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TMI Blog2009 (11) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... provision would be in relation to actual payment of duty as contemplated under conditions, and not of those facts which are neither incidental nor inevitable to payment of duty. it does not enlarge scope of the conditions and cannot be extended beyond its own scope to fact of actual payment itself as it will amount to virtually its rewriting. To presume payment of duty even in a case of no such payment having been made, would amount to creation of another fiction which is not contemplated under the said explanation. If department is able to show that assessee has not paid any duty on products specified in the conditions, then claim for benefit under the notification could be denied. Explanatory note to 2002 Budget did not merely refer to entitlement to benefit of Notification, without producing documentary evidence of payment of duty but also referred to compliance of condition of payment of duty, hence could be of no help to assessee. - E/5814, 6016, 6018-6020 and others - 1276-1346/2009-EX(PB), - Dated:- 11-11-2009 - Justice R.M.S. Khandeparkar, President and Shri Rakesh Kumar, Member (T) Final Order Nos. 1276-1346/2009-EX(PB), dated 11/12-11- 2009 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being in force" in the condition attached to the said notification, it was sought to be contended that no provision of the like nature was found present in the notification which was interpreted by the Apex Court in Dhiren Chemical case and that makes a lot of difference as far as the case in hard is concerned and also for the purpose of non applicability of the said decision to the matter in hand. The term" appropriate duty" was considered by the Apex Court in the facts and circumstances of the case before it in Dhiren Chemical case wherein the Apex Court had no opportunity to consider the scope of the above quoted expression as it was conspicuously absent in the notification which was under consideration before the Apex Court. Referring to the said expression, it is sought to be contended that the condition referring to the requirement of payment of the "appropriate duty" not only relates to the duly leviable under the Tariff Act but also to "any notification for the time being in force" and the same would include a notification granting either total or partial exemption from the payment of duty. Being so, according to the learned Advocates for the assessees, the conditions ex-f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r actuals basis) and capital goods (on actuals basis), he will be required to pay duty at 12% adv. [8% Cenvat + 4% AED (ST)]. If he does not want to avail any credit on inputs and capital goods, he is not required to pay any duty. The rates of deemed credit for processed knitted fabrics of cotton are the same as applicable to processed woven fabrics. In the case of goods falling under Chapter 59 and heading Nos. 58.07, 58.08, 58.09 and 58.10 of Chapter 58, the duty structure continues unchanged. Notification Nos. 14/2002-C.E. and 15/2002-C.E., both dated 1-3-2002 prescribes effective rates of duty of 'nil' or 12% adv. in the case of textile fabrics subject to the condition that the goods should have been made from textile yarns or fabrics on which the appropriate excise duty or CVD has been paid. It may, however, be noted that Explanation II to the notification makes it abundantly clear that all fibres and yarns are deemed to have been duty paid even without production of documents evidencing payment of duty. Therefore, the manufacturer is eligible for the rates prescribed in the notification. The only condition that has to be satisfied is with regard to availment or non-availm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case was delivered on 12-12-2001, the notification in question came to be issued in March, 2002. Being so, the Legislature and the Government were fully aware of the said decision Apex Court when the said notification was issued and precisely for the same reason, care was taken to clarify in the condition itself that the expression "appropriate duty" would also include the eventuality wherein the yarn and fabric is not subjected to the actual payment of the duty. It is also brought to the notice that since 1980, it has been the consistent stand Government that whenever the inputs are exempted from duty liability under a notification, they were always to be treated as duty paid inputs and that is evident from series of circulars issued by Central Board of Excise Custom from 1980 to 1985 and in that regard attention is sought to drawn to decision of the Apex Court in CCE, Patna v. Usha Martin Industries reported in 1997 (94) E.L.T. 460 (S.C.). Attention is also drawn to the Circular dated 26-9-2002 issued by the Board withdrawing previous circulars and further issuance of the Circular dated 10-12-2002 in relation to the clarification on the point of rate of duty. In this regard, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in distortion of the explanation inasmuch as that it would result in re-writing the said explanation by introducing therein an exclusion clause in relation to the exempted yarn and fibre which has been subjected to nil rate of duty. According to the learned Advocates in that case the explanation would read as under that "For the purposes of condition specified below, textile yarn or fabrics, except those which are fully exempt from duty or chargeable to rate of duty, shall be deemed to have been duty paid even without production of documents evidencing payment of duty thereon". Such an interpretation would amount to go beyond the scope of the legal fiction sought to be created under the said provision and it will defeat the very purpose and object of the notification. 