Customs, Excise and Gold Tribunal - Delhi
M.R.F. Ltd. vs Collector Of Central Excise on 25 April, 1988
Equivalent citations: 1988(17)ECC201, 1988(17)ECR521(TRI.-DELHI), 1988(37)ELT139(TRI-DEL)
ORDER D.C. Mandal, Member (T)
1. The facts of the case, in brief, are that the Notification No. 95/79-C.E., dated 1.3.1979 exempted certain finished products as specified in Columns 4 and 5 of the Table below the Notification from so much of the Central Excise duty leviable under First Schedule to the Central Excises & Salt Act, 1944 and the Additional duty of Customs leviable under Section 3 of the Customs Tariff Act, 1975 already paid on certain inputs as specified in Columns (2) and (3) of the said Table subject to certain condition, the condition (iii) being as follows :-
"(iii) the procedure set out in Rule 56-A of the Central Excise Rules is followed."
The above Notification was amended by Notification No. 58/82-C.E., dated 28.2.1982 by virtue of which three inputs, viz. Synthetic Rubber, Carbon black and Rubber Processing Chemicals falling under Central Excise Tariff Items 16AA, 64 and 65 respectively were added in columns 2 and 3 of the Table, and Tyres, Tubes and Raps falling under Tariff Item 16 were added columns 4 and 5 of the Table as serial Nos. 19, 20 and 21 of the said Table of the Notification No. 95/79-C.E. After amendment on 28.2.1982 as aforesaid, the text of the Notification No. 95/79-C.E., dated 1.3.1979 insofar as the three inputs and the final products tyres, tubes and flaps are concerned, read as follows :-
"In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts the excisable goods of the description specified in column (5) of the Table hereto Annexed (such goods being hereinafter referred to as "final products") and falling under such Item No. of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), as is specified In the corresponding entry in column of the said Table, from so much of the duty of excise leviable thereon as is equivalent to the amount of -
(a) the duty of excise leviable under the aforesaid First Schedule plus the special duty of excise, levied under Sub-section (1) of Section 37 of the Finance Act, 1978 (19 of 1978) or leviable under Sub-clause (1) of clause b2 of the Finance Bill, 1979, which clause has, by virtue of the declaration made In the said Bill under the provisional Collection of Taxes Act, 1931 (16 of 1931), the force of law, OR, as the case may be,
(b) the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), already paid on the goods of the description specified in the corresponding entry in column (3) of the said Table (such goods being hereinafter referred to as "Inputs") and falling under such Item No. of the aforesaid First Schedule as is specified in the corresponding entry In column (2) of the said Table:
Provided that -
(i) the inputs specified In column (3) of the said Table against a particular serial number in column (1) thereof are used in the manufacture of the final products specified in the corresponding entry in column (5) of the said Table against the said serial number,
(ii) where the duty of excise leviable on any final product is less than the amount of duty of excise (Including special duty of excise aforesaid) or the amount of additional duty aforesaid, as the case may be, paid on the inputs used in the manufacture of such final product, the extent of exemption shall be restricted to the duty of excise leviable on such final product; and
(iii) in relation to the exemption under this Notification, the procedure set out Rule 56-A of the aforesaid rules if followed :
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TABLE
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S.No. Item No. of the Description of in Item No. of the Description of First Schedule puts First Schedule final product
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(1) (2) (3) (4) (5)
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XXX XXX XXX XXX XXX
XXX XXX XXX XXX XXX
19. 16AA Synthetic Rubber 16 Tyres, tubes and
flaps
20. 64 Carbon black 16 Tyres, tubes and
flaps
21. 65 Rubber proces- 16 Tyres, tubes and
flaps
sing Chemicals
The effect of this amendment was that with effect from 1.3.1982, tyres, tubes and flaps were exempted from so much of the Central Excise duty as is equivalent to the Central Excise duty and additional duty of Customs already paid on Synthetic Rubber, Carbon black and Rubber processing Chemicals used in the manufacture of such tyres, tubes and flaps, subject to fulfilment of the conditions laid down in the Notification. One of the conditions was that for availing of this exemption the procedure set out In Rule 56-A of the Central Excise Flutes was followed.
