Customs, Excise and Gold Tribunal - Delhi
Tata Tea Limited vs Commissioner Of Central Excise on 8 December, 2003
Equivalent citations: 2004(92)ECC599, 2004(164)ELT315(TRI-DEL)
ORDER P.G. Chacko, Member (J)
1. The appellants are a 100% export-oriented undertaking [EOU] approved by the competent authority in the Ministry of Industry, Government of India, in the year 1992, for the manufacture and export of Instant Tea Powder and Aqueous Tea Aroma. The EOU scheme which had obligated them to export the entire production of the said goods for a period of ten years from the date of commencement of commercial production, permitted them to make duty-free imports and/or indigenous procurement of capital goods, raw materials, etc., required for the manufacture of the goods. The exemption from payment of Customs duty on imported items and that from payment of Central Excise duty on the items indigenously procured were provided under separate notifications issued by the Central Government under the respective provisions of the Customs Act and the Central Excise Act. The relevant Central Excise notification providing for exemption in respect of capital goods, raw materials, etc., procured indigenously by an EOU, for the period (1-1-2000 to 21-5-2000) relevant to the instant case, is Notification No. 1/95-C.E., dated 4-1-95 as amended from time to time. The notification exempted the excisable goods specified in Annexure-I thereto, when brought into a 100% EOU in connection with the manufacture and packaging of export products, from the Basic Excise Duty (leviable under Section 3 of the Central Excise Act) and the Additional Excise Duty leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Annexure-I to the Notification was amended from time to time. Only two of the entries in the Annexure are relevant to the dispute in this case. These entries, at Serial Nos. 3 and 7 of the Annexure, for the period 4-1-95 to 14-9-98, are as under :-
ANNEXURE-I
1. ...................
2. ...................
3. Captive power plants, including captive generating sets and their spares, fuel, lubricants and other consumables for such plants and generating sets as recommended by the said Board or the said Committee, as the case may be.
4. ...................
5. ...................
6. ...................
7. ...................
8. ...................
9. ...................
10. ...................
11. ...................
Amending Notification No. 31/98-C.E., dated 15-9-98 substituted four separate entries viz. 3, 3A, 3B and 3C for the above entry No. 3. Accordingly, for the period from 15-9-98, the entries of Annexure-I relevant to the instant case are as under :-
3C. Furnace oil required for the boilers used in the textile units as approved by the Commissioner of Customs on the recommendation of the Development Commissioner.
4. ...................
5. ...................
6. ...................
7. Consumables The next relevant amendment was made by Notification No. 40/2000-C.E., dated 22-5-2000 whereby entry No. 3C was altered but entry No. 7 was left intact. The relevant entries of Annexure-I since 22-5-2000 stand as under :-
3C. Furnace oil required for the boilers as approved by the Assistant Commissioner of Customs or Central Excise on the recommendation of the Development Commissioner.
4. ...................
5. ...................
6. ...................
7. Consumables
2. The appellants had, after complying with Rule 192 of the Central Excise Rules, procured Furnace Oil from Indian market without payment of duty under bond executed with the jurisdictional Assistant Commissioner in terms of Notification No. 1/95-C.E., dated 4-1-95 (as amended) and used the same as fuel for boilers which generated steam which was, in turn, used for the manufacture of Instant Tea Powder. The department issued to them two show cause notices, the first one dated 3-2-2001 read with corrigendum dated 1-3-2001 demanding Central Excise duty of Rs. 98,40,888/- for the period 1-1-96 to 31-3-2000 and the second one dated 23-3-2001 demanding duty of Rs. 5,63,030/- for the period 1-4-2000 to 21-5-2000, on the Furnace Oil procured and used as above. The demand of duty was based on the allegation that the exemption under Notification No. 1/95-C.E. was not available to furnace oil used as fuel in boilers. The show cause notices invoked the larger period of limitation under the proviso to Section 11A(1) of the Central Excise Act to raise the demand of duty by alleging that the appellants had, with intent to evade payment of duty on the furnace oil, misdeclared that the furnace oil was 'used as fuel in the manufacture of instant tea'. The party denied the allegations and contested the demand of duty by pleading that furnace oil used in the boilers was a 'consumable' and hence eligible for the exemption under the Notification as also by contending that the demand was barred by limitation. In the common order passed by the Commissioner in adjudication of the two show cause notices, it was held that the exemption under the Notification was not available to furnace oil and hence the appellants were liable to pay duty. The demand for the period up to 31-12-1999 was, however, held to be time-barred.
3. Heard both the sides. The learned Counsel for the appellants referred to the process of manufacture of Instant Tea Powder and submitted that furnace oil used as fuel in boilers for generating steam for the manufacture of the tea powder was squarely covered by the entry 'consumables' in Annexure-I to the Notification; that the entries in the said Annexure had to be liberally construed so as to give full effect to the EOU scheme; that, in answer to queries of the Central Excise Range Superintendent, the appellants had clarified through letter dated 12-8-94 that furnace oil was a consumable used in connection with the manufacture of Instant tea powder meant for export; that such clarification was accepted by the department; that this position was acknowledged in the impugned order itself; that the Commissioner erred in relying on the Amending Notification No. 31/98 to deny the benefit of the clear provisions of Notification No. 1/95; and that the applicability of the entry 'Consumables' to furnace oil was not affected by anything contained in any of the Amending Notifications. Without prejudice to the above submissions, Counsel also argued that the amendment of entry '3C' in Annexure-I to Notification 1/95-C.E., brought about by Notification No. 40/2000-C.E., was clarificatory and therefore the furnace oil used by the EOU in their boilers would be squarely covered by the entry for the entire period.
