Customs, Excise and Gold Tribunal - Delhi
Hindustan Sanitaryware And Industries ... vs Collector Of C. Ex. on 1 April, 1991
Equivalent citations: 1991ECR558(TRI.-DELHI), 1991(55)ELT248(TRI-DEL)
ORDER
G. Sankaran, President
1. By the impugned order, the Additional Collector of Central Excise, Faridabad, demanded excise duty amounting to Rs. 4,15,387.35 from the appellant under Section 11A of the Central Excises & Salt Act, 1944 (the 'Schedule', for short) on Plaster of Paris manufactured by them and captively used in the manufacture of plaster of paris moulds. The basis of the order was that -
(a) Plaster of Paris moulds are "goods". The contention that they are not marketable goods is not acceptable. The moulds are not crude as is evident from the fact that the sanitaryware manufactured with their help are precise in their shapes and sizes. The moulds can certainly be bought by anyone who requires them.
(b) The contention that sanitaryware is the final product for the input plaster of paris is untenable since the latter is used only in the manufacture of moulds which, in turn, are used captively for the manufacture of sanitaryware. The moulds are in the nature of equipment/apparatus/tools which are, themselves, final products falling under Heading No. 6807.00 of the Schedule. Plaster of paris is the input for moulds, not sanitaryware. Hence the benefit of Notification No. 217/86 is not admissible to plaster of paris so used since moulds are exempt from excise duty under Notification No. 221/86, as amended by Notification No. 89/89.
It is this order that is challenged in the present appeal.
2. We have heard Shri B. D. Ahmed, Advocate, for the appellant and Shri L. Narasimha Murthy, DR, for the respondent - Collector.
3. On 28-8-1989, the Assistant Collector issued a demand-cum-show cause notice for a sum of Rs. 1,95,675.75 for the period from March 1989 to July 1989. Cause was to be shown to the Assistant Collector. By a corrigendum dated 19-3-1990, issued by the Assistant Collector, cause was required to be shown to the Collector instead of the Assistant Collector. By another corrigendum dated 5-4-1990, the following words were added to para 4 of the notice :-
'and said moulds being in the nature of apparatus/appliances cannot be treated as inputs to be used in or in relation to the manufacture of sanitaryware.'
4. A second demand-cum-show cause notice dated 8-1-1990 was issued by the Superintendent for an amount of Rs. 1,99,931.25 for the period from August 1989 to December 1989. Again, cause was to be shown to the Assistant Collector. A corrigendum, as in the earlier show cause notice, was issued on 19-3-1990 requiring cause to be shown to the Collector instead of the Assistant Collector. A second corrigendum as in the earlier notice was also issued on 29-3-1990.
5. The learned Counsel for the appellants submitted, with reference to the dates of the corrigenda which only completed the notice, that the first notice for the period from March 1989 to July 1989 was barred by limitation. In the case of the second notice, a part of the demand was barred taking into account the dates of the corrigenda. The learned D.R., however, contended that the notices were in lime and the corrigenda did not vitiate the notices. He relied, in this connection, on the Tribunal's decision in Mahavir Products v. Collector of Central Excise -1989 (41) ELT 491. Collector had jurisdiction to adjudicate matters which fell in that of his subordinate officers by virtue of Section 12A of the Act.
