1993 (2) TMI 116 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for exemption under Notification No. 38/78-C.E. for skimmed milk powder used in the manufacture of products like Horlicks.
2. Interpretation of the exemption notification.
3. Conflict between the Gujarat High Court and Andhra Pradesh High Court judgments.
4. Applicability of the principle that there is no room for intendment in interpreting exemption notifications.

Issue-wise Detailed Analysis:

1. Eligibility for Exemption under Notification No. 38/78-C.E.:
The primary issue is whether the respondents are eligible for exemption of duty under Notification No. 38/78-C.E., dated 1-3-1978, on skimmed milk powder cleared from their factory for ultimate use in making products like Horlicks after regenerating the skimmed milk powder. The notification exempts skimmed milk powder used for the regeneration of liquid milk within the premises of the same factory of production, or elsewhere if certain conditions are met.

2. Interpretation of the Exemption Notification:
The Department relies on the Gujarat High Court's decision in M/s. Vadilal Dairy Frozen Food Industries, which held that the exemption under the notification is not available if the skimmed milk powder, after being regenerated into liquid milk, is further converted into other products like ice-cream. The Gujarat High Court interpreted the notification to mean that the exemption applies only when the skimmed milk powder is used solely for the regeneration of liquid milk for consumption. The Court emphasized that the purpose of the exemption is to augment the supply of liquid milk, not to facilitate the production of other products.

3. Conflict between High Court Judgments:
The respondents cited the Andhra Pradesh High Court's judgment in The Andhra Pradesh Dairy Development Corporation case, which had not been considered by the Gujarat High Court. The Andhra Pradesh High Court's decision was in a different context, dealing with the excitability of skimmed milk powder stored for regeneration into liquid milk during the lean season. The Tribunal noted that the Andhra Pradesh High Court was not interpreting an exemption notification similar to Notification No. 38/78-C.E. The Gujarat High Court's decision, rendered later and by a Divisional Bench, specifically addressed the same exemption notification and thus holds more relevance.

4. Principle of No Room for Intendment:
The respondents argued that the Gujarat High Court's judgment considered the intention behind the notification, which is not permissible as per the principle that there is no room for intendment in interpreting an exemption notification. They cited several Supreme Court decisions supporting this principle. However, the Tribunal found that the Gujarat High Court's interpretation, which considered both the language and the purpose of the notification, was valid. The Tribunal also noted that there is no High Court decision contrary to the Gujarat High Court's interpretation of Notification No. 38/78-C.E.

Conclusion:
The Tribunal concluded that the respondents were not eligible for exemption under Notification No. 38/78-C.E. for skimmed milk powder used in products like Horlicks. The exemption applies only when the skimmed milk powder is regenerated into liquid milk as such. The appeal by the Department was allowed, affirming the Gujarat High Court's interpretation that the final product should be liquid milk for the exemption to apply.