Customs, Excise and Gold Tribunal - Delhi
The Andhra Sugar Limited vs Collector Of Central Excise on 17 February, 1986
Equivalent citations: 1986(9)ECC31, 1986(7)ECR262(TRI.-DELHI), 1987(31)ELT573(TRI-DEL)
ORDER D.C. Mandal, Member (T)
1. This is a Revision Application, originally filed before the Central Government, which, on transfer to this Tribunal, is being treated as an appeal.
2. The point at issue to be decided by us in this appeal is whether the molasses produced by the appellants in their sugar plant prior to 19.6.1980 and used in their distillery located within the said factory after 18.6.1980 was liable to Central Excise duty under Item 15-CC of the Central Excise Tariff. Upto 18.6.1980, molasses was classified under Item of the Tariff as there was no separate Tariff Item for classification of this product. Under Notification No. 118/75-CE dated 30.4.1975, goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944, manufactured in a factory and intended for use in the factory in which they were manufactured, or in any other factory of the same manufacturer, were exempted from the whole of duty of excise leviable thereon. The appellants were availing the benefit of this exemption Notification upto 18.6.1980. With effect from 19.6.1980 a new Tariff Item 15-CC was introduced for molasses with no corresponding duty exemption. The dispute before us is in respect of the molasses which was manufactured in the factory and lying in the stock on 18.6.1980, but used in the distillery within the same Sugar factory of the appellants after 18.6.1980.
3. We heard Shri K. Narasimhan, learned Advocate for the appellants and Shri A.S. Sunder Rajan, learned J.D.R. for the respondent. The learned advocate argued that the appellants had two storage tanks for Molasses, one in the sugar unit of the facotry and the other was attached to the distillery unit within the sugar factory. The entire stock of Molasses' on 18.6.1980 was lying in the tank attached to the distillery unit. He further argued that as the said stock was manufactured by them prior to 19.6.1980, and used within the factory of manufacture, no Central Excise duty was payable by them although the molasses was used in the distillery after 18.6.1980. He relied on the following judgments in support of his arguments :-
(i) Judgment of the Division Bench of Madhya Pradesh High Court in the case of Union of India v. Kirloskar Brothers Limited, Dewas (decided on 30.7.1975 and reported in 1978-ELT-J-690),
(ii) Decision of the Customs, Excise and Gold (Control) Appellate Tribunal in the case of Collector of Central Excise, Indore v. Parmali Wallace Limited, Bhopal, (decided on 29.1.1985 and reported in 1985(6)-ETR -41, paragraphs 35 and 36) and,
(iii) Decision of the Customs, Excise and Gold (Control) Appellate Tribunal in the case of Vazir Sultan Tabacco Company Limited v. Collector of Central Excise, Hyderabad (decided on 25.3.1983 and reported in 1985-(21) ELT-757).
4. Opposing the arguments of Shri Narasimhan, the learned Departmental Representative stated that the case of Kirloskar Brothers (1978-ELT-690) stood on a different footing in as much as the goods in that case enjoyed conditional commission depending on the end use.
5. We have carefully considered the records of the case and the submissions made before us during the hearing. We find that the facts of the cases relied upon by the learned Counsel, were similar to those of the present case before us. In the case of Kirloskar Brothers, the assessee was manufacturing power driven pumps falling under Item No. 30-A of the Central Excise Tariff. By a Notification issued under Rule 6(1) of the Central Excise Rules, 1944, the Central Government exempted power driven pumps from the whole of Central Excise duty subject to the condition that the benefit of that exemption was available to those manufacturers who produced proof to the satisfaction of the Collector of Central Excise that such benefit was passed on to them, persons to whom they had sold the said power driven pumps. This exemption continued upto 16.3.1972, but with effect from 17.3.1972, Central Excise duty at the rate of 1096 ad-valorem was payable on such power driven pumps. The Hon'ble High Court of Madhya Pradesh in their judgment reported in 1978-ELT-(3)-33 decided that excise duty on power driven pumps manufactured from 1.3.1969 to 16.3.1972 (when no excise duty was payable by virtue of the exemption Notification),, but removed from the factory after 16,3.1972, was not payable by M/s., Kirloskar Brothers. It was held by the Division Bench in that judgment that the liability for tax, namely, excise duty would arise no sooner the manufacture or the production in completed and it is immaterial as to what machinery may be devised by the Central Government under the rule making powers for recovery of a tax. The point of recovery or any restriction on removal Will not be the determining factor for grant of exemption in respect of goods manufactured during duty-free period. The department filed a petition under Articles 132(1) and 133(1) of the Constitution of India before the Division Bench for a certificate of fitness for leave to appeal to Supreme Court against the aforesaid judgment. By their judgment dated 30.7.1975 (1978-ELT-690) the Division Bench dismissed this petition. Thereafter, the department filed a Special Leave Petition to the Supreme Court, which was dismissed with the follwing observations, viz., "S.L.P. dismissed on merit".
