Custom, Excise & Service Tax Tribunal
Pearl Enterprises, vs Chandigarh-I on 8 December, 2023
1 E/2831/2010
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
~~~~~
REGIONAL BENCH - COURT NO. 1
Excise Appeal No.2831 Of 2010
[Arising out of OIO No.78-79/CE/CHD-I/2010 dated 31.05.2010 passed by the
Commissioner of Central Excise, Chandigarh]
M/s Pearl Enterprises : Appellant (s)
Village Judikalan, Tehsil-Nalagarh,
District- Solan,
Himachal Prades173205
Vs
The Commissioner of Central Excise,
Chandigarh-I : Respondent (s)
Plot No. 19, Central Revenue Building, Sector-17C, Chandigarh-160017 APPEARANCE:
Shri Jitendra Motwani, Advocate for the Appellant Shri Rajeev Gupta, Shri Siddharth Jaiswal, Shri Nikhil Kumar Singh and Shri Aneesh Dewan, Authorised Representatives for the Respondent CORAM:
HON'BLE Mr. S. S. GARG, MEMBER (JUDICIAL) HON'BLE Mr. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER No.60693/2023 Date of Hearing: 15.09.2023 Date of Decision: 08.12.2023 Per: P. ANJANI KUMAR The appellants, M/s Pearl Enterprises, have undertaken the activity of inserting one 100gm toothpaste tube and one toothbrush into a promo pack containing one tube of 200mg toothpaste, one tube of 100mg toothpaste and toothbrush; the promo pack, wherein one tube of 200mg toothpaste is already packed and on which MRP is printed, is received by the appellants, from M/s Colgate Palmolive India Limited (Colgate), along with tubes of 100mg
2 E/2831/2010 toothpaste and toothbrushes in cartons; the appellant inserts 100gm toothpaste tube and one toothbrush in the blank slots provided in the promo pack at their facility/ factory in Tehsil Nalagarh, District Solan, HP started in September 2007. M/s Colgate manufacture the toothpaste in their factory situated at Baddi, District Solan, Himachal Pradesh and purchase the toothbrush manufactured in Goa; M/s Colgate send the manufactured tubes of 100gm toothpaste and purchased toothbrush to the appellants for completing the packing. M/s Colgate avail the exemption contained under Notification No.50/2003 dated 10.06.2003 as amended. The appellants under the impression that they are providing "Business Auxiliary Service" to M/s Colgate have registered themselves for payment of service tax and have been duly discharging the applicable service tax on the job charges received by them from M/s Colgate.
2. The appellants informed the Assistant Commissioner of Central Excise vide letters dated 11.10.2007, 01.11.2007 and 28.01.2008 informing that the activities undertaken by them. Consequent to an investigation initiated by the Department, the appellants informed the Department that Revenue was under an erroneous assumption that the appellant was engaged in manufacture vide their letter dated 20.02.2009 and have given declaration, in terms of Notification No.50/2003, under Protest. Two show-cause notices, one dated 09.04.2009, covering the period October 2007 to December 2008 and the other show-cause notice dated 04.02.2010, for the period January 2009 to June 2009 proposing to recover Central Excise duty about 3 E/2831/2010 Rs.14.93 crores along with interest and penalty, were issued to the appellants. The proposals in the show-cause notices were confirmed along with interest and penalties vide impugned common order dated 31.05.2010.
3. Shri Jitendra Motwani, learned Counsel for the appellant, submits that in the peculiar facts of the case, the principal manufacturer i.e. M/s Colgate manufactured toothpaste in their factory and the same was provided to the appellant in ready condition along with the cartons which had MRP printed on the same; the toothbrush was procured by M/s Colgate from a third-party and Excise Duty was discharged on the same; appellant merely inserted one 100gms toothpaste and toothbrush provided by M/s Colgate in the promo pack carton which already contained 200gms toothpaste; the same was returned to M/s Colgate; activity of just inserting toothpaste and toothbrush in the promo pack does not amount to manufacture as no activity of labelling or re-labelling; re-packing from bulk packs to retail packs and fixing of MRP is taking place. He relies on the following cases:
Yamuna Gases and Chemicals Limited - 2001 (130) ELT 854 (Tri. Del.) Adi Enterprises - 2002 (144) ELT 379 (Tri. Mumbai) Lakme Lever Ltd. - 2001 (127) ELT 790 Lupin Laboratories Ltd. - 2002 (139) ELT 366 Hindustan Lever Ltd. - 2005 (186) ELT 70 Buns & Cones Pvt. Ltd. - 2005 (187) ELT 462 3.1. Learned Counsel submits, further, that the Department's reliance on Prime Healthcare Products - 2009 (245) ELT 550 (Tri.
