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TMI Blog1995 (2) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 53/88, dated 1-3-1988 as amended on Bags and Sacks manufactured and cleared by them. 4. The ld. Collector has held that in the impugned order as follows : I have considered the submissions made by the appellant. Notification No. 53/88-CE as amended prescribed at the rate of 20% ad valorem for Bags and Sacks made out of fabrics, whether or not coated, covered or laminated with any other material, woven from strips or tapes of plastics and fabrics for making such bags or sacks subject to the condition that no credit of duty paid on the inputs used in the manufacture of such bags, sacks or fabrics has been used in the manufacture of such bags, sacks or fabrics has been availed under Rule 57A. In this connection, it is observed that the appellant use plastic granules to manufacture sacks and bags. The appellants themselves admit that they availed credit of excise duty on plastic granules because H.D.P.E. Tapes and Fabrics are merely intermediate products in terms of Rule 57D. They have also declared HDPE Tapes and HDPE Fabrics as intermediate products in their declaration filed under Rule 57G. The effect of this is that plastic granules becomes an input directly used in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on HDPE Tapes and HDPE Fabrics which were used in the manufacture of Sacks. Therefore, he argued that the ld. Collector has wrongly interpreted Notification to deny the benefit of the Notification. He pointed out to the words in Column 5 of the Notification which reads : If no credit of the duty paid on the inputs used in the manufacture of such bags, sacks or fabrics has been availed of under Rule 57A of the said Rules and submitted that the words employed are used in the manufacture of such bags . Therefore, it follows that the inputs in this case namely tapes and fabrics had not suffered duty and hence credit of duty has not been utilised. Therefore, the ld. Collector has wrongly presumed the utilization of credit of duty paid on granules as duty paid on the intermediate product. He submitted that even going by the Collector s reasonings, the intermediate products were independent goods and they were entitled for utilizing the credit of duty paid thereon or if no credit had been utilised then to take the benefit of this notification. He submitted that they could not take the credit of duty on HDPE Tapes and HDPE Fabrics, as they had been cleared at Nil rate of duty for ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat of Delhi High Court in the case of Commercial Refrigeration Corpn. v. Union of India, as reported in 1989 (42) E.L.T. 534. 6. Countering the argument of ld. Advocate, ld. JDR submitted that the order of the ld. Collector is sustainable as the party had availed the credit of duty paid on plastic granules. He submitted that the appellants had not indicated about utilization of Modvat on HDPE Sacks in the classification list and hence it amounted to suppression of fact and therefore, the invokation of larger period is sustainable. He submitted that the show cause notice is still pending for finalization and therefore, there was also no question of invoking of larger period and this is supported by the ruling rendered by the Supreme Court in the case of Samrat International (P) Ltd. v. CCE, as reported in 1992 (58) E.L.T. 561. On merits ld. JDR submitted that the ratio of ruling rendered in the case of Collector of Central Excise, Allahabad v. M/s. Hindustan Aluminium Corpn. (Tribunal) by Final Order No. E/252/94-D, dt. 29-4-1994 could apply the facts of the present case; as the Tribunal dealt with the similar issue arising the Notification No. 201/79 where similar words were u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puts carry nil rate of duty then the benefit is not to be extended. The notification grants benefit to bags or sacks made out of 20% Fabrics (whether or not coated, covered or laminated with any other material) Woven from strips or tapes of plastics and fabrics for making such bags or sacks. There is no dispute on this aspect of the matter. The only dispute is as to whether the appellants had availed credit of duty paid on the inputs. The answer is that the inputs were carrying Nil rate of duty and hene the question of utilising the credit of duty did not arise. Therefore, it follows that they have not violated the terms of col. 5 of the notification. We have to make a plain reading of the words in the notification. By such a reasonable interpretation to the notification, we have to hold that the benefit at concessional rate of duty is available to the appellants. Ld. JDR has relied on the ruling of Tribunal rendered in the case of CCE v. M/s. Hindustan Aluminium Corpn. (supra). In this case, the assessees were manufacturing aluminium products. They brought in their factory Hard Pitch, Soft and Coaltar Pitch after payment of duty on the same under T.I. 68 and use the same to manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, only six months duty could have be confirmed. The ld. Advocate s arguments pertaining on the imposition of penalty in the present case is also acceptable as penalty can be imposed only if there is deliberate suppression or clandestine removal with mala fide intention to evade duty. This is not so in the present case, as this case has arisen on the basis of interpretation of the terms of the notification. The facts of the case were fully within the knowledge of the deptt. In that view of the matter, the second issue is also answered in the assessee s favour. Thus, the appeals are allowed. 