Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Tisco on 22 April, 1988
Equivalent citations: 1988(18)ECR74(TRI.-DELHI), 1988(36)ELT320(TRI-DEL)
ORDER V.P. Gulati, Member (T)
1. This is an appeal filed by Collector of Central Excise, Patna against the order of Collector of Central Excise (Appeals), Calcutta. Brief facts of the case are that the respondents applied for availing of the benefit of the Notification No. 118/75, dated 30th April, 1975 as amended by Notification No. 105/82, dated 28-2-1982. In terms of this Notification the appellants availed of the benefit in respect of certain inputs cleared for use in their other factory subject to the observance of Chapter X procedure. The respondents made an application to the Collector as required under Chapter X procedure and before the sanction could be accorded by the Collector the respondents cleared the goods without payment of duty for use in their other unit. The Collector's sanction in the matter was accorded after over six months and in the meantime the respondents cleared the goods in terms of the said Notification. The demand was therefore was raised in respect of clearances made during the period of November, 1982 to March, 1983, that is a period before the sanction of the Collector was received. The Assistant Collector confirmed the demand. The Collector (Appeals) however, Yield that inasmuch as the respondents had applied for the necessary L-6 licence in November, 1982 and the same was issued only in April, 1983 and inasmuch as other conditions for the use of the material in terms of notification had been satisfied the department could not have raised the demand. The learned JDR for the department stated that the respondents applied for availing of the benefit of Notification and made the application in terms of the requirements of Chapter X on 6-10-1982 and pleaded that till the permission was given by the Collector by way of issue of L-6 licence the benefit of Notification could not have been availed by the respondents. He pleaded that following the Chapter X procedure was a condition precedent to the availing of the benefit under the said Notification. He pointed out that in terms of Chapter X under Rule 192 the assessee intending availing of the benefit of the exemption has to make an application to the Collector in proper form stating the estimated annual quantity of the excisable goods required and the purpose for the manner in which these are intended to be used them with a declaration that the goods will be used for such purpose. He pleaded that the Collector has to satisfy that the applicant is a person to whom concession can be granted without risk to revenue and after verification of the fact that suitable arrangements exist for storage of the goods and that can give permission only after consideration of the supervisory arrangements required. He pleaded in the present case before the application could be granted the respondents availed of the benefit of the notification. In this connection he cited the case of Kama/ Cold Storage (P) Ltd. v. Collector of Central Excise, Bombay, Order No. 130/1987-BI. Shri Ravinder Narain, the learned advocate of the respondents pleaded that for the purpose of notification in terms of provisions of Chapter X all that the respondent was required to do was to file an application for availing of the benefit of the Notification and that there was no stipulation for taking out any L-6 licence by the respondents or permission of the authorities. He pleaded that respondents having complied with the requirements of applying for the benefit of the Notification in terms of Chapter X, there was nothing further required to be done by the respondents. He pointed out that even the Central Board of Excise and Customs had clarified that in such a situation where a manufacturer has applied for a licence the manufacturing and clearance operations were directed not to be interfered with by the Central Excise authorities in this connection he filed a photo copy of the extract from Central Excise Law Guide, 5th Edition by R.K. Jain, published by Central Law Office, New Delhi. The copy of the instructions as above are reproduced below for convenience of reference:
"9.15. Start of manufacturing operation after applying for licence - (1) in view of the provisions of Rule 174 of the Central Excise Rules, 1944 and Section 6 of the Central Excises and Salt Act, 1944, a person cannot start the business of manufacture unless he has been granted the proper licence. Therefore, in cases where he commences his business without the actual grant of licence under Rule 174, the manufacturer may be liable for penal action, but it would obviously be unjust to proceed against him when he has dona fide applied for a licence and is awaiting the grant of a licence by the department. In the intervening period, the production and clearance of excisable goods should not be interfered with provided all other excise formalities are complied with. In such cases, the technical breach of Rule 174 should be condoned as this situation is created because of failure of the part of the administrative machinery. Therefore, the manufacture and clearance of excisable goods by a new applicant/assessee who has made a proper application for a Central Excise licence on due payment of prescribed fee and observance of the prescribed procedure is permissible provided that (i) he can satisfy the Range Officer that any delay in manufacture/clearance of goods will adversely affect him and (ii) he has followed prescribed procedure in Rule 173CC (applicable to S.R.P. Commodities only) (2) In respect of commodities not falling under S.R.P., the procedure prescribed in Rule 52 shall be followed in respect of clearances after the manufacturer has filed his classification list and price list which may be pending approval of the proper officer.
(3) In other words, there is no legal bar to a new manufacturer for clearing his excisable goods pending grant of a formal licence or formal approval of his classification/price list provided that such application/classification/price list are duly filed with the proper officer and the proper officer is satisfied that the provisional clearance of goods sought to be removed can be granted.
(4) However, on the introduction of a new levy, manufacturing operations are not to be stopped pending grant of the licence and execution of bond. It must, however, be ensured that whenever a licence in form L-4 is granted to a manufacturer on introduction of a new levy the bond must be executed within a maximum period of three months from the introduction of new levy."
