Custom, Excise & Service Tax Tribunal
M/S. Periashola Tea Factory (P) Ltd vs Cce, Salem on 10 December, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
ST/1243/2004
(Arising out of Order-in-Appeal No. 190/2004-CE (SLM) dated 31.3.2004 passed by the Commissioner of Central Excise (Appeals) Salem).
M/s. Periashola Tea Factory (P) Ltd. : Appellant
Vs.
CCE, Salem : Respondent
Appearance Shri Mohammed Zakir, Adv., for the Appellant Shri B.Balamurugan, AC (AR) for the Respondent CORAM Honble Shri R. Periasami, Technical Member Honble Shri P. K. Choudhary, Judicial Member Date of Hearing: 11.09.2015 Date of Pronouncement: 10.12.2015 FINAL ORDER No. 41665 / 2015 Per P. K. Choudhary The appellant filed this appeal against the order of the Commissioner (Appeals) dated 31.03.2004, confirming duty of Rs.5,08,452/- on the clearances of tea during the period from 01.04.2000 to 31.03.2001.
2. The brief facts of the case are that the appellants are the manufacturer of tea falling under chapter sub-heading No. 0902.00 of CETA, 1985 and clearing the impugned goods on payment of central excise duty. The tea manufactured and cleared was exempted vide Notification No. 4/99-CE dated 26.11.99, w.e.f. 10.12.1999 subject to the conditions specified therein. One of the conditions was that the assessees factory should have worked for atleast six months during the preceding financial year. The assessee had availed the benefit of exemption from duty for the financial year 2000-2001 after filing the undertaking in terms of the said notification vide their letter dated 27.03.2000, which was acknowledged by the Assistant Commissioner of Central Excise, Coonoor Division on 31.03.2000. In the said declaration the appellant had declared that the factory had been working for at least six months during the preceding year. Based on the said declaration in the undertaking, the assessee had availed the concession as provided under the said Notification No. 41/99 CE dated 26.11.99, and cleared 2,54,226/- kgs of tea without payment of basic excise duty at the rate of Rs.2/- per Kg. amounting to Rs.5,08,452/- during the period from 01.04.2000 to 31.03.2001.
Verification of accounts by the department revealed that they had worked from April, 1999 to June, 1999 and four days in the month of July, 1999 and undertook trial run on 24.03.2000, shows that they have not worked for six months. Hence, SCN was issued proposing demand of duty of Rs. 5,08,452/- along with interest on the clearance of tea and imposition of penalty under Section 11AC of CEA, 1944. On adjudication, the adjudication authority dropped the proceedings proposed in the show cause notice. Aggrieved by this order, the Revenue was in appeal before the Commissioner (Appeals). The Commissioner (Appeals) allowed the departments appeal and confirmed the duty demand of Rs. 5,08,452/- on the clearances of tea manufactured by the appellant but dropped the penal proceedings against M/s. Periashola Tea Factory (P) Ltd. Hence the present appeal.
3. The Ld.. Counsel appearing on behalf of the assessee Mr. Mohammed Zakir, Advocate submits that though there was no production activity in the factory from 05.07.1999 to 21.03.2000, the factory was in fact working for the entire financial year from 01.04.1999 to 31.03.2000. The records maintained in the factory, which were produced before the adjudicating authority shows that works were undertaken under the head manufacture and wages were paid to the workers, GPF was deducted and electricity bills were paid. The contention of the department in the SCN that the factory was not worked for six months is not correct. He also submits that the word manufacture has not been mentioned in the said exemption notification. He further submits that the repair and maintenance works are also incidental to manufacture in respect of the factory. The appellants factory was in fact functional and working during the entire financial year 1999-2000 and the fact is verifiable from the records maintained by them such as raw material purchase register, wages register, electricity payment details etc., which were duly produced before the adjudicating authority and he considered the same while passing the order. Hence, the findings of the Commissioner (Appeals) that the appellant factory had not been working during the financial year 1999-2000, so far as to qualify themselves for availing the benefit of exemption from duty in terms of the aforesaid notification is not correct. He further submits that the tea factory is a seasonal factory, which undertakes the process for period not exceeding seven months in a year and the intention of the legislature has been to promote not only the interest of the small growers of tea but also to help tea factories which are not in the co-operative sectors and have been in the business of manufacturing tea. During the seasonal period, the factories were working and in the non-seasonal period, they undertake the repair and maintenance works so as to keep the machineries under working condition for the next season. He relied on the decision of the Honble Supreme Court in the case of CCE, New Delhi Vs. M/s. Hari Chand Shri Gopal - 2010-TIOL-95-SC-CX-CB.
4. The Ld. AR Shri B. Balamurugan, AC, appearing on behalf of the Revenue reiterated the findings of the Commissioner (Appeals) and submits that during the course of verification it was observed by the officers that the assessee had not fulfilled the condition (b) (ii) at Sl.No. IV of the said notification in as much as they had not worked for atleast six months during the preceding year ie. 1999-2000 so as to qualify themselves for the benefit of the exemption from duty in terms of the said notification. From the RGI Register maintained by the assessee, it was observed that they had worked during the months of April, May and June, 1999 and for the first four days in July and had taken a trial run on 24.03.2000. From the green leaf weighment register, it was observed that they had purchased a quantity of 5,17,227 kgs of green leaf during 5.7.99 to 31.3.2000 and out of this they had sold 5,13,862 kgs of green leaf outside, burnt 1467 kgs and used 1898 kgs of green leaf for the one day trial run on 24.3.2000. The argument of the appellant assessee that maintenance and repair works are part of the manufacturing activity cannot be accepted in view of the definition of manufacture under Section 2(f) of the CEA, 1944, and the order of the Commissioner (Appeals) should be upheld.