11. [Order per : S.K. Bhatnagar, Vice President]. - With due respects to Hon. Member (J) my views and orders in the matter are as follows :- 12. I observe that according to the appellants themselves the Classification List was yet to be approved by the proper officer. Indeed they have gone to the extent of claiming that `the demand of differential duty is premature because approval of C/L is pending as apparent from their application dated 23rd March, 1993 and the grounds mentioned therein. They have also filed a copy of the unapproved Classification List filed by them. In view of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be claimed and they would automatically fall under the entry 40B. It is in this context immaterial whether fabrics arise as an intermediate product or not because both situations are covered. In fact if the fabric iteself was cleared at `NIL rate of duty then Modvat credit could not have been taken or availed of with reference to that quantity; if on the other hand the fabric itself was cleared on payment of duty then that would only mean that bag or sack stage had not yet arisen. 16. In case of bags or sacks made out of fabrics woven from strips or tapes since Modvat credit has been admittedly taken on HDPE Granules which were used as input in the process of manufacture which culminated in the final product as bags and sacks, obviously the entry 40B was attracted (and the benefit of 40A barred because of the condition prescribed in Col. 5). 17. The argument that the strips or tapes or fabrics had come into existence at intermediate stage does not in this case make any difference whatsoever because of the language used in Col. 3 which refers to all these and yet introduces a condition with reference to 57A in respect of bags, sacks as well as fabric. 18. Even othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic granules in the manufacture of exempted HDPE tapes. These exempted HDPE tapes were captively used in the manufacture of dutiable HDPE fabrics/sacks - the final product. The Central Excise duty suffered by plastic granules was taken credit of by the appellants under the provisions of Rule 57A of the Central Excise Rules, 1944 (hereinafter referred to as the `Rules ), and the credit so taken, was utilised towards payment of duty of excise leviable on the final product i.e. HDPE sacks. Excise duty on the fiinal product was paid at the exempted rate which was applicable only when no credit of the duty paid on the inputs used in the manufacture of sacks had been availed of under Rule 57A of the Rules. The HDPE tapes were exempted, and no Excise duty was paid thereon. The Ld. Member (Judicial) has proposed that the inputs in this case are not the plastic granules but the HDPE tapes, and that by the appellants taking credit of the duty paid on plastic granules and by utilising such credit under Rule 57A of the Rules towards payment of duty of excise leviable on HDPE sacks etc., it could not be said that the credit of the duty paid on the plastic granules, has been availed of under Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0A. 29. I have considered the matter. Under Rule 57A of the Rules, the provisions relating to the credit of duty paid on excisable goods used as inputs under Section AA of Chapter V of the Rules, apply to the specified finished excisable goods, and relate to allowing credit of the specified duty paid on the goods used in or in relation to the manufacture of the above specified finished excisable goods. The credit so allowed, can be utilised towards payment of duty of excise leviable on the said finished excisable goods. Under Rule 57C it has been provided that no credit of the specified duty paid on the inputs used in the manufacture of a final product (other than those cleared either to a unit in a free trade zone or to a 100% export oriented unit) shall be allowed if the final product is exempted from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. Thus if the final product is taken as exempted HDPE tapes, and not the dutiable HDPE fabrics/sacks then no credit of the duty paid on plastic granules, was admissible. The credit is, however allowable when the inputs are used in the final product through the exempted intermediate product. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e correct view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee - assuming that the said principle is goods and sound - does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals and other decisions, viz., each such exception/exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision is found applicable to him, full effect must be given to it. As observed by a Constitution Bench of this Court in Hansrj Gordhandas v. H.H. Dave [1978 (2) E.L.T. (J 350) (S.C.) = 1969 (2) S.C.R. 253)] that such a Notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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