Bombay High Court
Indoswe Engineers Private Limited vs Union Of India on 1 January, 1800
Equivalent citations: 1990(26)ECC266, 1989(41)ELT217(BOM)
JUDGMENT Ashok Agarwal, J.
(a) Whether the Petitioner is entitled to double benefit both under Notification No. 46//70 as well as under rule 56-A (Notification No. 91/67)?
(b) by taking benefit of credit of duty on raw materials, i.e. inputs under procedure prescribed in Rule 56-A, does the raw material become non-duty paid?
(c) What is the true interpretation of the phrase "has already been paid" appearing in Notification No.46/70?
1. These are the questions which have been raised in the present Petition.
2. The Petitioner is a manufacturer of aluminium extrude articles from crude aluminium scrap of different description The aforesaid crude aluminium and scrap form the raw material to be used in the aforesaid manufacturing process. The Petitioner had piad the requisite duty ;on the crude aluminium which was used in the manufacture of the final product. it was however given proforma credit of the said duty under the Notification under Rule 56-A . On the final product manufactured, the Petitioner claimed and the Department granted a reduction in duty under Notification No.46/70. This pertained to the period 2nd January, 1970 to 19h October, 1971,. The Office of the superintendent, Central Excise, by it show Cause Notices dated 1st/2nd January, 1971, 2nd January, 1971 and 30th November, 1971 raised a demand in the sum of Rs. 46,489.20, Rs.1,66,850.80 and Rs.11,66,999.84 respectively. According to the Department, the Petitioner was not entitled to claim benefit of both the Notifications and the duty had been shortly levied. Hence the amounts mentioned in the Show Cause Notices were payable by the Petitioner to the Department. The Petitioner by its replies dated the 9th March, 1971 and 28th December, 1971 inter alia contended that was no bar from claiming benefit under both the Notifications. The Petitioner's product complied with the requirements of th Notification No.46/70 as the raw material qualified the requirement of being duty paid at the time of assessment and, therefore, the Petitioner was eligible for reduction in duty as per the aid Notification. It was contended that the grant of a proforma credit did not make the raw material non-duty paid, so as to dis- entitle the Petitioner for being eligible for reduction in duty. The aforesaid contentions did not find favour with the Assistant a Collector of Central Excise and he by his three separate orders confirmed the demands contained in the show cause notices. The Assistant collector was of the view that the Petitioner had availed of proforma credit of duty on raw material and hence was not entitled to the benefit of Notification No. 46/70, i.e., use of duty paid raw material was not fulfilled and, therefore, the Petitioner was not entitled to the benefit of the said Notification. Aggrieved by the said orders, the Petitioner preferred three appeals to the Appellate Collector of Central Excise who,by his common order dated he January, 1975, confirmed the order of the Assistant collector and dismissed the appeals. Against the said order the Petitioner preferred a Revision Application to the Government of India, Respondent No. 1, and Respondent Nos. 2 and 3 by their order dated the 25th of February, 1978 dismissed the said Revision Application. Aggrieved by the aforesaid orders, the Petitioner has approached this Court by filing the present Petition.
3. Shri Patel, the learned advocate appearing in support of the Petition, submitted that show Cause Notices were issued only on the ground that the Petitioner is not entitled to both the benefits. He pointed out that even as per the order of the Assistant Collector dated 20th September, 1971 its was found that neither of the Notifications contained any prhobitory clause to the effect that if the advantage under one of them was availed;of, no advantage under the other would be available. Therefore, there is no dispute as to the Petitioners, entitlement to he concession under Notification No, 46/70subject of course to the fulfilment of the conditions/requirements of there respective the ground that the Petitioner had availed of the proforma credit of the duty that was paid on the aluminium ingots used in the further manufacture of aluminium articles. The Petitioner was, therefore, to entitled to the concessional rate of duty under notification No. 46/70 on the ground that the Petition had availed of the Proforma credit in respect of the duty that was pad n the raw material (ingots). In effect, it meant that at the time of using such raw material after availing of the proforma credit. the Same be come non-duty paid. By using such non- duty paid raw material in he further manufacture of aluminium articles, the Petitioner did not fulfill the aforesaid condition stipulated in the Notification No.46/70. consequently , the Petitioner was not eligible to the concessional rate of duty under that Notification. Had he Petitioner not availed o the proforma credit in respect of the duty that was paid on the ingots, it could have definitely been eligible for the concessional rate of duty under Notification No. 46/70. It is this latter part of the reasoning of the Assistant Collector which found favour with the appellate and the Revisional authorities that was seriously assailed by Shri Patel in the present proceedings. According to Shri Patel the Petitioner has paid the requiste duty on the raw material used in the manufacture of its final products. All that the Petitioner had been granted was the proforma credit tin respect of that duty. this was done not bay refunding to the Petitioner the duty that was paid but by making the necessary entries in regard to the proforma credit. The Petitioner was entitled to the benefit of the said proforma credit;only at the stage if clearing if its final products and this was in terms of the Notification under Rule 56-A . This did not render the raw material as non-duty paid. According to Shri Patel there is no provision in the Excise Act which makes a product non-duty paid once it is cleared on payment of duty which ought to have been paid at the time of clearance. Non -duty paid goods are only those which have been cleared clandestinely.