10. It is also sought to be contended that the most of appellants are independent job workers processing the gray fabrics procured from the open market and this fact is not in dispute. Denial of exemption would virtually result in levying and imposing duty (a) 24% on such product when under the notification itself, even in case where the Cenvat credit is availed, the maximum rate of duty is 12%. 11. On the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the specified limits and cannot be extended beyond the legitimate field. Attention is also drawn to the decision of the Apex Court in the matter of Motiram Tolaram v. Union of India reported in 1999 (112) E.L.T. 749 (S.C.) while contending that the expression in the exemption notification cannot be construed to enlarge the scope of the benefit under the notification. The Department has also sought to place reliance in the decision of the Tribunal in the matter of Sports Leisure Apparel Ltd. v. CCE, Noida reported in 2005 (180) E.L.T. 429 (Tri. - Del.) while contending that all the issues which are sought to be raised in the matter in hand stand answered by the said decision. 14. Learned Representatives of the Department have also submitted that the decision of the Tribunal in Prem Industries case (supra) was in relation to the composite mill and on the point of analysis of the Board Circular dated 10-12-2002 and being so, the same does not deal with the issues which are sought to be raised in the matter in hand and, therefore, is of no help to decide the cases in hand. 15. Upon hearing the learned Advocates and learned representatives of the Department following questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), dated the 1st March, 2001, except as respects things done or omitted to be done before such supersession, the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column (3) of the Table below and falling within the Chapter, heading No. or sub-heading No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), specified in the corresponding entry in column (2) of the said Table, from so much of the aggregate of, - (a) the duty of excise specified in the First Schedule to the said Central Excise Tariff Act; and (b) the duty of excise specified in the First Schedule to the said Additional Duties of Excise (Goods of Special Importance) Act, (hereinafter referred to as the 'aggregate duty') as is in excess of an amount calculated at the rate specified in the corresponding entry in column (4) of the said Table, subject to the relevant conditions specified below the said Table, and referred to in the corresponding entry in column (5) of the said Table : Provided that the aggregate duty of sixteen per cent, ad valorem leviable on the excisable goods specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 5207.10 or 5208.10 Denim fabrics, whether or not processed 16% 2 and 5 4 51.10, 51.11, 52.07, 52.08, 52.09, 54.06, 54.07, 55.11, 55.12, 55.13, 55.14, 5801.12, 5801.22, 5801.32, 5802.22, 5802.32, 5802.52 Woven fabrics, subjected to any process 16% 5 5 52.07, 52.08 or 52.09 Cotton fabrics woven on handlooms and processed with aid of power or steam by an independent rocesssor approved in this behalf by the Government of India on the recommendation of the Development Commissioner for Handlooms. 16% - 6 5801.21, 5801.31, 5802.21 or 5802.31 Woven fabrics, whether or not subjected to any process 16% 2 and 5 7 58.03 All goods 16% 2 and 5 8 5804.11 or 5804.12 All goods 16% 2 and 5 9 59.01 All goods 16% - 10 6001.11, 6001.21, 6001.91, 6002.42 or 6002.92 Knitted or crocheted fabrics of cotton, not subjected to any process Nil 1 11 6001.11, 6001.21, 6001.91, 6002.42 or 6002.92 Knitted or crocheted fabrics of cotton, not subjected to any process 16% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 If made from knitted or crocheted textile fabrics of cotton, whether or not processed, on which the appropriate duty of excise leviable under the First Schedule to the said Central Excise Tariff Act and the Additional Duties of Excise (Goods of Special Importance) Act, read with any notification for the time being in force, or the additional duty of customs leviable under section 3 of the Customs Tariff Act, 1975, as the case may be, has been paid. 5 If made from textile fabrics, whether or not processed, on which the appropriate duty of excise leviable under the First Schedule to the said Central Excise Tariff Act and the Additional Duties of Excise (Goods of Special Importance) Act, read with any notification for the time being in force or the additional duty of customs leviable under section 3 of the Customs Tariff Act, 1975, as the case may be, has been paid. [Notification No. 14/2002-C.E., dated 1-3-2002] 18. As pointed out above, it has been strenuously argued on behalf of the assessees that the expression "read with any notification for time being in force" appearing in the condition attached to the notification would disclose that payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied to the antecedent immediately preceding is also equally well settled law. The words in a statute are first understood in their