1995 (3) TMI 98 - SC - Central Excise

Whether the appellants were entitled to the benefit of the Notification No. 71/71-C.E., dated 29th May, 1971? Held that - The High Court, however, took note of the fact that no contention had been raised before the Tribunal that the appellants should be permitted to meet the requirements of Rule 56A of the Central Excise Rules and, therefore, they cannot be permitted to avail of that benefit in a Writ Petition brought under Article 226 of the Constitution. Once the Tribunal took the view that they were liable to pay duty on the intermediary product and they would have been entitled to the benefit of the notification had they met with the requirement of Rule 56A, the proper course was to permit them to do so rather than denying to them the benefit on the technical ground that the point of time when they could have done so had elapsed and they could not be permitted to comply with Rule 56A after that stage had passed. We are, therefore, of the opinion that the appellants should be permitted to avail of the benefit of the notification by complying at this stage with Rule 56A to the satisfaction of the Department. Appeal allowed and remit the matter to the Collector of Central Excise with a direction to permit the appellants to comply at this stage with the requirements of Rule 56A of the Central Excise Rules and claim set off of the duty payable on the intermediary product by satisfying the Collector that the same was used in the manufacture of the end product on which full duty had already been paid.

Summary

Issues:
1. Interpretation of Central Excise Tariff regarding duty liability on intermediary products
2. Applicability of Notification No. 71/71-C.E. for set off of excise duty
3. Compliance with Rule 56A of the Central Excise Rules for availing set off benefit

Detailed Analysis:

1. The dispute in the appeals revolved around the liability of duty on intermediary products, namely treated paper and cotton fabric, used in the manufacture of rigid plastic laminates. The Revenue contended that duty was payable on these intermediary products under specific Tariff Items. The appellants argued that they should be entitled to a set off for the duty paid on intermediary products as per Notification No. 71/71-C.E. The Tribunal had previously held that Tariff Item 17(2) covered treated papers, thus supporting the appellants' position.

2. The Notification in question exempted certain products from excise duty, subject to conditions, including the adjustment of duty paid on intermediary products towards the final product. The appellants claimed that they were entitled to set off the duty paid on treated paper and cotton fabric against the duty on the final product. The Revenue tried to argue that the Notification only applied to base products and not all products falling under the Tariff Items, but this argument was rejected as it was not raised in earlier proceedings.

3. The High Court initially took a technical view, stating that the appellants could not avail themselves of the benefit of the Notification due to non-compliance with Rule 56A of the Central Excise Rules. However, the Supreme Court disagreed, emphasizing that denying the benefit on technical grounds would result in double duty on the intermediary product. The Court held that the appellants should be allowed to comply with Rule 56A at the current stage to claim the set off benefit, remitting the matter back to the Collector of Central Excise for further action.

4. Consequently, the Supreme Court allowed Civil Appeal No. 1493/88, directing the appellants to comply with Rule 56A to claim the set off and passed appropriate orders upon satisfaction. Civil Appeal No. 4171/84 was disposed of accordingly, with no order as to costs in both appeals.