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TMI Blog1992 (1) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of Rs. 1 crore under Rule 209 of Central Excise Rules, 1944. (iii) Ordered confiscation of land, building, plant and machinery etc. belonging to them and used in the manufacture, production, storage and removals of Acrylic Fibre under the provisions of clause (a) to sub-rule (2) of Rule 209 of Central Excise Rules, 1944. However, granted redemption of the same by imposing a fine of Rs. 1 lakh. 2. The appellants are engaged in the manufacture of Acrylo nitrile falling under heading/sub-heading 2926.00. They are also manufacturing Acrylic fibre falling under head/sub-heading 5501.30. They are consuming the Acrylo nitrile within the factory of production for manufacture of Acrylic fibre and were availing set off of duty on said Acrylo nitrile under Notification No. 225/86-C.E., dated 3-4-1986 at the time of clearance of Acrylic fibre . 3. The allegations set out in the Show Cause Notice dated 4-10-1990 are that on the basis of the information received to the effect that the appellant/assessee had been debiting the entire amount of duty from RG 23A Part-11 account on the clearance of Acrylic Fibre and that they have not been discharging their duty liability as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) DSAF Plant 915.0 Kg of Acrylonitrile One MT of Acrylic Fibre It has been contended in the Show Cause Notice, that as per the set off of procedure laid down vide Baroda Collectorate s Trade Notice No. 126/81, dated 22-5-1981 the assessee was required to maintain Register of set off of duty and is also required to make adjustment of duty paid on inputs used in the manufacture of finished goods at the time of removal of finished goods on the basis of the above ratio. It is further alleged that on scrutiny of the records maintained by the assessee in this behalf, the officers found that the assessee had not adopted the correct set off procedures as prescribed for the set off available under Notification No. 225/86-CE, dated 3-4-1986 issued vide Rule 8(1) of Central Excise Rules, 1944 and had not paid duty as per the above ratio from RG 23A Part II account and from PLA. It has been alleged that the assessee has not followed the procedure intentionally to evade appropriate duty of excise by not debiting from PLA on the clearances of Acrylic Fibre . The officers worked out the details of duty paid in RG 23A Part II account by the assessee, the set o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by them in the form and manner desired/directed by the Central Excise officers exercising physical type of control on the respective commodities. 8. They contended that they had detailed discussions with the jurisdictional Assistant Collector as well as the Superintendent of Central Excise with regard to the formalities and procedures and they applied for permission to avail set off of duties on ACN for use in the manufacture of Acrylic fibres as per their letter dated 20-7-1989. The jurisdictional Assistant Collector had permitted them to avail set off of duties by his letter dated 28-7-1989. They contended that the removal and use of ACN for Acrylic fibre is within the knowledge of the Department. It is contended that from 1-8-1989, they started removing A.C.N. to their Acrylic fibre plants on full payment of duties at the normal effective rates for captive consumption on the basis of the permission granted and an intimation to that effect was also submitted to the jurisdictional Superintendent/Assistant Collector vide their letter dated 1-8-1989. They have further stated inter alia as follows :- (i) It was declared that they required 960 Kgs. of ACN to produce 1 MT of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d taken as credit when output manufactured is cleared. He has held that the assessee had utilised the entire balance of duty lying in RG 23 as set off and therefore, he held that the assessee has not correctly availed the set off of duty for the purpose of Notification No. 225/86. He has also held that the assessee had failed to follow correct procedure as stipulated in the Baroda Collectorate Trade Notice No. 126/81, dated 22-5-1981 for maintenance of records, submission of returns etc., in as much as the assessee were required to maintain set off register but they had not maintained the same and availed the set off duty at their own way which is not permissible. 12. He has negatived the assessees contention that the Asstt. Collector had approved the procedure followed by them and has noted the Asstt. Collector s letter by which the said Asstt. Collector had granted approval, subject to the assessees fulfilling the conditions stipulated in the Notification. 13. He has further held that what the assessee has availed in the name of set off is nothing but a credit of duty and therefore, to this extent, according to learned Collector, the assessee could be said to have committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On contemporaneous exposition of similar Notification, he relied on the following ratios :- C.C.E. v. Andra Sugars Ltd. reported in 1988 (34) E.L.T. 564 (S.C.) = 1989 (19) ECC 46 and State of Tamil Nadu v. Mahi Traders, reported in 1989 (40) E.L.T. 266 S.C. at page 270. 