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TMI Blog2006 (9) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... clearances of the plastic sheets as they were of the view that the product was exempt from payment of duty in terms of para 3(c) of SSI exemption Notification No. 16/97-C.E., dated 1-4-97. During the same period, they also did not pay duty of excise on plastic cups/containers [final products], claiming exemption/under Notification No. 4/97-C.E., dated 1-3-97. This notification prescribed 'nil' rate of duty for excisable goods falling under Headings 39.23 and 39.24 subject to the condition that no credit of duty be availed under Rule 57A of the Central Excise Rules, 1944 in respect of the inputs used in the manufacture of the final products. The appellants did not avail such input duty credit and hence claimed to be eligible for exemption for their final products under Notification No. 4/97-C.E. ibid. Since the final products were cleared without payment of duty, the lower authorities held that, in terms of Notification No. 67/95-C.E., dated 16-3-95, the appellants should have paid duty on their intermediate product [plastic sheets] which was used captively in the manufacture of the final products. Accordingly, duty was demanded on plastic sheets for the period April - November 1997 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authorities held that the appellants were liable to pay duty on the layflat tubings captively consumed in the manufacture of the final product as, according to the authorities, the benefit of exemption under Notification No. 67/95-C.E. ibid was not available to the intermediate product inasmuch as the final product was cleared without payment of duty. The contention raised by the assessees that the layflat tubings became dutiable only from 3-12-1997 by virtue of the amendment brought to para 3(c) of Notification No. 16/97-C.E. ibid by Notification No. 69/97-C.E. was rejected. In the cases of M/s. Uniplast Industries, Sujatha Polypack and Sakthi Plastics, the original authorities had accepted the said contention of the assessees, but the Commissioner (Appeals) rejected the same. In the result, there are demands of duty on the appellants in respect of layflat tubings for the respective periods. There are also penalties on all of them except M/s. Sakthi Plastics. Hence the appeals of these parties before the Tribunal. In Appeal No. E/394/2006, the department is aggrieved by non-imposition of penalty on M/s. Sakthi Plastics under Section 11AC of the Central Excise Act by the lower a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em. For the purpose of determining the aggregate value of clearances, the following clearances were not to be taken into account :- "(a) any clearances, which are exempt from the whole of the excise duty leviable thereon (other than an exemption based on quantity or value of clearances) under any other notification or on which no excise duty is payable for any other reason; (b) any clearances bearing the brand name or trade name of another person which are ineligible for the grant of this exemption in terms of paragraph 4 below; (c) any clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory or production of the specified goods. Such clearances of specified goods used as inputs shall be deemed to be exempt from the whole of the duty of excise leviable thereon; (d) any clearances of strips of plastics used within the factory of production for weaving of fabrics or for manufacture of sacks or bags made of polymers of ethylene or propylene." (emphasis added) Notification No. 38/97-C.E. also contained similar provisions. The amendment brought to Notification No. 16/97-C.E. by Notification No. 69/97- C.E., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f inputs (specified goods under Notification No. 175/86-C.E.) used within the factory in the manufacture of finished goods (also specified goods) was to be taken into account for the purpose of calculating the aggregate value of clearances for the purpose of the Notification, the Hon'ble Supreme Court observed that such inputs also enjoyed the exemption under the Notification. On the substantive issue, their Lordships held that the value of clearances of such inputs were not to be included in the aggregate value of clearances for the purpose of the Notification. 4.Learned counsel has also relied on the Supreme Court's judgment in Commissioner v. Jalaram Wood Crafts (P) Ltd.- 2003 (153) E.L.T. 251 (S.C.), wherein also it was held that the clearance value of inputs captively used in the manufacture of finished goods had to be excluded from the aggregate value of clearances under Notification No. 175/86-C.E. M/s. Jalaram Wood Crafts (P) Ltd. were a SSI unit entitled, under Notification No. 175/86- C.E., to exemption from payment of duty on final product up to a clearance value of Rs. 20.00 lakhs. The assessee who enjoyed that benefit was directed by the department to show cause as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not availed though the product was one of the specified goods eligible for such benefit. In respect of the intermediate product, however, SSI benefit was claimed under Notification 1/93-C.E. (successor to Notification 175/86-C.E. and predecessor to Notification 16/97-C.E.), which was denied by the department on account of the final product being exempt under the Tariff. The Commissioner took the view that, since the final product was chargeable to 'nil' duty under the Tariff, the intermediate product which as input went into its manufacture could not come under the purview of Notification 1/93-C.E.. The Tribunal set aside the Commissioner' order vide 2001 (136) E.L.T. 1382. The Supreme Court upheld the Tribunal's decision vide 2004 (167) E.L.T. A98 (S.C.) following the decision in Universal Electrical Industries (supra), with the result that SSI exemption became available to the intermediate product captively consumed in the manufacture of the final product which was cleared at 'nil' rate of duty under the Tariff. 6.It appears to us from the Apex Court's decisions that, where the intermediate product (input) captively consumed in the manufacture of final product by SSI unit f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med to be exempt from the whole of the duty of excise leviable thereon"; "5. Explanation - For the purposes of this notification (f) where the specified goods* are chargeable to nil rate of duty or are already exempt from the whole of the duty of excise leviable thereon under any other notification, the clearances of specified goods used as inputs, shall not be deemed to be exempt under clause (c) of paragraph 3." "Specified goods" mentioned second in clause (c) of para 3 and "specified goods" mentioned first in cause (f) of para 5 represent the final products vide (*). In clause (c), these goods are exempt from payment of duty under Notification 16/97-C.E. itself. These goods can also be exempt from payment of duty under any other notification (other than SSI) or chargeable to 'nil' rate of duty under the Tariff itself. The expression "such clearances of specified goods used as inputs" occurring in the second part of clause (c) means clearances of specified goods used as inputs for further manufacture of the above final products (specified goods exempt under SSI notification or other notification or chargeable to 'nil' rate of duty) within the factory of production of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpt from payment of duty under any non-SSI notification and not chargeable to 'nil' rate of duty but only exempt under Notification 16/97 (SSI) can claim exemption from payment of duty of excise leviable thereon. Thus, insertion of clause (f) in Notification 16/97 had the effect of reducing the scope of exemption of intermediate products (inputs) from payment of duty. In this view, clause (f) has to be seen as a substantive provision rather than clarificatory of pre-existing provisions of the notification. Had it been added as a proviso to para 3 of the Notification, it would have looked better. In other words, the text of clause (f) of para 5 would have found itself in an eminent position as proviso to para 3 of the Notification. 'Explanation' is a misnomer for the said clause. Therefore, we are unable to accept learned SDR's argument that the provision contained in clause (f), being part of Explanation, should be held to be clarificatory and hence retrospective in effect. For the same reason, the ratio of the High Court's decision in Shree Cement (supra) relied on by learned SDR is not applicable to clause (f) of para 5 of the Notification. In the absence of any material in Notif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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