2. The commodities covered by Rule 56-A were required to be specified by issue of Notification under Sub-rule (1) of Rule 56-A. The parent Notification Issued under this sub-rule was the Notification No. 223/62-C.E., dated 29.12.1962. By Notification No. 198/83-C.E., dated 1.8.1983 Issued under Sub-rule (1) of Rule 56-A, goods falling under Item 16 of the First Schedule to the Central Excises and Salt Act, 1944 were included as entry No. 59 in the said parent Notification No. 223/62-C.E. As a result of this amendment, under Rule 56-A as it stood after amendment, Central Excise duty and additional duty paid on raw materials, component parts and finished products used in the manufacture of tyres, tubes and flaps could be set off against the duty payable on such tyres, tubes and flaps, provided, Inter alia, that the duty on such raw material and component parts was paid under the same Tariff Item as the finished excisable goods.
3. The appellants had a stock of Synthetic rubber, Carbon black and Rubber processing Chemicals on 27.2.1982. The appellants claimed that the said stock was duty-paid and was used In the manufacture of tyres, tubes and flaps after 1.3.1982. On 16.8.1982 they submitted a refund claim for Rs. 12,29,819.11 on the ground that the above stock was used by them In the manufacture of tyres, tubes and flaps and "in view of the language employed in Notification No. 95/79, dated 1.3.1979" the refund was being claimed. The lower authorities rejected the refund claim on the grounds that (i) the appellants did not follow the procedure set out in Rule 56-A, which was one of the conditions for availing of the benefit of exemption Notification No. 95/79-C.E., dated 1.3.1979, (il) no application for condonation under Rule 56-A(2 B) was filed to the Collector of Central Excise, (iii) it was not established that duty on the inputs was erroneously paid, (iv) the inputs were received prior to the amendment of the Notification and (v) no refund in cash or by cheque was permissible under Rule 56-A of duty-paid inputs. Hence, the present appeal before us.
4. During the hearing before us, Shrl Ignltious has argued for the appellants that the goods falling under Tariff Item 16 were brought within the purview of Rule 56-A with effect from 1.8.1983 by Notification No. 198/83-C.E., dated 1.8.1983. Therefore, It was not possible to follow the procedure set out in Rule 56-A prior to 1.8.1983 nor was It required to be followed prior to that date for the purpose of availing of the exemption under Notification No. 58/82-C.E., dated 28.2.1982; the fact that D-3 intimation about duty-paid Inputs was not sent or that no application for condonation under Rule 56-A(2 B) was filed would not make any difference; Inputs were duty-paid and were lying in stock on 28.2.1982 and those were used in the manufacture of tyres, tubes and flaps cleared from 2.3.1982 to 15.8.1982; therefore, the appellants were entitled to the benefit of exemption under Notification No. 95/79-C.E. as amended by Notification 58/82-C.E., dated 28.2.1982; refund claim was accordingly filed on 16.8.1982; procedural lapse should not stand in the way of their getting the refund. He relied on the decisions reported In (i) 1984 (18) ELT135 (Tribunal) - Chemiequlp Limited v. Collector of Central Excise, Thane, (ii) 1978 ELT (J-452) (SC) -Aluminium Corporation of India Ltd. v. Union of India and Ors., (iii) 1987 (Ld ELT 275 (Tribunal) - Sundaram Fasteners Ltd. v. Collector of Central Excise, Madras, (iv) AIR 1986 (SC) 1499 - Girdhari Lal & Sons v. Balbir Nath Mathur and Ors., (v) Tribunal's Order Nos. 774 to 776/1987-D, dated 29.8.1987 in Appeals No. E-1413/81-D, 205/81 -D and 287/83-D -1987 (32) ELT 579 (Tribunal) - Collector of Central Excise, Madras v. Madras Rubber Factory Ltd. (vi) 1986 (8) ETR 400 (Tribunal) - Collector of Central Excise, Bangalore v. Vikrant Tyres Ltd. and (vii) 1987 (Vol. 11) ECC Page T-90 (Tribunal) -Andhra Pradesh Paper Mills Ltd. v. Collector of Central Excise, Guntur, in support of his arguments.
5. Appearing for the respondent, Shri G. V. Naik has argued as follows :-
(i) The three inputs, viz. Synthetic Rubber, Carbon black and Rubber processing Chemicals, were Included in the exemption Notification No. 95/79-C.E. by amending Notification No. 58/82-C.E., dated 28.2.1982. The amending Notification did not have retrospective effect. The same was effective from 1.3.1982. Therefore, the inputs received prior to 1.3.1982 were not eligible to the benefit of exemption under Notification No. 95/79-C.E. The inputs in stock on 27.2.1982 were received prior to the date of issue of the Notification No. 58/82-C.E., dated 28.2.1982. The said stock was not, therefore, eligible for this exemption.