4 E/2831/2010 Ahmd.) affirmed by the Hon'ble Gujarat High Court - 2011 (272) ELT (Guj.) is incorrect as the issue therein was availability of CENVAT credit on bought out items and that the reliance on Colgate Palmolive (I) Ltd. - 2009 (248) ELT 930 (Bang.) is not correct as the same is only an Interim Order.
4. Learned Counsel submits, without prejudice to the above argument, that the appellants, in any way, are eligible for exemption contained under Notification No.50/2003 as they have fulfilled the substantial condition of the Notification; M/s Colgate, as principal manufacturers, have submitted, vide letters dated 11.10.2007; 01.11.2007 and 28.01.2008, the details required as per the said notification giving all the particulars and facts; the benefit cannot be denied just because the declaration was not on the letter head of the appellant. He relies on the decision of the Tribunal in the case of Gillette India Limited - 2011 (272) ELT 154 (Tri. Del.). He further submits that even if the appellant is required to submit the declaration, delayed submission of the same on 20.02.2009, cannot take away the substantial right available to the appellants. He relies on the following cases:
Krsna Urja Projects Ltd. - 2019 (366) ELT 839 (Tri. All.) Controls & Switchgears Company Ltd. - 2017-TIOL- 1960-CESTAT-DEL.
Alumeco India Extrusion Ltd. -2010 (249) ELT 577 (Tri. Bang.) Jai Maa Appliances (P) Ltd. - 2015 (329) 387 (Tri. Del.) 4.1. Learned Counsel for the appellants submits additionally that condition for furnishing a declaration is mere procedural and 5 E/2831/2010 substantive benefit of exemption cannot be denied for the same as held by the Hon'ble Apex Court in the case of Harichand Shrigopal-
2010 (260) ELT 3 (SC); in a similar case, Vasantham Enterprises - 2015 (37) STR 1007 (Tri. Del.) [affirmed by the Hon'ble Supreme Court- 2018 (13) GSTL J33 (SC)], the facts of which are identical to the impugned case, the Tribunal remanded back the case to the Adjudicating Authority, who in turn, allowed the exemption even though the declaration was delayed. Learned Counsel submits that Department cannot accept a case, with identical facts, and agitate the other as held in Amar Bitumen and Allied Products Pvt. Ltd. - 2006 (202) ELT 213 (SC).
5. Learned Counsel for the appellants submits that Department incorrectly relies upon Condition No.(4) in the Notification No.50/2003, as amended by Notification No.01/2008 dated 18.01.2008; though the issue was raised in the show-cause notice and replied by the appellants, the Adjudicating Authority has not given any findings on the applicability or otherwise of the Condition; moreover, Hon'ble High Court of Himachal Pradesh in the case of Gillette India Limited - 2009 (235) ELT 5 (HP) held that the Condition shall not apply to units set up prior to 18.01.2008.
6. Learned Counsel for the appellants submits also that as the service tax stands paid, no Excise Duty can be demanded from the appellants as held in K.R. Packaging - 2017 (51) STR 438 (Tri. Del.). He submits further that extended period cannot be invoked 6 E/2831/2010 in the case as Department has always been aware of the exact nature of activity of the appellants; M/s Colgate vide their letters dated 11.10.2007, 01.11.2007 and 28.01.2008 have intimated the Department the activity of the appellant and that the same did not amount to manufacture; the appellant was under the bona fide belief that the activity performed by the appellants invited service tax rather than central excise duty; the appellants have not suppressed any material fact with intent to evade payment of duty and more so, in the absence of any positive act of suppression, extended period cannot be invoked. He relies on the following cases:
Jai Maa Appliances (P) Ltd. - 2015 (329) ELT 387 (Tri.