4. Shri Patel further submitted that unless the Notifications is question contain a specific condition that the benefit thereunder is barred if benefit is taken under other provisions or Notification, the assessee would be entitled to both the benefits. He submitted that in matters of taxation there is no scope for intentment in interpretation of Notifications. he relied on the decision in the case of Hemraj Gordhandas v. H. H. Dave, 1978 Excise Law Times 350, and Indian Lead Pvt. Ltd. V. Union of India, 1988 (38) excise Law Times 23. According to Shri Petal, all exemption Notifications are Self-contained and independent and if a person is well within them, he will be entitled to their benefits which cannot be denied on the ground that he has avail the exemption under a different Notification. However, where benefit under an exemption Notification is subject to the condition that it does not apply if benefit under any other Notification is availed of, only in such a case the manufacturer has option to avail benefit of only one Notification. There is no bar to availing more than one benefits unless it is barred categorically. Hence a person can avail the benefit of proforma credit, set-off ad the exemption notification simultaneously if he fulfills the conditions and follows the procedure embodied under them unless the exemption Notification itself contained a bar of this effect. According to Shri Patel, Rule 56-A contains a non- obstante clause and hence stood by itself. The non-obstante clause with which Rule56-a (1) starts only indicates that whatever might have been contained in any other Rules, Rule 56-A would operate on its own . Moment that result is achieved, full effect has to be given to what is stated in Rule 56-A . Reliance was placed on the case of Digvijay Cement v, Union of India, 1986 (25) E. L. T. 879 (902).
5. Shri Patel further submitted that there are several Notifications similar to one relevant to the present Petition with same conditions. Wherever the Government did not want to give benefit both under exemption Notification and Rule 56-A a specific proviso is added to incorporate such a condition. He placed reliance on various Notifications wherein the benefit of two notifications was specifically excluded by insertion of a proviso to the Notification. since such a proviso was absent in the present Notification, it was not open to read in the present Notification a a curtailment of benefit under the exemption Notifications.
6. In order to appreciate the controvercy at hand it may be convenient to peruse the relevant Notifications. Notification No. 46/70 has provided an exemption on aluminium and its products provided the prescribe amount of duty of excise or the additional duty levied under Section 2A of the Indian Tariff Act, 1934, as the case may be has already been paid,. The extent of exemption from duty is Rs.850/- per metric tonne.
7. Rule 56-A (Notification No.91/70) provides for special procedure of movement of duty-paid materials or component parts or use in the manufacture of finished excisable goods . Sub-rule(1) provides:
"Notwithstanding anything contain in these rules, the Central Government may by notification in the Official Gazette, specify the excisable goods in respect which the procedure laid down in sub-rule (2) shall apply."
SUB-RULE(2) provides:
"The Collector may, on application made in this behalf and subject to the condition mentioneds in sub-rule(3) and such other conditions as may from item to time be prescribed by the Central Government,permit a manufacturer of any excisable goods specified under sub-rule (1) to receive material or component parts of finished product on which the duty of excise or the additional duty under Section 2-A of the Indian Tariff Act, 1934, "he countervailing duty" has been paid in his facotry for the manufacture these goods....... and allow a credit of the duty already paid on such material or component parts of finished product, as the case may be.' It is further provided that no credit of duty shall be allowed in respect of any material or component part used in the manufacture of finished excisable goods if such finished excisable goods produced by the manufacturer are exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty and unless duty has been paid for such material or component parts under the same item or sub-item as the finished excisable goods.
