Customs, Excise and Gold Tribunal - Delhi
Kharia Cement Works vs Collector Of C. Ex. on 4 May, 1989
Equivalent citations: 1989(24)ECR37(TRI.-DELHI), 1989(42)ELT696(TRI-DEL)
ORDER
G. Sankaran, Sr. Vice-President
1. This appeal is against Order-in-Original No. 25/88-C.E., dated 26-9-1988 passed by the Collector of Central Excise, Jaipur.
2. The facts of the case, briefly stated, are that M/s. Kharia Cement Works (hereinafter called the appellants), a division of M/s. Lohia Engineering Works Private Ltd., Kanpur, have a factory at Kanpur, manufacturing machines and a factory in Jodhpur District, manufacturing cement. Based on certain investigations, the Collector issued a show cause notice to the appellants alleging that since the aggregate value of clearances of all excisable goods (save for certain exclusions) manufactured and cleared by the factories at Kharia and Kanpur during the financial years 1984-85 and 1985-86 had exceeded the prescribed ceiling of Rs. 1.5 crores, they were not entitled to the benefit of duty exemption under Central Excise Notification No. 175/86, dated 1-3-1986. It was further alleged that since the Kanpur unit had, during 1987-88, availed itself of MOD-VAT credit of duty paid on inputs, the Kharia cement unit was not entitled to full exemption from duty on first clearances upto Rs. 15 lakhs under Clause (1)(a)(ii) of Notification No. 175/86. The Kharia unit could avail itself of only partial exemption on first clearances upto an aggregate value not exceeding Rs. 75 lakhs as per Clause (1)(a)(i) and (1)(b) of the said notification. It was alleged that the amount of duty thus evaded by the Kharia unit worked out to Rs. 38,469 during the period from 1-3-1986 to 24-3-1986, Rs. 9,38,301.20 during 1986-87 and Rs. 1,93,354.60 during 1987-88 (upto September 1987). In all, the duty in respect of the Kharia unit was Rs. 11,70,124.80 and that in respect of the Kanpur unit Rs. 6,73,070.16. The appellants deposited a total sum of Rs. 9,76,7717-in a number of instalments, some of them preceding the issue of the show cause notice and the others following it, but all prior to the date of the adjudication order.
3. On the issue whether entitlement to exemption under Notification No. 175/86 would depend on the aggregate value of clearances of all excisable goods from both the Kanpur and Kharia units, the Collector, in his adjudication order, noted that the appellants had not raised any dispute.
4. As regards the issue whether the Kharia unit was entitled to duty exemption on first clearances upto Rs. 15 lakhs though the Kanpur unit had availed itself of MOD-VAT credit during 1987-88, the appellants' contention was that the two units were distinct and separate. The fact that the Kanpur unit applied for and availed itself of MOD VAT credit would not mean that the Kharia unit had also availed itself of MOD-VAT credit. Therefore, the Kharia unit could not be denied full duty exemption on its first clearances upto Rs. 15 lakhs. The Collector, however, noted that the real issue was whether the manufacturer having availed itself of MOD VAT credit in respect of its Kanpur unit would be entitled to avail itself of full duty exemption on the first clearances of specified excisable goods upto Rs. 15 lakhs. Relying on Clause (a)(i) of para 1 of the Notification the Collector held that the Kharia unit was not entitled to the said full duty exemption.
5. Though the Collector held that the appellants had rendered themselves liable to penalty under Central Excise Rule 173Q inasmuch as they had suppressed the value of clearances of the Kanpur unit in their classification list, he noted that they had voluntarily deposited a major part of the duty. The said omission, according to the Collector, was not a deliberate and conscious intention to evade Central Excise duty but was attributable to an erroneous interpretation of the notification. Therefore, the Collector did not impose any penalty on the appellants but cautioned them to be more careful in future.
6. In the result, the Collector confirmed the demand for duty in the sum of Rs. 11,17,124.80 from the appellants under Rule 9(2) of the Central Excise Rules read with Section 11A of the Central Excises and Salt Act, giving, however, due credit for the amount already deposited by them voluntarily.
7. In the present appeal against the Collector's order, the only relief claimed is in respect of the demand for duty amounting to Rs. 1,93,354.60 from the appellants on the basis of the finding that the Kharia unit was not entitled to full duty exemption on cement cleared by it in 1987-88 upto a value of Rs. 15 lakhs since the Kanpur unit had availed itself of the MOD VAT credit facility.