natural, ordinary and popular sense and phrase and sentences are construed according to their grammatical meaning, unless it leads to some absurdity or unless there is something in the context to suggest the contrary. Bearing in mind this settled rules of interpretation, if one has to understand the correct meaning of the expression "has been paid" in the said condition, then on proper reading of the said condition, it would at once be clear that the said expression specifically clarifies the obligation prescribed under the said condition in relation to the duty liability to be required to be discharged by actual payment of the duty at the rate prescribed either under the schedule to the Tariff Act or under the notifications issued thereunder. In other words, the condition cannot be said to be complied with unless there is actual payment of duty. The condition does not merely provide that the obligation is merely to comply with in any notification including the exemption notification. But it specifically speaks of actual payment of duty. It is needles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty has, as a matter of fact, been paid, and has been paid at the "appropriate" or correct rate. Unless the manufacturer has paid, the correct amount of excise duty, he is not entitled to the benefit of the exemption notification. 7. Where the raw material is not liable to excise duty or such duty is nil, no excise duty is, as a matter of fact, paid upon it. To goods made out of such material the notification will not apply. 8. The notification is intended to give relief against the cascading of excise duty - on the raw material and again on the goods made therefrom. There is no cascading effect when no excise duty is payable upon the raw material and the hardship that the notification seeks to alleviate does not arise". 23. Learned Advocates for the appellants however, tried to distinguish the said decision while contending that the notification which was under consideration before the Apex Court did not have the expression "read with any other notification". As already observed above, the said expression cannot be read de hors the remaining portion of the condition and forgetting the qualifying expression "has been paid". The actual and factual payment of duty in te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been paid". Being so, it is not possible to give wider meaning to the words "any" preceding words "notification" and rather it will have to be read in a restrictive or narrow sense whereby it would refer to those notifications which deal with effective and appropriate rate of duty of excise, compliance of which would result in actual payment of duty. 27. Coming to the contentions which are sought to be raised in relation to Explanation II, it would be worthwhile, at the cost of repetition, to reproduce the said Explanation. The same reads as under :- "For the purposes of the condition specified below, textile yarn or fabrics to be deemed to have been duty paid even without production of the documents evidencing payment of duty thereon". 28. It is settled law that while interpreting a provision creating a legal fiction, the Court or Tribunal has to ascertain purpose for which the fiction is created. After ascertaining the same, the Court or Tribunal has to assume of those facts existence of which is incidental or inevitable to give full effect to the fiction; but in the process, the fiction can not to be extended beyond the purpose for which it is created. However, it must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the provision. 31. Explanation II to the said notification which is essentially for the purpose of condition specified thereunder creates a deeming provision regarding the discharge of duty liability by the assessee cannot be construed to mean payment of duty even in cases where the assessee has not actually paid the duty. To resume payment of duty even in a case of no such payment having been made, it would amount to create another fiction which is not contemplated under the said explanation. 32. In S. Teja Singh case, the Apex Court was dealing with the question as to whether under Section 28(1) read with Section 18-A(9)) of the Indian Income Tax Act 1922, the Income tax authorities were empowered to impose a penalty on a person who had failed to comply with Section 18-A(3) of the Act. While dealing with the said question and after noting the legal fiction that had been enacted under Section 18A(9)(b) of the Act to the effect when a person had failed to send an estimate of tax on his income under Section 18-A(3), he was deemed to have failed to furnish the return of his income, it was held that Section 18-A(9)(b) did not merely say that an estimate under Section 18-A(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requirement of filing of the return and, therefore, the power to impose penalty could not have been exercised. Reverting to the explanation in the matter in hand, it deems the existence of proof of the payment of duty without the production of the documents evidencing the payment, in other words, while dealing with the fiction regarding the proof of the payment of duty whatever is required for compliance and fulfillment of the obligation regarding the payment of duty can be presumed to have been done. At the same time such presumption is exclusively related to the condition attached to the notification. As already quoted above, the condition clearly speaks of actual