Customs, Excise and Gold Tribunal - Delhi
Ravindra Steel Limited vs Collector Of Central Excise on 24 January, 1983
Equivalent citations: 1983ECR294D(TRI.-DELHI), 1983(12)ELT413(TRI-DEL)
ORDER
1. This is a revision application to the Government of India which, under Section 35 P(2) of the Central Excises & Salt Act, 1944, is to be proceeded with as if it were an appeal filed before the Tribunal.
2. The facts of the case, in brief, are that the Superintendent of Central Excise, MOR III, Nagpur, issued a Show Cause Notice on 21-6-1977 to the appellants (who were manufacturers of steel ingots falling under Item No. 26 of the First Schedule to the Central Excises & Salt Act, 1944) alleging that the appellants should have paid excise duty on 107.986 MT of steel melting scrap cleared by them during May, 1976; June, 1976; September, 1976 and February, 1977 at the rate of Rs. 100/-basic excise duty plus Rs. 100/- auxiliary excise duty per M.T. (Metric Tonne) instead of at Rs. 25/- basic excise duty plus Rs. 25/- auxiliary excise duty per M.T. The Show Cause Notice went on to state that Central Excise Notification No. 237/75 dated 9th December, 1975 under which the concessional rates of duty referred to earlier were fixed was applicable to "steel ingots" falling under Item 26 of the Central Excise Tariff Schedule and not to "steel melting scrap", although these latter goods also fell under the said tariff item. On these grounds, the notice sought to recover an amount of Rs. 16,206.50 as the differential amount of duty involved on the said goods. After considering the appellant's submissions made in writing and orally, the Assistant Collector of Central Excise, Nagpur made an order to the effect that the appellants should pay a sum of Rs. 16,182.90 as the differential duty involved on the steel melting scrap cleared by them on payment of the lower rates of duty held as not applicable to them. Against this order the appellants went in appeal to the Appellate Collector of Central Excise, Bombay who held that Central Excise Notification No. 237/75 dated 9th December, 1975 did not apply to "steel melting scrap". He also did not accept the plea of the appellants that the exemption contained in Central Excise Notification No. 54/64 dated 1-31964 was applicable in the instant case. He also rejected the appellant's contention that part of the duty demanded was hit by the time limit prescribed in Rule 10 of the Central Excise Rules, 1944. In the result, he upheld the Assistant Collector's orders and rejected the appeal. It is against this order that the appellants filed a revision application before the Central Government which, as stated earlier, has to be disposed of by the Tribunal as if it were an appeal filed before it.
3. The learned Counsel for the appellants submitted that item No. 26 of the Central Excise Tariff Schedule reads as follows:-
"Steel ingots including steel melting scrap", and, therefore, for the purpose of the Central Excise Tariff Item No. 26 and exemption notifications relating thereto, the expression "steel ingots" should be understood and interpreted in the sense it was used and described in the tariff entry. In other words, wherever the expression used was "steel ingots", it should be construed as including within its ambit "steel melting scrap". It would not be correct in interpreting Central Excise exemption notifications relating to Item 26 of the Excise Tariff Schedule to exclude steel melting scrap from the scope of the expression "steel ingots" since the tariff entry itself gave to the expression "steel ingots" the enlarged meaning of including steel melting scrap. The Legislature also had sought to tax both steel ingots and steel melting scrap at the same rate of duty. On these grounds, the Counsel argued that any interpretation of Central Excise Notification No. 237/75 dated 9th December, 1975 in such a manner as to exclude steel melting scrap from the scope of the notification would not be a correct interpretation inasmuch as it would be inconsistent with the tariff entry. Besides, scrap was a waste product inevitably arising in the course of manufacture of steel ingots and it would be invidious and it could not have been the intention of the Legislature to tax the waste product at a rate of duty higher than that applicable to steel ingots. In this context, he referred to the Order-in-Revision No. 780/82 passed by the Government of India in the case of Century Iron & Steel Limited, wherein Government had held that since Item 26 of the Central Excise Tariff included both steel ingots and steel melting scrap it would not be reasonable to deny the exemption under Notification No. 237/75 to steel melting scrap (including runners and risers) generated along with the ingots in the process of their manufacture. In this context, the Counsel further referred to Sub-clause (b) of the proviso to Notification No. 237/75 and urged that where the express intention was to refer to steel melting scrap separately from steel ingots it was explicitly so referred to. Such was not the case with the operative part of the Notification in the operating para exempted steel ingots falling under Item 26 of the Central Excise Tariff Schedule (C.E.T.) without any qualifying words. Therefore the exemption conferred on steel ingots would be available to melting scrap also.