17. He contended that when two views were possible from reading of a Notification, then the benefit of the Notification has to go in favour of the assessee and relied on the ruling in the case of C.C.E. v. Parle Exports Ltd., reported in 1988 (38) E.L.T. 741 (S.C.) = 1989 (19) ECC 49. He further contended that if credit is available on utilisation of inputs then the benefit of set off has to be extended, otherwise it would defeat the purpose of the legislation. In this regard, he relied on the ruling rendered in the case of Vatanmal v. Kailash Nath as reported in 1989 (22) ECR 488 SC. He contended that there is no financial loss to the revenue in the matter. 18. Shri W. Christian, learned advocate arguing on the question of time bar, contended that at the material time, the factory of the assessee was under physical control with 8 inspectors, 4 sepoys and one Superintendent attached to the factory for inspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of exemption to the excisable goods of description specified in column (5) of the Table thereto annexed (such goods are referred to as Final Product ) and falling under such chapter, heading number or sub-heading number of the Schedule to the Central Excise Tariff Act, 1985 as is specified in the corresponding entry in column (4) of the Table, from so much of duty of excise leviable thereon under Central Excises and Salt Act, 1944 as is equivalent to the duty of excise leviable thereon under the Central Excises and Salt Act, 1944 or the additional duty leviable under the Customs Act, 1975 as the case may be already paid on the goods of the description specified in the corresponding entry in column (3) of the said Table (such goods are referred to as inputs ) used in or in relation to the manufacture of the final products." 21. In the instant case there is no dispute regarding the input acrylonitrite (ACN) being used in the manufacture of final goods Acrylic Fibre . The input and final product are falling in the specified chapter, heading and sub-heading in the Notification. The only doubt the learned Collector has is in regard to the term as is equivalent to the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon. In the case of State of Tamil Nadu v. Modi Papers as reported in 1989 (40) E.L.T. 266. The Hon ble Supreme Court has observed relying on the earlier ruling rendered in the case of Deshbandhu Gupta and Others v. Delhi Stock Exchange reported in 1979 (4) SCC 565 and Verghese v. I.T.O. in 1981 13 ITR 597; that contemporaneous exposition by the Administrative authorities is a very useful and relevant guide to the interpretation of the expression used in a statute. 26. Similarly, the Supreme Court in the case of C. C.E., Guntur v.Andhra Sugars Ltd. as reported in 1988 (34) E.L.T. 564 (S.C.) = 1989 (19) ECC 46 has observed as follows :- ......5. It appears that the same principle was reiterated in the case of Shasum Chemicals (Madras) Pvt. Ltd., 1982 (10) E.L.T. 786. It is well settled that the meaning ascribed by the authority issuing the notification, is a good guide of a contemporaneous exposition of the position of law. Reference may be made to the observations of this Court in K.P. Vqrghese v. The Income Tax Officer, Ernakulam 1982 (1) SCR 629. It is a well settled principle of interpretation that Courts in construing a statute will give much weight to the interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d herein below :- 17. How then should the Courts proceed ? The expression in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in mind the context in which the expressions occur. The words used in the provision, imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them. It is, however, necessary to bear in mind certain principles. The notification in this case was issued under Rule 8 of the Central Excise Rules and should be read along with the Act. The notification must be read as a whole in the context of the other relevant provisions. When a notification is issued in accordance with power conferred by the statute, it has statutory force and validity and, therefore, the exemption under the notification is, as if it were contained in the Act itself. See in this connection the observations of this Court in Orient Weaving Mills (P) Ltd. v. The Union of India 1962 Supp. 3 SCR 481. See also Kailash Nath v. State of U.P. AIR 1957 S.C. 790. The principle is well settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beverage bases as food products or food preparations in that light. 19. We have also noted how these goods were treated by the Government as mentioned hereinbefore. There is no direct evidence as such as to how in commercial parlance unlike in ordinary parlance non-alcoholic beverage bases are treated or whether they are treated as food products or food preparations. The purpose of exemption is to encourage food production and also give boost to the production of goods in common use and need. After all the purpose of exemption is to help production of food and food preparations at cheaper price and also help production of items which are in common use and need like electric light and power. 