6. On the merits of the dispute, the learned Counsel submitted that plaster of paris moulds were recognised as an input for use in the manufacture of the final product, ceramic ware, as evidenced by Notification 221/86, dated 2-4-1986, as amended. Plaster of paris manufactured by the appellants was used in the production of plaster of paris moulds which, in turn, were used for manufacture of ceramic goods. According to the Department, the proviso to Notification 217/86, as amended, acted as a bar to the availment of exemption by the appellants. This proviso stated that nothing contained in the notification shall apply to inputs used in or in relation to the manufacture of final products which were exempt from the whole of the duty of excise leviable thereon or were chargeable to nil rate of duty. In the list of inputs specified in this notification, goods classifiable under Chapter 25 under which plaster of paris fell figured. Chapter 68 under which plaster of paris moulds fell, figured in the list of final products. Therefore, according to the Department, plaster of paris moulds was the final product. And, since such moulds were exempted from duty in terms of Notification 221/86, the exemption in terms of Notification 217/86 was not admissible by virtue of the proviso referred to earlier. In this context, reliance was placed on the Tribunal's decision in Gujarat Alkalies & Chemicals Ltd. v. Collector of Central Excise - 1989 (41) ELT 424. The question considered therein was whether Titanium Metal Anodes could be considered as an input for the purpose of Central Excise Rule 57A. The Tribunal noted that anodes could not be considered to fall in the excluded category of machines, machinery, plants, equipments, apparatus, tools and appliances. After considering the matter at length, the Tribunal held that the benefit of the said rule would be available in the case of Titanium Metal Anodes. Reliance was also placed on the Tribunal's decision in Union Carbide (I) Ltd. v. Collector of Central Excise -1989 (43) ELT 286 (Paras 10 and 1.1). In that decision, it was held that to be an input, a material must be used and consumed in the process of manufacture of the finished product. It is not necessary for the input or the raw material to form part of the finished product when it finally comes out at the end of the manufacturing process but so long as the input is used up necessarily in the process that carries forward and furthers the process of bringing out and completing the manufactured product, the article or raw material would be an input or raw material used in the manufacture of the finished product. The Supreme Court's observation in the case of J.K. Cotton Spinning Mills -1965 (16) STC 563 - was also relied on in the said decision. The observation was to the effect that where any particular process was so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression "in the manufacture of goods". Plaster of paris moulds being necessary or integral to the manufacture of sanitaryware, it would follow that plaster of paris used in the production of plaster of paris moulds is an 'input' used in the manufacture of sanitaryware. In response to an enquiry from the Bench, the learned Counsel stated that the process of manufacture employed by the appellants was not a continuous process.
7. In his reply, the learned D.R. stated that in relation to plaster of paris, plaster of paris moulds were the final product and since they were exempt in terms of Notification 221/86, the benefit of Notification 217/86 would not be available in respect of plaster of paris. Further, moulds were in the nature of appliances and, by virtue of the Explanation to Notification 217/86, plaster of paris used for production of moulds would not be eligible for exemption in terms of Notification 217/86. In this context, the D.R. placed reliance on the Tribunal's decision in Mysore Kirloskar Ltd. v. Collector of Central Excise - 1991 (31) ECC 418. In that: case, the assessee was making sand moulds, exempted from duty, for use in the manufacture of steel castings. The assessee claimed benefit of Modvat Credit in respect of duty paid on the inputs used in the manufacture of sand moulds. The lower authorities held that the assessee would not be eligible for the said Modvat credit as sand moulds would have to be considered as in the nature of equipment or apparatus specifically excluded from the purview of Modvat credit in terms of Central Excise Rules 57A. Before the Tribunal, the assessee contended that sand moulds should be taken as intermediate goods and though they were exempt from duty, the benefit of Modvat credit in terms of Central Excise Rule 57D was available. The Tribunal held that sand moulds manufactured by the assessee for use in the manufacture of castings, were in the nature of tools or apparatus, and did not qualify as intermediate goods. The use of the inputs in the manufacture of sand moulds was held to be not use in or in relation to the manufacture of castings and the assessee was held as not eligible for the benefit of Rule 57D, as moulds did not qualify as intermediate goods. Shri Murthy also contended that the decision in the case of Gujarat Alkalies & Chemicals Ltd. (supra) was not applicable to the present case since plaster of paris moulds were not similar to the goods in that case.
8. In his rejoinder, the learned Counsel submitted that the question was not whether plaster of paris was eligible for exemption when used in the production of moulds but whether it was eligible for exemption when used in the manufacture of sanitaryware. In the Mysore Kirloskar case, the issue was different and not similar to the one in the instant case because Notification 221/86 recognises plaster of paris moulds as input and, therefore, they must be held as used in relation to the manufacture of the finished product, viz., sanitaryware.
