Customs, Excise and Gold Tribunal - Tamil Nadu
Sundaram Clayton Limited vs Commissioner Of Central Excise, ... on 17 October, 2001
Equivalent citations: 2003(160)ELT640(TRI-CHENNAI)
JUDGMENT S.L. Peeran 1. The matter has been listed for passing final order today under Section 35K of the CE Act, 1944 on the High Court of Madras answering the reference in their reference case No. 2 of 1996 dated 24.4.2001. The order of the Hon'ble High Court is reproduced below: ORDER R. Jayasimha Babu, J.
As to whether Notification No. 217 of 1986 CE dated 02.04.1986 issued under Rule 8(1) of the Central Excise Rules exempting the specified inputs manufactured in a factory and used within the factory of production in or in relation to the manufacture of final products also specified in the notification, from the whole of the duty of excise leviable thereon, is a notification to which the provisions of the Central Duties of Excise (Retrospective Exemption) Act, 1986 (Act 45 of 1986) is applicable, is the question raised before us by a manufacturer who makes the inputs which are specified in the notification and uses the same within the factory of production.
2. The assessee was prior to the issue of the notification, availing the benefit of Notification No. 118 of 1975 CE dated 30.04.1975 also issued under Rule 8(1) of the Central Excise Rules, by which exemption had been granted for goods falling under Section 68 of the First Schedule manufactured in a factory and intended for use in the factory in which they are manufactured or any other factory of the same manufacturer, from the whole of the duty of excise leviable therein. That notification was rescinded on 01.03.1986 after the enhancement of the Central Excise Tariff Act, 1985 (5 of 1986).
3. By the Central Act No. 45 of 1986 retrospective effect was given to all the notifications issued under Rule 18(1) of the Central Excise Rules on or after 3rd of March, 1986 but before the 8th day of August, 1986, inter alia, for the purpose of maintaining the effective rates of duties of excise in respect of certain goods at the level obtaining prior to 1st day of March, 1986 notwithstanding the changes in the rates of duties of the Excise made in the Finance Bill, 1986. The retrospective effect was on and from the 1st day of March, 1986. The assessee manufacturer claimed the benefit of that Act read with Notification No. 217 of 1986 for the period from 01.03.1986 to 02.04.1986 during which period no notification had been issued continuing the exemption that had been granted under Notification No. 118 of 1975. The original authority having allowed the claim of the manufacturer, on appeal at the instance of the revenue, the claim for the exemption was negatived by the Collector, and the Collector's view had been affirmed by the Tribunal. The manufacturer is aggrieved by that order of the Tribunal.
4. Act 45 of 1986 was enhanced in order to give retrospective effect to notifications issued under Rule 8(1) after 3rd of March, 1986, but before the 8th of August. Such retrospective effect to commence on and from the first day of March, 1986. Indisputably the notification dated 02.04.1986 is one which was issued during the period specified in Section 2 of Act of 1986. According to the revenue, the retrospective operation cannot be given to that notification as according to it that notification was not one which had been issued for the purpose of maintaining the effective rate of duty in respect of certain goods at the level obtaining 1st day of March, 1986, notwithstanding the changes in the rate of duties of excise made by Finance Bill.
5. We do not find it possible to accept this submission of the revenue. The effective rate of duty, so far as the manufacture was concerned, in respect of the inputs manufactured in the factory and actually consumed, was nil by reason of the Notification 181 of 1975. In the absence of a notification continuing exemption the effective rate of the duty which it was required to pay after 01.03.1986 is the whole. The object of the Act 45 of 1986 was to ensure that the effective rates for the products dealt with in the notification issued within the specified period remain at the level obtaining prior to the 1st day of March, 1986 notwithstanding the charges made in the rates of duties of excise made by the Finance Bill. The primary object was to maintain the effective rate of duty at the same level. By reason of the assessee being exempt the effective rate of duty prior to 1st of March was nil, and that position was meant to be retained by giving retrospective operation to the notifications issued subsequently but prior to the 8th of August, 1986.
6. The fact that the notification No. 217 of 1986 does not refer to the Finance Bill, 1986 is of no consequence. The object of the notification was clearly to grant exemption from the duty on the inputs actually consumed for the factory. The fact that the inputs referred to in the notification are with reference to Chapter headings of the schedule to the Central Excise Tariff Act, 1985 does not also make a difference.
7. Counsel for the assessee also relied on a judgment of the Karnataka High Court in the case of The Collector of Central Excise v. Mysore Lamp Works Ltd. (1993 (64) ELT 193 Kar), wherein it was held by the Division Bench, inter alia, that the notification exempting the articles from the excise duty after the Finance Act, 1985 came into effect from 01.03.1986, having been issued subsequent to 01.03.1986 and retrospective effect of not having been given therein, it had become necessary to enact Act 45 of 1986. It was also observed by the Court that by effective rate of duty for those entitled to the benefit of two notifications was meant to remain at the same level through out, prior to and after 01.03.1986, and that was the object which was sought to be achieved by the Act 45 of 1986.
8. Revenue has not placed before us any record to show that there was no change in the rate of duty of excise in respect of any of numerous items contained in the several chapters of the Central Excise Tariff Act, 1985 referred to in Notification No. 217 of 1986. It is not possible to accept the revenue's claim that Notification of 217 of 1986 was not one to which retrospective operation could be given by reason of Section 2 of the Central Act, 45 of 1986.
9. The questions referred to us, are therefore answered in favour of the assessee and against the revenue. Parties to bear their respective costs.
2. Heard Shri Narayan Swamy, learned Counsel for the appellants and Shri Sounderarajan, learned DR for the Revenue.
3. The learned Counsel submitted that in terms of the above order the question was answered in their favour and therefore, their appeal which was filed against the order in Appeal No. 154/87 (CBE) dated 29.2.88 should be deemed to have been allowed in their favour inasmuch as they are not required to pay any duty confirmed in terms of the impugned order in appeal as the Assistant Collector vide order in original No. 87/86 dated 25.11.86 has held that the goods were captively consumed and the proceedings were dropped and his order is required to be confirmed.
4. We find that proceedings were initiated against the appellants by issue of show cause notice by the Supdt of Central Excise,. Hosur I Range, regarding use of parts/accessories for manufacture of motor vehicles and IC engines used for further manufacture of motor vehicle (Moped). The appellants resisted the show cause notice and the Assistant Collector after due consideration of the matter dropped the proceedings. The duty amount involved is Rs. 18,93,325/-. However, the Department filed appeal before the Collector (Appeals) and the Collector (Appeals) reversed the order of the Assistant Collector and held that the assessees are required to pay duty in terms of the demand raised in the show cause notice. Their appeal was rejected by the Tribunal vide final order No. 261/89 dated 29.9.89. The reference application filed by the party was rejected by the Tribunal vide Reference order No. 48/91 dated 7.8.91. However, on their filing application before the Hon'ble Madras High Court under Section 35G of the CE Act, 1944 as directed by the Hon'ble High Court of Madras statement of facts were drawn and submitted to the Hon'ble High Court and the Hon'ble Madras High Court after due consideration answered the question in favour of the assessee and hence the Tribunal is required to pass a final order in the matter. Now that the reference has been answered in favour of the assessee, therefore, impugned order in appeal is required to be set aside and the order in original dropping the proceedings is required to be confirmed. Ordered accordingly.
(Dictated & pronounced in open Court)