Customs, Excise and Gold Tribunal - Delhi
Shalimar Chemical Industries Pvt. Ltd. vs Collr. Of C. Ex. on 24 October, 1990
Equivalent citations: 1991ECR55(TRI.-DELHI), 1996(81)ELT248(TRI-DEL)
ORDER T. Prabhakaran Nambiar, Member (J)
1. Being aggrieved by the order passed by the learned Collector of Central Excise (Appeals), New Custom House, Bombay in order-in-appeal dated 18th April, 1990, the above captioned appellants had approached this Tribunal with a prayer to set aside the abovesaid order. In terms of that order, the learned Collector (Appeals) upheld the order passed by the learned Assistant Collector of Central Excise, Division IX, Bombay-II in order No. V-Adj. 29(3) 23/88/4276, dated 31-3-1989. In terms of that order, the learned Assistant Collector held that the appellants are not entitled to exemption under Notification No. 75/84, dated 1-3-1984 and confirmed the show cause-cum-demand notice issued on 30th March, 1988 by the Superintendent of Central Excise and ordered the appellants to pay Rs. 3,59,885.91 P.
2. Briefly stated, the facts of the case are that the appellants obtained a Central Excise L-6 Licence bearing No. R-III/3/May, 1985 Benzene and Toluene for the manufacture of Solvents, diluent or thinner which in turn are required to be used in the manufacture of paints, varnishes, lacquers and various other Industrial uses declared by them in their AR-6 application. Accordingly, licence L-6 was granted in terms of provisions of Notification No. 75/84, dated 1-3-1984. The appellants were bringing the above mentioned goods fallng under Chapter 29 of Central Excise Tariff Act, 1985 under Chapter X procedure. After receipt of these goods, they started manufacturing thinners and solvents. The case of the appellants is that for the manufacture of 'thinners' and 'solvents' the raw materials like Benzene, Toluene and Xylene are required.
3. The case of the Department is that the appellants are not utilising Benzene, Toluene and Xylene for the purpose declared in the Notification No. 75/84 and accordingly, the Range Superintendent issued the show cause notice requiring the appellants to show cause as to why the exemption under the Notification No. 75/84, dated 1-3-1984 should not be denied and why the differential duty of Rs. 3,59,885.91 P. should not be recovered from them. The learned Assistant Collector held that the appellants were bringing Toluene, Benzene and Xylene and were merely mixing and stirring the same by hand with some materials and were removing the same from the factory for sale. Accordingly, he held that the appellants were not using these raw materials in the manufacture of paints and varnishes etc. in their premises and the concession cannot be extended them under the Notification No. 75/84.
4. The learned Collector of Customs and Central Excise (Appeals) in the impugned order, has held that the appellants have not used Benzene, Toluene, thinner or diluent for the manufacture of paints and varnishes but sold the same and therefore, has wrongly availed the benefit under the notification and he dismissed the appeal filed by the appellants against which order the present appeal is filed.
5. The learned Advocate Shri R.K. Habbu, appearing for the appellants, contended before us that in the instant case, the Assistant Collector by an order dated 31st October, 1986, had withdrawn the show cause notice demanding an alleged short-levy of Rs. 82,234.05 P. and allowed the benefit of Notification No. 75/84 to the appellants. It was his contention that the Assistant Collector who passed the order, who was successor in his office on the same issue, could not have disallowed the benefit of Notification No. 75/84 in the absence of there being any change in the facts and circumstances. In this connection, he contended that such a direcion is not in accordance with law and on this point, he relied on the following decisions :-
