Customs, Excise and Gold Tribunal - Tamil Nadu
Watts Electronics Pvt. Ltd. vs Collector Of Central Excise on 3 April, 1993
Equivalent citations: 1993ECR286(TRI.-CHENNAI), 1994(70)ELT127(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. This appeal is against the order of the Collector of Central Excise (Appeals), Cochin. The short point that falls for consideration in the appeal is as to how the aggregate value of the clearances of specified goods has to be commuted when a unit starts availing of the benefit of Notification 175/86 not in the beginning of the financial year but somewhere during the course of the financial year. In the present case the appellants were clearing the goods after paying duty as per Tariff rate from 1-4-1991 to 4-8-1991 and started availing of the benefit of Notification 175/86 with effect from 5-8-1991. Under the Notification 175/86 the specified goods at the exempted rates can be cleared upto the limits under paras 1(a) and 1(b) and para 2 of the Notification. These for convenience of reference are reproduced below:
"In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 85/85-Central Excises, dated the 17th March, 1985, the Central Government hereby exempts the excisable goods of the description specified in the Annexure below and falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), (hereinafter referred to as the "specified goods"), and cleared for home consumption on or after the 1st day of April in any financial year, by a manufacturer from one or more factories,-
(a) In the case of first clearances of the specified goods upto an aggregate value not exceeding rupees thirty lakhs-
(i) in a case where a manufacturer avails of the credit of the duty paid on inputs used in the manufacture of the specified goods cleared for home consumption under Rule 57A of the said Rules, from so much of the duty of excise leviable thereon which is specified in the said Schedule [read with any relevant notification issued under Sub-rule (1) of Rule 8 of the said Rules and in force for the time being] as is equivalent to an amount calculated at the rate of 10% ad valorem:
(ii) in any other case from the whole of the duty of excise leviable thereon:
Provided that the aggregate value of clearances of the specified goods under Sub-clause (ii) of this clause in respect of any one heading No. of the said Schedule, shall not exceed rupees fifteen lakhs;
(b) in the case of clearances (being the clearances of the specified goods of an aggregate value not exceeding rupees sixty lakhs) immediately following the said clearances of the value specified in clause (a) from so much of the duty of excise leviable thereon which is specified in the said Schedule read with any relevant notification issued under Sub-rule (1) of Rule 8 of the said Rules as is equivalent to an amount calculated at the rate of 10% ad valorem:
Provided that the amount of duty of excise payable on the specified goods under Sub-clause (i) of Clause (a), or, as the case may be, under this clause, shall not be less than an amount calculated at the rate of 5% ad valorem:
Provided further that the aggregate value of clearances of the specified goods in terms of clause (a) and clause (b) of this paragraph taken together, shall not exceed rupees seventy-five lakhs.
2. The aggregate value of clearances of the specified goods from any factory by one or more manufacturers in any financial year under Clauses (a) and (b) of paragraph 1, shall not exceed rupees thirty lakhs and sixty lakhs respectively:
Provided that the aggregate value of clearances of the specified goods from any factory by one or more manufacturers in any financial year in terms of clause (a) and clause (b) of paragraph 1, taken together, shall not exceed rupees seventy-five lakhs.
3. Nothing contained in this notification shall apply if the aggregate value of clearances of all excisable goods for home consumption,-
(a) by a manufacturer, from one or more factories, or
(b) from any factory, by one or more manufacturers, had exceeded rupees one hundred and fifty lakhs in the preceding financial year."
The appellants have claimed that in terms of the Notification they can clear goods at the exempted rates as specified in paras 1(a) and 1(b) read with Para 2 of the Notification upto the aggregate value of Rs. 75 lakhs ignoring the earlier clearances made at full rate of duty upto the time when they started availing of the benefit of Notification 175/86. The learned lower appellate authority has, however, held that the Notification allowed the benefit in respect of first clearances in a financial year notwithstanding the fact that the first clearances made by the appellants were on payment of full duty and the same will have to be added for the purpose of arriving at the total value of the exempted clearances in terms of Paras 1(a) and 1(b) read with Para 2 of the Notification. The learned lower appellate authority's findings in this regard are as under:-
"8. On a detailed reading of the Notification No. 175/86, it is noticed that the notification gives full exemption to the first clearance of the specified goods in a financial year and partial exemption for clearances immediately following the first clearances. The notification thus makes it amply clear that the value of those clearances has to be computed from the beginning of the financial year and duty free clearances or concessional rate of duty are applicable for the goods cleared from the beginning of the financial year and also for the goods cleared immediately after such duty free clearances. At the beginning of the financial year 1991-92, the appellants cleared goods on payment of the full rate of duty. Thus, in terms of the language of the Notification, they have foregone their chances of duty free clearances and concessional rate clearances to that extent because they paid full rate of duty for their first clearances in the financial year. Since Notification No. 175/86 extends the exemption based on the aggregate value of the first clearances made in a financial year, the appellants are not entitled for the benefit of the Notification if the goods were not cleared at the beginning of the financial year. In this case, they came into the purview of the Notification No. 175/86 only on 5-8-1991 and by 29-10-1991, they had exceeded the limit laid down in the Notification No. 175/86. Since the Notification is very categorical that the benefit of the Notification can be extended only to the first clearances in a financial year, the appellants' plea for extending the benefit of the notification to clearances on subsequent dates cannot be accepted. Thus I find no merit in the appeals and therefore, reject the appeals."
