2003 (11) TMI 94 - HC - Central Excise

Summary

Issues Involved:
1. Refusal to permit exemption from payment of duty under Notification No. 193/86.
2. Interpretation of the phrase "duty paid on inputs."
3. Application of circulars and previous judicial decisions.
4. Consistency in granting exemptions to similar entities.
5. Legal implications of the phrase "appropriate amount of duty of excise have already been paid."

Issue-Wise Detailed Analysis:

1. Refusal to Permit Exemption from Payment of Duty Under Notification No. 193/86:
The Petitioners challenged the refusal by the Respondents to allow them to avail exemption from duty under Notification No. 193/86. The Petitioners argued that their competitor was granted a similar exemption and that a circular issued on 15th May 1995 clarified that such exemptions should be available even when the raw materials used were subject to nil duty.

2. Interpretation of the Phrase "Duty Paid on Inputs":
The Petitioners contended that the phrase "duty paid on inputs" should include goods subject to nil duty. They referenced the Supreme Court decision in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries, which interpreted the phrase to mean that the exemption applies only if the raw materials have, in fact, been subject to excise duty. The Court held that goods made from raw materials on which no duty was paid or where the duty was nil do not qualify for the exemption.

3. Application of Circulars and Previous Judicial Decisions:
The Petitioners relied on a circular dated 15th May 1995, which stated that inputs exempted from duty should be treated as if duty had been paid for the purpose of granting exemptions to finished products. However, the Court noted that the circular was issued after the impugned order and could not retroactively affect the case. Additionally, the Court emphasized the binding nature of the Supreme Court's interpretation in Dhiren Chemical Industries, which took precedence over the circular.

4. Consistency in Granting Exemptions to Similar Entities:
The Petitioners argued that their competitor had been granted the exemption, and thus, they should also be entitled to it. The Court rejected this argument, stating that a wrong interpretation in one case does not entitle others to claim the same benefit. The principle of equality cannot be invoked to perpetuate illegality.

5. Legal Implications of the Phrase "Appropriate Amount of Duty of Excise Have Already Been Paid":
The Court examined the legal implications of this phrase, concluding that the exemption notification aims to prevent the cascading effect of excise duty. The Supreme Court's decision in Dhiren Chemical Industries clarified that the exemption applies only when the raw materials have been subject to excise duty at the correct rate. Goods made from raw materials on which no duty was paid or where the duty was nil do not qualify for the exemption.

Conclusion:
The petition was dismissed, and the Petitioners were ordered to pay the duty amount of Rs. 10,24,009/- within eight weeks. The Court ruled that the Petitioners were not entitled to the exemption under Notification No. 193/86, as the raw materials used were not subject to excise duty. The Court also clarified that the interpretation of the phrase "duty paid on inputs" as laid down by the Supreme Court in Dhiren Chemical Industries was binding and took precedence over any circulars or previous decisions that suggested otherwise. The Petitioners' argument based on equality and consistency was also rejected, emphasizing that a wrong interpretation in one case does not create a right to claim the same benefit in another case.