Del.) Alumeco India Extrusion Ltd. - 2010 (249) ELT 577 (Tri.
Bang.) CCE Vs Chemphar Drugs and Liniments - 1989 (40) ELT 276 (SC) Lubrichem Industries Ltd. - 1994 (73) ELT 257 (SC).
Pushpam Pharmaceuticals -1995 (78) ELT 401 (SC). Nestle India Ltd. - 2009 (235) ELT 577 (SC).
7. Shri Rajeev Gupta, assisted by Shri Siddharth Jaiswal, Shri Nikhil Kumar Singh and Shri Aneesh Dewan, Authorized Representatives, submits that the letters given by M/s Colgate cannot be overstretched to mean a declaration by the manufacturer in terms of the Notification No.50/2003; the letter dated 11.10.2007 gives a revised declaration intends to inform that M/s Colgate intend to manufacture combo pack consisting of colgate dental cream 200gms + Colgate dental cream 100gms manufactured at their Baddi Factory + one toothbrush to be given 7 E/2831/2010 free of cost and that at that time, M/s Colgate did not have the facility to manufacture combo pack in their premises; M/s Colgate vide their letter dated 01.11.2007 indicated that they are sending their goods, fully manufactured and marketable, to the job workers (the appellant) and that Notification No.214/1986 is not applicable.
8. Learned Authorized Representative further submits that the appellant's reliance on M/s Man care International Private Limited is misplaced as the Tribunal has held that the benefit under the Notification No.50/2003 cannot be granted to the appellants retrospectively; the facts of the case of M/s Man care International are different to the extent that they have availed SSI exemption till 03.11.2009 and started availing exemption under Notification No.50/2003 without filing any declaration; the declaration was filed only on 28.06.2010. He submits that reliance on M/s Krishna Urja Projects Ltd. - 2019 (366) ELT 839 (Tri. Allahabad) and M/s Herbal Concepts Healthcare Pvt. Ltd, is also misplaced as they were rendered before the Hon'ble Apex Court's decision in the case of Shri Dilip Kumar.
9. Learned Authorized Representative submits also that reliance placed on M/s Vasantham (supra) is incorrect; he distinguishes the case of M/s Vasantham on following grounds:
Unlike in the impugned case, Tribunal concluded that there was a bona fide belief on the part of the appellants therein;
The required declaration, though incomplete, was filed by the appellants therein till 20.02.2009;
8 E/2831/2010 M/s Vasantham were only repacking the soap manufactured by M/s Hindustan Lever whereas in the instant case, toothpaste and toothbrush are repacked and toothbrush is not manufactured in Himachal Pradesh.
The job worker was present within the premises of M/s Hindustan Lever.
The activity of repacking soap was held to be manufactured.
Moreover, Hon'ble Supreme Court has only endorsed the order of the Tribunal in remanding the case back to the Commissioner.
9.1. Learned Authorized Representative also distinguishes the case of M/s Gillette India (supra) stating that the Tribunal has only rejected the stand of the Department that the declaration needs to be filed by the main manufacturer and not by job worker; therefore, the appellant in the instant case cannot rely upon the declarations given by M/s Colgate as there is not master and servant relationship.
10. He further submits that the appellant is not entitled to exemption even after filing declaration on 20.02.2009, in view of the amendment dated 18.01.2008, as the toothbrush is not manufactured in the State of Himachal Pradesh and Uttrakhand; the clarification vide Circular No.908/28/2009-CX dated 23.12.2009 is not applicable to the facts of the case; the Hon'ble Apex Court in the case of M/s V.V.F - 2020 (372) ELT 495 (SC) overruled the above judgment of M/s Gillette India and has given precedence to public interest over promissory estoppel. Learned Authorized Representative further submits that the demand is not 9 E/2831/2010 barred by limitation as the initial letter was filed by M/s Colgate and not by the appellants; the declaration given by the appellants on 20.02.2009 cannot have retrospective effect and the Adjudicating Authority has clearly dealt with this aspect. He further submits that the activity undertaken by the appellant amount to manufacture and as such the appellants are not covered under taxable service of "Business Auxiliary Service". He relies on the following cases:
Prime Healthcare Products - 2009 (245) ELT 550 (Tri. Ahmd.) and 2011 (272) ELT 54 (Guj.)_ Colgate Palmolive (India) Ltd. - 2009 (248) ELT 930 (Tri. Bang.).