(ii) One of the conditions of the exemption Notification No. 95/79-C.E. was that the procedure prescribed in Rule 56-A should be followed. In the present case, the appellants did not follow the procedure laid down in Rule 56-A. As the condition of the Notification was not fulfilled, the benefit of the exemption was not available. Notification should be interpreted strictly.
(iii) To follow the procedure of Rule 56-A was an essential condition of Notification 95/79-C.E. as amended by Notification No. 58/82-C.E. The appellants neither applied for permission under Rule 56-A(2) nor observed the procedure prescribed in Rule 56-A(3). They did not even apply under Rule 56-A(2 B) for condonation of delay in complying with Rule 56-A(2). Collector could not condone the requirements of Sub-rule (2) of Rule 56-A in view of the proviso (b) to Rule 56-A(2 B), according to which the materials or component parts should be received in the factory on or after the date of Notification. Notification under Sub-rule (1) of Rule 56-A was issued in this case on 1.8.1983 whereas the inputs (materials and components) were received in the factory earlier to 27.2.1982.
(iv) The mere fact that the stock was duty-paid and was used in the manufacture of finished products falling under Tariff Item 16 will not entitle the appellants to exemption under Notification No. 95/79-C.E. To be eligible for this exemption, all the conditions of the Notification must be fulfilled. Any plea that substantial compliance is a compliance of the conditions does not stand. The Rules framed under the Act are parts of the Act. Notification issued under Rule 8(1) of the Central Excise Rules is statutory and no part thereof could be ignored.
(v) The appellants could not also avail of proforma credit under Rule 56-A as the three inputs in question and the final excisable goods did not fall under the same Tariff Item. For availing proforma credit under Rule 56-A the inputs and the final product must fall under the same Tariff Item. Proforma credit under this Rule was also not permissible as the inputs were received much earlier than the date of issue of Notification No. 198/83-C.E., dated 1.8.1983 under Sub-rule (1) of Rule 56-A. Therefore, the appellants were not eligible either for exemption under Notification No. 95/79-C.E. or for proforma credit under Rule 56-A.
(vi) The claim for refund was time-barred under Section 11 -B of the Central Excises and Salt Act, 1944. Duty was paid on the inputs prior to 27.2.1982, but the refund claim was filed on 16.8.1982.
(vii) No refund by cash or cheque was permissible as per provision of Rule 56-A(3)(vi)(b).
(viii) In the case reported in 1984 (18) ELT135 (Tribunal). D-3 intimation COUld not be sent in extenuating circumstances. None of the other decisions relied on by Shri Ignitious held that proforma credit was available in respect of goods received prior to the date of the Notification. So, the ratio of those decisions is not applicable to the present case.
In support of his arguments Shri Naik has relied on the following judgments :-
(i) 1982 ELT 844 (M.P.) Gwalior Rayon Mfg. Wvg. Co. v. Union of India and Ors.;
(ii) AIR 1973 S.C. 1445 Sri Ram Mohan Motor Services. Commissioner of Income Tax, Hyderabad;
(iii) Tribunal's Order No. 519/86-B1, dated 18.8.1986 in the case of Heavy Engineering Corporation v. Collector of Central Excise, Patna.
