Custom, Excise & Service Tax Tribunal
M/S Ratmani Metals And Tubes Ltd vs Cce, Rajkot on 12 May, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Zonal Bench, Ahmedabad COURT NO. II DATE OF HEARING : 12/05/2011. DATE OF DECISION : __________. Excise Appeals No. 1031, 1032 and 1472 of 2008 M/s Ratmani Metals and Tubes Ltd. Appellants Versus CCE, Rajkot Respondent
[Arising out of the Order-in-Appeal No. 32 to 34/2008/COMMR (A)/RAJ dated 14/02/2008 passed by The Commissioner (Appeals), Central Excise, Rajkot.] For Approval and signature :
Honble Mrs. Archana Wadhwa, Member (Judicial) Honble Shri P. Babu, Member (Technical)
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it would be released under Rule 27 of :
the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordships wish to see the fair :
copy of the order?
4. Whether order is to be circulated to the :
Department Authorities?
Appearance Shri R. Subramanya, Advocate for the Appellants.
Shri R.S. Srova, Authorized Representative (JDR) for the Respondent.
CORAM : Honble Mrs. Archana Wadhwa, Member (Judicial) Honble Shri P. Babu, Member (Technical) Order No. ________________ Dated : _____________ Per. Archana Wadhwa :-
All the three appeals are being disposed of by a common order as the issue involved is identical and all three of them arise out of the same impugned order passed by Commissioner (Appeals).
2. As per facts on record, the appellant is a unit located in the area of Kutch. They are engaged in the manufacture of seamless stainless steel and carbon steel tubes/pipes. As the units located in the area of Kutch had been extended the benefit of exemption by way of a special mechanism in terms of the provisions of Notification No. 39/2001-CE dated 31/7/01, the appellant was enjoying the benefit of the same. The said notification placed certain conditions, which are required to be fulfilled before the exemption becomes available to an assessee. In terms of the said notification, the new industrial set up in the Kutch District on or after the duty of publication of the notification and having original value of investment in plant and machinery to the extent of Rupees Twenty Crores are entitled to the benefit of the notification, which prescribes refund mechanism, wherein a manufacturer is first required to pay full duty (partly through Cenvat credit and partly in cash) and duty paid in cash is later on refunded to the manufacturer. The cut-off date prescribed in the notification, for being entitled to the same is 31/12/05 i.e. the commercial production in the unit must start before 31/12/05.
3. The appellant herein was enjoying the exemption in terms of the said Notification No. 39/2001-CE dated 31/7/01 in as much as they fulfilled the eligibility criteria as prescribed in the said notification. Accordingly, the duties being paid by them in cash, were being refunded to them by the lower authorities. However, the dispute in the present appeal relates to refund of duty paid on their final product, manufactured by the appellant by utilising the plant and machinery, which was installed after 31/12/05. The lower authorities while denied the benefit of the notification has rejected that part of the refund claim, which pertains to the duty paid on the goods manufactured by the plant and machinery installed after the cut-off date of 31/12/05. Accordingly, both the authorities have held that the appellant is not entitled to the benefit of notification in respect of the said goods. Hence, the present appeals.
4. Learned advocate appearing for the appellant has reiterated the same very grounds, which were advanced before the lower authorities. Its stands submitted that the additional plant and machinery was installed after 31/12/05, for manufacture of the same very goods, which were being manufactured by the appellant prior to the cut-off date i.e. 31/12/05. As such, it is nothing but enhancement of the production capacity of the unit, which was, in any case, availing the benefit of the area based exemption Notification No. 39/2001-CE. Learned advocate submits that once the assessee fulfils the criteria of the notification, the benefit of the same would be available to the goods manufactured with the machinery installed after 31/12/05. He submits that after crossing the limit of Rupees twenty crores investment in plant and machinery, they reach the zone of finite exemption. It is their contention that once the legislation has created such finite zone with respect to investment criteria, any further extension will not affect the exemption limit. The notification does not provide any clause or provision, whereby the interpretation adopted by the lower authorities can be sustained. Had the intention of the legislation to the contrary, there would have been a restricting clause in the notification itself. As such, they submit that in absence of any such clause, the intention of the legislation is very clear that in order to develop the area of Kutch after the devastating earth quake, the notification was issued to encourage the investments in that area. As such, they submit that the benefit of notification to be extended to them and refund to be allowed.
5. On the other hand, learned SDR appearing for the Revenue submits that exemption notifications are required to be interpreted strictly as held by the Honble Supreme Court in the case of CCE, Jaipur vs. Mewar Bartan Nirman Udyog reported in 2008 (231) E.L.T. 27 (S.C.) and in the case of Sarabhai M. Chemicals vs. CCE, Vadodara reported in 2005 (179) E.L.T. 3 (S.C.). Accordingly, he submits that the notification, in question, prescribes an unambiguous condition that the plant and machinery must be completely installed by 31/12/05 and commercial production must start by that date in order to avail the exemption. Allowing exemption in respect of goods manufactured by using plant and machinery installed after the cut-off date of 31/12/05 would amount to expanding the scope of the notification, which is not the intention of the legislation.