Mancare International Pvt. Ltd. - 2018 (363) ELT 432 (Tri. Del.) Maha Lakshmi Packages- 2015 (329) ELT 823 (Tri. Del.) Satyabrat Swain - 2015 (316) ELT 106 (Tri. Del. Ambey Cement and anothers - 2005 (1) SCC 368 = 2004 (178) ELT 55 (SC).
Dilip Kumar & Company - 2018 (361) ELT 577 (SC). Eagle Flask Industries -2004 (171) ELT 296 (SC). Gillette India - 2009 (235) ELT 5 (HP) VVF Ltd. - 2020 (372) ELT 495 (SC).
11. Heard both sides and perused the records of the case. The brief issues that require decision in the impugned case are as to whether:
(a) the activity undertaken by the appellants amounts to manufacture.
(b) the appellants are eligible for the exemption contained in the Notification No.50/2003as the declaration was filed late.
(c) the activity undertaken by the appellants attracts service tax or central excise duty.
10 E/2831/2010
(d) extended period is invokable in the facts and circumstances of the case.
12. We find that the appellants are job-workers of M/s Colgate Palmolive India Ltd; under the impression that they are only performing a job-work for M/s Colgate Palmolive India Ltd., the appellants have obtained registration for payment of service tax under the category of "Business Auxiliary Service" and have been paying service tax as applicable. It is on record that M/s CPIL have intimated the jurisdictional Assistant Commissioner of Central Excise, vide letters dated 11.10.2007, 01.11.2007 and 28.01.2008,that they are outsourcing certain process of the manufacture of Colgate+ dental cream in combi pack to the appellants; the said letters, inter alia, informed the Department the nature of the processing undertaken by the appellant; the opinion that such process does not amount to manufacture and that they are availing the benefit under Notification No.50/2003. Further, M/s CPIL vide letter dated 28.01.2008 requested the authorities to intimate the reasons as to why their job-worker i.e. the appellant was asked to pay central excise duty so that they can effectively reply. The appellants vide letter dated 20.02.2009 have filed a formal declaration in terms of Notification No.50/2003, without prejudice to the stand taken by them earlier that the process undertaken by them does not amount to manufacture.
11 E/2831/2010
13. It is seen that the appellants are receiving combi packs containing 200mg of toothpaste in final retail packing along with 100gm toothpaste and a toothbrush from M/s CPIL; the appellants insert the 100gm toothpaste and the toothbrush provided by M/s CPIL in the slots available for them and close the packing; 36 such combi packs are packed in a box for shipping. The appellants claim that they are only inserting the toothpaste and toothbrush in the combi pack and the same does not amount to manufacture as the activity does not bring out a new product into existence. We find as per Note 6 to Chapter 34 that in relation to products of this chapter, labelling or re-labelling of containers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to consumer shall amount to „manufacture‟. The appellants contend that no new marketable product emerges out of the process undertaken by them and therefore, the process does not amount to manufacture. On going through the show-cause notice, we find that the learned Commissioner records that the noticee receives 200gms toothpaste duly packed in promo pack carton which contains the following declarations:
(a) Name of the manufacturer of the toothpaste, which is CPIL, Solan, Himachal Pradesh.
(b) Name of the manufacturer of the toothbrush, which is M/s Logic Plastic Pvt. Ltd., Daman.
(c) Total net weight of the pack i.e. 300gm with two tubes of 200gm and 100gm each.
12 E/2831/2010
(d) Declaration that the pack contains one-piece free toothbrush.
(e) Maximum retail price with the breakup of the individual retail price of 200gm and 100gm toothpaste.