20. The question of interpretation involves determining the meaning of a text contained in one or more documents. Judges are often criticised for being tied too closely to the statutory words and for failing to give effect to the intention of the Parliament or the law-maker. Such language, it has been said, in Cross s Statutory Interpretation (Second Edn.) at page 21, appears to suggest that there are two units of enquiry in statutory interpretation - the statutory text and the intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e latter is not condonable, as observed in paras 11 and 12 which is re-produced below :- 11. We have given our careful consideration to these submissions. We are afraid the stand of the Revenue suffers from certain basic fallacies, besides being wholly technical. In Kedarnath s case, the question for consideration was whether the requirement of the declaration under the proviso to Sec. 5(2) (a) (ii) of the Bengal Finance (Sales-tax) Act, 1941, could be established by evidence aliunde. The Court said that the intention of the legislature was to grant exemption only upon the satisfaction of the substantive condition of the provision and the condition in the proviso was held to be of substance embodying considerations of policy. Shri Narasimhamurthy would say the position in the present case was no different. He says that the notification of llth August, 1975 was statutory in character and the condition as to prior-permission for adjustment stipulated therein must also be held to be statutory. Such a condition must, says Counsel, be equated with the requirement of production of the declaration form in Kedarnath s case and thus understood the same consequences should ensure for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s condition of prior-permission clearly envisages a procedure to give effect to the exemption. A distinction between the provisions of statute which are of substantive character and were built-in with certain specific objectives of policy on the one hand and those which are merely procedural and technical in their nature on the other, must be kept clearly distinguished. What we have here is a pure technicality. Clause 3 of the notification leaves no discretion to the Deputy Commissioner to refuse the permission if the conditions are satisfied. The words are that he will grant . There is no dispute that appellant had satisfied these conditions. Yet the permission as withheld - not for any valid and substantial reason but owing to certain extraneous things concerning some interdepartmental issues. Appellant had nothing to do with those issues. Appellant is now told We are sorry. We should have given you the permission. But now that the period is over, nothing can be done . The answer to this is in the words of Lord Denning: Now I know that a public authority cannot be estopped from doing its public duty, but I do think it can be estopped from relying on a techincality and this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be given to it and it calls for a wider and liberal construction........."(Emphasis supplied) 30. The learned advocate has contended that the above rulings attempted to show that the analogy given in the case of interpretation of Notification No. 201/79-C.E, dated 4-6-1979 which has got similar terms as the Notification in question has to be accepted. In this connection, he has relied on the ruling of Good Year India Ltd. and Others v. Union of India and Others as reported in 1990 (49) E.L.T. 39 (Del.) = 1990 (28) ECC 22 rendered by Delhi High Court. The Hon ble Delhi High Court has observed in paras 29,30,31, 32 and 34 as follows :- 29. Under the present notification, a manufacturer is required to take proforma credit of the duty, paid on imports, as soon as the inputs are brought into the factory. This credit is, then utilized and, the manufactured goods are cleared and is not linked to any particular item of the manufactured products. The language of the new notification does not require the inputs to be co-related with end-product. Similarly, under Rule 56A of the Rules, which is the procedure applicable to Notification No. 95/79-C.E, as amended by Notification No. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Collector of Central Excise, Bangalore v. Wipro Information Technology as reported in 1988 (33) E.L.T. 172 in paras 20 to 23 as follows :- It is not necessary to elaborate the point further, because it is abundantly clear, as we stated at the outset, that both at the time of taking credit and at the time of utilizing it, the respondents were doing what both they and the Department felt to be authorised under Rule 56A. The question then is whether there is anything in Rule 56A which authorised the Department to take back the duty credit on the ground that the respondents became disentitled to it because of the subsequent exemption from duty granted in respect of computers. 