Customs, Excise and Gold Tribunal - Delhi
Indian Oil Corporation Limited vs Collector Of Central Excise on 26 December, 1985
Equivalent citations: 1986(6)ECR657(TRI.-DELHI), 1986(24)ELT593(TRI-DEL)
ORDER V.T. Raghavachari, Member (J)
1. As all these appeals raise a common question for determination, though the periods and the relevant Finance Acts relating to the different periods may be different, all these appeals were heard together.
2. The Indian Oil Corporation had exported certain petroleum products to Nepal without payment of duty under Bond claiming to be entitled to do so in terms of notification No. MF (DR) 151/81 dated 29-7-81 issued under Rule 13(2) of Central Excise rules, 1944. Subsequently, various show cause notices were issued as to why special excise duty should not be demanded from them in respect of such exports. They replied denying liability relying on the notification mentioned supra. Their denial of liability was rejected by the Assistant Collectors concerned. Their appeal against the said orders were rejected by the Collector (Appeals) under order dated 27-5-1985. It is against the said order that these 11 appeals have been filed. Apart from claiming that no special excise duty was payable as demanded, it is further contended that in any event the demand in respect of several of the instances was barred by time also.
3. We have heard Shri N.V. Raghavan Iyer, Adviser, (Excise and Customs), Indian Oil Corporation on behalf of the Appellant and Shri P.K. Ajwari, Sr. Departmental Representative for the respondent Collector.
4. Shri Raghavan Iyer contended that the words "without payment of duty" in Rule 13(2) (in terms of which notification No. 151/81 had been issued) meant without payment of any excise duty under whatever name it may be called. He contended that there was no provision for assessment proceedings in respect of such exports and that itself would support his contention. He referred to the decision of the Delhi High Court in the case of Modi Rubber Limited (1983 E.L.T. 24 Delhi) and further submitted, with reference to the provisions of the Central Excise Laws (Amendment and Validation) Act 58 of 1982 that the provisions in the said Act referred to grant of exemption under notifications and that, therefore, they referred to exemptions under Rule 8 of the Central Excise Rules and not to notifications under other rules. He, therefore, contended that even after the passing of Act of 58 of 1982, the contentions approved of in the Modi Rubber Limited case would apply to the present facts. He also referred to the provisions of Rule 9A(3) of Central Excise Rules and also the provisions of Section 11A to support his arguments. Finally he contended that even if special excise duty is to be held payable the same would be nil only since it is to be quantified at a percentage of the basic excise duty payable and such basic excise duty in all the instances under consideration was nil only.
5. On the other hand Shri Ajwani contended that the Central Excises and Salt Act is different from the several Finance Acts under which the special excise duty becomes payable and, therefore, the reference to the words in Rule 13(2) cannot be read as applicable to the special excise duty payable under the Finance Acts. He contended that the documents to be prepared and submitted in connection with the exports in question did make a reference to the value of the commodity, the duty payable etc. and these would indicate the provisions for assessment. He relied upon the provisions of Act 58 of 1982 and contended that this was passed specially to overcome the effect of the judgment of the Delhi High Court in the Modi Rubber case and hence the appellants cannot draw strength from the findings in the said judgment to support their contentions. On the question of the special excise duty being payable at a percentage of the basic excise duty only he relied upon the decision of the Tribunal in the Vazir Sultan case (19s5(21) ELT 757) and stated that the chargeable event in respect of special excise duty being the manufacture and basic excise duty having been payable on the date of manufacture special excise duty cannot be claimed to be nil in the present instances. On the question of limitation he contended that this question had not been raised before the lower authorities and cannot be permitted to be raised at this stage.
6. We have carefully considered the submissions of both sides and have perused the relevant records.
7. Rule 13 (2) reads as follows :
"The Central Government may, from time to time, by notification in the official gazette, permit export of specified excisable goods under bond, without payment of duty from a warehouse or licensed factory, to Nepal or Bhutan, subject to such conditions or limitations as regards the class of goods, destination, mode of transport and other matters as may be specified therein".