4. The learned Counsel for the Appellants further submitted that if it was held that Notification No. 237/75 did not apply in the instant case, the steel melting scrap in question was entitled to the exemption contained in Central Excise Notification No. 54/64 dated 1-3-1964 on the footing that the said Notification exempted scrap obtained in the manufacture of certain specified products including steel ingots under certain conditions.
5. Turning to the question of time-bar prescribed in Rule 10 of the Central Excises Rules, 1944, the Counsel submitted that the Show Cause Notice issued by the Superintendent of Central Excise on 21-6-1977 was clearly beyond the period of 3 months from the date of payment of duty with respect to the goods cleared on payment of duty during the months May, 1976 to February, 1977. To a question from the Bench whether, at the material time, Rule 10 read with Rule 173 J of the Central Excise Rules had not provided for a time limit of 12 months from the date of payment of duty in the case of manufacturers working under what is known as the "Self Removal Procedure", the Counsel said that he was not sure whether, at the material time, Rule 173-J was in force. However, he fairly conceded that if the said rule was in force, the Appellants had no case on the ground of the demand being hit by time-bar.
6. Shri N.V. Raghavan Iyer, appearing for the Respondent, submitted that in construing expressions used in exemption notifications, they should be given their plain meaning having regard to the words used. Exemption notifications had to be specific and there was no room for vagueness or ambiguity as to their scope. In this connection, he relied on 2 judgments-
(i) 1977-AP Weekly Report-PP. 381-384 ; and
(ii) Bombay High Court judgment in Ravji Industrial Corporation v. Union of India and Ors. (1981 ELT 734 Bom.).
In the instant case, notification No. 237/75 specifically sought to exempt "steel ingots" falling under Item 26 of the CET and manufactured from specified , materials with the aid of electric furnace from basic duty of excise leviable thereon in excess of Rs. 25/-per M.T. There was no warrant to read into the expression "Steel ingots" employed therein the words "including steel melting scrap". He submitted that whereas the Parliament had sought to levy Central Excise duty on both steel ingots and steel melting scrap at Rs. 100/-per M.T. Government, in exercise of its powers under the Central Excises and Salt Act read with the Central Excise Rules, and having regard to all aspects of the matter, sought to exempt only steel ingots from excise duty in excess of Rs. 25/- per M.T. Though one might argue that it was anomalous to tax the waste product at a higher rate than the primary product, the express words of the notification did not permit the construction sought to be put on it by the appellants. Even if one were to assume that the non-mention of "steel melting scrap" along with steel ingots in the notification was an omission, there would be no question of supplying the omission by a strained construction not warranted by the express words used in the notification. Shri Iyer was not in a position to explain the background leading to the Government of India's Order-in-Revision referred to by the party in support of this argument.
7. On the question of the time-limit prescribed in the Central Excise Rules for raising demands for duties short-levied, Shri Iyer submitted that, at the material time, the time-limit was 12 months in terms of Rule 10 read with Rule 173-J of the Central Excise Rules. The demand issued by the lower authorities was, therefore, within the time-limit.
8. The Tribunal has carefully considered the submissions of both the parties. The crux of the matter in the present appeal is the interpretation of Central Excise Notification No. 237/75 dated 9-12-1975 in order to ascertain its true scope. For a proper understanding of the matter it is considered necessary to set out the notification in extenso :-
"In exercise of the powers conferred by Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts steel ingots falling under item No. 26 of the First Schedule to the Central Excises & Salt Act, 1944 (1 of 1944) and manufactured with the aid of electric furnace from so much of the duty of excise leviable thereon, as is in excess of twenty five rupees per metric tonne :
Provided that such steel ingots are manufactured from any of the following materials namely :
(a) old iron or steel melting scrap ;
(b) a combination of the material referred to at (a) above with fresh unused steel melting scrap on which the appropriate duty of excise has been paid ; and
(c) iron in any crude form falling under Item No. 25 of the said First Schedule on which the appropriate duty of excise has been paid in combination with the materials referred to at (a) and (b) above.
The exemption granted by this Notification shall remain in force upto and inclusive of the 28th day of February, 1977."