6. The facts of the cases relied on by Shri Ignitious are not similar to those of the present case. In the case reported in 1984 (18) ELT135 (Tribunal), the appellants cleared a consignment of imported Alpha Napthol on payment of Customs duty amounting to Rs. 25,136.25 which did not include additional duty of Customs. Subsequently, a less charge demand for Rs. 18,475.14 on account of additional duty was raised by the Assistant Collector of Customs. The less charge demand was paid by the appellants and they wanted proforma credit under Rule 56-A in respect of additional duty. The claim was rejected by the Assistant Collector on the ground that D-3 intimation was not sent. It was held by the Tribunal that there was no question of the appellants' sending D-3 intimation as the additional duty was not paid at the time of receipt of the goods, but was paid subsequently on receipt of less charge demand. In the circumstances, proforma credit should be allowed even though D-3 intimation was not sent. In the case of Sundaram Fasteners Ltd. 1987 (29) ELT 275 (Tribunal), the procedure laid down in Chapter X of the Central Excise Rules was not followed due to wrong classification of the goods by the Department under Tariff Item 52 instead of Tariff Item 68 claimed by the appellants. In the circumstances, Tribunal held that refund was admissible to the appellants as the lower authority was satisfied that the goods had been cleared for the purpose set out in the Notification and were duly accounted for as required under Chapter X Procedure. In the case at Aluminium Corporation of India Ltd. reported in 1978 ELT (J-452), aluminium sheets, circles etc. were manufactured partly of duty-paid and partly of non-duty paid aluminium. Hon'ble Supreme Court allowed the benefit of the Notification as it did not provide that the sheets, circles etc. should be manufactured wholly and solely out of duty-paid slabs. In paragraph 9 of the judgment reported in AIR 1986 (SC) 1499 Girdhari Lal & Sons v. Balbir Nath Mathurand Ors.) the Hon'ble Supreme Court, in a case under Delhi Rent Control Act, observed that the statutes should be so interpreted as to promote the object and purpose of the enactment and the court may even depart from the normal rule that plain words should be interpreted according to their plain meaning to achieve aforesaid purpose, Shri Ignitious cited this judgment in support of his contention that in the Central Budget of 1982, the duty on tyres, tubes and flaps was increased to 66% ad valorem, but the assessees were not to increase the price of these goods. Partial exemption was, therefore, granted under Notification No. 58/82-C.E., dated 28.2.1982 adding three inputs as mentioned therein, to the exemption Notification No. 95/79-C.E. According to him, the object was to allow the exemption and not to deny it. In the case of Vikrant Tyres Ltd., reported in 1986 (8) ETR 400, duty paid goods were received and consumed in the production of dutiable finished goods. The Deptt. denied the benefit of set-off of duty paid on the inputs as the D-3 intimation was delayed and the goods were not available for verification. In the facts of that case, the Tribunal allowed the set-off. The appeal filed in the case of Andhra Pradesh Paper Mills Ltd. v. Collector of Central Excise, Guntur 1987 (Vol. 11) ECC Page 90 was allowed by the Tribunal considering the fact that in the relevant Notification No. 178/77-C.E., as amended, there was nothing to indicate that the exemption was to be claimed only at the time of clearance of the goods, and no refund of duty was to be claimed subsequently. In the appellants' own cases covered by the Tribunal's Order Nos. 744 to 746/87-D, dated 28.9.1987, the Department's case was that the benefit of exemption under Notification No. 201/79-C.E. was not admissible as the raw materials were converted into an intermediate product called masticate rubber falling under Tariff Item 16-A(2) in one factory of the appellants and the intermediate product was used in the manufacture of the final product in another factory of the appellants and that the raw materials were not directly used in the manufacture of final product. In the facts of that case the Tribunal held that the benefit of the Notification was available to the appellants. None of the above decisions is applicable to the present case as the facts of this case are different. This case should be decided on its own facts and provisions of the relevant Notifications and the Central Excise Rules.
7. Admittedly, the inputs in the present case were in stock of the appellants on 27.2.1982; in other words, the same were received in their factory prior to that date. The three inputs, viz. Synthetic Rubber, Carbon black and Rubber processing Chemicals, were included in the Notification No. 95/79-C.E. with effect from 1.3.1982 by Notification No. 58/82-C.E., dated 28.2.1982. Notification No. 58/82-C.E. had no retrospective effect. Therefore, the exemption Notification should apply to the aforesaid three inputs from 1.3.1982. In the result, the receipt of the duty-paid inputs and the use thereof in the final products tyres, tubes and flaps should take place on and from 1.3.1982. The inputs were received before the date of issue of this Notification. This is one reason why the benefit of this Notification should not be available to the appellants in this case. The second reason is that one of the conditions of the exemption Notification No. 95/79-C.E., as amended by the Notification No. 58/82-C.E., dated 28.2.1982, is that the procedure set out in Rule 56-A of the Central Excise Rules, 1944 should be followed. Admittedly, the said procedure was not followed by the appellants. Under Sub-rule (2) of 56-A, an application is required to be made before the Collector of Central Excise for his permission to avail of the procedure and the Collector may grant permission subject to the conditions mentioned in Sub-rule (3) of Rule 56-A and such other conditions as may be prescribed by the Central Govt. from time to time. Sub-rule (3) prescribes many conditions. Some of the important conditions are that a manufacturer shall:
(a) give prior notice to the proper officer before the duty-paid inputs are received in his factory to enable the proper officer to be present at the time of receipt of such inputs;
(b) bring to the factory the inputs in the original packing under the cover of AR 1 or such other documents as may be approved by the Central Board of Excise and Customs in this behalf or Bill of entry evidencing the payment of excise duty or additional duty of Customs (countervailing duty);
(c) produce the inputs when brought to the factory before the proper officer to enable him to identify the same and verify the actual quantity thereof; and
(d) maintain an account in Form RG 23, Part I and II.