8. It would appear that Rule 56-A (Notification No. 91/67) is introduced to lessen the burden of levy on a consumer so that he is not required to pay duty both on raw material and also additional duty on finished product. This is obvious for the reason that o n the raw material duty is already paid and forms a part of the cost of the finished product. The rule thus gives concession in payment of duty on the finished product by giving credit to the extent of duty paid on raw material. But for such a rule a consumer would have to pay duty both on raw material as also on finished product. Hence Rule 56-A (Notification No. 91/67) seeks to avert a double levy on the raw material as also on the finished product. It cannot have the effect of making the raw material non-duty paid. All that the Notification No. 46/70 meant is to reduce the rate of excise duty. It does not exempt any of the goods mentioned therein from payment of excise duty altogether. The only requisite condition for grant of the said concession is that the prescribed amount of duty of excise has already been paid on the raw material. In our judgment, the Petitioner by availing of the proforma credit under Rule 56-A is not deprived of the benefit under the Notification No. 46/70. The Petitioner has paid the requisite duty on the raw material used in the manufacture of its final product. The duty so paid has at no point of time been refunded to the Petitioner. Therefore, it cannot be held that merely because the Petitioner has availed of the proforma credit in terms of the benefits granted by Rule 56-A (Notification no. 91/67), it is deprived of the concession and the rate of duty on the finished product provided under Notification No. 46/70. Under Rule 56-A (Notification No. 91-67) the Petitioner has been given a proforma credit which can be availed of only at the time of the clearance of the finished product and not otherwise. Such relief, which is conferred on the Petitioner by Rule 56-A (Notification No. 91/67) cannot have the effect of the raw material used in thee manufacture of the final product not duty paid. Similarly, if the Petitioner is found to be entitled to the benefit of the Notification No. 46/70, the same cannot be denied on the ground that the final product is manufactured out of raw material upon which excise duty has not been paid. In our view, the duty on the raw material has in fact been paid by the Petitioner. Merely because the Petitioner in term's of Rule 56-A (Notification No. 91/67) has availed of the proforma credit, it would not refer the raw material non-duty paid.
9. The phrase "has already been paid' as found i n the Notification points out to a time when the duty is required to be paid. this duty is required to be paid on the raw materials at the time of their clearance from the factory of its manufacture. Once duty is paid on such raw materials, they ar raw materials on which duty has already been paid. This character of duty already having been paid is not taken away on account of the fact that at a subsequent state when the final products are cleared, the Petitioner has claimed the benefit of set-off of the duty paid on the raw materials. What is required is that duty-paid raw materials are used in the manufacture of the final product. At the stage when the raw materials are used in the manufacture of the final products no credit is utilized by way of reduction in duty on the finished product. The subsequent taking of credit in respect of duty paid on the raw materials while clearing the final product cannot operate retrospectively.
10. It may be pertinent to note that Rule 56-A (Notification No. 91/67) starts with a non-obstainte clause, viz, "Notwithstanding anything contained in the rules'. This would indicate that whatever that might be contained in any other Rules, Rule 56-A (Notification No. 91/67) would operate on its own. the moment that result is achieved, full effect will have to be given to what is stated in Rule 56-A [(Notification No. 91/67). Digvijay Cement v. Union of India, 1986 (250 E. L. T. 879 (902)]. In our view, unless a Notification contains a specific condition that the benefit thereunder is barred if a benefit is taken under the other provision or Notification, the assessee would be entitled to both the benefits. It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. If the tax-payer is within the plain terms of an exemption he cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. What the legislature intended to be done or not to be done can only be legitimately ascertained from that what it has chosen to exact either in express words or by reasonable or necessary application. M/s. Hemraj Gordhandas v. H. H. Dave, 1978 Excise Law Times 350. In this view of the matter, it will have to be held that the benefit conferred by both the rule and the Notification are self- contained and independent. If a person is within them, he will be entitled to their benefits. This cannot be denied on the ground that he has availed of the benefit one or the other. However, if the benefit under an exemption Notification is subject to the condition that it will not apply if benefit under any other Notification is availed of, only in such a case the manufacturer will have the option to avail the benefit of only one Notification. In other words, there is no bar to avail the benefit of the proforma credit, set-off and the exemption notification simultaneously so long as he fulfills the conditions and follows the procedure modied in the rule and the notification unless the exemption notification itself contains the bar to that effect. It may be pertinent to note that in respect of several notifications where benefit under more than one notification is not intended to be conferred, a specific proviso to that effect is enacted. It may be convenient to reproduce one of the several notifications which as been pointed out by Shri Patel containing such a proviso. Notification No. 109/80 dated 19th June, 1980 provides;
"Concessional rate of duty for bituminised water proof paperboard. - In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts bituminised water proof paper or paperboard obtained by bonding a layer of paper or paperboard and another layer or paperboard with bitumen, and falling under sub-item (2) of Item No. 17 of the First Schedule in the Central Excises and Sale Act, 1944 (1 of 1944), from so much of a duty of excise leviable thereon as is in excess of 15 per cent ad valorem, subject to the condition that the appropriate duty of excise or additional duty leviable under Section 2A of the Indian Tariff Act, 1934 (32 of 1934), as the case may be, has already been paid in respect of the base paper or paperboard used in their manufacture;
provided that nothing contained in this notification shall apply to a manufacture who avails of -
(i) the special procedure prescribed under rule 56A of the aforesaid rules in respect of the duty paid on base paper or paperboard; or
(ii) the exemption granted under the notification of the Government of India in the Department of Revenue and Banking, no. 67/76-Central Excise, dated the 16th March, 1976.
