1991 (2) TMI 239 - AT - Central Excise

Summary

Issues Involved:
1. Interpretation of Notification 231/87 regarding eligibility for money credit.
2. Applicability of the notification to captively consumed ethyl alcohol.
3. Compliance with the condition of payment of notified prices for molasses and ethyl alcohol.
4. Impact of subsequent amendments and departmental clarifications on the interpretation of the notification.

Detailed Analysis:

1. Interpretation of Notification 231/87 regarding eligibility for money credit:
The primary issue revolves around the interpretation of Notification 231/87, specifically the conditions under which money credit can be availed. The appellants argued that the Department's interpretation of the notification rendered the intended concession nugatory. They relied on subsequent amendments and departmental clarifications to support their position that the notification should be interpreted to allow money credit even for captively consumed ethyl alcohol.

2. Applicability of the notification to captively consumed ethyl alcohol:
The notification specifies that money credit can be availed for ethyl alcohol used in the manufacture of final products, provided the price notified by the Government has been paid. The appellants contended that they fall within the purview of the notification as they manufacture acetone, which is listed in the notification, using indigenously produced ethyl alcohol. The Department, however, denied the money credit on the basis that there was no sale transaction, as the ethyl alcohol was captively consumed within the same factory.

3. Compliance with the condition of payment of notified prices for molasses and ethyl alcohol:
The crux of the Department's argument was that the appellants did not fulfill the condition of paying the notified price for molasses and ethyl alcohol, as required by para (b)(ii) of the notification. The appellants countered this by pointing out that duty had been paid at the higher rate on molasses, and that the term 'paid' should be interpreted to include 'payable,' as supported by the Supreme Court decision in N.B. Sanjana v. Elphinstone Spinning and Weaving Mills Co. Ltd.

4. Impact of subsequent amendments and departmental clarifications on the interpretation of the notification:
The appellants cited a subsequent amendment to Notification 231/87, which deleted the contentious clause, and departmental clarifications that indicated the intention behind the notification was to grant money credit even for captively consumed ethyl alcohol. These clarifications and amendments were used to argue that the original intent of the notification was not to exclude such cases.

Judgment:
The Tribunal considered the submissions and noted that the finished product, acetone, was listed in the notification and that the ethyl alcohol used was indigenously produced. The Tribunal referred to the Supreme Court's guidance in Union of India v. Wood Papers, which stated that exemption provisions should be construed strictly at the stage of applicability but liberally once the applicability is established. Given that the appellants met the conditions of the notification, the Tribunal held that they were eligible for the money credit.

The Tribunal also took into account the departmental clarifications and the subsequent amendment to the notification, which supported the appellants' interpretation. The Tribunal concluded that the appellants had fulfilled the requirement of paying duty at the higher rate on molasses and that the intention behind the notification was to grant money credit in such cases.

Conclusion:
The impugned order was set aside, and the appeals were allowed, affirming the appellants' eligibility for money credit under Notification 231/87.