1985 (1) TMI 188 - AT - Central Excise

Summary

Issues Involved:
1. Classification of miniature tyres under Central Excise Tariff Item 16 or Item 68.
2. Applicability and validity of the exemption order dated 27-10-1964 for miniature tyres under Item 68 post-1-3-1975.

Issue-wise Detailed Analysis:

1. Classification of Miniature Tyres:
The appellants manufacture miniature tyres intended for distribution as free gifts and claim exemption from central excise duty based on an ad hoc exemption order issued by the Central Board of Excise & Customs on 27-10-1964. The primary contention is whether these tyres fall under Item 16-III (All other tyres) or Item 68 of the Central Excise Tariff. The Department's Representative argued that the miniature tyres, lacking bead wire and not intended for locomotion, should be classified under Item 68, which came into force from 1-3-1975. The appellants countered that the exemption order did not specify a tariff item, thus applying regardless of classification under Item 16 or Item 68.

2. Applicability and Validity of the Exemption Order:
The exemption order dated 27-10-1964 grants exemption from central excise duty for miniature tyres distributed as free gifts. The key question is whether this order remains valid and applicable after the introduction of Item 68. The majority opinion held that the exemption order, which does not tie the exemption to any specific tariff entry, remains valid. The order's conditions are that the goods must be miniature tyres manufactured by the appellants and distributed as free gifts, both of which are undisputed. Therefore, the miniature tyres are entitled to full exemption from duty under the exemption order, regardless of their classification under Item 16 or Item 68.

Separate Judgments:

Majority Judgment:
The majority opinion, represented by K.L. Rekhi and S. Venkatesan, concluded that the exemption order is still in force and applicable. They emphasized that the exemption order does not mention any tariff item number, and its conditions are met by the appellants. Thus, the miniature tyres are entitled to full exemption from duty. S. Venkatesan further elaborated that even if the goods were not excisable under Item 16 initially, the exemption order would become operative under Item 68 post-1-3-1975, as it contains a clear description of the goods without reference to any tariff item.

Dissenting Judgment:
M. Gouri Shankar Murthy dissented, arguing that it is imperative to determine whether the goods fall within Item 16 before considering the exemption order's applicability. He opined that the miniature tyres, intended for use as ashtrays and not for vehicles, do not fall within the definition of "tyres" under Item 16. Therefore, the exemption granted under the assumption that the goods fell within Item 16 cannot be extended to Item 68, which was introduced later. He emphasized that an exemption from a levy cannot precede the levy itself and must be strictly construed against the assessee.

Conclusion:
In accordance with the majority judgment, the appeal is allowed with consequential relief to the appellants, affirming that the miniature tyres are entitled to full exemption from central excise duty under the exemption order dated 27-10-1964.