Customs, Excise and Gold Tribunal - Delhi
Meteor Satellite Ltd. vs Collector Of Central Excise on 19 November, 1986
Equivalent citations: 1987(11)ECC27, 1987(11)ECR62(TRI.-DELHI), 1987(29)ELT437(TRI-DEL)
ORDER
S. Venkatesan, President
1. These three appeals turn on the same facts. Appeal No. 1250/82-B1 deals with the basic question whether the appellants were entitled to the exemption in terms of Notification No. 71/78 dated 1.3.78. The other two appeals deal with the consequential claims for refund. Both sides are agreed that these appeals will succeed or fail according as the main appeal succeeds or fails.
2. The appellants are manufacturers of motor vehicle parts, namely pistons, falling under Item 34A of the Excise Tariff as in force at the relevant time. They supplied these parts to manufacturers of motor vehicles in terms of exemption Notification No. 101/71 dated 29.5.71 as amended by Notification No. 96/72 dated 17.3.72. Under the amended notification, motor vehicle parts including pistons were exempt from the whole of the excise duty leviable thereon, provided it was proved that they were to be used as original equipment (O.E.) parts by manufacturers of motor vehicles, and the procedure set out in Chapter X of the Central Excise Rules was followed.
3. Under Notification No. 71/78, various goods as specified in the Table" annexed to that notification were exempt from excise duty up to a value of Rs. 5 lakhs in a financial year. This exemption was subject to a number of conditions, some general and some specific for particular goods. The condition relevant to the present cases is that in para 2 of the notification, which reads as under :-
"2. Nothing contained in this notification shall, in so far as goods of the description specified against serial number 41 of the said Table, apply to manufacturers of such goods who avail of the exemption under the notification of the Government of India in the Ministry of Finance (Department of Revenue and insurance) No. 101/71-Central Excises, dated the 29th May, 1971, or under the notification of the Government of India in the Ministry of Finance (Department of Revenue and Insurance) No. 153/71-Central Excises, dated the 26th July, 1971."
4. Since the pistons manufactured by the appellants came within the category of the goods specified against Serial No. 41 of the Table, and since the provisions of Notification No. 101/71 dated 29.5.71 were considered to have been availed of with respect to those goods, it was held that they came within the mischief of the condition in para 2 of Notification No. 71/78. Their claim for exemption from duty on the pistons manufactured by them and also their claims for refund of duty paid were accordingly rejected by the Assistant Collector. They fifed appeals before the Collector of Central Excise (Appeals), Bombay, which were also rejected. This has given rise to the present appeals.
5. Before us Shri Dushyant Dave, Advocate for the appellants, argued basically the same points as had been argued before the Collector (Appeals). These are the following :-
(1) No doubt the exemption under Notification No. 101/71 was extended to the pistons manufactured by the appellants. However, the appellants could not be said to have availed themselves of this exemption. It was the manufacturers of the motor vehicle parts who had assumed the liability for duty by availing themselves of the Chapter X procedure. In terms of the provisions of this procedure it was they who had to satisfy the Excise authorities that the conditions laid down therein were satisfied, or to pay the duty if the conditions were not satisfied. Therefore it was those manufacturers who bought the pistons from them and who had availed themselves of the exemption. Therefore the, appellants did not come within the mischief of para 2 of Notification No. 71/78.
(2) Assuming that the said para 2 could apply to the appellants, it would still not affect their case because the notification as issued on 29-5-71 did not include pistons. Since para 2 did not refer to Notification No. 101/71 "as amended", it should be taken to refer only to the notification in its unamended form.
(3) Again, assuming Notification No. 101/71 to be applicable, it should be applied only to those manufacturers of motor vehicle parts and accessories who in turn had availed themselves of the same exemption with respect to raw materials procured by them; the appellants had a case in equity, as otherwise they would be unfairly discriminated against in comparison with other manufacturers who did not supply their goods to manufacturers who availed themselves of Notification No. 71/78.
6. Opposing these arguments, Shri A.K. Jain, SDR, submitted the following arguments :-
(a) Under Section 3 of the Central Excises and Salt Act, read with Rule 7 of the Central Excise Rules, the liability to pay duty is on the manufacturer of the goods. The liability is to be discharged under Rule 9. It is not taken away by the provisions of Chapter X. This liability was discharged only through the operation of Notification No. 101/71 under Rule 8(1). Therefore the appellants had availed themselves of this notification;
(b) There was no warrant for reading into para 2 of Notification No. 71/78 a provision that "parts of parts" were under consideration.