1. Arti Paints & Chemicals Industries, Bombay v. Collector of Central Excise, Bombay [1984 (15) E.L.T. 206.
2. J.K. Synthetics Limited and Anr. v. Union of India and Ors. [1981 (8) E.L.T. 328 (Delhi)].
3. Camlin Pvt. Ltd. v. Union of India and Anr. [1982 (10) E.L.T. 1 (Bom.)].
4. Mukund Engineering Works v. Collector of Central Excise, Ahmedabad [1983 (12) E.L.T. 816 (CEGAT).
5. Collector of Customs and Central Excise and Anr. v. Oriental Timber Industries. [1985 (20) E.L.T. 202 (SC).
It was also contended before us that Notification No. 75/84-C.E., dated 1-3-1984 is a notification which is in continuation of the earlier Notification No. 26/62-C.E., dated 24-4-1962 and No. 35/73-C.E., dated 1-8-1973 in so far as the instant isue is concerned. It was also contended that the two Notifications No. 35/73 and No. 75/84 referred to above, are in pari materia. In this connection, he drew our attention that with respect of Notification No. 35/73, the Government of India had clarified that in regard to benzene obtained in terms of notification for the manufacture of thinner, solvent or diluent, no end-use verification for thinner, which is cleared outside the factory, is necessary. The clarification of the Government of India dated 19-8-1980 in this regard, which is at Exhibit 'L' was relied upon by him in this regard. It was also contended before us that this practice based on this clarification, was continued even after the issue of Notification No. 75/84. In this connection, he drew our attention to the instructions issued by the Central Board of Excise & Customs dated 11th February, 1988 according to which under Notification No. 75/84, the end-use verification was held to be obligatory. He, therefore, contended that this clarification of the Board was the reason for the issue of the show cause notice to the appellants and orders passed by the learned Assistant Collector in this regard. He also contended that the learned Collector of Customs and Central Excise (Appeals) also upheld the decision of the learned Assistant Collector in view of the above clarification of the Board and that the interpretation of the Board in respect of the Notification No. 75/84 is not a correct interpretation. Alternatively, he contended that even assuming that the above interpretation is correct, it cannot have retrospective effect. For all the abovesaid grounds, he prayed that the appeal of the appellants may be allowed.
6. The learned Senior Departmental Representative, Shri S. Chakrabor-ty, appearing for the respondents, contended before us that both the orders of the learned Assistant Collector as well as the learned Collector, nowhere mentioned about the instructions issued by the Board in this regard. It was, therefore, contended that it cannot be presumed that the abovesaid authorities based their decisions on the instructions of the Board in this regard. He, therefore, contended that there is no infirmity in the order passed by them. It was also contended before us that the Notification No. 35/73 and No. 75/84 are not similar in nature. It was his contention that the wordings of the Notification No. 75/84 are different. He, therefore, contended that according to the wordings of the Notifiction No. 75/84, the "end-use verification certificate" is necessary. He, therefore, contended that the orders passed by the lower authorities are in accordance with law. In this connection, he relied on a decision of the Supreme Court in the case of Collector of Central Excise, Guntur v. Andhra Sugar Ltd. reported in [1988 (38) E.L.T. 564 (SC). Relying on the abovesaid decision, it was contended before us that the requirement of end-use, though not built into the exemption notification, is not only implied but also becomes imperative in a situation which exists in the present case. He also contended that it is a well-settled principle that the meaning ascribed by the authorities issuing the notification in question is a good guide of a contemporaneous exposition of the position of law. For all the abovesaid reasons, he prayed that the appeal may be dismissed.
7. We have considered the submissions made by both the sides. The learned Departmental Representative had contended that the requirement of end-use though not built into the exemption notification, is not only implied but also becomes imperative in a situation where the product manufactured by the appellants has other uses than in the manufacture of varnishes and paints. It was, therefore, contended that the end-use certificate is absolutely essential. Heavy reliance was placed on the decision of the Supreme Court in the case of Collector of Central Excise, Guntur v. Andhra Sugar Ltd. [1988 (38) E.L.T. 564 (SC) wherein the Supreme Court has held as follows :
"The requirement of end-use, though not built into the exemption notification, is not only implied but also becomes imperative in a situation where the product has uses other than as drug intermediate whereas the exemption is limited only to drug intermediate, i.e. when the product is used as drug intermediate."
In the abovesaid decision, their Lordships of the Supreme Court approved the decision of the Government of India in Hindustan Organic Chemicals Ltd. dated 14th September, 1989. The Government of India in that case held that the requirement of end-use though not built into the exemption notification, is not only implied but also becomes imperative in a situation where the product has uses other than as drug intermediate whereas the exemption is limited to drug intermediate i.e. when the product is used as a drug intermediate.
8. The above decision is not applicable to the facts of this case. In this case, there is nothing to show that the solvents, thinner or diluent manufactured by the appellants can be used otherwise than in the manufacture of paints, varnishes lacquers, etc. In fact, this was not the reasoning furnished by the lower authority in coming to their conclusion. It is fairly settled principle that in finding out the validity of the order, the reasons mentioned therein are to be looked into by the Tribunal. This reasoning was not furnished in both the orders of the lower authorities. In such circumstances the abovesaid decision is not applicable to the facts of this case.