It may be seen that the notification, on the face of it, mentions only steel ingots falling under Item 26 of the CET. What the learned Counsel for the Appellants wants the Tribunal to do is to read the words "including steel melting scrap" after the expression "steel ingots" appearing in the notification. The ground adduced in support of this plea is that the tariff entry in item 26 of the Central Excise Tariff Schedule reads "Steel ingots including Steel melting scrap". There Is no dispute on the question whether steel melting scrap is synonymous with steel ingots. It is common ground that the two products are not the same and are known to the trade and commerce by distinct and separate nomenclatures. The tariff entry of item 26 has enlarged the scope of the expression "steel ingots" for the purpose of levy of excise duty under the said item by assigning to the said expression an extended meaning so as to include steel melting scrap. But for this extended meaning, there would be no scope to argue that steel ingots would include steel melting scrap. The citation referred to by Shri Iyer, namely, Sikakellu Subbarao & Co. v. Andhra Pradesh (77) I AN. W.R., 381-384, shows that the word "includes" is used in order to enlarge the meaning of the words or pharases occurring in the body of statutes when it is so used, i.e., those words and phrases must be construed as comprehending not only such things as they signify according to their nature and import, but also those things which the interpretation clause declares that they shall include. In this connection, it would be relevant to note that Rule 8 of the Central Excise Rules, 1944 empowers the Central Government to exempt by notification in the official gazette, subject to such conditions as may be specified in the notification, any excisable goods from the whole or any part of the duty leviable on such goods. It is clear that the exemption notification must set out precisely the excisable goods sought to be exempted. There can be no question of any vagueness or ambiguity about the scope of the notification. Notification No. 237/75, which is relevant to the present case, specifies only steel ingots and does not specify steel melting scrap. Though the tariff entry relating to item No. 26 of CET includes "steel melting scrap" along with steel ingots, there appears to be no warrant to read such an extended meaning into the expression "steel ingots" employed in the said notification. This gains support from the fact that where Government sought to exempt steel melting scrap they have done so by specifying steel melting scrap in the relevant notification. One such notification is No. 54/64 dated 1-3-1964 which has been referred to by the Counsel for the Appellants. The Counsel for the Appellants has relied upon the Government of India's Order-in-Revisibn in the case of Century Iron & Steel Tubes. In the said order Government has applied the ratio in its earlier order dated 25-2-1981 in anothor case wherein it had held that when ingots were exempted under Notification No. 237/75 it would not be reasonable to deny the exemption to the "steel melting scrap" generated along with the ingots in the process of their manufacture from old iron and steel melting scrap, especially when item 26 of the C.E.T. covers both "ingots" and "steel melting scrap". Unfortunately, neither the Counsel for the Appellants nor the Departmental Representative could explain the background leading to this Order-in-Revision. Be that as it may, we are unable to accept the Appellant's interpretation of the subject Notification for the reasons already set out. We are, therefore, of the view that Notification 237/75 did not cover within its scope steel melting scrap.
9. The Counsel for the Appellants made an alternative submission that in the event of the Appellant's claim under Notification No. 237/75 not being upheld, the steel melting scrap, the subject matter of the appeal, would fall within the exemption contained in Notification No. 54/64 dated 1-3-1964. For proper appreciation of this Notification, it is set out below : -
"In exercise of the powers conferred by Sub-rule (1) of Rule #0. of the Central Excise Rules, 1944, the Central Government hereby exempts scrap iron and steel melting scrap falling under the Item Nos. 25 and 26 respectively and obtained in the manufacture of iron and steel products from iron in any crude form, or steel ingots, or iron or steel products, which have already paid the appropriate amount of duty of excise leviable under Item Nos. 25, 26, 26AA of the said Schedule or the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), as the case may be, from the payment of the whole of the excise duty leviable thereon, provided that no set of duty has already been availed of".