8. There is no dispute that in all the instances in question the appellants (Indian Oil Corporation) had stored the concerned petroleum products in their bonded warehouse and therefrom had exported them to Nepal after complying with the necessary statutory formalities, including execution of a bond. No duty had been paid by them in respect of such exports. They claimed that they were entitled to do so in terms of notification No. 151/81-C.E., dated 29-7-1981 issued under Rule 13(2) of the Central Excise Rules. The Department concedes that by virtue of the notification the appellants were absolved of the liability to pay basic excise duty. But while the appellants claimed that they were absolved from payment of the special excise duty payable under the Finance Act of the respective years the department contests the same.
9. Notification No. 151/81 permits, on compliance with the necessary formalities prescribed thereunder, the export of petroleum and lubricants products to Nepal through the agency of Nepal Oil Corporation in bond without payment of duty of excise from the calibrated bonded stocks of the Indian Oil Corporation licensed as a bonded warehouse, The main question for determination is whether the words "without payment of duty of excise" would cover payment of basic excise duty only or special excise duty also.
10. In the case of Modi Rubber Limited the Delhi High Court had to construe the provisions of notification No. 123/74-CE., dated 1-8-1974. That notification had been issued under Rule 8(1) of the Central Excise Rules. Thereunder the Central Government had exempted tyres falling under T.I. 16(1) CET from so much of the duty of excise leviable thereon as was in excess of 55% ad valorem. The appellants in the said case claimed that the total duty of excise leviable inclusive of special duty of excise could not exceed the effective duty leviable in terms of the notification. The Government contested the same. The Delhi High Court held "Applying the ratio of these cases, it has to be held that the nature of the duties in respect of manufacture or production of goods remains the same i.e. the "duty of excise", whether termed as the basic duty of excise or special duty of excise or additional duty of excise or auxiliary duty of excise. The exemption notifications which exempt "from so much of the duty of excise leviable thereon as is in excess" are to be construed in their ordinary and natural meaning. The exemption is dependent on the duty of excise leviable on the manufacture or production of goods. This would be sum total of the duty of excise leviable under all statutory provisions and the exemption would be to the extent indicated". In a later passage it further held "the exemption notification grants exemption in respect of excise without any specification whether it is the basic duty of excise leviable under the Act, or Special duty under the Special enactment or Auxiliary duty under a Statute. In such case the exemption is in respect of all duties of excise and no duty of excise in excess of the amounts mentioned in the exemption notification can be levied".
11. Subsequently, in order to overcome the situation created by this judgment Ordinance No. 1 of 1982 was promulgated which was then replaced by Act No. 58 of 1982. Section 2(3) of the said Act read as follows.
"Where any Central law providing for the levy and collection of any duty of excise makes the provisions of the Central Excises Act and the rules made thereunder applicable by reference to the levy and collection of the duty of excise under such Central law, then,-
(a) it shall be necessary for the purpose of granting, by any notification or order, any exemption from any duty of excise, or fixing, by any notification or order, any rate of duty, leviable under such Central law to expressly refer to the provisions of the said Central law in the preamble to such notification or order, or to state by express words in such notification or order that the exemption provided for, or the rate of duty fixed, by such notification or order is an exemption from or the rate of duty under, such Central law;
(b) no notification or order issued or made under the Central Excises Act or the said rules (whether issued or made before, on or after the 24th day of September, 1982 and whether or not in force oh such date) granting any exemption from any duty of excise or fixing any rate of such duty shall have the effect of, or be construed as, providing for exemption from the duty of excise leviable, or as the case may be, fixing the rate of duty, under the said Central law, unless such notification or order-
(i) expressly refers to the provisions of the said Central law in the preamble; or
(ii) by express words, provides for an exemption from the duty of excise leviable, or, as the case may be, fixes the rate of duty, under the said Central law ; and
(c) every notification or order of the nature referred to in clause (b) which expressly refers to the provisions of any Central law or Central laws in the preamble, shall have the effect of, and be construed as, providing for exemption from the duty of excise leviable or, as the case may be, fixing a rate of duty, only under such Central law or Central laws, unless such notification or order also, by express words, provides for an exemption from the duly of excise leviable, or, as the case may be, fixes the rate of duty, under the Central Excises Act.
