Allahabad High Court
Ganges Soap Works Pvt. Ltd. And Anr. vs Union Of India (Uoi) And Ors. on 10 March, 1992
Equivalent citations: 1992(43)ECR707(ALLAHABAD)
Author: Brijesh Kumar
Bench: Brijesh Kumar
JUDGMENT Brijesh Kumar, J.
1. The petitioner objects, through this petition, to the disallowance of benefit of utilisation of money credit available under Notification No. 46/89, dated 11.10.1989 as amended by Notification No. 26/91, dated 25.7.1991, issued under Rule 57-K of the Central Excise Rules, 1944 (hereinafter referred to as the Rules), in respect of vegetable oils used as input by the petitioners in manufacture of soap noodles. A copy of the order dated 31.10.1991 passed by the Assistant Collector, Central Excise, Kanpur, disallowing the utilisation of money credit has been filed as Annexure-9 to the writ petition.
2. The petitioners' factory is situate in district Unnao which manufactures soap noodles. Soap noodles is a final product of the petitioners' factory. To establish the above facts the petitioners filed the classification list duly approved by the Assistant Collector, Central Excise, Kanpur. It is Annexure 1 to the writ petition, showing the full description of the item produced or manufactured as "soap noodles" excisable under sub-heading 3401.10 of the Central Excise Tariff. Annexure-2 is the Price List duly approved by the competent authority of the Excise Department, also showing the same as Annexure-1. The sub-head 3401.10 of the Central Excise Tariff shows the excisable item as "soap in any form". Petitioners' case is that it manufactures soap in "noodle" form. According to the petitioners, it is also not disputed by the opposite parties that specified vegetable oils are used as input in the manufacture of the final product, namely, the "soap noodles". Therefore, the petitioners are entitled for the benefit of utilisation of money credit on account of use of specified vegetable oil as input, as admissible under the notifications mentioned above, issued under Rule 57-K of the Rules. For the sake of convenience, Rule 57-K is reproduced below:
57-K. Applicability and extent of credit.--(1) The Central Government may, by Notification in the Official Gazette, specify--
(a) the finished excisable goods (hereinafter referred to as "final products") and the raw materials used in the manufacture of such final products (hereinafter referred to as "inputs"), to which alone the provisions of this section shall apply; and
(b) the rates at which the credit of money is to be given for use of such inputs in the manufacture of final products.
(2) When a Notification has been so issued under Sub-rule (1), credit at rates specified therein may be allowed for use of such inputs in the manufacture of such final products and the credits so allowed may be utilised for payment of duty on the final products, subject to the provisions in this section and the conditions, if any, stipulated in the said Notification.
3. A copy of the amended Notification dated 25.7.1991 issued under Section 57-K of the Central Excise Rules, 1944 has been filed as Annexure-3 to the writ petition. Clause (i) of the said Notification provides as follows:
NOTIFICATION NO. 47/89 (N.T.) C.E. (SIC) DATED 11.10.1989, AS AMENDED BY NOTIFICATION NO. 26/91 (N.T.) C.E., DATED 25.7.1991.
In exercise of the powers conferred by Rule 57-K of the Central Excise Rules, 1944, the Central Government hereby specifies--
(i) the inputs, namely, vegetable oils (whether or not subjected to any one or more of the process of hydrogenation or hydrolysis) of the description in column (2) of the Table hereto annexed and used in the manufacture of the final product, namely, soap, falling under sub-heading No. 3401.10 : of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); and
(ii) ...
4. On the basis of the above provisions, the petitioners had been availing of the utilisation of money credit facility as vegetable oil is used as an input for manufacture of soap noodles. The petitioners' returns submitted, in the prescribed form R.T. 12 utilising money credit along with R.G. 23-B, Part-II were duly assessed and accepted up to June, 1991 by the competent authority of the department. R.G. 23-B, Part-II is entry book of duty credit in respect of inputs received by the manufacturer, for manufacture of final products. But later on petitioners received a notice from the Superintendent, Central Excise Range-II, Unnao in August, 1991 requiring the petitioners to show cause, why the money credit facility utilised and availed of by them be not disallowed and duty be recovered in accordance with the Rules. A copy of the show cause notice is annexed as Annexure-5 to the writ petition. The show cause notice indicated that "soap noodles" despite their classification under sub-head No. 3401.10 are not final products as they are used as input in manufacturing soap and they are not marketed as soap noodles. The petitioners submitted their reply but the same was not acceptable to the Assistant Collector, Central Excise, who by means of impugned order dated 31.10.1991, disallowed the money credit utilised by the petitioners and issued a demand of excise duty with a penalty of Rs. 10,000/-. The petitioners have also been directed not to avail or utilise any credit of money in future.