(c) The substance of an exemption notification is not taken away merely because it contains conditions of one kind or other;
(d) There are clear rulings regarding the effect of legislation by incorporation and legislation by reference. This concept has relevance to Acts and not to notifications. It has reference only to questions of procedure. The Tribunal has held in the case of National Jute Manufacturing Company (1985 ECR 2417) that in a case of legislation by incorporation subsequent amendments can be taken into account.
(e) Once any proportion of the goods in question had been supplied as original equipment to manufacturers of motor vehicles, other questions such as whether or not the overall value limits were crossed, became irrelevant. The legislative intent clearly was that the notification should only apply in such cases;
(f) Equity had no place in construing the physical (fiscal) statute. Shri Jain therefore submitted that the appeals should be rejected.
7. Shri Trivedi, the learned consultant appearing along with Shri Dave, replying to Shri Jain, in substance repeated the arguments already advanced by Shri Dave.
8. We have carefully considered the arguments advanced by both sides. As regards the main question whether the appellants availed themselves of Notification No. 71/78, we find that the position is clear. As pointed out by Shri Jain, the basic liability for duty on the pistons was on them as the manufacturers. It was through the operation of Notification No. 101/71 that they were relieved of their liability. The fact that this notification included certain conditions, and that those conditions were to be fulfilled by the person who bought their goods, does not affect this basic position; not the fact that in case of failure to do so the duty liability had to be met by the buyer. There are a number of exemption notifications which are conditional in nature. Many of them are based on the end-use of the goods, something which is beyond the control of the manufacturer. Nevertheless it is he who is held basically liable for the duty and it is he who is relieved of his liability through the operation of the relevant exemption notification. Notification No. 101/71 no doubt brings in the Chapter X procedure, which shifts the duty liability from the manufacturer to the industrial user. The fact however remains that, had it not been for that notification, the appellant would not have been able to rid himself of the duty liability by passing it on to the buyer of the pistons. We therefore find that this was clearly a case where the appellants had availed themselves of the benefit of Notification No. 101/71.
9. The other main argument of the appellants was that, since Notification No. 71/78 referred merely to Notification No. 101/71, and not to that notification "as amended", the appellants did not come within the mischief of the exclusion in para 2. The learned advocate for the appellants sought to rely on well-known pronouncements on the subject of legislation by reference and legislation by incorporation. It was pointed out to him that this would be more a case of legislation by reference than one of legislation by incorporation. But there is another important reason why this argument has to fail. Shri Jain made the very valid point that at the time of Notification No. 71/78 was issued, that is on 1.3.78, Notification No. 101/71 dated 29.5.7J already stood amended by Notification No. 96/72 dated 17.3.72. The various pronouncements on the question of legislation by incorporation or by reference are concerned with a situation where the "previous Act" is amended after the "subsequent Act" has been enacted. That is not so here, and therefore those pronouncements do not have a bearing on the present case. What the learned advocate for the appellants is asking us to do is to assume that when Notification No. 71/78 was issued, referring to Notification No. 101/71, the competent authority had in mind that notification as it was originally worded and not as it was in force on the day that notification No. 71/78 was issued. This argument has only to be heard to be rejected. When any Act or statutory instrument makes reference to another instrument it necessarily has to be assumed, in the absence of any indication to the contrary, that the reference is to that instrument as in force at that point of time. If there could be any possible doubt on this point, we would refer to the judgment of the Hon'ble High Court of Gauhati in the case of Sankar Tea Co. Ltd. and Ors. v. Collector of Central Excise, Shillong and Ors. 1985 (21) ELT 679 (Gauhati). That case related to the levy of Excise duty on tea, under the scheme by which different rates of tea were applicable to tea produced in different Zones. Zone V produced high quality tea, and the rate of duty applicable to it was substantially higher than the rate applicable to tea produced in Zone I, which was the residuary Zone. On 1.5.1970 the Central Government issued a notification under Rule 96F of the Central Excise Rules, which had the effect of fixing differential rates of duty on tea produced in different Zones. The "place of production" specified against Zone V was defined as under :-
"District of Darrang excluding Mangaldai Sub-Division and the districts of Lakhimpur and Sibsagar in Assam States."
