1991 (6) TMI 84 - HC - Central Excise

Summary

Issues Involved:
1. Challenge to the levy of excise duty on fertilizers.
2. Interpretation of exemption notifications.
3. Compliance with conditions for availing exemption.

Summary:

1. Challenge to the levy of excise duty on fertilizers:
The petitioner, a multi-unit Co-operative Society engaged in the manufacture of fertilizers, challenged the levy of excise duty on fertilizers cleared during April 1975 to May 1976. The petitioner argued that it was denied the benefit of Notification No. 106 of 1974-C.E., dated 20th June 1974, as amended by Notification No. 191 of 1976-C.E., dated 12th June 1976, issued by the Central Government u/r 8(1) of the Central Excise Rules, 1944.

2. Interpretation of exemption notifications:
The court examined the conditions under the Notification at Annexure `A' which required the manufacturer to:
- Give an undertaking at the time of clearance to credit the specified amount into the Fertilizers Pool Equalization Fund.
- Make the payment into the fund.
- Furnish proof of such payment within sixty days of the clearance.

The court referred to the Supreme Court ruling in Union of India v. Wood Papers Ltd., 1990 (47) E.L.T. 500, which held that once an exemption becomes applicable, it should be construed liberally. The court concluded that the first two conditions were mandatory and the third condition was directory, meaning substantial compliance with the third condition was sufficient.

3. Compliance with conditions for availing exemption:
The petitioner had complied with the first two conditions but failed to furnish proof within the stipulated time due to procedural changes by the Ministry of Agriculture. The court noted that the petitioner did furnish proof belatedly and held that the third condition, being procedural, required liberal construction. The court emphasized that the exemption could not be denied if the delay in furnishing proof was due to reasons beyond the petitioner's control.

Conclusion:
The court quashed the demand orders for excise duty as illegal and invalid, ruling that the petitioner had substantially complied with the conditions for exemption. The petitions were allowed, and the rule was made absolute with no order as to costs.