9. The learned Departmental Representative had contended that Notifications No. 35/73 and No. 75/84 are materially different. While dealing with the Notification No. 35/73-C.E., dated 1-3-1973, the Government had clarified that the end-use verification of thinners etc. is not necessary once they are cleared out of L-6 premises and the same is not warranted in terms of the above notification. This was clarified by the Government in their letter MF (DR) F. No. 83/10/79-CX. HI dated 19-8-1980. The wordings of Notification No. 35/73 and Notification No. 75/84 are almost similar. But the learned Departmental Representative contended that there is difference. But we are not able to find out any material difference in this regard. Notification No. 35/73-C.E., dated 1-3-1973 mentioned solvent or diluent or thinner for the manufacture of paints, varnishes and lacquers, and allied materials or for use in painting for the manufacture of adhesives, rubber solutions, water proofing composition and similar products. Notification No. 75/84-C.E., dated 1-3-1984 also gave exemption if they are intended for use as solvent, diluent or thinner for the manufacture of paints, varnishes and lacquers and allied materials or for use in painting for the manufacture of adhesives, rubber solutions etc. We are unable to come to the conclusion, on a reading of the above two notifications, that there is a clear distinction between the end-use in the Notification No. 35/73-C.E., dated 1-3-1973 and the end-use in the Notification No. 75/84-C.E. dated 1-3-1984. Therefore, there is no justification to hold that end-use verification is necessary under the Notification No. 75/84-C.E., dated 1-3-1984.
10. In this connection, we may refer to the arguments of the learned advocate, Shri R.K. Habbu. It is evident from Exhibit 'F' produced by the appellants (copy of the order of the Assistant Collector dated 31st October, 1986) that the Assistant Collector dropped the show cause notice against the appellants in similar issue. The Assistant Collector held that the Department has issued L-6 licence to the appellants and they have been following the Central Excise procedures. Hence, the show cause notice issued to the appellants bearing No. SCN R-III/Shalimar/L-6/804/86/775, dated 28-4-1985 was withdrawn. Once when the show cause notice was withdrawn, which was issued to the appellants, the successor Assistant Collector could not have reopened the matter without any further evidence being brought to justify his stand. In this connection, the decision relied on by the learned advocate, Shri R.K. Habbu, appearing for the appellants, reported in the case of Arti Paints and Chemicals Industries, Bombay v. Collector of C. Ex., Bombay [1984 (15) E.L.T. 206 becomes important. In that decision, the Tribunal held that when the appellants had stated in their application that they required Toluene for the manufacture of thinners and when the Central Excise authorities issued L-6 licence and allowed the use of Toluene under Notification No. 35/73-C.E., it is pointless to blame them for the misuse of the licence on the ground that they did not use Toluene in the manufacture of the paints. It was also held that when the discovery of the Department's mistake was made by issuing the L-6 licence, there is no reason for thinking that there was a misuse by the appellants. So also in the decision relied on by the appellants in the case of J.K. Synthetics Ltd. and Anr. v. Union of India and Ors. 1981 (8) E.L.T. 328 (Del.), the Delhi High Court at page 338, has held as follows :
* * * * * This decision was followed by the Tribunal in the case of Mukund Engineering Works v. Collector of Central Excise, Ahmedabad [1983 (12) E.L.T. 816 (Cegat). In such circumstances, when it is not suggested that there were either fresh facts or change in law, change in the process of manufacture or in the entries of tariff, the authorities below were not justified in changing the stand, as per the orders of the learned Assistant Collector dated 31st October, 1986 wherein the show cause notice issued to the appellants was withdrawn.
11. In the decision of Camlin Pvt. Ltd. v. Union of India and Anr. [1982 (10) E.L.T. 1 (Bom.)], the Bombay High Court had held that in all such cases, there must be circumstances to justify the change of stand taken by the Department. It was held in that decision that the circumstances are that if further facts are brought on record or if the process of manufacture has changed or if the relevant entries have undergone modification or if subsequent decisions of the High Court or Supreme Court had come into existence, then the Department will be justified in reconsidering their earlier stand. But in this case, no such circumstances had come into existence and the Department cannot change its stand arbitrarily without assigning any reasons in this behalf.
12. The learned Advocate Shri R.K. Habbu had further placed reliance on the decision of the Supreme Court in the case of Raipur Development Authority v. Chokhamal Contractors (AIR 1990 SC 1426) and contended that the decision of the Department which is a long standing one, as far as the appellants are concerned, should not be disturbed lightly, as it will have the effect of shaking the rights and titles of the appellants. In the abovesaid citation, their Lordships of the Supreme Court in paras 33 and 34, at page 1444, has followed as under :
"A decision on the question argued before us involves a question of legislative policy which should be left to the decision of Parliament, it is a well-known rule of construction that if a certain interpretation has been uniformly put upon the meaning of a statute and transactions such as dealings in property and making of contracts have taken place on the basis of that interpretation, the Court will not put a different interpretation upon it which will materially affect those transactions. We may refer here to the decision of the Court of Appeal rendered by Lord Evershed M.R. in Braumsea Haven Properties v. Poole Corporation (1958 Ch. 574) in which it is observed thus :
"There is well established authority for the view that a decision of long standing, on the basis of which many persons will in the course of time have arranged their affairs should not rightly be disturbed by a superior court not strictly bound itself by the decision."