5. Sri Bharat Ji Agarwal, learned Counsel for the petitioners has taken us through the order of the Assistant Collector and has drawn our attention specifically to the finding recorded by the Assistant Collector, which reads as under:
A careful reading of the above notification, makes it very clear that the credit under above notification is admissible in respect of specified vegetable oils, if they are used in the manufacture of final product, i.e. soap falling under subheading 3401.10 of the Schedule to the Central Excise Tariff Act. 1985. It is an admitted fact that the party is using the above specified vegetable oils in the manufacture of 'Soap Noodles' and not in the manufacture of 'Soap'. Mere fact that 'Soap Noodles' are also classifiable under sub-heading No. 3410.10 of the tariff, does not make the party entitled for availment of the credit under above notification unless 'Soap Noodles' have been specified as a final product under the said notification.
6. Learned Counsel for the petitioners submit that according to the finding of the Assistant Collector, Excise itself the petitioners use specified vegetable oil as an input in manufacture of soap noodles. It has been found that the final product of the petitioners is excisable under sub-head No. 3401.10 which covers "soap in any form". "Soap noodle" is nothing but soap in a different form. There is nothing to indicate that money credit facility will not be available on soap in the shape of cake or bar. The Assistant Collector, however, while rejecting the said contention of the petitioners, held as follows:
The party's contention that soap noodles are nothing but soap only, cannot be accepted. By no stretch of imagination 'Soap Noodles' can be considered as "soap" because these are not only a distinctive product known in the market and commercial parlance as such, but are also marketed as 'Soap Noodles' as also admitted by the party in their written brief dated 23.9.1991. The party's contention that 'Soap Noodles' is 'Soap' in the shape of Noodles only is also not correct. In fact, soap noodles are used as raw material in the manufacture of 'Soaps' by the consignees/customers of the party. If soap noodles are soap, as contended by the party, then there was no need to use the same as raw materials for further manufacture of 'Soap'. I am therefore, unable to accept the above contentions of the party.
7. Sri K.D. Nag, learned Counsel appearing on behalf of the opposite parties while supporting the above finding of the Assistant Collector has vehemently urged that soap noodle is not a finished product, though he has not disputed that it is "soap" and final product of the petitioners. His contention is that soap noodle gets converted into a "finished product" only after it is given shape and is added with perfumes etc. and is made marketable by putting in packings etc. Sri Nag has, therefore, submitted that in Rule 57-K of the Central Excise Rules, 1944 the words which have been used, are "finished excisable goods" which have been referred thereafter in the Rule, as "final products". According to the learned Counsel, the finished soap product becomes costlier because so many things are added before marketing them, such products are wrapped or packed in packages and that may be reason that "finished soap" was intended to be given the benefit under Rule 57-K. He has further submitted that the Notification issued under Rule 57-K has also gone beyond the Rule itself when it provides cash credit utilisation to the "final product" of soap. It is further submitted that the intention is to be gathered from the rule itself on the basis of which it should be inferred that the Notification An-nexure-3 only means to provide the benefit for "finished products".
8. We, are, however, unable to accept the contention raised on behalf of the opposite parties. First of all, it may be noted that no such distinction between "finished" and "final" products is to be found in any of the relevant provisions, nor any such provision has been pointed out differentiating "final" and "finished" products nor it appears that the intention was to give benefit only to perfumed and wrapped soap as argued. As a matter of fact, sub-head 3401.10 in (he Tariff says "soap in any form". It may be in crude form or perfumed or in any shape, no distinction can be made on that count, nor package of the produce would make any difference in the face of the provision noted above. On the other hand, there is nothing to indicate that the intention might have been to give benefit of cash credit to the "finished soap" with fragrance and wrapper etc. as its cost goes higher as compared to soap in its initial or crude form. Cost factor seems to have no relevance. The relevant factor, which clearly comes out of the provisions quoted earlier is the use of specified vegetable oil as an input in manufacture of "soap in any form".