(f) Declaration that the toothbrush is free.
(g) Description and pictorial declaration that the Promopack contains "Colgate" brand 200gm and 100gm toothpaste with free toothbrush into this Promopack, the Noticee inserts 100gm toothpaste and a free toothbrush.
14. We find that having given the entire description of the combi pack received by the appellants and their activity of inserting 100 gm toothpaste and a toothbrush in the combi pack and closing the pack, learned Commissioner comes to the conclusion that the pack with complete contents is only marketable to the ultimate consumer and the job undertaken by the appellants amounts to manufacture. We find that as per Chapter Note 6 cited above, the following processes amount to manufacture:
(a) labelling or re-labelling of containers.
(b) packing from bulk packs to retail packs.
(c) adoption of any other treatment to render the product marketable to the consumer.
15. We find that the appellant's activity is not clearly covered by
(a) or (b) above and it is not the case of the Department also. It is the contention of the Department that the process undertaken by 13 E/2831/2010 the appellants falls under (c) and thus, amounts to manufacture. We find that other than this averment neither the show-cause notice nor the OIO elaborate on how the activity undertaken by the appellant renders the goods marketable. It is M/s CPIL that manufactures the toothpaste and purchases toothbrush on payment of duty and supplies the same to the appellant. The goods have already become marketable before they reach the premises of the appellants. It is the case of the Department that the process undertaken by the appellants makes them marketable as the combi pack contains a disclaimer that "individual items are not for sale".
16. We find that the marketability of the goods and the manner in which they are marketed by an individual manufacturer are quite different. The manner in which the goods are marketed does not at all make them marketable. If that is the case, no toothpaste or toothbrush should have been marketed not only by M/s CPIL but also by others, in a standalone condition. However, it is everybody's knowledge that toothbrush and toothpaste are also sold as individual pieces. The scheme of offering them in a combi pack does not make them marketable only as a combo. To that extent, we find that learned Commissioner has failed to distinguish between "marketability" and the manner in which the said product is "marketed". The appellants are merely completing the process of combi pack manufactured by the principal manufacturer i.e., M/s CPIL. Therefore, we are of the considered opinion that the process undertaken by the appellants takes care of the manner in which 14 E/2831/2010 the said product is marketed and in no case makes the goods marketable. Therefore, we hold that the process undertaken by the appellant does not amount to manufacture.
17. Revenue relies on the decisions of the Tribunal in the case of Prime Healthcare Products (supra) and M/s Colgate Palmolive India Ltd. (supra). We find that the ratio of the cases is not applicable on the facts of the cases. In both the cases, the issue involved was manufacturing of combi packs by the original manufacturers and not the job-workers and it was held that the same amounts to manufacture in that context. In the impugned case, the appellants are only inserting the 100gm toothpaste and a toothbrush into the combi pack which already contained 200gm toothpaste. The combi pack with all other ingredients including the MRP is supplied by M/s CPIL, the original manufacturers. In a way, the appellants are completing the process of packing already initiated by the principal manufacturer. The appellants returned the combi packs to the original manufacturer i.e M/s CPIL, who is liable for payment of duty on the combi packs cleared by them. In the impugned case, M/s CPIL are availing exemption contained under Notification No.50/2003 and therefore, are not paying duty. To this extent, we find that the ratio of the cases cited above is not applicable. Moreover, we find that the decision in the case of M/s Colgate Palmolive India Ltd. (supra) is not a final decision and is rendered in the context of stay. Even if it is held that the preparation of a combi pack makes the product marketable, the process is 15 E/2831/2010 undertaken by M/s CPIL and not by the appellants. The appellants are duly discharging service tax on the part of the job undertaken by them.
18. Without prejudice to our conclusion above that the process undertaken by the appellants does not amount to manufacture, we will take up the question as to whether the appellants are eligible for the exemption contained in the Notification No.50/2003 as the declaration was filed late. We find that in terms of the Notification No.50/2003, a manufacturer who intends to avail of the exemption under the notification shall exercise his options in writing before affecting the first clearance and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year. Further, the manufacturer shall while exercising the option under Condition as above inform in writing to the jurisdictional Deputy Commissioner or Assistant Commissioner of Central Excise, as the case may be, with a copy to the Superintendent of Central Excise giving the following particulars viz. (a) Name and address of the manufacturer, (b) Location/ locations of factory/ factories; (c) description of inputs used in manufacturer of specified goods; (d) description of the specified goods produced; (e) date on which option under this Notification has been exercised.