"Courts should be slow in taking decisions which will have the effect of shaking rights and titles which have been founded through a long time upon the conviction that a particular interpretation of law is the legal and proper one and is one which will not be departed from."
13. Applying the above principles to the facts of this case, it is clear that the appellants, on the basis of the L-6 licence began to obtain Benzene, Toluene at concessional rate of duty on the strength of CT-2 certificate issued by the Jurisdictional Superintendent of Central Excise. The appellants were maintaining the required Register and regularly submitting the monthly returns in form RT-11. The appellants also obtained the L-6 licence and on their application that they are manufacturing solvent based on Benzene and Toluene and all types of thinners. On the basis of that licence, they began to obtain Benzene, Toluene at concessional rates from the Indian Oil Corporation and Bharat Petroleum Corporation and others and manufactured thinners and solvents. In such circumstances, there was no justification to insist on the end-use certificate in terms of Notification No. 73/84 as discussed by us above.
14. In view of the above discussion, we are of the opinion that the demand in the show cause notice No. C. Ex/R/m/IX/Shalirnar/SCN/80/88, dated 30th March, 1988 issued by the Superintendent of Central Excise, is not in accordance with law and the impugned order is liable to be set aside. Accordingly, the impugned order is hereby set aside and consequently this appeal is allowed.
15. The operative portion of this order was pronounced in the Open Court.
G. Sankaran, President
16. I have perused the order proposed by learned brother Shri Nambiar. While I agree with the conclusion therein, I would like to add the following words :-
17. The difference, if any, between Notifications 35/73 and 75/84 is more a matter of form than of substance. The relevant portion of Notification No. 35/73 provided : "an officer not below the rank of Assistant Collector of Central Excise is satisfied that the Motor Spirit is intended for use - as solvent or diluent or thinner for the manufacture of paints, varnishes, lacquers and allied materials or for use in painting; for the manufacture of adhesives, rubber solution, water proofing compositions and similar products, in the production of plastics; for degreasing or cleaning."
18. It also provided : "where such use is elsewhere than in the factory of production the exemption shall be allowable only if the procedure laid down in Chapter X of the Central Excise Rules, 1944, is followed."
19. The corresponding provisions of Notification No. 75/84 are : "provided that where any such exemption is subject to the intended use, the exemption in such case shall be subject to the following conditions namely :-
(i) that it is proved to the satisfaction of an officer not below the rank of Assistant Collector of Central Excise that such goods are used for the intended use specified in column (5) of the said table; and
(ii) where such use is elsewhere than in the factory of production, the procedure set out in Chapter X of the Central Excise Rules, 1944, is followed."
Against the entry concerning Benzene and Toluene the notification states : "intended for use - as solvent or diluent or thinner for the manufacture of paints, varnishes, lacquers and allied materials or for use in painting, for the manufacture of adhesives, rubber solutions, water proofing compositions and similar products, in the production of plastics, for degreasing or cleaning". The only difference, as far as can be seen, is that whereas the former notification requires the Assistant Collector to be satisfied that the Motor Spirit was intended for use for the specified purposes, the latter notification requires the Assistant Collector to be satisfied that the Motor Spirit is used for the intended use specified in the notification. The expression "used for the intended use" is somewhat ambiguous and, in any case, the specific condition set out in column (5) is paints, varnishes etc. In so far as this particular aspect is concerned, there is no difference whatsoever between the two notifications. Evidently, the present manufacturer has, with the approval and knowledge of the Central Excise department, obtained Benzene and Toluene in terms of the notification for the manufacture of solvents and thinners to be used in the manufacture of paints, varnishes etc. The licence granted authorises them to obtain in terms of the notification Benzene and Toluene etc. to be used in the manufacture of solvents based on them. It is not the department's case that the appellants did not manufacture solvents based on Benzene or Toluene or that they diverted, the raw materials to other uses. It does not appear that the appellants represented to the department that they were manufacturing paints, varnishes etc. in the manufacture of which the solvents manufactured by them would be used. Apart from these considerations, it appears to me that the notification is very broadly worded. For example, one of the intended uses is in painting. It does not require any argument to appreciate that it will be next to impossible to show by evidence that the solvent or diluent or thinner manufactured by an L-6 licensee has been used in painting which work may be undertaken in innumerable places spread over a wide area. It could have not been the intention of the notification issuing authority to provide that proof of use of solvent etc. in painting to be produced. We have, therefore, to take a practical view of the matter. As stated earlier, there does not seem to be any significant difference between the two notifications.
20. For the above reasons, I agree that the appeal should be allowed.