8. We have heard Shri M.C. Bhandare, Counsel for the appellants and Shri A.S. Sunder Rajan, DR, for the respondent-Collector. We have also perused the record.
9. Shri Bhandare, learned Counsel for the appellants, drew our attention to sub-clauses (i) and (ii) of Clause (a) of para 1 of Notification No. 175/86 reading as follows :-
"(a) in the case of the first clearances of the specified goods upto an aggregate value not exceeding rupees seven and a half lakhs, -
(i) in a case where a manufacturer avails of the credit of duty paid on inputs used in the manufacture of the specified goods under Rule 57A of the said Rules, from so much of the duty of excise leviable thereon which is specified in the said Schedule [read with any relevant notification issued under Sub-rule (1) of Rule 8 of the said Rules and in force for the time being] as is equivalent to an amount calculated at the rate of 75% of such duty, or an amount calculated at the rate of 10% ad valorem, whichever is higher;
(ii) in any other case from the whole of the duty of excise leviable thereon."
He submitted that the clear implication was that where the manufacturer availed himself of the facility of utilisation of input duty credit in terms of Central Excise Rule 57A, the extent of duty exemption was 75% of the effective amount of duty, or an amount calculated at the rate of 10% ad valorem whichever was higher. In any other case, that is, in the case of a manufacturer who did not avail himself of the said facility, the extent of exemption was the whole of the duty. There could be a third type of case, as in the present instance, of a manufacturer availing himself of the MOD VAT credit facility in one of his factories and not doing so in the other. The benefit of the duty concession was meant to accrue to the manufacturer and so, a beneficial construction should be adopted. The fact that the Kanpur factory had utilised MOD VAT credit would not mean that the Kharia factory had also utilised MODVAT credit. And since the latter factory did not utilise MODVAT credit, it would not attract the mischief of para l(a)(i) and could not be denied the benefit of full duty exemption in terms of para l(a)(ii). The Counsel also submitted that para l(b) of the notification (reading as follows :-
"(b) in the case of clearance (being clearances 6f the specified goods of an aggregate value not exceeding rupees seven and a half lakhs) immediately following the said clearances of the value specified in Clause (a), from so much of the duty of excise leviable thereon which is specified in the said Schedule [read with any relevant notification issued under sub-rule (t) of Rule 8 of the said Rules and in force for the time being] as is equivalent to the amount calculated at the rate of 75% of such duty or an amount calculated at the rate of 10% ad valorem, whichever is higher:") was not relevant for the interpretation of Clause (a). He referred to para 120 of the Finance Minister's Budget speech of 1986 to the effect that the scheme which he proposed to introduce would considerably enhance the scope of concessions available to the small scale sector. Therefore, submitted the learned Counsel, the intention could not have been to deny even the exemptions available prior to the budget.
10. In reply, Shri Sunder Rajan, learned DR, submitted that the exemption notification should be construed strictly. The notification in question made a clear distinction between manufacturers and factories. The supposed intentions would not be relevant in construing the terms of the notification. He further submitted that clauses (a)(i) and (a)(ii) of para 1 of the notification were not mutually exclusive. The option was in respect of the manufacturer and not in respect of the goods. Relying on the reasonsing adopted by the Collector, Shri Sunder Rajan prayed that the appeal should be dismissed.
