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TMI Blog1996 (10) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment of the CEGAT involves the interpretation of Notification No. 210 (sic) of 1979-C.E., dated 4-6-1979, issued by the Central Government under Rule 8 of the Central Excise Rules. 2.The appellant assessee is engaged in the manufacture, inter alia, of "Horlicks" falling under Tariff Item 1B of the Schedule to the Central Excises and Salt Act. It has a factory at Rajahmundry (Bommur) for manufacturing "Horlicks". The entire stock of Horlicks manufactured at Rajahmundry is, however, not cleared/removed after paying the duty at Rajahmundry. Only a portion of the production is put in unit containers/packages and cleared at Rajahmundry after paying the duty while the bulk of the production is sent to the appellant's factories situated at different places in India in bulk containers. There, the Horlicks is put in unit containers/packages and cleared after paying the duty. 3.For the purposes of manufacturing Horlicks, the appellant purchases barley malt which was dutiable under Tariff Items 68. 4.On June 4, 1979, the Central Government issued the aforesaid notification (No. 201 of 1979) exempting "all excisable goods .................... on which the duty of excise is leviable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jahmundry. Revenue also says that the respondent is not entitled to take credit of balance of Rs. 7,500/- (duty paid on 75 tons of barley malt) from out of the duty paid on 750 tons at Bangalore. The question is who is right? 5.Notification No. 201 of 1979, insofar as it is relevant, reads : "In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 178/77-Central Excises, dated the 18th June, 1977, the Central Government hereby exempts all excisable goods (hereinafter referred as "the said goods"), on which the duty of excise is leviable and in the manufacture of which any goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) have been used, as raw materials or component parts (hereinafter referred as "the inputs", from so much of the duty of excise levi- able thereon as is equivalent to the duty of excise already paid on the inputs : Provided that the procedure set out in the Appendix to this notification is followed : Provided further that nothing contained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication in respect of the factory to which the credit or (emphasis added)stock is transferred." 6.The first proviso to the notification lays down that the procedure set out in the Appendix to the notification will have to be followed for availing of the credit for the duty paid on the inputs. The Appendix provides that the manufacturer will have to give a declaration to the Superintendent of Central Excise having jurisdiction over his factory giving full description of the goods intended to be manufactured in his factory as well as full description of the inputs intended to be used in the manufacture of such goods (Rule 1). The manufacturer may take credit of the duty already paid on the inputs which are received by him after submitting the declaration and utilise such credit for payment of duty of excise on the said goods (Rule 2). 7.These rules do not specifically lay down that the credit of duty taken by the manufacturer must be set-off against the duty payable on the goods actually manufactured utilising these inputs. The manufacturer is entitled to take credit of the duty already paid on the inputs as soon as he receives the inputs and submits the necessary declaration to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puts against the duty payable on the goods manufactured by the manufacturer. 10.With respect to the main controversy, the Revenue emphasises the words "all excisable goods ........ on which a duty of excise is leviable and in the manufacture of which any goods falling under Item No. 68 ............. have been used ........... from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs." It says that the aforesaid words mean and imply the concept of correlation. In other words, they say that only the duty paid on inputs which have been used for manufacturing the goods cleared from the factory (where the inputs were received) can be taken credit of, as explained in the illustration given hereinabove. On the other hand, the learned counsel for the appellant submits that the words in the body of the notification should be read alongwith the procedural rules mentioned in the Appendix. In particular, he relies upon Clauses (9) and (10) of the Appendix. The learned counsel also relies upon the instructions issued by the Central Board of Excise and Customs on 18-6-1979 to the following effect : "Central Excise - Simplification o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For claiming set-off of duty paid on Tariff Item 68 furnishing on the "input" - "output" ratio was necessary as at the time of claiming the set-off while clearing the finished goods the manufacturers had to satisfy the Central Excise Department about the exact amount of set-off sought to be claimed with reference to the duty paying documents under which the "input" had been received. Government have given considerable thought to alleviating3. these difficulties. And, now, as measure of facilitation the procedure for claiming this exemption has been substantially simplified. Under the revised Notification No. 201/79-C.E. issued on 4-6-1979, the cumbersome "set-off" procedure has been given up, and a self-contained procedure for claiming the exemption has been prescribed. This procedure is basically on the lines of the proforma Credit System prescribed under Rule 56A of the Central Excise Rules, 1944."(emphasis added) 11.With a view to explain the procedure obtaining under Rule 56A, the learned counsel for the appellant brought to our notice clause (VI) of sub-rule (3) of Rule 56A of the Central Excise Rules, as it obtained prior to 1973 and as it obtains now i.e., as sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are not relying upon the Board's instructions either as binding upon the Courts or as an aid to construction of the notification but only as explaining the background to the issuance of Notification 201). The change in the language and content of Clause (vi) of sub-rule (3) of Rule 56A in 1973 is equally relevant in this behalf. It explains why the concept of correlation - or the rule of set-off, as it is referred to in the Press-note - was given up and a different method adopted. Clause (9) of appendix to Notification 201, it is significant to note, is in pari materia with Clause (vi) of Rule 56A(3) (as substituted in 1973). The practical difficulties in implementing the method in force prior to the issuance of Notification 201 and the object underlying the said notification (as also the amendment of Clause (vi) of Rule 56A(3) in 1973) also induce us to accept the appellant's contention in preference to the Revenue's contention. 14.By accepting the appellant's contention, the object underlying the enactment is in no way defeated nor is the objective underlying the Notification No. 201 of 1979 defeated. The object underlying the notification is to prevent the cascading effect ..... 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