Ld. Counsel also relied on the following decisions :-
(i) Collector of Central Excise v. Kudremukh Iron Ore Co. Ltd. [1988 (36) E.L.T. 626]
(ii) Waterbase Ltd. v. CC, Guntur [2001 (130) E.L.T. 386] (iii) Johnson & Johnson Ltd. v. CCE, Aurangabad [1997 (92) E.L.T. 23 (S.C.)]
(iv) Sun Export Corporation v. CC, Bombay [1997 (93) E.L.T. 641 (S.C.)]
(v) Novopan India Ltd. v. CCE, Hyderabad [1994 (73) E.L.T. 769 (S.C.)]
(vi) Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner [1991 (55) E.L.T. 437 (S.C.)]
(vii) Belapur Sugar & Allied Indus. Ltd. v. CCE, Aurangabad [1999 (108) E.L.T. 9 (S.C.)]
4. The learned SDR vehemently defended the decision of the adjudicating authority on the strength of the latter's reasonings. He however agreed that the only issue to be decided upon was whether furnace oil was a 'consumable' within the meaning of entry No. 7 in Annexure-I to Notification No. 1/95-C.E., dated 4-1-95.
5.1. We have carefully considered the submissions. It appears from the record that, prior to 4-1-95, the appellants had been procuring furnace oil free of duty in terms of Notification No. 57/94-C.E., dated 1-3-94 and their claim that furnace oil was a "consumable required for manufacture of goods" under the said notification and was "used in connection with the manufacture of Instant tea meant for export" had been accepted by the Central Excise Range Officer concerned. Duty-free indigenous procurement of furnace oil had, accordingly, been permitted through CT3 certificates issued in accordance with the procedure under Chapter X of the Central Excise Rules, 1944. Under the successor-Notification (1/95-C.E.), the appellants continued to claim as above. These facts have been correctly found and recorded in the impugned order of the Commissioner. However, with reference to Notification No. 1/95-C.E., the adjudicating authority has arrived at a conclusion that furnace oil cannot be treated as "consumable". It is this conclusion that is under challenge in this appeal.
5.2 The adjudicating authority's reasoning for the above finding reads thus :-
"furnace oil is no doubt a fuel but there is a separate entry for exemption of fuel used for captive power plants including captive generating sets in the same notification. In other words a conscious distinction between fuel and consumables has been made in Notification 1/95. Therefore extending the benefit of exemption for furnace oil as consumable under Notification 1/95 to M/s. Tata Tea Ltd., is ab-initio wrong. For the first time furnace oil used in boiler for textile unit was included in Notification No. 1/95 by an amendment Notification 31/98, dated 15-9-98. Later on 22-5-2000 the words "used in textile units" were deleted and for the first time furnace oil for all EOUs was exempted with effect from 22nd May, 2000 in view of the amending notification 40/2000. This notification does not have any retrospective effect. In this context it is observed that an amendment was carried out in the notification 1/95 on 15-9-98. After issue of Notification 40/2000, GOI issued Circular No. 49/2000 Cus., dated 22-5-2000 and para 23 of the circular reads as follows : "Notification Nos. 133/94-Cus., dated 22-8-1994, 53/97-Cus., dated 3-8-97 and 1/95-C.E., dated 4-1-95 provide for duty free import/procurement of furnace oil for boiler in textile units only. The Ministry of Commerce has requested that the boiler is required for units other than textiles also. It has also been pointed out that Notification No. 126/94-C.E., dated 2-9-94, does not allow duty free procurement of furnace oil even for the textile unit. The matter has been considered and notification Nos. 133/94-Cus., dated 22-6-94, 53/97-Cus., dated 3-8-97, 1/95-C.E., dated 4-1-95 and 126/94 C.E., dated 2-9-94 have been amended to allow duty free import/procurement of furnace oil for boilers in all EOU/EPZ units." In view of the above circular, it is abundantly clear that the duty free procurement of indigenous furnace oil for EOU was not having the sanctity of the law till 21-5-2000."