19. We find that M/s Colgate Palmolive India Ltd vide their letters dated 11.10.2007 and 01.11.2007 and 28.01.2008 have intimated 16 E/2831/2010 the Department their intention to outsource part of their work to the appellants; they have also intimated all the particulars as required in terms of the notification in their intimation. When the name of the manufacturer and the particulars of activity have been intimated prior to the availment of the benefit of the notification, the same can be treated as the declaration or intimation by the appellants themselves. It is not the case of the Department that the appellants are not situated in an area to which the said exemption is not available. Therefore, by undertaking the activity in the specified area, the appellants have made themselves eligible as per the substantial condition of the notification. In such circumstances, it has to be held that the declaration is only procedural. Moreover, all the details as required as per the notification have been furnished by M/s CPIL. The appellants are eligible for the exemption contained in the Notification No.50/2003 as the declaration was filed late. We find that the Tribunal in the case of Vasantham Enterprises (supra) held that:
12.5 Primary object of the Notification No. 50/2003-C.E., dated 10-6-2003 is to grant duty exemption to manufacturing units situated in the area specified therein subject to fulfilment of conditions prescribed therein read with the Board Circular No. 908/2009-CX, dated 23-12-2009 as well as Circular No. 757/73/2003-CX, dated 22-10-
2003 [F. No. 201/54/2003-CX-6]. It is not in dispute that the appellant was situated in the specified area of Himachal Pradesh and entitled to the exemption benefit granted by the notification read with the Board circulars. However relying on the copy of agreement dated 1-9-1977 and Board Circulars, the appellant bona fidely believed that it was a mere service provider and not a manufacturer for the reasons mentioned 17 E/2831/2010 hereinbefore as urged by it and failed to file necessary declaration for consideration of its exemption status by the Authority.
13. Hon'ble Supreme Court in Associated Cement Companies Ltd. v. State of Bihar &Ors., (2004) 7 SCC 642, while explaining the nature of the exemption notification and also the manner in which it should be interpreted has held :
"12. Literally "exemption" is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially, in a growing economy. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden of progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking, liberal and strict construction of an exemption provision is to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in the nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. (See Union of India v. Wood Papers Ltd. and Mangalore Chemicals and Fertilisers Ltd. v. Dy. Commr. of Commercial Taxes to which reference has been made earlier.)"[Emphasis supplied]
14. In G.P. Ceramics Private Limited v.
Commissioner, Trade Tax, Uttar Pradesh, (2009) 2 SCC 90, Apex Court has held :
"29. It is now a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. [See CTT v. DSM Group of Industries (S.C.C. para 26); TISCO v. State of Jharkhand (SCC paras 42 to 45); State Level Committee v. Morgardshammar India Ltd.;
18 E/2831/2010 Novapan India Ltd. v. C.C.E. & Customs; A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala and Reiz Electrocontrols (P) Ltd. v. C.C.E.]" [Emphasis supplied]
15. Apex Court in Commissioner of Customs (Preventive), Mumbai v. M. Ambalal and Company, (2011) 2 SCC 74 = 2010 (260) E.L.T. 487 (S.C.), (in which one of us was the party) has observed that the beneficial notification providing the levy of duty at a concessional rate should be given a liberal interpretation :
"16. It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. The rule regarding exemptions is that exemptions should generally be strictly interpreted but beneficial exemptions having their purpose as encouragement or promotion of certain activities should be liberally interpreted. This composite rule is not stated in any particular judgment in so many words. In fact, majority of judgments emphasise that exemptions are to be strictly interpreted while some of them insist that exemptions in fiscal statutes are to be liberally interpreted giving an apparent impression that they are contradictory to each other. But this is only apparent. A close scrutiny will reveal that there is no real contradiction amongst the judgments at all. The synthesis of the views is quite clearly that the general rule is strict interpretation while special rule in the case of beneficial and promotional exemption is liberal interpretation. The two go very well with each other because they relate to two different sets of circumstances. " [Emphasis supplied]
16. Filing of declaration before first clearance being necessity of notification, that cannot be given go by following the ratio laid down in Paras 24 and 26 of the judgment in the case of State of Jharkhand v. Ambay Cements [2004 (178) E.L.T. 55 (S.C.)] as under :-
"24. In our view, an exception or an exempting provision in a taxing statute should be construed strictly and it is not open to the Court to ignore the 19 E/2831/2010 conditions prescribed in the Industrial Policy and the exemption Notifications. [Emphasis supplied]
26. Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance of the same must result in cancelling the concession made in favour of the grantee - the respondent herein." [Emphasis supplied]
17. In view of settled position of law relating to compliance, it is considered that dealing with various citations made by both sides shall be only burdening this order and academic.
