2004 (6) TMI 506 - HC - Central Excise

Demand - Exemption, captive consumption, Partial exemption - Writ jurisdiction of High Court - Show cause notice - Demand

Issues Involved:
1. Condonation of delay
2. Entitlement to excise duty exemption under Notifications No. 217/86 and 452/86
3. Classification and excise duty applicability on 'stabled wagon'
4. Applicability of Rule 57A for adjustment of duty
5. Jurisdiction of the Court to entertain the writ petition

Comprehensive, Issue-wise Detailed Analysis:

1. Condonation of Delay:
After hearing the learned Counsel for the parties, the Court found that the delay had been sufficiently explained. Therefore, the delay was condoned, and the appeal was registered. Both parties addressed the Court on the merits of the appeal, and by consent, the appeal was treated as on the day's list for hearing.

2. Entitlement to Excise Duty Exemption under Notifications No. 217/86 and 452/86:
The respondent was issued a show cause notice requiring the levy of excise duty under Heading 8607 of the Central Excise Tariff Act, 1985, on the grounds that the assessee was not entitled to the benefit of two exemptions under Notification No. 217/86-C.E. and Notification No. 452/86-C.E. The learned Single Judge quashed the show cause notice, reasoning that even assuming the existence of two products, there was no justification for assuming that the assessee was availing the benefit of two Notifications for one product. The exemptions under the two Notifications were granted under Rule 8(1) of the Central Excise Rules, 1944, and were distinct from the adjustments available under Rule 57A.

3. Classification and Excise Duty Applicability on 'Stabled Wagon':
The appellant contended that the 'stabled wagon' was an independent product manufactured by the assessee, subject to excise duty, and captively used when mounted on bogies for the production of the complete wagon. The assessee was allegedly availing benefits under both Notifications No. 217/86 and 452/86, which the appellant argued were mutually exclusive. The respondent countered that the 'stabled wagon' and the finished wagon were two separate products, each entitled to its respective exemption. The Court found that if the 'stabled wagon' was an independent product, it would be exempt under Notification No. 217/86, and the finished wagon would be subject to duty under Notification No. 452/86.

4. Applicability of Rule 57A for Adjustment of Duty:
The appellant argued that the assessee was seeking adjustment under Rule 57A, which was not permissible. The respondent contended that Rule 57A dealt with adjustments and was distinct from the exemptions under Rule 8(1). The Court agreed with the respondent, noting that Rule 57A could not be invoked in this case as no duty was paid on the inputs (stabled wagon), and the exemptions under Rule 8(1) were separate from the adjustments under Rule 57A.

5. Jurisdiction of the Court to Entertain the Writ Petition:
The appellant did not contest the jurisdiction of the Court to entertain the writ petition. The Court held that on the face of the show cause notice, there was no substance to the contentions raised, and it would unnecessarily subject the petitioner to proceedings. Therefore, the Court had the jurisdiction to interfere, particularly when the matter could be adjudicated purely on questions of law.

Conclusion:
The appeal was dismissed, and the judgment and order of the learned Single Judge were affirmed. The Court found that the show cause notice did not disclose any prima facie substance, and there was no scope for applying Rule 57A. The exemptions under Notifications No. 217/86 and 452/86 were applicable to the respective products, and there was no question of enjoying double benefits. The Court also upheld the jurisdiction to entertain the writ petition, as the show cause notice lacked substance.

Order:
The appeal failed, and the judgment and order appealed against were affirmed. There was no order as to costs. An urgent xerox certified copy of the order was to be provided to the parties on a priority basis.

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