12. Shri Ajwani contends that in view of the passing of this Act, the reliance placed by the appellants on the observation of the Delhi High Court would not be justified. He points out that in the notification relied on by the appellants there is no reference to the provisions of the Finance Acts under which special excise duty is levied and, therefore, by reason of the provisions of the Section 2(3) of Act No. 58 of 1982 the exemption claimed with reference to special excise duty cannot be upheld. But in this connection it may be noted that Section 2 (3) above said referred to notifications etc. granting exemptions from any duty of excise or fixing any rate of such duty and, in that connection, provides that the exemption under the said notification cannot be claimed with reference to other duties of excise leviable under separate central enactments unless specific reference is made in that notification to the said enactments also. Shri Raghavan Iyer contends that Rule 13 of the Central Excise Rules (under which the notification in question had been issued) does not provide for any exemption from duty and, therefore, the provisions of the said notification should not be construed with reference to the provisions of Section 2(3) of Act 58 of 1982.
13. As earlier noted, Rule 13(2) provides for export without payment of duty. The question would be whether this provision would amount to an exemption from duty of excise. From the words of the rule it would appear that the goods have not been exempted from liability to duty but that the export of the said goods was being permitted without payment of duty. It may be noted that the bond to be executed in connection with such export without payment of duty provides for collection of duty in case the export is not carried out or there is a deficiency in the export. This provision is also suggestive that the goods have not become exempt from duty but that the collection of duty is waived on the condition of export being fulfilled.
14. In this connection we may take note of the provisions of Section 25 of the Customs Act which are as follows :
"Power to grant exemption from duty :-(!) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon. (2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from the payment of duty, under circumstances of an exceptional nature to be stated in such order, any goods on which duty is leviable".
15. It may be seen that under Section 25(1) above said the Central Government may by notification exempt goods from the whole or any part of duty of Customs leviable thereon. Under Sub-section (2) the Central Government may by special order exempt from payment of duty any goods on which duty is leviable. Construing these provisions a Full Bench of the Bombay High Court had held, in the case of Apar (Private) Limited v. Union of India (1985 (22) ELT 644) in paragraph 7 at page 656 as follows :
"It is important to note that the power vested in the Central Government under Section 25 (1) is not merely one of granting any exemption from payment of customs duty, but is one of exempting "generally" goods of any special description from the whole or any part of duty of Customs leviable thereon. It is only under Sub-section (2) of Section 25 that while the goods maybe dutiable and may not be exempted under Sub-section (1) of Section 25 Central Government may by special order in each case exempt from the payment of duty, under circumstances of an exceptional nature to be stated in such order, any goods on which duty is leviable". Once goods are exempted from levy of duty under Sub-section (1) of Section 25, question of payment of duty does not arise and no special, order granting exemption from payment is necessary. Only where goods are not exempt under Sub-section (1) of Section 25 and the Central Government having regard to special circumstances deems it necessary is exempt from payment of duty any goods on which duty is leviable, would it be necessary to make a special order under Sub-section (2) of Section 25. Once exemption is granted under Section 25 (1) it would mean that, as envisaged by Section 12 of Customs Act, the exemption notification "provides otherwise" and the goods are not chargeable to duty under Section 12. Thus Section 25 (1) of the Customs Act empowers the Central Government to exempt goods from levy of duty generally and under Section 25 (2) from payment of duty by a special order. If as provided under Section 25 (1) exemption is granted from the whole of the duty leviable on certain goods, customs duty itself is not leviable on such imported goods, no question of calculating the customs duty leviable at any particular rate specified either under the Customs Tariff Act or any other law for the time being in force arises".