Explanation. - For the purposes of this notification, appropriate duty of excise or additional duty leviable under Section 2A of the Indian Tariff Act, 1934 (32 of 1934), shall be deemed to have been paid on the base paper or paperboard used in the manufacture of bituminised water proof paper or paperboard if it is purchased from the market'.
Since there are several such notifications which contain a specific proviso denying the benefit of an notification if the benefit under another notification has been availed of and such a proviso is absent in the present notification, it would be reasonable to infer that it was not intended, as held by the lower authorities, that the benefit under Notification No. 46/70 would to be available on the ground that the benefit under Notification No. 91/67 has been availed of.
11. Shri Desai, the learned Counsel appearing on behalf of the Respondents, however, submitted that the present petition is not tenable under Article 226 of the Constitution of India as the concerned authorities have applied the provisions of law to the facts of the case and their finding cannot be interfered with under Article 226 of the Constitution of India. In our judgment, there is no merit in the aforesaid contention. Once it is found that the concerned authorities have misconstured the relevant provisions of the notifications and they have failed to give effect to the true purport and effect of the same thereby casting a heavy monetary liability on the petitioner which cannot be justified in law. The present petition will have to be held as maintainable and the relief claimed will have to be granted.
12. On the merits of the petitioner's claim, Shri Desaid submitted that the petitioner has taken the benefit of the proforma credit and hence it is not entitled to the benefit of the Notification No. 46/70. the petitioner has taken proforma credit and has also claimed exemption on the finished products. It has thus sought benefit which it is not entitled. What the Notification No. 46/70 contemplates is that the raw material used in the manufacture of articles must be duty-paid for attracting the concessional rate of duty. According to rule 56A (Notification No. 91/67) the credit of duty in respect of any material or component part may be utilized towards the payment of duty on any excisable goods for the manufacture of which such materials or component parts were permitted to be brought into the factory. Under Rule 56-A (Notification No. 91/67) proforma credit would be utilized towards payment of duty on the finished product. The availment of proforma credit of a duty on raw material and utilising the said credit for payment of Central Excise duty on the finished products, the raw materials lose its duty paid character. Hence it cannot bee said that the raw materials were utilized in the manufacture of final products out of the duty paid materials. The petitioner was thus not entitled to the benefit of Notification No. 46/70. Shri Desai sought to distinguish the case of Galada Continuous Casting Ltd. v. Assistant Collector, 1987 (320 E. l. T. 474, which was relied upon on behalf of the petitioner, by contending that the facts of that case were not identical to the facts of the present case. In that case, the issue was whether the petitioners were entitled to proforma credit of the duty paid on the raw material as the said credit was due for payment of the lower duty under the notification. That case did not consider whether the raw material becomes of a non-duty paid character, if a party takes advantage of the proforma credit. It is true that th said case did not deal with facts identical to the facts of the present case. However, that case has laid down that an assessee by availing of the benefit of one Notification is not deprived of the benefit of the other. We are in agreement with the reasons adopted in that case. We have already indicated hereinabove our reasons for arriving at our conclusion that the petitioner would be entitled to both the benefits, under the Notification No. 46/70 and Rule 46-A (Notification No. 91/67). For those reasons the submissions advanced by Shri Desai are liable to be negatived.
13. For thee foregoing reasons, we are of the view that the petitioner would be entitled to the benefit of both the Notification No. 46/70 and Rule 56-A (Notification No. 91/67). Consequently, it will have to be held that the impugned Show Cause Notices and the order dated the 25th February, 1978 passed by the second and the third Respondents, the orders dated the 20th September, 1971 and 10th April, 1972 of the Assistant Collector, and the order dated the 8th January, 1975 of the Appellate Collector, Central Excise, are liable to be set aside and the impugned Show Cause Notices dated 1st/2nd January, 1971, 2nd January, 1971 and 30th November, 1971 will have to be quashed.
14. In the result, the Rule is made absolute in terms of prayer Clause (b). in the facts and circumstances of the case there shall be no order as to costs.