2003 (3) TMI 104 - SC - Central Excise

Benefit of Notification No. 175/1986-C.E. dated 1st March 1986 denied - Held that - Where inputs which are specified goods are used within the factory of production for further manufacture of finished goods which are also specified goods the clearance of such inputs for such use shall not be taken into account for the purposes of calculating the aggregate value of clearances under this notification. There appears to be a rationale behind this Explanation; firstly when the value of the finished goods which are exempted under different notifications is to be excluded having regard to the wording of Explanation II on the same analogy the value of inputs which are being used for manufacture of finished goods are also excluded as both are specified goods subject of course to the limit of the notification. Secondly the notification provides relief to small scale industries; when the inputs which enjoys the exemption under the notification have already been dealt with there is no reason why the value of the same inputs again be added for the purposes of aggregate value. It follows that the assessee would be entitled to the benefit of Explanation III while computing the aggregate value for the purposes of availing exemption under the notification. No illegality in the order of the Tribunal. The appeals are therefore dismissed

Summary

Issues:
Interpretation of Notification No. 175/1986-C.E. for excise duty exemption based on the value of clearances under the notification.

Analysis:
The Supreme Court examined the appeal against the order of the Customs, Excise and Gold (Control) Appellate Tribunal regarding the interpretation of Notification No. 175/1986-C.E. The case involved an assessee, a small scale industry manufacturing electric appliances, claiming benefit under the notification. The jurisdictional Collector demanded duty from the assessee, contending that the finished goods were exempted under a different notification, thus denying the benefit of Explanation III to the notification. The Tribunal, however, allowed the appeal by the assessee, emphasizing the exclusion of clearances under different notifications while computing the aggregate value for availing the benefit of the notification.

The main argument put forth by the Revenue was that Explanation III could only be invoked if the finished goods were cleared under the notification, which was not the case as they were exempted under a different notification. On the other hand, the assessee's counsel argued that the general exemption for finished goods should not be held against the small scale industry. They highlighted that Explanation II and III needed to be read together to determine the true intention, excluding clearances under different notifications and inputs used for further manufacture of finished goods from the aggregate value calculation.

The Court analyzed the relevant part of Notification No. 175/1986-C.E., which provided exemptions for specified goods based on their value of clearances. Explanation II excluded clearances under nil duty rates or exemptions from other notifications while calculating the aggregate value. Explanation III exempted the clearances of inputs used for further manufacture of specified goods within the factory. The Court noted that the value of exempted finished goods and inputs used for manufacturing them should be excluded from the aggregate value calculation for availing the notification's benefit.

In conclusion, the Supreme Court upheld the Tribunal's order, finding no illegality in their decision. The Court dismissed the appeals, affirming the assessee's entitlement to the benefit of Explanation III while computing the aggregate value for excise duty exemption under Notification No. 175/1986-C.E.