1997 (8) TMI 77 - SC - Central Excise

EXEMPTION SCOPE OF - EXEMPTION ON GOODS PRODUCED FROM MATERIALS ON WHICH APPROPRIATE AMOUNT OF DUTY HAS ALREADY BEEN PAID AVAILABLE EVEN WHERE RAW MATERIALS WERE EXEMPT - BINDING ON REVENUE

Summary

Issues Involved:
1. Whether the benefit of excise duty exemption can be claimed for commodities made from raw materials on which no excise duty was payable.
2. Interpretation of the phrase "on which appropriate amount of duty of excise has already been paid" in the context of excise duty exemption notifications.
3. Relevance and binding nature of circulars issued by the Central Board of Excise and Customs.

Detailed Analysis:

1. Benefit of Excise Duty Exemption:
The central issue in these appeals was whether excise duty exemption could be claimed for commodities produced from raw materials on which no excise duty was payable. The relevant notifications exempted commodities from excise duty if they were produced from materials on which the appropriate amount of duty of excise had already been paid. The Tribunal upheld the claims made by certain manufacturers, leading the Revenue to file these appeals.

2. Interpretation of the Notification Phrase:
The specific phrase under scrutiny was "on which appropriate amount of duty of excise has already been paid." The Revenue argued that this phrase meant that the exemption could not apply to goods made from raw materials that were exempt from duty. However, the Tribunal and the Court found that the notification's intention was to prevent double taxation and to apply the same rationale for exemption to both raw materials and the final product. The Court emphasized that the word "appropriate" should not be sidelined and that the meaning of "already paid" should be interpreted in the context of the notification as a whole.

3. Relevance of Previous Judgments:
The Revenue cited previous judgments, such as Ahura Chemical Products Pvt. Ltd. v. Union of India and Andhra Re-Rolling Works, Hyderabad v. Union of India, to support their interpretation. However, the Court found these cases distinguishable. In Ahura Chemical Products, the context was different as it involved goods purchased from the open market, making the observations obiter. In Andhra Re-Rolling Works, the exemption was partial, not total, and thus not directly applicable to the present case.

4. Circulars Issued by the Central Board of Excise and Customs:
The Court considered the circulars issued by the Central Board of Excise and Customs, which instructed that exemptions should not be denied even if the inputs were exempted from excise duty. The Court noted that these circulars aimed to achieve uniformity and were binding on the department. The Court emphasized that the department could not take a stand contrary to these instructions, especially when others had acted based on them.

5. Binding Nature of Circulars:
The Court reiterated that circulars issued by the Board, whether before or after the insertion of Section 37B in the Act, were binding on the department. The Court cited several decisions affirming that the Revenue could not take a stand contrary to the Board's instructions. The Court highlighted that when a notification was not free from doubt, the benefit of doubt should be given to the assessee.

Conclusion:
The Court concluded that the benefit of exemption from duty could legitimately be claimed by the respondents for goods made from raw materials that were not subject to any excise duty. The appeals were dismissed, upholding the Tribunal's interpretation and the binding nature of the Board's circulars.