5. We have heard the rival submissions. On perusal of the records, we find that the adjudicating authority has discussed the issue in detail and the relevant portion of the said order is reproduced for better appreciation of the case.
14. I am convinced about their bonafide as they had promptly intimated about the commencement and completion of repair work. Another contention of the assessee was that the notification did not contain the expression manufacture and it only stipulated that the factory should have worked for atleast six months during the previous year. I am convinced that this is a valid argument. Maintenance and repair work are directly having relevance for the activities of the factory without which the factory cannot function smoothly. The argument that the exemption under Notification No. 41/99-CE dated 26.11.99 was permitted by the Department itself despite knowing the fact of stoppage of manufacturing activity for the period from 5.7.99 to 21.3.2000 cannot be swept under the carpet. A factory can be said to be non-working, if only the same is under lock out or on strike as there would be virtually no work under those circumstances.
15.1 The assessee had relied upon the decision of the Honble High Court of Madras pronounced in the case of R. Vijayakumar Vs. UOI reported in 2000 (122) ELT 670 (Mad.), I find that this decision is not in support of the assessee as the same had dismissed the appeals filed by the petitioner seeking to declare that the conditions stipulated in Sl.No. III (b) (ii) and the portion of the explanation in the preceding financial year of Notification No. 41/99-CE dated 26.11.99 as illegal and ultravires Article 14 read with Article 39 (C) of the Constitution of India.
15.2 However, I find that the evidences/documents placed before me are supportive of the contention of the assessee and due to the reasons already explained above, I am inclined to hold that the factory was working throughout the year satisfying the condition (b) (ii) at Sl.No. IV of Notification No. 41/99-CE dated 26.11.99. I agree with the assessees argument that there is no condition that the factory was manufacturing for minimum of six months during the preceding year. The requirement is that it should be working for atleast six months during the preceding year. This condition has been fulfilled. Having met all the requirement as stipulated in the said Notification, I find that they are eligible to avail the exemption from payment of duty during the year 2000-2001 a envisaged in the said notification. The relevant Notification No. 41/99-CE dated 26.11.99 is also reproduced as under:
Tea Exemption In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods of the description specified in column (2) of the Table below falling under sub-heading No. 0902.00 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) from the whole of the duty of excise leviable thereon under section 3 of the Central Excise Act, 1944 (1 of 1944), subject to the conditions specified in the corresponding entry in column (3) of the said Table.
TABLE Sl. No. Description of Goods Condition III.
Tea cleared by a bought leaf factory during the period on and from 10th December, 1999 to 31st March, 2000.
(a) The benefit of exemption from duty will commence from the date of the undertaking with the Assistant Commissioner/Deputy Commissioner of Central Excise as specified in condition (b) :-
(b) The manufacturer files an undertaking that :-
(i) not less than two-thirds of the green leaf used by the factory during the period on and from 10th December, 1999 to 31st March, 2000 shall be purchased from growers, each having a holding not exceeding ten hectares under tea cultivation.
(ii) The factory has been working for at least six months during 1998-99.
(c) In the first week of April, 2000, the manufacturer shall submit a statement of accounts, in a format to be prescribed by the jurisdictional Commissioner of Central Excise, as proof of having fulfilled the undertaking.
(d) In the event of his failure to satisfy the undertaking, the manufacturer shall be liable to pay duty of excise specified in the First Schedule to the said Central Excise Tariff Act for the period referred to in condition (b).
IV.
Tea cleared by a bought leaf factory during any financial year subsequent to 1999-2000.
(a) The benefit of exemption from duty will commence from the date of the undertaking with the Assistant Commissioner/Deputy Commissioner of Central Excise as specified in condition (b) :
(b) The manufacturer files an undertaking that :
(i) not less than two-thirds of the green leaf used by the factory, during the period from the date of the aforesaid undertaking till the end of the financial year, shall be purchased from growers, each having holding not exceeding ten hectares under tea cultivation.
(ii) The factory has been working for at least six months during the year preceding the year in which the undertaking referred to in condition (b) is filed.
(c) In the first week of April of each succeeding financial year the manufacturer shall submit a statement of accounts, in a format to be prescribed by the jurisdictional Commissioner of Central Excise, as proof of having fulfilled the undertaking.
(d) In the event of his failure to satisfy the undertaking, the manufacturer shall be liable to pay duty of excise specified in the First Schedule to the said Central Excise Tariff Act for the period referred to in condition (b).
2.?This notification shall come into effect from the 10th December, 1999.
Explanation. - For the purposes of this notification, bought leaf factory means a factory which purchases not less than two-thirds of the green leaf processed by it in the preceding financial year from any grower who has a holding not exceeding ten hectares of land under cultivation of tea.
6. The Honble Supreme Court in the case of M/s. Hari Chand Shri Gopal (supra), wherein at para -22 discussed the interpretation of the taxing statute which is reproduced as under:-
Exemption Clause - Strict Construction
22.?The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan Indian Ltd. (supra), this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave - (1996) 2 SCR 253, held that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption. From the above notification we are of the considered view that the adjudicating authority had correctly held that the appellant factory was working through out the year and complied the conditions of the notification and eligible for the benefit of the notification. It is not the case of the department that the appellants not processed green leaves for small growers. The benefit of exemption is intended to promote small growers having less than 10 hectares. The appellants used not less than two thirds of green leaves which were procured from small growers. The exemption notification should be read and interpreted in right perspective. By respectfully following the Honble Supreme Court decision above, we hold that the appellants are eligible for exemption under Notification No. 4/1999. Accordingly, we uphold the adjudication order and the impugned order passed by the LAA is set aside. The appeal is allowed.
(Pronounced in open court on 10.12.2015) (P.K. CHOUDHARY) (R. PERIASAMI) Judicial Member Tehnical Member BB 1