payment. Consequently the existence of the facts which could be presumed for giving full effect to the deeming provision would be in relation to the actual payment of duty as contemplated under the condition. The presumption of existence of the fact cannot be of those facts which are not required for compliance of the condition attached to the notification. The presumption cannot be of those facts which are neither incidental nor inevitable, but has necessarily to be of those facts which are incidental or inevitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case before it, the sum of Rs. 27,06,593/- was assessable as a profit of the assessee company for the previous year relevant to the assessment year 1949-50 in accordance with the fourth proviso to Section 10(2)(vii) of the Indian Income Tax Act. 1922. Section 10(2) of the Income Tax Act was dealing with the statutory allowances as distinguished from deductions those could be made in commercial practice for ascertaining the profits of a business. Under the said clause where any building, machinery or plant was discarded, demolished or destroyed, an allowance was given in respect of the amount by which the written down value of the such building machinery or plant exceeded the amount for which it was sold or its scrap value. But the 4th proviso introduced a fiction that in ease any insurance, salvage or compensation money was received in respect of the such property exceeded the difference between the written down value and the scrap value, so much of the excess as mentioned therein was to be deemed to be the profits of the previous year in which such monies were received. Though in fact the said compensation represented a capital asset to the extent me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enial of benefit of the exemption notification to some of the products. It is sought to be contended that prior to 2002 knitted processed fabric was completely exempt from duty besides that the mean rate of excise duty levied on any product under the budgetary provisions in the year 2002 was only 12%. Being so, it is contended that rejection of the interpretation sought to be canvassed on behalf of the assessees would result in duty being levied at the rate 24% on the processed knitted fabrics and it would be totally contrary to the purpose and the object of the scheme and the notification in question. 40. Merely, because the rejection of the interpretation sought to be canvassed on behalf of the assessees could result in levy of 24% of duty on the processed knitted fabrics that cannot be a reason to accept the interpretation sought to be canvassed on behalf of the assessees. In taxing statute, hardship can not be a ground to accept the interpretation sought to be canvassed on behalf of the assessee. As far as the rate of duty is concerned, it is exclusively in the domain of executive wisdom. It is not the function of the Court and/or Tribunal to interpret the statutory provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee who had already availed benefit under some other exemption notification would also be entitled to claim the benefit under the present notification ignoring the obligation prescribed under the condition regarding the requirement of payment of duty. 42. The decision in Usha Martin's case was in a totally different set of facts. Therein the contention raised on behalf of assessee had clear support from the Board's circular, besides the observations of a proviso which existed in a comparable notification therein also lend support to the interpretation sought to be given to the notification under consideration in that case, and therefore, in the facts of the case, looking from different angles, the Apex Court was inclined to take a view that the benefit of exemption from duty could legitimately be claimed by the assessees in respect of those goods referred to in the notification under consideration before the Apex Court the raw materials of which were not exigible to any excise duty at all. That is not the case in the matter in hand, and the wordings of the notification in question before us are not similar to that of the said notification before the Apex Court in Ush ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption and subject to the assessee not claiming CENVAT credit before claiming exemption. The question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions". Though, the exemption notification in question was not subject matter of detail discussion, in the said case, the Apex Court clearly took note of the fact that in order to avail benefit under the said notification, it was necessary to comply with the conditions specified thereunder and those conditions include the condition regarding the payment of duty on the yarn. 46. The view that we are taking in relation to the scope of the legal fiction created under the said Explanation has been reiterated by the Tribunal in the matter of Dogra Distilleries (supra). 47. In the facts and circumstances of the case and for the reasons stated above including the decision of the Apex Court in Dhiren Chemical, the observations in Machine Builders case cannot lend any support to the contentions sought to be canvassed on behalf of the assessees. 48. It is true, that in Prem Industries case, wherein both of us were parties to the decision, related to the claim of benefit under the notification in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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