Again in para 42 (page 673) it is observed as follows :-
"A notification under Section 25 (1) of the Customs Act exempts the goods themselves from the levy of duty under Section 12 A, notification under Sub-section (2) of Section 25 does not exempt goods from the levy of the tariff, A notification thereunder only exempts under special order in each case from payment of duty under circumstances of exceptional nature. While under Sub-section (1) of Section 25 goods themselves are exempt from the levy of duty, under Sub-section (2) of Section 25 the goods continue to be chargeable to duty but the importer is only exempted from payment of such duty".
16. Similarly, in the present case, also there would be no need for making a provision for export without payment of duty if the same provision would amount to an exemption from the liability for payment of duty itself. Further, as already noted, duty would have to be paid on the said goods themselves on proof of export not having been made or not fully made. In the circumstances, it appears to be clear that Rule 13 of the Central Excise Rules cannot be read as a provision under which goods become exempt from duty but only as a provision under which removal of the goods for export becomes permissible without payment of duty, though the goods continued to the dutiable goods.
17. In the light of the above, we are satisfied that reliance on the provisions of Section 2(3) of Act 58 of 1982 in construing the words of notification No. 151/1981 is not permissible, On the other hand, following the ratio of the decision of the Delhi High Court in the Modi Rubber Limited case, the word "duty" in Rule 13 and the notification made thereunder would have to be read to mean any type of duty of excise and not merely basic duty of excise payable under the provisions of the Central Excises and Salt Act. If so read it is clear that in exporting their petroleum products under notification 151/81 the Indian Oil Corporation was free from the liability for payment of any type of duty of excise (including the special duty of excise concerned in the present case) and not merely the basic excise duty.
18. It is in this background that the other argument of Shri Raghavan Iyer, regarding absence of provision for assessment proceedings in respect of such exports, has to be considered. If, as claimed by the department now, all other duty of excise except the basic excise duty would be payable in the absence of any reference in the notification except to the provisions of Central Excises and Salt Act only, one would certainly except provisions regarding such assessments in the Statutory forms and bonds to be maintained in connection with such exports. Shri Ajwani no doubt points that in the bond as well as the gate-pass reference is made to the value of the goods, rate of duty etc. But the provisions in the rule as well as the bond make it clear that these details are necessary only with reference to any assessment they may have to be done on failure to fulfil the conditions of the notification, or the bond, in the matter of export. As pointed out by Shri Iyer, these would not be relevant with reference to the acts done before the export, as the notification or the bond do not make any reference, to proceedings for assessment before such export.
19. In view of the above conclusion it would be unnecessary to go into the other grounds raised by Shri Iyer except one where, on the above reasoning itself, the argument raised by him will have to be rejected. This is with reference to his last submission that in any event the basic excise duty being nil even according to the department, the special excise duty would also be nil since it is to be quantified at a percentage of the basic excise duty. This argument cannot be accepted since, for the reasons already given, the goods would be chargeable to basic excise duty, though payment thereof is waived by virtue of the notification under Rule 13. Hence, the basic excise duty chargeble cannot be said to be nil, though what may be payable may be nil.
20. As mentioned earlier, Shri Iyer had further urged that even if all his other arguments are to fail, the appeals will have to be allowed at least to the extent of the claims having become barred by limitation. He had submitted that all the exports were under bond to the full knowledge of the department and under their supervision. He, therefore, contended that in any event the claim for any period preceding six months before the dates of the show cause notices would be barred. Shri Ajwani had contended that this question of bar of limitation had never been raised at any earlier stage and cannot now be permitted to be raised. But we are unable to accept this contention. The bar of limitation is raised with reference to admitted facts. It had been raised in the appeals before the Collector (Appeals) also. The fact of export under bond as well as the fact that the same was under the supervision of the Department is not in dispute nor do the show cause notices refer to any fraud or suppression. In the circumstances, there can be no doubt that the demands should have been made within six months from the date when the liability arose. It is seen from the record that at least in seven of the show cause notices the demand had been made beyond the period of six months and in the other four cases it was partly beyond this time limit. Therefore, even if all the other arguments of the appellants were to fail they would be entitled to relief at least on this ground of limitation.
