification became operative and enforceable on the very date of its publication in the Gazette. In the instant case, the benefit of SSI exemption under Notification No. 1/93-C.E. was extended to Cotton Yarn by the Central Government under amending Notification No. 90/94-C.E. published in the Gazette on 25-4-1994. The provisions of Notification No. 1/93-C.E. became operative and enforceable from 25-4-1994 in respect of cotton yarn. Whether the respondents came across the amending notification at a later stage is immaterial and inconsequential. As the substantive scheme of exemption provided in paragraph l(a) of Notification No. 1/93-C.E., conjunctively read with the provisions contained in Para 5 thereof, became operative and enforceable from 25-4-1994, the respondents were liable to work from that date under the scheme of exemption as long as they did not want to opt out of it under the said Para 5 and had no option to pay duty on their own volition during such period. The CBEC has clarified this position correctly in its Circular dated 4-1-91. Therefore, full effect has to be given to the provisions of Notification No. 1/93-C.E. in respect of cotton yarn manufactured and cleared by the respondents from 25-4-1994 and, consequently, the first clearances from that date aggregating to the value of Rs. 30 lacs will get the benefit of exemption under Para (1)(a) of the notification. Whether any part of such clearances was made on payment of duty cannot alter the position inasmuch as the notification in its terms did not provide for excluding any such duty-paid clearance from computation of the above aggregate value as also any payment of duty on exempted goods has no legal sanction. For this view, we draw support from the Tribunal's Larger Bench decision in Ramakrishna Engg. Works v. CCE - 1996 (83) E.L.T. 346 which relied on the Madhya Pradesh High Court's judgment in B.K. Rubber Industries (P) Ltd. v. Union of India - 1993 (68) E.L.T. 575 (M.P.). The contrary view taken in the cases of Watts Electronics, Sri Kumaran Spinners and S.M. Textiles cannot be accepted.
10. In the case of B.K. Rubber Industries (supra), a Division Bench of the High Court examined the scope of the expression "first clearances" under Notification No. 65/81-C.E., dated 25-3-81, which had fixed a concessional rate of excise duty for tyres of certain types of motor vehicles subject to the condition that the aggregate value of first clearances of the goods for home consumption at the concessional rate of duty shall not exceed Rs. 50 lacs in any financial year, That notification had specifically declared that it shall come into force on the first day of April, 1981. The limit of Rs. 50 lacs was enhanced, later on, to Rs. 75 lacs by an amendment of the notification. The High Court held that the intention of the Government was, clearly, to exempt first clearances i.e. the clearances in the chronological order up to the aggregate value of Rs. 75 lacs. The intention was not to grant total concession on the goods cleared at any time during the financial year. The exemption was to be given on first clearances i.e. in the serial order of clearances. As soon as the aggregate clearances attained the value of Rs. 75 lacs, the concession would automatically stop. The Court further observed that any simultaneous clearance of the goods at full rate of duty would militate against the plain language of the notification. In the case of Ramakrishna Engg. Works (supra), this Tribunal's Larger Bench was dealing with Notification No. 175/86-C.E., dated 1-3-86, the "first clearance" clause of which was similar to that of Notification No. 1/93-C.E. In the context of examining how to compute the aggregate value of clearances of Rs. 30 lacs for total exemption from payment of duty, the Larger Bench followed the High Court's ruling and held that if, within the first clearances of Rs. 30 lacs, any goods were cleared on payment of duty, the same could not be excluded from reckoning. We are in full agreement with this view and accordingly hold that the duty-paid clearances made by the respondents from 25-4-94 would also form part of the first clearances in chronological order from that date to aggregate to the value limit of Rs. 30 lacs for exemption.
11. We have noted that, prior to the above decision of the Larger Bench, a 2-Member Bench of this Tribunal followed the ruling of the M.P. High Court for the purpose of computing the aggregate value of first clearances of Rs. 15 lacs for total exemption from payment of duty under Notification No. 175/86-C.E. ibid, and held to the effect that duty-paid clearances of specified goods from the start of the financial year should also be included in the computation vide Global Remedies (supra). We have also considered the case of Central Pulp Mills cited by the SDR. In that case, the Bench, relying on B.K. Rubber Industries (supra) and Ramakrishna Engg. Works (supra), rightly held that the duty-paid clearances made by the assessee from 1-4-1989 to 3-10-89 were to be included in the "first clearances" aggregating to the value limit for concessional rate of duty under Notification No. 138/86-C.E., dated 1-3-1986. The assessee's claim that the "first clearances" had to be reckoned only from 3-10-1989, the date on which they opted for the benefit of the notification, was rightly rejected. These decisions have been rendered on the basis of a correct interpretation of the notifications. But the case of Garlon Poly-fab Industries (supra) presents a different picture. In that case, another regular Bench of this Tribunal was considering issues touching Notification 90/94-C.E. itself. The goods in question was filament yarn which was also specified under Notification 90/04-C.E., dated 25-4-1994 for the exemption under Notification 1/93-C.E. The Bench held that the exemption would be applicable only from the date of Notification No. 90/94-CE., which view is quite correct as we have already held earlier in this order. The Bench further held that the "first clearances" would commence from 1-4-1994 and that the assessee had an option to avail exemption either from 25-4-1994 or from a later date, which view cannot be endorsed for reasons; already recorded.
12. A small-scale manufacturer of cotton yarn automatically came within the realm of operation of Notification No. 1/93-C.E. from 25-4-1994, the date on which cotton yarn was specified for the purpose by the Central Government under Notification No. 90/94-CE, None of the respondents opted out of the operation of the notification at any time thereafter. Therefore, the clearances of cotton yarn from 25-4-94 in chronological order, whether made on payment of duty or not up to the aggregate value of Rs. 30 lacs would constitute the first clearances in the financial year. The aggregate value has to be reworked and any demand of duty requantified accordingly. We have answered the referred issue in favour of the Revenue. Therefore, the order of the lower appellate authority allowing the respondents to operate under Notification No, 1/93-C.E. only w.e.f. the dates on which they had actually started availing the exemption under the notification by clearing cotton yarn without payment of duty cannot be sustained. We set aside that order.
13. In the light of the view we have taken, the amounts paid by the respondents as duty of excise on cotton yarn cleared from 25-4-94 till they started availing the benefit of Notification No. 1/93-C.E. (as amended) cannot be recognized as duty of excise and have to be treated as bare deposits of money lying with the Government as rightly clarified in the Board's circular dated 4-1-91. The respondents neither owed nor forfeited the money to the Government. The amounts are liable to be adjusted against the duty of excise held payable by the respondents under the adjudication orders. We direct the adjudicating authorities concerned to make such adjustments and modify their orders accordingly.
14. The appeals are disposed of as above. All the remaining appeals mentioned in Para (6) of the referral order shall be posted before the regular Bench for disposal in similar manner.