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TMI Blog2014 (11) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... is exempted if the final product is dutiable. The crux of the arguments advanced by the ld. Advocate is that it is not the intention of the legislature to levy duty on the intermediate products. It is the contention that in any case, no duty is required to be paid on the intermediate product when used in the manufacture of other finished goods. The argument is attractive and we would have agreed with the contention of the ld. Advocate for the Applicants; but we find that the vital point missing from the said argument, is that the finished product ought to be dutiable, so as to claim exemption on the intermediate product. Prima facie, we are of the view, both intermediate and final product cannot avail the benefit of exemption from payment of duty. Prima facie we do not find from records that the Applicants had specifically ever disclosed the facts and claimed exemption on the intermediate product ‘Compound in balti’, even after the issue of exciseablity was settled by the Hon’ble supreme Court [2005 (4) TMI 66 - SUPREME COURT OF INDIA] in their own case. In these Circumstances, the Applicants could not make out a prima facie case for total waiver of pre-deposit of dues adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Notification No.52/2002-CE dated 17.10.2002 in respect of the said compound manufactured and captively consumed. On adjudication, the demands were confirmed by the ld. Adjudication Authority and penalties imposed. 3. Assailing the Order and advancing submissions on behalf of the Applicants, ld. Advocate Shri T.R.Rustogi has submitted that the compound manufactured by the Applicant, at intermediate stage would also be exempt from duty under Notification No.08/2004-CE dated 21.01.2004, as is apparent that the exemption to Finished Chewing Tobacco under this Notification, implies automatic exemption to the intermediate stage compound as well, when used for captive consumption. It is for the simple reason that all the conditions of Notification No.08/2004 dated 21.01.2004 are also satisfied for captive use of the compound as well. Further, he has submitted that compound falls under the list of sub-headings specified under Notification No.08/2004-CE, herefore, it is eligible to the benefit of said Notification. Further, it is his contention that the amount equal to the duty payable on compound , but for the exemption under Notification No.08/2004-CE, works out to be ze ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugs Industries Ltd. vs. CCE,Bangalore-II, 2008(230)ELT492(Tri.-Bang.); (iii) Burn Standards Co. Ltd. vs. CCE, Bolpur, 2006(206)ELT 411(Tri.-Kolkata); (iv) Rachna (P) Ltd. vs. CCE, Allahabad, 1996(87)ELT 393(Tribunal); (v) Rajasthan State Warehousing Corp. vs. CCE, Jaipur, 2011(23)STR 385(Tri.-Del.); (vi) CCE, Bangalore-I vs. MTR Foods Ltd., 2012(282)ELT 196(Kar.). 4. Per contra, ld. Special Counsel, Shri A.K.Raha for the Revenue submitted that the intermediate product, compound in balti is dutiable and the issue is no longer res integra, in view of the judgment in the case of Dharampal Satyapal vs. CCE, New Delhi, 2005(183)ELT 241(SC). Responding to the argument whether the intermediate product namely, Kimam or Compound in balti be considered as exempted under Notification No. 52/2002 CE and/or 08/2004-CE the ld. Special Counsel submitted that since the intermediate compound is used in the manufacture of exempted finished goods, the benefit of notification 52/2002 CE cannot be extended to them. 4.1 Regarding the benefit of Notification No.08/2004CE it was open to the Applicant to avail the benefit of the said exemption, subject to fulfillment of the condition that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compound and cleared for captive consumption, in their own factory, for manufacture of Branded Flavoured Chewing Tobacco/Zarda Scented Tobacco , which is exempted under Notification No.08/04-CE dated 21.01.2004. It is not in dispute that the said compound is classifiable under Chapter Sub-Heading 24039930 after 28.02.2005 and prior to that, it was classified under 2404.41 of CETA,1985. The show cause notice has been issued to the Applicants alleging that the said compound (Chewing Tobacco, Kimam), which is also called compound in balti , an excisable goods, though manufactured and used in the exempted finished excisable goods i.e. Branded Flavoured Chewing Tobacco/Zarda Scented Tobacco , no duty has been paid on the said compound . It is, further, alleged that the benefit of Notification No.52/02-CE dated 17.10.2002 could not be available in respect of the said intermediate product compound , manufactured and cleared for captive consumption. 6. The ld. Advocate, Shri T.R. Rustogi for the Applicants submitted that the finished product is exempted from payment of duty by virtue of Notification No.08/04-CE and they were required to invest the amount equivalent to the dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts manufacturing activities after the 28th day of February, 2001; (B) an amount equal to the sum of basic excise duty, special excise duty, additional excise duty and National Calamity Contingent duty, payable, but for the exemption in this notification, shall be utilized by the manufacturer only for investment in- (i) plant and machinery in a manufacturing unit which is located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura; or (ii) infrastructure or civil works or special projects in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura; 7. It is his submission that the intention of the legislature is not to collect duty twice: i.e. once on the intermediate product , namely on compound and again, on the finished goods i.e. Branded Flavoured Chewing Tobacco/Zarda Scented Tobacco . It is his further submission that in the normal course, assuming that Notification No.08/04-CE is not in existence, then also the Applicants would have been required to pay duty only on the finished product i.e. Branded Flavoured Chewing Tobacco/Zarda Scented Tobacco, and not on the intermediate product, compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the above three licensed factories where it was diluted and used in the manufacture of Tulsi Zafrani Zarda. In their reply to the show cause notice, the assessee admitted that the said compound was not capable of being used for any purpose, other than for manufacture of branded chewing tobacco (underline supplied by us). The statement of the assessee in reply to the show cause notice establishes that the said compound (kimam) was not edible, it was not capable of consumption as such, however, it was used as preparation in the manufacture of Tulsi Zafrani Zarda which was a branded chewing tobacco manufactured in the licensed factories of the assessee at Okhla Industrial Estate, Phase-II, New Delhi, Noida (UP) and Barotiwala (HP). Further, from time to time, the assessee herein bought from the market a similar compound (Lucknowi kimam) and used it in the manufacture of the final product which indicated that on blending of sada kimam with saffron, spices, menthol etc., the compound in question (kimam) which emerged was a distinct, identifiable product, known to the market as kimam. Hence, we do not find any infirmity in the impugned judgement of the tribunal which has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able thereon or are chargeable to Nil rate of duty. 10. The crux of the arguments advanced by the ld. Advocate is that it is not the intention of the legislature to levy duty on the intermediate products. It is the contention that in any case, no duty is required to be paid on the intermediate product when used in the manufacture of other finished goods. The argument is attractive and we would have agreed with the contention of the ld. Advocate for the Applicants; but we find that the vital point missing from the said argument, is that the finished product ought to be dutiable, so as to claim exemption on the intermediate product. Prima facie, we are of the view, both intermediate and final product cannot avail the benefit of exemption from payment of duty. In the instant case, the intermediate product is compound in balti , which are used in the finished goods, Branded Flavoured Chewing Tobacco/Zarda Scented Tobacco , on which the Applicants had claimed exemption under Notification No.08/04-CE dated 21.01.04. The conditions referred to in the said Notification at clause (B), are applicable to Branded Flavoured Chewing Tobacco/Zarda Scented Tobacco, and in our opinion, cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan Indian Ltd. (supra), this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave - (1996) 2 SCR 253, held 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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