18. Learned adjudicating authority in Para 60 of his adjudication order (Ref : page 58 of the appeal folder) recorded that "In the present case, the noticee had claimed the benefit of Notification No. 50/2003-C.E., dated 10-6-2003. They have filed a declaration also. It was for them to see to it that all the conditions are fulfilled. The declaration has to be filed by giving all particulars as required in the notification which they failed to do so. It was incumbent on their part to ensure that they have fulfilled all conditions before availing benefit under the notification. The declaration was incomplete inasmuch as details were not given. This information is relevant for knowing and verifying whether the finished goods can be made out of such inputs. It thus appears that the noticee is not entitled to the benefit of Notification No. 50/2003- C.E., dated 10-6-2003." Such recording leads to the conclusion that the appellant was entitled to cure the defect providing necessary particulars for consideration of its claim of exemption under the notification above since it was primarily entitled to 20 E/2831/2010 the area based exemption being situated in the specified area of the State of Himachal Pradesh.
19. Registration of the appellant under Finance Act, 1994 and its existence in the specified area of Himachal Pradesh, as well as its activity carried out as job worker of HUL was well known to record. Appellant bonafidely believed that it was not manufacturer and not liable to Excise duty and if held to be manufacturer, it is entitled to the exemption by Notification No. 50/2003 read with the Board circulars aforesaid. There is nothing on record to show that either appellant or HUL suppressed any fact to the authority. Record also reveals that appellant has not acted mala fide. It is primarily entitled to the benefit of exemption notification aforesaid. It only failed to file necessary declaration under bona fide belief as stated above. Non-filing of declaration is not suppression of fact. So also there is nothing on record to appreciate that appellant had any intention to evade duty. Therefore, appellant acting bona fide is not debarred it to file the same before the authority to re-examine its eligibility to the exemption, otherwise that would defeat object of the area- based exemption as observed by Apex Court in Commissioner of Sales Tax v. Industrial Coal Enterprises, (1999) 2 SCC 607 :
"11. In CIT v. Straw Board Mfg. Co. Ltd. this Court held that in taxing statutes, provision for concessional rate of tax should be liberally construed. So also in Bajaj Tempo Ltd. v. CIT it was held that provision granting incentive for promoting economic growth and development in taxing statutes should be liberally construed and restriction placed on it by way of exception should be construed in a reasonable and purposive manner so as to advance the objective of the provision. "[Emphasis supplied]
20. On the aforesaid factual background and law, remanding the matter for filling of necessary declaration by the appellant for scrutiny of the adjudicating authority to grant area-based exemption shall serve interest of justice. The Authority granting reasonable opportunity of hearing to the appellant shall pass appropriate order. It is, ordered accordingly.
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21. Learned adjudicating authority recorded that the appellant did not provided manpower supply service. In such case, realisation of Service Tax from the appellant is unwarranted under law. Therefore, that should be refunded to the appellant against appropriate application filed.
20. We find that the Adjudicating Authority pursuant to the directions given by the Tribunal as above has allowed the benefit of notification on the basis of the declaration submitted by the appellants therein on 11.12.2014. We find that the above case squarely covers the issue before us and is applicable on four legs.