None of the above conditions and also the other prescribed conditions were fulfilled by the appellants. So far as an application under Sub-rule (2) is concerned, under Sub-rule (2 B) the Collector is empowered to condone delay in filing such application, but in the present case no such application was filed and the Collector could not also condone the delay in view of the proviso (b) to Sub-rule (2 B) as the input materials had been received before the Notification was issued. Condition (iii) of the Notification No. 95/79-C.E. as amended, viz. that the procedure set out in Rule 56-A should be followed in relation to the exemption under this Notification, is an important condition of this exemption Notification. This condition has not been fulfilled by the appellants. They did not even apply to Collector for permission to avail of the procedure of Rule 56-A in relation of the Notification No. 95/79-C.E. as amended by Notification No. 58/82-C.E. although the said Rule was in force on 28.2.1982. The Notification No. 58/82-C.E., dated 28.2.1982 has no retrospective effect. There is no scope to draw any presumption that it is the intention of Government to extend the benefit of this Notification without fulfilment of this important condition and that too in respect of inputs which were received during a period prior to the issue of the said Notification dated 28.2.1982. The ratio of the Supreme Court judgment in the case of Girdhari Lal & Sons v. Balbir Nath Mathur and Ors. (AIR 1986 SC1499) is not applicable in this case. An assessee who claims the benefit of an exemption Notification, has to prove that he has fulfilled the terms of the Notification. As discussed herein above, the appellants have miserably failed to establish that they are eligible to the benefit of the exemption Notification.
8. Refund application was filed claiming refund of Central Excise duty and countervailing duty paid on the inputs, received by the appellants prior to 27.2.1982. Refund claim was filed on 18.6.1982. The relevant provision for claiming such refund is Section 11 -B of the Central Excises and Salt Act, 1944. This Section provides that any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before expiry of six months from the relevant date. The relevant date in this case is the date of payment of duty. Shri Naik has argued that the refund is time-barred as the claim was not filed within six months from the dates of payments of duty on the inputs. This argument has not been controverted by the appellants. The time limit cannot be counted from the date of clearance of the finished products, viz. tyres, tubes and flaps, as the refund of duty paid on tyres, tubes and flaps was not claimed in the appellants' application dated 18.6.1982. In the said application refund was claimed in respect of duty paid on Synthetic Rubber, Carbon black and Rubber processing Chemicals, which were in their stock on 27.2.1982. No materials have been placed before us by the appellants to establish that duty was paid in excess on those input materials. Therefore, no question of refunding the same does arise in this case.
9. The refund was, therefore, correctly rejected by the lower authorities. There is no justification to interfere with their orders. The impugned order is, therefore, upheld and the appeal is dismissed.
10. In view of the above findings and order it is not necessary to discuss the facts, the cases and the ratio of the decisions relied on by Shri Naik. It is also not necessary to discuss and give findings on the other points raised by him as such discussion will be academic in nature. We, however, observe that proforma credit under Rule 56-A is admissible when the inputs (i.e. the duty paid raw materials, component parts and finished goods) and the final product in which such duty-paid inputs are used, fall under the same Tariff Item. Notification No. 198/83-C.E., dated 1.8.1983 was issued by the Government under Sub-rule (1) of Rule 56-A to extend the benefit of proforma credit under that Rule to the goods falling under Item 16 of the Central Excise Tariff. This Notification had no relation to the Notification No. 95/79-C.E., as amended by Notification No. 58/82-C.E. issued under Rule 8(1) of the Central Excise Rules, an assessee could avail of the exemption under Notification No. 95/79-C.E. as amended if the, terms and conditions thereof were fulfilled, and not otherwise.
11. As held in paragraph 9 (supra) the appeal is dismissed.