21. But in view of the earlier findings, we hold that the appellants are entitled to succeed in full in all these appeals. These appeals are accordingly allowed and the orders of the lower authorities are set aside, with consequential relief.
S. Venkatesan, President
22. I have read with great care the admirably clear and succinct order recorded by my learned brother. While I have no difficulty in agreeing with his conclusion, namely that these appeals should be allowed, I have some difficulty in agreeing with certain parts of the reasoning adopted by him. In my view, the appeals should succeed purely on the basis of the argument set out in para 19 of my learned brother's order. On this argument I find myself obliged, with the greatest respect, to take a view different from that of my learned brother.
23. The argument is quite simple. There is no doubt that in these cases the basic duty of excise was not payable (at this stage I am using the word "payable" in preference to "chargeable" to avoid confusing the issue). Even where under the provisions of the respective Finance Acts applicable from time to time Special Excise Duty was leviable (the word used in the relevant section), the amount actually payable as Special Excise Duty was in every case expressed as a percentage of the basic excise duty. The basic excise duty in these cases being zero, the Special Excise Duty was therefore itself zero. In other words, the goods were correctly allowed to be exported without payment of Special Excise Duty, and there was no legal justification for demanding it later on.
24. My learned brother did not find the appellants' argument acceptable because of his finding that the goods in this case remained chargeable to basic excise duty, though payment of that duty had been waived. It is necessary to go into this aspect in some detail.
25. At the outset, I would like to make clear my greatest respect to the Hon'ble Bombay High Court, on whose observations in the case of Apar (Private) Limited (of para 15 above) he has placed reliance in coming to his conclusion in para 19 above. There is no question of my taking of view different from that of the Hon'ble High Court on any issue decided by it. I would however like to observe that the question before the Hon'ble Bombay High Court in that case was quite a different one, namely the interpretation of Section 12 read with Section 15 of the Customs Act, 1962. In the present case we are concerned with the interpretation of another specific provision of law, namely the section of the Finance Act of 1982 (and of subsequent years), levying the Special Excise Duty. If in the relevant provision itself the Legislature has made its intention clear beyond doubt (which, for the reasons which I shall give, I think it has), we have necessarily to give effect to that intention, rather than proceed from a judgment delivered in relation to a different question.
26. The charging sections of the respective Finance Acts, levying the Special Excise Duty from year to year, read as under:-
Finance Act, 1981 "49. (1) In the case of goods chargeable with a duty of excise under the Central Excises Act, as amended from time to time, read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable there shall be levied and collected a special duty of excise equal to ten per cent of the amount so chargeable on such goods".
[Rest of the section is not reproduced as it is not material to the argument] Finance Act, "50. (1) In the case of goods chargeable with a duty of excise under the Central Excises Act, as amended from time to time, read with any notification for the time being in force issued by the Central Government in relation to the duty so, chargeable, there shall be levied and collected a special duty of excise equal to ten per cent of the amount so chargeable on such goods."
Finance Act, 1983 "55. (1) In the case of goods chargeable with a duty of excise under the Central Excises Act, as amended from time to time, read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable (not being a notification providing for any exemption for giving credit with respect to or reduction of duty of excise under the said Act on such goods equal to, any duty of excise under the said act, or the additional duty under Section 3 of the Customs Tariff Act, already paid on the raw material component parts used in the production, or manufacture of such goods), there shall be levied and collected a special duty of excise equal to ten per cent, of the amount so chargeable on such goods."
Finance Act, 1984 "52. (1) In the case of goods chargeable with a duty of excise under the Central Excises Act, as amended from time to time, read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable (not being a notification providing for any exemption for giving credit with respect to, or reduction of duty of excise under the said Act on such goods equal to, any duty of excise under the said Act, or the additional duty under Section 3 of the Customs Tariff Act, already paid on the raw material or components parts used in the production or manufacture of such goods), there shall be levied and collected a special duty of excise equal to ten per cent, of the amount so chargeable on such goods."