2. The learned Consultant for the appellants pleaded that the object of the Notification would be defeated in case the appellants are not allowed to clear the goods at the exempted rates upto the limits as specified in paras 1(a) and 1(b) and Para 2 of the Notification. He pleaded that there is no dispute that so far as the limit of aggregate value of the excisable goods manufactured by the appellants is concerned the same limit as set out in Para 3 has not been exceeded. He has pleaded that the lower appellate authority was in error in holding that these are the first clearances which are alone eligible for the benefit of the Notification and in case the appellants choose to clear the same goods on payment of full duty, the subsequent clearances, if the limit set out for the first clearances is exceeded, will not be eligible for the benefit of the Notification. He pleaded that this is an erroneous interpretation of the Notification.
3. The learned DR for the Department adopted the reasoning of the learned lower appellate authority.
4. We observe that Notification 175/86 is a beneficient piece of legislation to take care of the special needs of the small scale sector and to provide them with the necessary competitive edge in the matter of the goods manufactured by them. The Notification, as would be seen in Paras 1,2 & 3, lays down the limits within which the benefit is allowed.The first condition is the-goods should be specified in the Notification and in case the goods are specified, then for each of the specified goods the benefit of total exemption or in case of units availing of MODVAT credit on payment of duty of 10%, is limited upto the aggregate value of Rs. 30 lakhs for all specified goods and thereafter in terms of para 1(b) for the clearances beyond that limit for the specified goods not exceeding Rs. 60 lakhs and upto a total value of Rs. 75 lakhs of the clearances under Paras 1(a) and 1(b) at a lower rate of duty than normally chargeable is available. However, the clearances under the exempted rates is not available to an unit with a value of all the excisable goods manufactured by one or more factories, if the total value of the clearances exceeds the limit set out in Para 3 of the Notification. It is not in dispute that limits set out in Para 3 have been exceeded by the appellants. The dispute is as to whether after the appellants opted for the benefit of Notification 175/86 they are eligible for the full concessions as set out under Paras 1(a) and 1(b) and Para 2 of the said Notification i.e. whether the appellants are eligible for the exemption benefits upto Rs. 75 lakhs of the goods cleared after they started availing of the benefit of Notification 175/86. We observe that there is nothing in the Notification to say that if a manufacturer starts availing of the benefit of the Notification 175/86 during the middle of a financial year he is not eligible for the clearances at the exempted rates upto the limits as specified in paras 1(a) and 1(b) and Para 2 of the Notification 175/86. There is also nothing in the notification to say that an assessee can avail of the benefit of Notification 175/86 either in the beginning of the financial year or not at all. In fact such interpretation has not been placed by the authorities on the Notification as the appellants have been allowed to avail of the benefit of Notification 175/86 in the middle of the financial year. If there is no such bar, once the benefit of the Notification is given it has to be given to the extent of the full value of the goods as set out in Paras 1(a) and 1(b) and Para 2 of the Notification. In case the appellants have cleared goods after paying full duty under the Tariff without the benefit of Notification 175/86, that cannot be held to be a reason to deny them the benefit of the Notification upto the limits as specified in Paras 1(a) and 1(b) and Para 2 of the said Notification. The learned lower authority has placed a lot of stress on the words "first clearances in a financial year". We have held in a number of cases that the first clearances in a financial year are basically to indicate the order for the purpose of availing of the full exemption and partial exemption as set out in Paras 1(a) and 1(b) of the Notification and it is not to deny the benefit of the Notification upto the limits as set out in these Paras, as otherwise the implementation of Notification would lead to very anomalous results. All that has to be seen is that when a person avails of the benefit of Notification 175/86 he is given the benefit of the full exemption etc. as set out in para 1(a) within the aggregate limits of Rs. 15 lakhs for individual item of the specified goods within an overall limit of Rs. 30 lakhs and thereafter upto a further amount of value of Rs. 60 lakhs within the overall value of the clearances of specified goods upto Rs. 75 lakhs at the concessional rate. The appellants have cleared the goods at full rate without the benefit of the Notification prior to the availing of the benefit of the said Notification and this cannot be added for arriving at the value of the exempted goods upto Rs. 75 lakhs. We, therefore, hold that the learned lower appellate authority's order is not maintainable in law and set aside the same and allow the appeal.