1968 (10) TMI 45 - SC - Central Excise

Demand - Limitation - Iron and steel products - Rate of duty on - Plus - Interpretation of taxing statute - Badly drafted entry

Issues Involved:

1. Scope and interpretation of Entry No. 26AA of the First Schedule to the Central Excises and Salt Act, 1944.
2. Consideration of notifications issued by the Government in interpreting the scope of Entry 26AA.
3. Limitation under Rule 10 of the Central Excise Rules, 1944.
4. Validity of the demand for excise duty on wires manufactured from imported steel rods.

Issue-wise Detailed Analysis:

1. Scope and Interpretation of Entry No. 26AA:

The primary issue revolves around the interpretation of Entry No. 26AA of the First Schedule to the Central Excises and Salt Act, 1944. The majority judgment held that the duty leviable on wires manufactured by the assessee out of imported steel rods should be calculated based on the formula provided in Item 26AA. The term "plus" in the context indicates that the rate of duty consists of two parts: ad valorem duty and the excise duty calculated according to the formula. The formula "the excise duty for the time being leviable on pig iron or steel ingots" is interpreted as the duty leviable on a hypothetical steel ingot if it had been manufactured or removed at the same time as the steel rods were manufactured or removed. The majority judgment emphasized that the formula is not concerned with the actual ingots used but with the hypothetical duty on ingots if they were manufactured at the same time as the final product.

2. Consideration of Notifications Issued by the Government:

The majority judgment considered the notifications issued by the Central Government to provide reliefs in interpreting the scope of Entry 26AA. Notifications such as No. 70/62 and No. 77/62 provided exemptions to manufacturers from paying the full duty if the raw materials had already paid the appropriate amount of duty. The notifications indicated that the intention was not to levy excise duty at various stages of manufacture but to provide reliefs to avoid double taxation. The majority judgment noted that these notifications support the interpretation that the duty leviable under Item 26AA should consider the duty already paid on the raw materials used.

3. Limitation under Rule 10 of the Central Excise Rules, 1944:

The issue of limitation was addressed by both the majority and dissenting judgments. The majority judgment found no force in the plea of limitation advanced by the assessee. The demand for differential duty was initially made under Rule 9(2) but was later confined to the period within the limitation prescribed under Rule 10. The majority judgment held that the incorrect reference to Rule 9(2) did not vitiate the demand as the officer had the authority to make demands under both rules. The demand was ultimately modified to comply with Rule 10, and the plea of limitation was dismissed.

4. Validity of the Demand for Excise Duty on Wires:

The majority judgment upheld the validity of the demand for excise duty on wires manufactured from imported steel rods. It concluded that the duty should be calculated based on the formula provided in Item 26AA, considering the hypothetical duty on steel ingots if they were manufactured at the same time as the final product. The dissenting judgment, however, argued that the duty leviable should be based on the actual materials used in the manufacture of the wires. It emphasized that the excise duty leviable should refer to the duty on pig iron or steel ingots used in the production of the final product. The dissenting judgment held that the demand for duty on wires manufactured from imported steel rods was not justified as the raw materials had already paid the appropriate duty.

Conclusion:

The majority judgment dismissed the appeal, upholding the demand for excise duty on wires manufactured from imported steel rods based on the interpretation of Entry 26AA and the supporting notifications. The dissenting judgment allowed the appeal, directing the Revenue to refund the excess duty paid under protest, based on the interpretation that the duty leviable should consider the actual materials used in the manufacture of the final product.

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