9. We have carefully considered the submissions of both sides and perused the record. We are of the opinion that discussion on whether plaster of paris moulds constitute an input used in or in relation to the manufacture of ceramic products is academic for the present purpose since Notification 221/86 recognises, in terms, plaster of paris moulds as an input for the manufacture of ceramic products. What remains to be considered is whether plaster of paris used in the production of plaster of paris moulds, which constitute an input for the manufacture of ceramic products, would be eligible for exemption in terms of Notification 217/86.
10. In this connection, we may also note that discussion on whether plaster of paris moulds constitute equipment, apparatus, tools or appliances for the purpose of Notification No. 217/86 is irrelevant since that consideration is relevant only to inputs as set out in that notification. Moulds, for that purpose, constitute the final product. It is also significant to note that Notification No. 221/86 does not, unlike Notification No. 217/86, contain a clause excluding goods in the nature of apparatus, appliances, equipment, etc. from the scope of the term "inputs".
11. It is true that the moulds in question are exempt from duty, in terms of Notification No. 221/86, when used as inputs for the manufacture of ceramic ware. It is the Department's case that the first proviso to Notification No. 217/86 ("provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty"), therefore, comes into play and acts as a bar to duty exemption to plaster of paris used in the manufacture of moulds. We do not agree with this contention.
12. Notification 217/86, as amended, as already noted, exempts goods classifiable inter alia under Chapter 25 of the Schedule (under which plaster of paris falls) which are used in or in relation to the manufacture of final product classifiable inter alia under Chapter 68 of the Schedule (under which plaster of paris moulds falls) and Chapter 69 of the Schedule (ceramic products fall under this Chapter). In the present case, plaster of paris has been used in the manufacture of plaster of paris moulds which, in turn, have been used in relation to the manufacture of ceramic products. In the process of manufacture employed by the appellants, plaster of paris moulds are not the final product. They are not cleared outside the factory. If they are cleared outside the factory, only then would the question whether they are to be treated as final products for the purpose of Notification 217/86 arise. The appellants' contention that plaster of paris moulds are not goods for the purpose of excise levy would also then need be considered. Such, however, is not the case in the present instance. Even presuming that plaster of paris moulds are goods falling under Chapter 68 of the Schedule, we do not see any reason why the benefit of Notification 217/86 cannot be extended to plaster of paris used in the manufacture of plaster of paris moulds which are used in relation to the manufacture of ceramic products. In our view, the first proviso to the notification (extracted earlier) would come into operation only if plaster of paris moulds are sought to be cleared from the factory as final product and, then again, only if they are exempt from duty in terms of any notification in force.
13. The above view would also lead to a harmonious construction of Notifications 217/86 and 221/86. In terms of the latter, plaster of paris moulds used in the factory of their production for manufacture of ceramic products are exempt from excise duty. In the present instance, plaster of paris moulds have been produced in the appellants factory and they are used for manufacture of ceramic products. Now, plaster of paris moulds, it goes without saying, can only be manufactured from plaster of paris. If it is held that plaster of paris moulds are final products for the purpose of Notification 217/86 and are denied the benefit of Notification 221/86 on the ground that they are exempt in terms of Notification 221/86 when used in the manufacture of ceramic products, the net result would be that plaster of paris moulds produced in the factory and used in the manufacture of ceramic products would be denied exemption from duty though this is one of the specific objects of Notification 221/86. Such an obviously absurd result cannot be brought about by a process of construction. In our opinion, therefore, the view which we have taken is the appropriate one to take on the facts and in the circumstances of the case.
14. In the light of the foregoing discussion, we set aside the impugned order and allow the appeal with consequential relief to the appellants. In the view we have taken, we do not consider it necessary to discuss the other contentions raised by the appellants such as limitation, whether plaster of paris moulds are goods, etc.