He also draws our attention to the various circulars issued by the Government clarifying that the benefit of notification will not be available in the situation present in the instant case. He submits that such officials statements of the meaning of statutes are of particular importance since every statute is originally promoted by Government, which is assumed to be legislative intent behind a legislation. Accordingly, he prays for setting aside the impugned decisions.
6. After carefully considering submissions made by both the sides, we find that there is no dispute about the fact that the goods, in respect of which refund stands denied by lower authorities, were manufactured with the machinery installed after 31/12/05. The notification, in question, is available in respect of manufacturing units, which has made the investments and started their production before 31/12/05. As such, it can be reasonably concluded that the legislature intended to cover only those units in the Kutch area, wherein the investment was complete by 31/12/05. The benefit of the said notification is being extended to the appellant in respect of the goods manufactured with the plant and machinery installed prior to the said date.
7. The question which arises is as to whether subsequent expansion of the unit by installing new machines after 31/12/05 would get covered by the said notification or not. Admittedly the second tube mill was installed after 31/12/05. If viewed from another angle, it can be reasonably observed as if the appellant have installed a second factory in the said area for manufacture of the goods. If the machines, instead of being installed in the same factory, would have been installed in a separate factory, the benefit of the notification was admittedly not available to the appellant. As such, merely because the second tube mill stand installed in the same factory, which was earlier enjoying the exemption, would not result in grant of exemption to the second tube mill.
8. Even if viewed from the conditions of the notifications, it is clearly mentioned that the benefit of notification would be available in respect of those units which have been fully complete prior to 31/12/05 and has started their production prior to the said date. There is nothing in the said notification as regards extension of the said date of 31/12/05 in respect of the subsequent instalment of plant and machinery. As rightly contended by learned SDR, when the notifications are unambiguous and clearly lay down the conditions, the scope of the same cannot be extended by referring to the legislative intent. Such notifications are required to be interpreted in accordance with the words of the notification.
9. Even if we go by the legislative intent, the same becomes clear from the various circulars and clarifications issued by the Government. The TRU letter F. No. 356/02/01-TRU dated 17/10/01 addressed to the Chief Commissioner of Customs, Vadodara seeking clarifications raised by the Chief Commissioner supports the Revenues case. For better, appreciation, we reproduced the clarification on issue No. 4 :-
Issue, in brief View of Chief Commissioner, Customs & C. Ex., Vadodara Boards decision
4. Whether any extra benefit of exemption in terms of the proviso to the first para is to be given for the value of any subsequent investment increasing the capacity of the unit The reference in the Notification being only to the original value of investment in plant and machinery on the date of commencement of commercial production, subsequent investment should be ignored.
We agree. The intention was to keep the operation of the scheme simple. Giving benefit of subsequent investments would not only complicate the scheme, the quantum of benefit available to a unit would also keep changing.
10. Reference may be made to Circulars No. 110/11/2006/CX.3 dated 10/07/08. The relevant part of said circular, clarifying the issue is as under :-
Point No. 1 : Whether the benefit of exemption would be available to goods/products that the units starts manufacturing after the cut off date for the commencement of commercial production i.e. 31/12/2005. Comments : There would be two situations. First is that where a unit introduces a new product by installing fresh plant, machinery or capital goods after the cut of date in such a situation, exemption would not be available to this new product. The said new product would be cleared on payment of duty, as applicable, and separate records would be required to be maintained to distinguish production of these products from the products which are eligible for exemption. The other situation is the one where a unit starts producing some products (after the cut off date) using the plant and machinery installed upto the cut of date and without any addition to the plant and machinery. For example, in case of plastic moulded products a unit may commence the production of different products simply by changing the moulds and dies. In that case, the unit would be eligible for the benefit of Notification because the plant and machinery used for manufacture has remained the same. In this connection, it is further clarified that for the purpose of computing the original value of plant and machinery, the value of plant and machinery installed on the date of commencement of commercial production only shall be considered.
11. Admittedly the clarification issued by the said letter reflects upon the legislative intent that the benefit under the said notification is intended to be restricted only to those units, which have started commercial production or before 31/12/05 and the benefit cannot be extended to the products manufactured by installing fresh plant and machinery. To the similar effect is another letter written by TRU on 25th April 2000 addressed to the Secretary General, Federation of Industries of India, indicating that the benefit of the notification would not be available to those new industrial units, which commences commercial production after 31/12/05.
In as much as the appellant had admittedly installed a new second tube mill after 31/12/05, though in the same factory, which was earlier enjoying the exemption, we are of view that the benefit of the notification would not be available to the appellant in as much as the object of the notification was to invite investors for promotion of the Kutch area and to complete such investments before 31/12/05. Allowing of exemption in respect of subsequent instalments of plant and machinery would defeat the very purpose of issuance of the notification and the legislative intent.
12. In view of the above, the appeals are rejected.
(Order pronounced in the open court on ____________.) (Archana Wadhwa) Member (Judicial) (P. Babu) Member (Technical) PK ??
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