9. We find no force in the submission made on behalf of the opposite parties that the notifications in question issued under Rule S7-K of the Rules is beyond the scope of Rule 57-K itself. At least it is not possible for the opposite parties who have themselves issued the notification to take such stand. As observed in the preceding paragraph, if it is felt by the Government that it has issued a notification beyond the scope of Rule 57-K, it can always withdraw and re-issue or amend the notification at any time. As a matter of fact, it cannot be said that the notification is beyond the scope of Rule 57-K. It is no doubt that the words "finished excisable goods" have been used in Rule 57-K, but it is further explained that "finished excisable goods" have been later referred to in the provision as "final products". The use of two phrases is such that it is more an interchangeable expression rather than an expression excluding the other". It cannot be said that "final products" can be given benefit under Rule 57-K. We have already discussed above that no distinction between the expressions "final products" and "finished products" has been drawn under the Central Excise Rules, 1944. At least no such provision has been brought to our notice. The substance of the relevant provision, as indicated earlier as well, is that utilisation of money credit would be available to specified vegetable oils used as input in manufacture of soap which under sub-head 3401.10 means "soap in any form". So long the produce manufactured remains soap after using specified vegetable oils as input, it is wholly immaterial in what shape or form it is manufactured. It is also immaterial if that produce is perfumed and wrapped in packings etc. as it does not affect the character of the produce. The distinction sought to be drawn is irrelevant so long the product is specified by mentioning the sub-head 3401.10 of the Tariff under the Notification. As observed earlier, it is not open at least for excise authorities or the Government to contend that the notification is beyond the scope of Rules, and if it is really so felt, notification can always be withdrawn, re-issued or amended.
10. Learned Counsel for the petitioners submits that Noodle is the only form in which soap is manufactured by the petitioners. It can be produced in the form of a bar or cake merely by putting a different dye. In the sub-head 3401.10 of the Tariff, shape and form have no relevance as it provides excisable item as "soap in any form". It is difficult to accept, as argued on behalf on the opposite parties, that the product may be subjected to excise duty under sub-head 3401.10 of the Central Excise Tariff but when the same sub-head is mentioned to indicate the product for the purposes of benefit available under the notification issued under Rule 57-K, a different meaning should be given to it That is to say, if excise duty is liable to be paid on "soap noodles" under sub-head 3401.10 of the Tariff as "soap in any form" the same meaning will have to be given as far the product is concerned where it is indicated by mentioning the same sub-head of the Tariff, specially when the Tariff sub-head 3401.10 does not draw any distinction between "finished" and final" product as sought to be drawn. In what manner specified vegetable oil is used as input in making a final soap product into a finished soap product has not been indicated on behalf of the opposite parties. If an item becomes excisable under a particular heading and item under the same heading are given benefit, it may not be possible to say that in latter case it means different item in the absence of any such distinction having been provided anywhere under the statute or notification etc.
11. A product may be available in different shapes, moulds and forms, but may remain one commodity. If the commodity is made excisable or concession is available for the commodity, its shape, size, form or mould will be immaterial so long it remains that very commodity. It may be pointed out here that it is not the case of the opposite parties that "soap noodle" is not soap rather it can very well be inferred that according to them, it is a "final product" of soap since excise duty is charged as such. Therefore, so long it is soap, covered under the words "soap in any form", no distinction can be drawn. In this connection, reference can be made to a case reported in 1978 U.P. Tax Cases, 473--Mis. Khanna Coke Industries Ltd. v. Assistant Commissioner, Sales Tax, where it was held that mere change in shape by mechanical pressing does not change the commodity and it remains the same. It was further found that mere change of shape or structure in the raw material does not result in production of a new commodity. The matter related to Sales Tax and coke briquettes manufactured by the assessee out of hard coke breeze or coke dust was sought to be assessed as an unclassified item, but it was held that both were covered by the expression "coke in all its form".
12. In view of the discussion held above and for the fact that even according to the findings of the Assistant Collector, soap noodles are "final products" excisable under sub-head 3401.10 of the Tariff which have been given concession by means of Notification No. 46189 dated 11.10.1989 as amended by Notification No. 26/91, dated 25.7.1991, we are of the view that the opposite parties erred in disallowing the utilisation of cash credit under the above noted notifications on the ground that some consumers use the product as their raw material for preparing some better quality of soap cake and bar. The basic fact remains that the petitioners use specified vegetable oils as input in manufacture of "soap noodles", excisable as final product covered under the expression "soap in any form". Such a product is entitled to the benefit of the notification. The use of the word "noodles" only indicates the form or shape of the product, on the basis of which no distinction can be made. It may also be pointed out that in such fiscal statutes or provisions it is not possible to draw inferences or to go behind a provision which is clear on the face of it, to find out the intention of the Legislature. In this connection, we may further point out that if the Government has any different intention than one expressed in the notifications, it can always amend the Tariff, its heading, sub-heads or notification, but so long the provision stands as it is, it would not be possible to give any different meaning inferring some other intention of the Legislature of the Government, as was submitted on behalf of the opposite parties.
13. In the result, we allow the writ petition and set aside the order dated 30.10.1991, passed by opposite party No. 2 as contained in Annexure 9 to the writ petition. No order as to costs.