The Counsel sought to interpret this Notification in such a way as to yield the result that steel melting scrap obtained in the (a) manufacture of iron and steel products from iron in any crude form or (b) manufacture of steel ingots or (c) manufacture of iron or steel products which had already paid the appropriate amount of duty of excise leviable under the Central Excise Tariff Schedule or, as the case may be, the additional duty of Customs leviable thereon under the Customs Tariff Act, was exempted from the whole of the excise duty leviable thereon subject to the condition that no set off of duty had already been availed of. We find it difficult to uphold this contention. The plain reading of the Notification can lead only to the conclusion that steel melting scrap obtained in the manufacture of iron and steel products from (i) iron in any crude form, or, (ii) steel ingots, or (iii) iron or steel products-
which had already paid the appropriate excise duty or additional customs duty was exempted from the payment of excise duty leviable thereon subject to the condition that no set off of duty had already been availed of. This Notification applies to steel melting scrap obtained in the manufacture of iron and steel products from any of the 3 specified duty-paid raw materials. Any other construction would lead to absurd results. For example, steel melting scrap obtained in the manufacture of steel ingots which have already paid the appropriate duty would be exempt from excise duty-such would be the result if the construction canvassed by the Counsel for the Appellants were to be accepted. Further support for the view taken by us may be had from the portion of the Notification which talks of the appropriate amount of duty leviable thereon having been already paid under Item Nos. 25, 26 or 26AA of the Central Excise Tariff Schedule. These items refer respectively to iron in any crude form, steel ingots and iron or steel products. It follows, therefore, that the meaning of the Notification is very clear and that is that scrap iron and steel melting scrap obtained in the manufacture of iron and steel products from specified duty paid materials, namely, iron in any crude form or steel ingots or iron or steel products alone were exempted from payment of excise duty. In the present case, steel melting scrap had arisen in the course of manufacture of steel ingots and not in the manufacture of iron and steel products. We have, therefore, no hesitation in rejecting this contention of the Appellants.
10. In so far as the plea taken by the Appellants regarding the notice of demand being hit by the time limit prescribed by Rule 10 of the Central Excise Rules is concerned, it is observed that, at the material time, the time-limit prescribed for raising demands in respect of short levy was 12 months from the date of payment of duty in terms of Rule 10 of the Central Excise Rules read with Rule 173 J in the case of manufacturers working under what was known as the "Self Removal Procedure" set out in Chapter VII-A of the Central Excise Rules. The Notice of demand in this case was issued by the Superintendent of Central Excise, Nagpur on 21-6-1977. The period to which the demand pertained was the months of May 1976, June 1976, September 1976 and February 1977. Evidently, the demand issued on 21-6-1977 could cover within the prescribed time limit only consignments of Steel melting scrap cleared on payment of duty during the period of 12 months preceeding the date of the demand. Therefore, the demand in so far as it pertained to clearances of steel melting scrap on payment of duty during the month of May, 1976 and part of June, 1976, would appear to be outside the prescribed limit of 12 months. The Assistant Collector and the Appellate Collector have relied upon the fact that steel melting scrap was not at all indicated in classification list No. 114 of 28-4-1976 filed by the party as a product for clearance and have argued that this non-disclosure disentitled the party from the benefit of limitation under Rule 10 as it could not take advantage of its own wrong. They have further held that the mention of steel melting scrap in the classification list was only in relation to the raw material used for the manufacture of steel ingots and not as a product sought to be cleared from the Appellant's factory. The Show Cause Notice dated 21-6-1977 does not contain any allegation that part of the short-Jevy was caused by reason of fraud, collusion, wilful statement or superession of facts with intent to evade payment of duty. Only in such an eventuality could the question of extending the period of 12 months to a period of 5 years arise. Having regard to the facts and circumstances on record as well as the submissions of both the parties, we are of the view that in the present case the extended period of 5 years is not attracted. The demand was time-barred to the extent the period to which it related fall outside the prescribed period of 12 months. The Tribunal does not have before it the precise dates and other material necessary to come to a definite ascertainment of the extent to which the demand is hit by time-bar, we, therefore, direct that the Assistant Collector shall, within a period of 60 days from the date of communication of this order, re-adjudicate the case in the light of the observations made above and determine the exact amount of short-levy due from the appellants and pass appropriate orders.
11. The appeal is disposed of in the light of the observations made and the directions given above.
12. Before parting with the case we would like to mention that a strict legal interpretation of Notification No. 237/75 results in a situation where while steel ingots were liable to pay basic excise duty only at a concessional rate of Rs. 25/- per M.T., the scrap arising in the course of manufacture of such ingots in electric furnace units was visited with a liability to pay basic excise duty at Rs. 100/- per M.T. prima facie, it appears that the intention might not have been to bring about such a situation. If this be so, it would be for Government to consider the matter for any possible remedial action.