2. He stated that Hon'ble Bombay High Court in the case of Zenith Tin Works Private Limited v. K.K. Verma and Ors. -1979 ELT (J 618), have held that in the context of Rule 56A that the same was available from the date of application. He. pleaded that under Rule 56A procedure there is a specific requirement of permission for availing of the credit before a licensee can avail of the same but inspite of all these specific provision the Hon'ble High Court has held it otherwise. He pleaded that in April, 1983 the respondents were given the permission but they fulfilled all the requirements of Chapter X for the grant of permission right from the time they applied for the same.
3. The short point that arises for our consideration is that in the absence of any permission on the application made by the respondents in terms of requirements of Chapter X procedure whether they could have availed of the benefit of the Notifications referred to (supra). The revenue have cited the case of Kamal Cold Storage Order No. 130/1987-BI. The facts in that case as required under the Notification 132/68, the appellants had not applied nor obtained a L-6 licence in terms of Chapter X, but had cleared the goods on payment of full, duty and later on claimed refund for the same. In the present case before us the necessary application in terms of Chapter X had been made by the respondents before they proceeded to avail of the benefit of the notification. The respondents had made the departmental authorities aware of their intention to avail of the benefit of the Notification and it is presumed that all the necessary information for the purpose was furnished to the department, as we find on the application filed by them the necessary permission was given later in April, 1983. It is also not the case of the department that the other provisions of Chapter X that is maintaining of record, utilisation of materials, disposal of the wastes etc. and accountal of the goods have not been complied with. The respondents are well organised industry and various records would be available for the departmental verifications. We observe as pointed out by the Collector (Appeals) that the departmental authorities took inordinately long time to give the permission and no reasons have been given for such a long delay to accord the permission. In any case it is not the case of the department that it was on account of any failure to furnish any information or to comply with the requirements of Chapter X procedure that the delay for permission took place. In a situation like this where the industry is engaged in the production of goods it is not expected that the manufacturing operations should come to a stop just because the departmental authorities are taking their own sweet time in the discharge of their functions. In case there was going to be any delay in giving permission or there was any doubt as to the eligibility of the respondents to the benefit of the Notifications they could have been informed so and clearances could have been provisionally allowed as provided for under the law. The respondents as required under the law would have been also filing the necessary RT-12 returns etc. and made the authorities aware of their clearances but yet the departmental authorities did not raise any objection that pending the permission they had wrongly availed of the benefit of the Notification. In fact the Board have taken note of such possible delays in a different context as brought to our notice above and have instructed that production and clearances of the goods should be allowed to be done provided all other excise formalities are complied with. Here we find the only failure attributed to the respondents is that they did not wait for the permission to come through and there is no other failure attributed so far as the compliance with terms of the Notification or Chapter X are concerned. Now the relevant provision for the observance of the Chapter X procedure in the Notification 118/75 as amended is as under:
"Provided that where such use is in a factory of a manufacturer, different from his factory where the goods have been manufactured, the exemption contained in this notification shall be allowable subject to the observance of the procedure set out in Chapter X of the Central Excise Rules, 1944:"
4. It is seen from the Notification that in case an assessee avail, of the benefit of this Notification and uses the Item 68 goods in the same factory then no requirement of observance of any special procedure has been provided. However, it is only when he takes the goods out of the factory of production and uses the same in his other factory he is required to observe the procedure set out under Chapter X. The first step in the observance of the procedure as mentioned earlier on his part would be to make his intention to avail of the benefit of the notification known to the authorities and further thereafter to maintain accounts and also account for these goods as provided for under Chapter X. Now Chapter X as seen from Rule 192 deals with the remission of duty on excisable goods used for special industrial purposes. The special industrial process may be such where the utilisation of excisable goods exempted is in a unit which is not under excise control and it is primarily for this reason that the satisfaction of the Collector for utilisation of the goods in respect of which remission has been given is provided for and permission of the Collector after his satisfaction regarding the safeguard for the revenue etc. has been provided for. In a case where the benefit of exemption has been given and the utilisation of the goods is in a unit which already is under excise control the question of any special safeguards to be looked into does not arise. It is in this background that the plea of the permission by Collector for availing of the" benefit has to be viewed. We observe that the other conditions like providing of proper store room for goods and execution of Bond etc. under Rule 192 which in the present case have not been asked to be fulfilled apparently for the reason that the licensee is already working under Central Excise control. So far as the observance of the Chapter X procedure is concerned it calls for an application to be filed and also maintenance of accounts, records and calls for accountal of the goods removed. All these the respondents have been complied with. The question of giving sanction and permission as mentioned earlier under Chapter X is relevant when the goods are removed for special industrial purpose and the end use of these goods is at a place which is not under Central Excise control.
5. In view of this we find that inasmuch as the respondents on their part have done all that is required to be done under the law no fault can be found with them and the demand raised is not maintainable. We, therefore, dismiss the appeal.
S.D. Jha, Vice-President (J)
6. It is not the case of the Revenue that for the intervening period between the period of application dated 6-10-1982 for availing of concession and grant of permission, the respondents except for the fact that permission had not been granted did not comply with other requirements of the Notification On the facts and circumstances set out by Brother Gulati in his order the permission granted by the Collector in April, 1983 should be held as relating back to date of application dated 6-10-1982.1 agree that the appeal should be dismissed.