6. The learned advocate relied on paragraphs 35 and 36 of this Tribunal's decision in the case of Collector of Central Excise, Indore v. Parmali Wallace Limited, Bhopal, 1985-(6)-E.T.R.-41. In paragraph 35 of that order the Special Bench 'D' of this Tribunal enumerated the various situations which are covered by the cases cited before them, the first situation being "goods excisable but fully exempt at the time of manufacture, and excisable and not exempt at the time of removal". The case of Kirloskar Brothers fell in that category. In paragraph 36 of the order, the Bench explained the decision of the High Court and that of the Supreme Court on the Special Leave Petition. We have already discussed the same in the preceding paragraph.
7. The third decision relied upon by Shri Narasimhan, viz. Vazir Sultan Tobacco Company Limited v- Collector of Central Excise, Hyderabad (1985-(21)-E.L.T.-757) is the decision of Five Member Bench of this Tribunal. The facts of Vazir Sultan's case were that special Excise duty was imposed on cigarettes under Section 37 of the Finance Act, 1978, the provisions of which took effect from 1.3.1978. The goods were liable to Central Excise duty under Item 4.11(2) of the first schedule to the Central Excises and Salt Act, 1944 (commonly known as basic excise duty), both before and after 1.3.1978. There was no special Excise duty on the goods prior to 1.3.1978. The question arose whether special excise duty was leviable on cigarettes manufactured before 1.3.1978, but removed from the factory after 1.3.1978. This Tribunal decided in that case that the special excise duty was by itself a duty of excise and in a case where it was not leviable at the time of manufacture but was imposed between the time of manufacture and the time of removal, it could not be levied and collected at the time of removal. In taking this view, the Five-Member Bench considered various judgments cited before them by both sides, including the judgment in Kirloskar Brothers.
8. There is another decision dated 31.12.1984 of this Tribunal which goes in favour of the present appellants. This decision relates to the case of Castrol Limited, Calcutta v. Collector of Central Excise, Patna, reported in 1985-(5)-E.T.R.-427. This decision was not relied upon by either party in the present appeal. M/s. Castrol Limited were enjoying the exemption under Notification No. 143/71 dated 26.7.1971 in respect of their product blended and compounded lubricating oil. This Notification was replaced by Notification No. 36/73 dated 1.3.1973 as a result of which they became disentitled to the exemption. This Tribunal decided that the stock held on the midnight of 28.3.1973 was not liable to duty when cleared from the factory after 1.3.1973. While taking this decidion, the Tribunal followed interalia the judgment of Madhya Pradesh High Court in Kirloskar Brothers, which was confirmed by the Supreme Court by dismissing the Special Leave Petition filed by the department.
9. The issue involved in the present appeal before us and in the cases of Kirloskar Brothers, Vazir Sultan Tabacco Company and M/s. Castrol Limited, is similar and we do not find any reason to differ from those dicisions. We, therefore, respectfully follow those decisions and hold that duty was not payable on the molasses manufactured by the appellants prior to 19.6.1980 but used in the same factory of production after 18.6.1980. Although there are contrary decisions of Bombay High Court and Allahabad High Court in the case of Union of India v. Elephinstone Spinning & Weaving Mills (1978-ELT-680) and Kesar Sugar Works v. Union of India (1983-ELT-285) respectively (these decisions not cited by either of the parties before us), the judgment of Madhya Pradesh High Court in Kirloskar Brothers will prevail over them as it went before the Supreme Court in Special Leave Petition, which was dismissed by the Hon'ble Supreme Court on merits.
10. The learned Departmental Representative has stated that the case of Kirloskar Brothers stands on a different footing as the exemption was conditional. We are unable to distinguish that case from the case before us on this ground as the exemption Notification relating to molasses was also conditional. Prior to 19.6.1980, all molasses were not exempted from duty. The molasses which was intended for use in the factory in which it was manufactured, was exempted from duty. We, therefore, do not find any substance in the argument of the learned Departmental Representative.
11. In the result, we allow the appeal and set aside the impugned order with consequential relief to the appellants.