The adjudicating authority has gone solely by Entry No. 3C of Annexure-I to the Notification to hold that the entry was not applicable to the furnace oil used in boilers in the appellant's EOU (not being a textile unit) till 21-5-2000. The authority appears to have taken the view that, there being a separate entry for "furnace oil for boilers", the entry for "consumables" could not be invoked to claim duty-free procurement of furnace oil into a 100% EOU for the relevant period. In other words, the question whether furnace oil used by the EOU in their boilers was a "consumable" within the meaning of Entry No. 7 of Annexure-I to the Notification has been decided upon with reference to Entry No. 3C. We can hardly sustain this inasmuch as each entry in the Annexure is per se specific and requires to be construed independently, untrammeled by anything contained in any other entry. This legislative intent underlying the Notification is clear from the very opening paragraph thereof :
"In exercise of the powers............... the Central Government.......hereby exempts excisable goods specified in Annexure-I to this notification (hereinafter referred to as the said goods) when brought, in connection with -
(a) the manufacture and packaging of articles, into a hundred per cent export-oriented undertaking..............."
"Furnace oil required for the boilers" vide Entry 3C of Annexure-I as amended on 22-5-2000 is specific for all 100% EOUs from the said date. But "furnace oil required for the boilers used in the textile units" vide Entry 3C of Annexure-I for the period from 15-9-98 to 21-5-2000 was specific only for the textiles units among the 100% EOUs for the said period. On the other hand, "consumables" have ever remained as specified goods for all 100% EOUs under the notification vide Entry No. 7 of Anexure-I thereto. It follows that for the relevant period (1-1-2000 to 21-5-2000), it was Entry No. 7 and not Entry No. 3C that was specific for the appellants' EOU.
5.3. The question, now, is whether the furnace oil used as fuel for the appellants' boilers could be considered as a "consumable". This term has not been defined in the Notification nor under the Central Excise Act/Rules. According to the Concise Oxford Dictionary of Current English it means a "commodity that is eventually used up". There is no dispute, in the instant case, of furnace oil having been used as a fuel for the boilers. The boilers generated steam and the latter was used in the drying stage of the process of manufacture of Instant Tea Powder. The furnace oil was, thus, consumed in the process. It fell in the category of consumables indisputably, and undisputedly too. Therefore, we hold that the furnace oil brought into the EOU and used in the boilers during 1-1-2000 to 21-5-2000 was exempt from payment of Central Excise duty in terms of Entry No. 7 of Annexure-I to Notification No. 1/95-C.E., dated 4-1-95.
6.1 We have also examined the case law cited. In the case of Kudremukh Iron Ore Co. Ltd. (supra), the question considered by this Tribunal was whether the HSD oil used by the respondents (100% EOU) as fuel for generating electricity which in turn was utilized for operating dumpers for transferring crude ore from the ore body to crusher could be held to be brought into the EOU in connection with the manufacture of export goods in terms of Notification No. 123/81-C.E. (as amended) which exempted consumables, among other goods, from payment of duty of excise when brought into a 100% EOU. The Tribunal answered the question in the affirmative and extended the benefit of the notification to HSD oil. In the above case, it appears, there was no dispute of HSD oil being a consumable. The question was whether it could be considered to be brought into the EOU in connection with the manufacture of the export goods. In the instant case, such a question has not arisen as nobody has had a case that furnace oil was not brought into the appellants' EOU in connection with the manufacture of Instant Tea Powder (export goods). The cited decision, therefore, is not on the point considered by us. In the case of Waterbase (supra), the question was whether the benefit of exemption under Notification No. 1/95-C.E. was available to HSD oil and furnace oil used by the assessee (100% EOU) in their aquaculture farms after the issuance of Notification No. 10/95-C.E., dated 23-2-95 which exempted from duty various excisable goods brought into aquaculture farms of 100% EOUs. This Tribunal held that the assessee had the right to choose that Notification which extended the benefit to him. Again, this decision does not appear to be relevant to the facts of the present case in which the party has claimed only under one notification viz. 1/95-C.E. for the relevant period.
6.2. In the case of Johnson & Johnson (supra), the Hon'ble Supreme Court held that the legislative intent behind an Exemption Notification could be gathered from a subsequent notification on the same subject. In Sun Export Corporation (supra), the Apex Court held that, where two views were possible in a taxation matter, the one favourable to the assessee was to be preferred. The decision in Belapur Sugar & Allied Industries (supra) was that, unless there was anything to the contrary in the taxing statute, rules or the notification itself, if there be two possible interpretations of an Exemption Notification, that interpretation which subserved the object and purpose of exemption should be accepted. But, in the instant case, we have not heard anybody say that 'consumable' could be so construed as to exclude fuels like furnace oil used in boilers. In the cases of Mangalore Chemicals and Fertilizers (supra) and Novopan India (supra), it was held by the Court that, once an assessee was found to fall within the ambit of an Exemption Notification, full effect should be given to the exemption by a liberal interpretation of the terms of the notification. This ruling appears to have a say in the instant case. The appellants had, admittedly, satisfied all the substantive conditions of Notification No. 1/95-C.E. to come within its purview. The only dispute was whether the "furnace oil" which was procured without payment of duty fell within the coverage of "consumables" under Entry No. 7. When construed in terms of the Apex Court's ruling, the entry would squarely cover the appellants,' furnace oil. We need not consider the learned Counsel's plea for giving retrospective effect to Notification No. 40/2000-C.E.
7. In the result, we set aside the impugned order to the extent it relates to the demand of duty for the period, 1-1-2000 to 21-5-2000. The appeal stands allowed.