We further find that the decision of the Tribunal has been affirmed by the Hon'ble Apex Court. In the instant case, the appellants have filed a declaration on 20.02.2009 as required by the Department.
We find that thus the appellants have fulfilled the conditions of the notification making themselves eligible for availing the benefit thereof. We find support from the observation of Allahabad Bench of the Tribunal in the case of Krsna Urja Projects Ltd. wherein it is held as under:
" 4. Being aggrieved, the appellants are before this Tribunal. The Learned Counsel for the appellants urges that the issue is no longer res integra and the same are decided in favour of the appellants vide the precedent orders of this Tribunal. So far the merits are concerned. A similar issue came up before this Tribunal in the case of M/s. Controls & Switchgears Company Ltd. v. Commissioner of Central Excise, Meerut-I, reported in 2017-TIOL-1960-CESTAT-Delhi. Wherein under similar facts and circumstances, under the same Notification No. 50/2003-C.E. this Tribunal held, intimation to the Department about the option for claiming benefit of the exemption appears to be only procedural requirement. A liberal attitude, 22 E/2831/2010 therefore, has to be taken in this regard, when the assessees otherwise are entitled to the benefit of exemption notification. It was also observed that exemption provisions have to be complied with strictly, but some latitude may be shown in case of some requirements which are directory in nature, the non-compliance of such requirements would not affect the substantive benefit of notification, granting exemption."
21. We further find that CESTAT, New Delhi in the case of Gillette India (supra) held that the declaration filed by the principal manufacturer should be treated as the declaration filed by the job- worker. Tribunal held that:
"5. We have carefully considered the submissions from both the sides and perused the records. Without going into the merits of the Department's case, that in terms of the agreement between M/s. Gillete and M/s. M.J., it is the M/s. Gillete, who is the actual manufacturer, even if the department's allegation is accepted and M/s. M.J. is treated as an agent of M/s. Gillete, since any action of an agent is to be treated as the action of the principal and since in this case, it is not disputed that the required declaration had been filed by M/s. M.J., the same will have to be treated as the declaration filed by M/s. Gillete. In view of this, even if the department's allegation that the relationship between M/s. Gillete and M/s. MJ is that of master and servant, is accepted, the exemption under Notification No. 50/03 cannot be denied. There is, therefore, no merit in the department's case. The impugned orders, therefore, not being sustainable, are set aside. The appeals are allowed."
22. Thus, we find that either on the strength of the declaration filed by the principal manufacturer i.e. M/s CPIL or on the strength the declaration filed by the appellants themselves though belatedly, 23 E/2831/2010 the appellants are eligible to avail the exemption contained in the Notification No.50/2003. Further, we find that in the case of Gillette India Ltd (supra) Hon'ble High Court of Himachal Pradesh held that, the amended condition to the effect that articles manufactured in places other than specified area will not be applicable to the items manufactured after 18.01.2008, shall not apply to units set up prior to 18.01.2008. Further, we find that Department has been changing the stand. In the case of Gillette India, the Department was pleading that it is for the principal manufacturer to file the declaration and not the job-worker, whereas in the impugned case, Department refuses to accept the declaration filed by M/s CPIL. We find that such a stand is not acceptable.
23. In addition to the above, the appellants have taken the plea that extended period cannot be invoked in the facts and circumstances of the case. We find that the Department was kept informed about the activities of the appellants by their principal manufacturer as early as 2007. Therefore, we find that there is no positive act on the part of the appellants to show intent to evade payment of duty. Further, the appellant has entertained a bona fide opinion that the said activity did not amount to manufacture but was exigible to service tax. At no point of time even though a couple of audit inspections were conducted, Department did not raise any objection as to the payment of service tax on the activity undertaken by the appellants. Therefore, we are of the considered 24 E/2831/2010 opinion that Department has not made out any case for invocation of extended period.
24. In view of our discussion above, we set aside the impugned order and allow the appeal of the appellant with consequential relief, if any, as per law.
(Pronounced on 08/12/2023) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) PK