27. Apart from the words in brackets in the last two years, the provisions are similarly worded. What they provide for is the levy and collection of a special duty of excise. The quantum of this levy is "ten per cent of the amount so chargeable on such goods."
28. For "the amount so chargeable" we have to be guided by the opening words of the sub-section. It is "a duty of excise (chargeable) under the Central Excises Act ... read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable". That is, it is the basic excise duty read with any notification in relation to that duty. What is to be read with the basic duty is any notification. Its scope is not restricted to notifications issued under Rule 8 (1) of the Central Excise Rules. This follows not only from the rise of the word "any" but also from the specific wording of the provisions in the Finance Acts of 1983 and 1984, which shows that other notifications too have to be taken into account, except where specifically excluded.
29. That notification No. 151/81 dated 29-7-1981 is a "notification ... issued by the Central Government" does not admit of doubt : nor that it is "in relation to the duty so chargeable" (viz. the basic duty), inasmuch as it begins " the Central Government hereby permits export...in bond without payment of duty of excise...". It therefore clearly comes within the meaning of the expression "any notification" referred to in the chargeable provision.
30. In the light of the actual wording of the charging provision it is clear that what the Legislature intended to be the base for the calculation and levy of the Special. Excise Duty was the basic duty as modified by any relevant notification. If by the words "the amount so chargeable" the Legislature had intended to refer only to the basic duty at the tariff rate, then the words "read with any notification..." would be meaningless. It is axiomatic that we should avoid such an interpretation when an alternative one giving full meaning to the words is available. Also, as explained in paras 28 and 29 above, there is no warrant for restricting the expression "any notification" to notifications issued under Rule 8(1) of the Central Excise Rules.
31. I therefore consider it to be quite clear that in a case where no basic excise duty was payable, because the conditions of notification No. 151/81 were fulfilled, no Special Excise Duty was leviable, and that accordingly the contention of the appellants in this regard is well-founded and their appeals deserve to succeed.
32. Notification No. 151/81 permits export through different land customs stations and different routes. So too in considering the effect of that notification I have followed a different route from my learned brother. However, this has led me to the same destination and I join him in ordering that these 11 appeals be allowed, with consequential relief.
ORDER H.R. Syiem Member (T)
33. Duty in the Central Excise Rules means "the duty payable under Section 3 of Act [Rule 2 (v)]. Hence, the duty levied by the Finance Acts, is not the "duty" exempted or foregone by rule 13. Therefore, the Special duty is not affected by notification No. 151/18.
34. On the other hand, there remains the proplem of collecting this Special duty. It is to be collected at 10% of the duty of excise chargeable under the Central Excises & Salt Act. The learned counsel for the department argued that the notification only permits the goods to be exported" without payment of duty of excise"; the duty of excise remains chargeable. I do not think this is correct.
35. The noun "charge" means a load, a burden, weight. As a verb, it means to cause to bear, to place a load upon, to load, to put in or on (a thing) or cause it to receive what it can bear or is adopted to receive. "Chargeable" is of the nature of a charge or burden; responsible; burdensome; costly, capable of being or liable to be charged. [The Shorter Oxford English Dictionary]. If charge is a load and chargeable is a burden also be liable to be charged, then the petroleum products exported to Nepal had no charge nor were they chargeable with, excise duty under Section 3 of the Central Excise Act. If they were in this condition, they did not meet the qualification demanded by the Finance Acts of being "Chargeable with a duty of excise under the Central Excise Act". They had no load of basic excise duty because they were "permitted to be exported "without payment of duty of excise", and so, because of this statutory permission, were not chargeable to duty of excise. No person could charge or load them with excise duty under the Central Excise Act.
36. That being so, the special duty under the Finance Act will have to be calculated or a percentage of 10% of the duty of excise chargeable under the Central Excise Act or 10% of 0, which is 0. That is the special duty to "be levied and collected" on these petroleum products.