On 22.9.1971 the Government of Assam issued a notification creating a new district of Dibrugarh out of the erstwhile district of Lakhimpur. The Central Government did not however make a consequential amendment in the notification under Rule 96F.
10. On 5.11.81 the Central Government issued a fresh notification 'in supersession of the notification dated 1.5.1970. In this notification, the rate of duty against Zone V was the same as in the notification of 1.5.1970 and the "place of production" was defined in the same words as in the earlier notification.
11. A controversy arose as regards the rate of duty applicable to tea produced in the new Dibrugarh district on or after 22.9.1971. It was the contention of the assessees that with effect from that date the area covered by the new district was excluded from Zone V and fell within the residuary Zone I, and consequently was liable to the "residuary" rate of duty. As against this the contention of the Revenue was that tea produged in the area comprised in the new district continued to be liable to the rate of duty specified for Zone I.
12. In their judgment the Gauhati High Court held (briefly speaking) that the expression "the district of Lakhimpur" continued even after 22.9.1971 to have the meaning which it had when the notification dated 1,5.1970 was issued. However, on and after 5.11.81, those words should be understood as applying to the district of Lakhimpur as in existence on that date, that is, excluding areas covered by the new district of Dibrugarh. In their judgment their Lordships of the Gauhati High Court made the following observations :-
"11. With this backdrop let us construe the notification of 1970. It is the common case of the parties that the expressions "the district of Lakhimpur" was used by the rule making authority as the area comprising the physical boundary of the district including the subdivision of Dibrugarh. This is the natural meaning of the expression. We also hold that the words "the district of Lakhimpur", were used precisely and exactly, not loosely and inexactly. We also hold that the words used the notification bore the idea of the then existing districts at the time when the notification was made. We are of the firm view that the notification must be understood and construed according to the idea or meaning of the word used as if one were interpreting it the day after it was made. Thus, interpreting we find that the meaning of the words "the District of Lakhimpur" conveyed a positive and affirmative physical area covered by the three subdivisions comprising within the district of Lakhimpur including the sub-division of Dibrugarh as well. This is in accordance with the golden rule of construction of notification, which negatives the meaning of one part of the notification on the ground that' the authorities making the notification dealt with an uncertain state of law and fact when it was made, and the words contained in the notification should be understood in the light of that uncertainty. In construing the notification we have attempted to find the intention of the authority. We find the intention from the expressed words as understood on the following day of the making of the notification. The words used in the notification should be construed in the light of the facts known to the authority when the notification was issued. Therefore when the notification was issued, the fact known to the authority was that the district of Lakhimpur comprised the physical area consisting of several sub-divisions, including the sub-division of Dibrugarh. We must assume that the authority making the notification had known the condition. The existing condition was not notoriously uncertain, and, therefore, we accept the contention of learned counsel for the parties that the words used in the notification should be understood in the sense they bore at the time when the notification was issued. The meaning as understood by the authority must continue to be the meaning until it is changed, altered or superseded by the authority itself."
(Emphasis added).
These observations are fully applicable to the present case and dispose of the argument sought to be advanced by the learned advocate for the appellants.
13. Shri Dave had argued that the disqualification in para 2 of Notification No. 71/78 was applicable only to those manufacturers of motor vehicle parts and accessories, who also obtained raw materials falling under the same tariff item and covered by the same notification, without payment of duty. There is nothing in the wording of para 2 as it stands which would support this argument, nor is it permissible to read into the paragraph words which are not there.
14. As regards the argument based on the grounds of equity, Shri Jain had rightly pointed out that such considerations do not affect the interpretation of a fiscal statute. In any event these considerations are hardly relevant to the case. It was entirely for the concerned manufacturer to decide whether he should sell his goods only to buyers who did not seek the application of Notification No. 101/71, and thereby keep alive his claim for the benefit of Notification No. 71/78; or whether he should sell his goods to buyers who invoked Notification No. 101/71, with consequent prejudice to his claim to the benefit of Notification No. 71/78 in respect of such goods sold to other buyers. This was a matter for the appellant's commercial judgment. Having made his choice on the basis of commercial judgment, the appellant cannot avoid the consequences on grounds of equity.
15. We accordingly find that the orders of the lower authorities in these case were correct. Appeal No. 1250/82-B1 accordingly has to fail. Consequently appeals Nos. 1164/82 and 1165/82 also have to fail. We therefore reject all the three appeals.