1985 (8) TMI 364 - AT - Central Excise

Issues Involved:
1. Interpretation of Notification No. 198/76-C.E., dated 16-6-1976.
2. Determination of "base clearances" and "base period" for calculating excise duty exemption.
3. Applicability of the term "clearances" to excisable and non-excisable goods.
4. Impact of non-availability of excise data for the period before goods became excisable.

Issue-Wise Detailed Analysis:

1. Interpretation of Notification No. 198/76-C.E., dated 16-6-1976:
The core issue revolves around the interpretation of the Government of India, Ministry of Finance (Revenue) Notification No. 198/76-C.E., dated 16-6-1976, which grants a 25% excise duty exemption on excess clearances of specified excisable goods. The appellants argued that the term "clearances" should apply only to excisable goods, whereas the respondents contended that it should cover all removals of goods, whether excisable or not, to align with the notification's intent of encouraging increased production.

2. Determination of "base clearances" and "base period" for calculating excise duty exemption:
The notification outlines three scenarios for determining "base clearances" and the "base period":
- Clause 2(2)(a): For goods cleared for the first time on or after April 1, 1976, the base period is 1975-76, and base clearances are nil.
- Clause 2(2)(b): For goods cleared for the first time between April 1, 1973, and March 31, 1976, the base period is the three financial years 1973-74, 1974-75, and 1975-76, with base clearances being one-third of the aggregate clearances during this period.
- Clause 2(2)(c): For goods cleared before April 1, 1973, the base period is the year with the highest clearances among 1973-74, 1974-75, and 1975-76.

The appellants argued that their case fell under Clause 2(2)(b), as their goods became excisable only from March 1, 1974. Initially, the base clearances were set at Rs. 2,52,94,080.09, but were later revised to Rs. 4,17,01,768.87, leading to rejection of refund claims and a demand for differential duty.

3. Applicability of the term "clearances" to excisable and non-excisable goods:
The appellants contended that "clearances" should refer only to excisable goods, as the term is specific to excise law. They pointed to provisions in the notification requiring clearances to be calculated based on accounts maintained under Central Excise Rules and values determined under Section 4 of the Central Excises and Salt Act, 1944. The respondents argued that the term "clearances" should be understood broadly to include all removals of goods, consistent with the notification's purpose of incentivizing increased production.

The Tribunal noted that while "clearances" typically imply compliance with excise formalities, the term should be interpreted broadly to avoid anomalies and fulfill the notification's objective. The Tribunal emphasized that the notification's intent was to reward increased production, and adopting a narrow interpretation would contradict this goal.

4. Impact of non-availability of excise data for the period before goods became excisable:
The Tribunal acknowledged the absence of excise data for the period April 1973 to February 1974, as the goods became excisable only from March 1, 1974. It held that this non-availability should not render the notification inapplicable. Instead, the Tribunal suggested using the available data for 1974-75 and 1975-76 to determine base clearances, which would be more beneficial to the appellants than denying the concession altogether.

The Tribunal concluded that the appellants' case fell under Clause 2(2)(c), as they had been producing goods before April 1, 1973. The highest clearances during 1973-74, 1974-75, and 1975-76 should be taken as the base clearances. Ignoring the 1973-74 data, the base clearances would be the higher of the figures for 1974-75 and 1975-76, aligning with the Department's determination.

Conclusion:
The Tribunal confirmed the orders of the Appellate Collector, rejecting the appeals. It held that the term "clearances" should be interpreted broadly to include all removals of goods, whether excisable or not, to align with the notification's intent of encouraging increased production. The appellants' case was correctly classified under Clause 2(2)(c), with the highest clearances during 1975-76 being the base clearances.

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