21. It appears to us that in such a situation, where the assessee was acting in good faith and where what he did was not at the time he did it illegal or unauthorised, any action which would impose a liability on him should be something clearly authorised by law. We have, therefore, to see whether there is anything in Rule 56A which authorised the Department to demand back the duty amount in a case like this. It is abvious that, although Rule 56A covers more than seven printed pages, and includes a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructions could not enlarge or restrict the scope of a statutory provision. Further, the Board s Clarification had reference to Notification No. 95/79, which inter alia made the procedure under Rule 56A applicable.The clarification was not with reference to Rule 56A as such." 34. The above view was reiterated in the case of Sarvottam Ispat Pvl. Ltd. v. Collector of Central Excise as reported in 1989 (41) E.L.T. 181 in para 5 as follows :- On a careful consideration of the submissions made by the learned Consultant and the learned SDR, we find that according to Rule 57F(3) as amended, credit of specified duty allowed in respect of any inputs may be utilized towards payment of excise duty on any of the final products in or in relation to the manufacture of which such inputs are intended to be used in accordance with the declaration filed under Rule 57G. The appellants case is that they have in fact, utilized the credit earned by them on the input scrap only on the single final product that they manufactured viz. steel ingots and that the provisions of Rule 57F(3) as above do not bar such utilisation when admittedly there is no one-to -one co-relation between the inputs and ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs and the final products made therefrom. In other words, the credit of duty from a certain quantity or lot of inputs can be utilised only for payment of duty for the final products manufactured from that lot and not for those manufactured from different lots, say previous lots. This may appear to bring the modvat scheme on a par with the set-off procedure with its strict correlation between input and final product which had been dispensed with by executive instructions. But the executive instructions and procedural relations cannot go beyond the statutory stipulations. The latter are represented by Rules 57F(3) and 57C. There is no doubt that, going by Rule 57C, no credit of duty will be permissible if the inputs used in the manufacture of wholly exempted goods. Thus, if a manufacturer has got unutilised inputs and also unutilised credits, the latter has to be disallowed if the final products become exempt. There is no escape from that, in terms of Rule 57C. Simply because another manufacturer has, with alacrity, utilised the credit before utilising the inputs themselves he cannot be given a more favoured treatment, unless the law allows him the same. It is here that the stric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s could be seen the ruling rendered in East India case (supra) is in contra with the findings given in Mis. Wipro as well as the ruling of the Delhi High Court as rendered in the case of Good Year India Ltd. As the Hon ble Delhi High Court has given the ruling earlier to the E.R.B. s East India s case, the ratio of the ruling of M/s. Good Year s case would apply to the case in hand. 35. Now it has to be seen as to whether the finding given by the learned Collector is sustainable in the facts and circumstances of the case and in the light of the ratios of the rulings rendered above. 36. The admitted facts are that the assessee s factory is under physical control of the Department. The entire operation of the inputs and outputs have been checked and supervised. The records have been scrutinised and regular assessment of RT 3 returns has been done, RG 23A II and P.L.A. has been regularly looked into. The AR 1 s, GP 1 s have also been prepared/processed under the official supervision. It is also admitted fact that the procedure was finalised after the assessee had discussions with Superintendent and Asstt. Collector and Asstt. Collector permitted them by his letter dated 28-7-1989. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the bench has clarified that Trade Notice No. 126/81 issued on the basis of administrative instructions has no statutory force. The Hon ble Supreme Court ruling rendered in the case ofMangalore Chemicals and Fertilizers Ltd. v. Deputy Commissioner as reported in 1991 (55) E.L.T. 437 is applicable to the facts of this case. 38. The learned Collector has implied by his reading of the Notification that the condition for grant of benefit is that the manufacture has to avail set off of duty equivalent to duty involved on input taken into use for manufacture of final products. But the reading of the Show Cause Notice dated 4-10-1990 it is very clear that the charges have not been levelled on the basis of this understanding by the Department. Nor it was alleged that this was the understanding which both the Department and assessee had understood, while utilising the credit of the duty. Therefore, the learned Collector has travelled beyond the Show Cause Notice to give a new interpretation to the wordings of the Notification, other than what a simple reading has been given, understood and applied by the officials of the Department and the assessee. Even this understanding is erroneous. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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