11. We have carefully considered the submissions of both sides and perused the record.
12. The relevant portions of the notification in question have been already set out. Clause (a)(i) sets out the extent of exemption in the case of a manufacturer who avails himself of the facility of utilisation of input duty credit under Central Excise Rule 57A. Sub-clause (ii) provides that in any other case (which would necessarily mean in the case of a manufacturer who does not avail himself of the said input duty credit availment facility), the extent of exemption shall be the whole of the duty of excise leviable on the first clearances of the specified goods upto an aggregate value not exceeding Rs. 7.5 lakhs. Now a manufacturer may have one factory or may have more than one factory. He may avail of the credit facility in respect of one factory or in respect of all factories. The notification does not make any distinction between such different likely situations. It is quite clear when it states that the extent of exemption shall be 75% of the effective amount of duty, or an amount calculated at the rate of 10% ad valorem whichever is higher, in the case of a manufacturer who avails himself of the said aggregate facility. This provision, that is, Clause (a)(i) of para 1 of the notification does not, in our opinion, lend itself to the interpretation, as contended by the Counsel for the appellants, that it applies only to that factory of the manufacturer in which such credit availment takes place and not in the case of another factory of the same manufacturer where such credit availment does not take place. Sub-clause (ii) of the same provision, as noted earlier, refers to cases of manufacturers who do not avail of the said facility. This is clear enough and, in our opinion; it cannot be read in such a way that its scope and effect are construed to apply to factories of manufacturers where such availment does not take place though such availment does take place in respect of other factories belonging to the same manufacturer. The notification is to be read as a whole. Para 3 of the notification clearly sets out that nothing contained in the notification shall apply if the aggregate value of clearances of all excisable goods for home consumption -
(a) by a manufacturer, from one or more factories, or (b) from any factory, by one or more manufacturers,
had exceeded Rs. 150 lakhs in the preceding financial year. It is obvious that there is a clear distinction in the notification between a manufacturer and a factory and wherever such a clear distinction is sought to be applied the words "manufacturer" and "factory" have been employed. As we have seen, in the provision which we are called upon to construe here, the word used is "manufacturer" and not "factory". We are, therefore, of the opinion that the construction sought to be put on the provision by the learned Counsel for the appellants is not tenable.
13. The learned Counsel referred to Notifications No. 77/85 and 85/85, dated 17-3-1985 and had submitted that the intention could not have been to deny the benefit of these pre-existing notifications. We do not find any force in this contention. Para 4 of the notification provides that the exemption contained in the notification shall be applicable only to factories which are registered with the Director of Industries or the Development Commissioner (Small Scale Industries) as a small scale industry under the provisions of the Industries (Development and Regulations) Act, 1951. It further provides that this restriction shall not be applicable inter alia in a case where a manufacturer had been availing himself of the exemption contained in any of the notifications specified in the paragraph during the preceding financial year. The two notifications referred to by the Counsel are listed in the paragraph. The purport of this paragraph appears to be that the requirement of registration with the Director of Industries or the Development Commissioner as a small scale industry is waived in the case of factories which have been enjoying the benefit of the listed notifications. There is no finding in the Collector's order that the mischief of this paragraph is attracted in the present case. We do not see the relevance of the reference to the two Notifications No. 77/85 and 85/85.
14. The Counsel also referred to the Finance Minister's Budget speech. The speech no doubt states that the proposed scheme of exemption would considerably enhance the scope of the concessions available to the small scale sector. The direction in which such enhancement was to take place is also set out in the same budget speech. It can be seen therefrom that prior to the budget full duty was chargeable on clearances exceeding Rs. 40 lakhs until the turn over reached Rs. 75 lakhs. If a unit crossed that level, it altogether lost the exemption. Under the scheme proposed in the budget, the excise duty concession was to be available at different levels upto a turn over limit of Rs. 75 lakhs and thereafter the unit would pay normal duty but continue to enjoy the concessional rate on the first Rs. 75 lakhs turn over. The concession would be altogether lost when the unit crossed a turn over of Rs. 1.5 crores. This appears to be the direction hi which the small scale exemption was enhanced. We do not see anything in the Finance Minister's speech which supports the construction sought to be placed on the notification by the learned Counsel for the appellants.
15. The Counsel for the appellants also referred to the meaning of the term "avail" in Venkataramaiya's "Law Lexicon and Legal Maxims" (page 256-4 II Edition). This book says that a person can be said to have availed himself of something only if he had taken advantage of or profited by that thing or utilised it to his benefit. We do hot see how this helps the appellants' case. For, as we have already noted, the notification has provided for two situations, one where the manufacturer (not the factory) avails himself of the credit facility and the other where he does not. There is no dispute that, in the present instance, the manufacturer availed himself of the facility in one factory and not the other. Nothing, in our view, turns on the meaning of the term "avail" in the present case.
16. In the result, we confirm that part of the Collector's order (which alone is under challenge in the present appeal) which denies the benefit of full duty exemption in respect of the first clearances upto Rs. 15 lakhs by the Kharia unit. We dismiss this appeal.