Full Judgment Text
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6433 OF 2003
M/S. BONANZO ENGINEERING & CHEMICAL
PRIVATE LIMITED .... APPELLANT
VERSUS
COMMISSIONER OF CENTRAL EXCISE ... RESPONDENT
O R D E R
1. This appeal is directed against the judgment and order passed by
the Customs, Excise and Gold (Control) Appellate Tribunal, New
Delhi (for short 'the Tribunal') in Appeal No.E/1352/2002-B dated
25.10.2002. By the impugned judgment and order, the Tribunal has
sustained the original order passed by the Adjudicating Authority.
2. The undisputed facts are: the appellant is a manufacturer of goods
falling under Chapter Headings 32 and 84 of the first schedule to
the Central Excise Tariff Act, 1985 ('the Act' for short). The
description of the goods under those chapters for the purpose of
disposal of this appeal may not be necessary, since we are called
upon in this appeal to give a purposive construction to the language
employed in the Notification No.175/86-CE dated 1.3.1986 and
Notification No.111/88-CE dated 1.3.1988.
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3. The Notification No.175/86-CE dated 1.3.1986 exempts the
excisable goods of the description specified in the annexure
appended to the Notification as enumerated under various Chapters
of the Schedule to the Act. The assessee availing the benefit of the
exemption notification has to satisfy two specific conditions for
claiming exemption from payment of duty under the Act. We need
to notice Sub-clauses (a), (a)(ii) and proviso to Clause 1, and the
Explanation II to the Notification. They read as under:
“(a) in the case of the first clearance of the specified
goods upto an aggregate value not exceeding rupees thirty
lakhs,-
xxx xxx xxx
(ii) in any other case from the whole of the duty of excise
leviable thereon:
Provided that the aggregate value of clearances of the
specified goods under Sub-clause (ii) of this clause in
respect of any one Chapter of the said Schedule, shall not
exceed rupees twenty lakhs [w.e.f. 1.4.1990]....”
“Explanation II For the purposes of Computing the
aggregate value of clearances under this Notification, the
clearances of any excisable goods, which are chargeable to
nil rate of duty or which are exempted from the whole of
the duty of excise leviable thereon by any other Notification
[not being a notification where exemption from the whole
of the duty of excise leviable thereon is granted based upon
the value or quantity of clearances made in a financial
year] issued under Sub-rule[1] of Rule 8 of the said rules,
or under Sub-section [1] of Section 5A of the Central
Excises and Salt Act, 1944 [1 of 1944], shall not be taken
into account.”
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4. A bare perusal of Sub-clause (a) of Clause 1 of the said
Notification demonstrates that the goods enumerated in the
Schedule to the Notification are exempted from payment of the
central excise duty for the first clearances of the specified goods
upto the aggregate value not exceeding rupees thirty lacs. Clause
(a)(ii) provides that such clearances should not exceed rupees
twenty lacs in any one of the chapter. The Notification also say that
for the purpose of computing the aggregate value of the clearances
under the said Notification, the value of clearances of any excisable
goods which are exempted from the whole of duty by any other
Notification shall not be taken into account.
5. Having seen the first Notification, namely, the Notification dated
1.3.1986, let us also refer to the Notification No.111/88-CE dated
1.3.1988. This Notification is issued by the Central Government in
exercise of its powers under sub-rule (1) of Rule 8 of the Central
Excise Rules, 1944. By the said Notification, the Central
Government exempts the goods of the description specified in
column 3 of the table appended to the Notification, from the whole
of the excise duty leviable on the said goods. It is an admitted fact
that the assessee is the manufacturer of specific goods falling under
Serial No. 12 of the table appended to the Notification.
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6. We once again make it clear that the assessee in the instant case is a
manufacturer of goods falling under both chapters 32 and 84 of the
Act.
7. The assessee has filed its declaration before the adjudicating
authority, inter alia, informing him that the assessee would be
claiming exemption from payment of excise duty for a sum of
Rs.20 lacs under Chapter heading 32 of the Act and upto Rs.10 lacs
under Chapter heading 84 of the Act.
8. The adjudicating authority has issued two show cause notices dated
26.11.1992 and 20.01.1993, respectively. The first show cause
notice is for the period 20.08.1992 to 31.10.1992 and the second
show cause pertains to the period 01.11.1992 to 31.12.1992. The
duty effect of both the notifications does not exceed beyond Rs.2.3
lacs.
9. In the aforesaid show cause notices, the assessing authority had
stated that the assessee has exceeded the aggregate value of Rs.30
lacs as specified in the Notification dated 1.3.1986 and, therefore,
other clearances made by him would attract the levy of duty. It was
also mentioned in the notice that since the assessee had paid the
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duty on the excess clearances of more than the value of Rs.30 lacs,
the assessee is liable to pay duty with penalty.
10. In reply to the said show cause notice, the assessee had brought to
the notice of the adjudicating authority that it is a manufacturer of
items which would fall under chapter heading 84 of the Act and,
therefore, the Notification dated 1.3.1988 requires to be applied and
if it is applied the goods enumerated in the table appended to the
Notification are exempted from the levy of duty and, therefore, the
excise duty paid by the assessee under the aforesaid notification
cannot be added for the purpose of computing the aggregate value,
while granting benefit of the Notification No.175/86-CE dated
1.3.1986.
11.
The stand of the assessee was, initially, accepted by the adjudicating
authority (Assistant Commissioner) vide his Order dated 12.3.1993.
However, the Collector of Central Excise (Judicial) in his Review
Order dated 17.2.1994 found that the Order-in-Original dated
12.3.1993 is legally incorrect and is passed by the authority which is
incompetent on account of monetary limits. He further directed the
Assistant Collector to file an appeal before the Collector, Central
Excise (Appeals) for appropriate remedy. On Review Appeal, the
Collector, Central Excise (Appeals) vide its order dated 2.6.1994
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had set aside the Order-in-Original and remanded the matter to the
Competent adjudicating authority (Deputy Commissioner) for de
novo proceedings. Thereafter, the adjudicating authority vide Order
dated 7.1.2000 while rejecting the assessee’s claim had confirmed
the duty demanded and also imposed the penalty.
12. Aggrieved by the said order, the assessee had carried the matter in
appeal before the Tribunal. The Tribunal rejects the claim only on
the ground that the assessee has not claimed the refund of the duty
paid for the clearances of the goods falling under Chapter heading
84 of the Tariff Act, and therefore, the assessee is not entitled to
avail the benefit of the exemption Notification dated 1.3.1986. In
the words of the Tribunal:
“It is admitted fact that the Appellants have not availed of
the exemption provided under Notification No.111/88 while
clearing the goods classifiable under Heading 84.37. It has
not been brought on record that the Appellants have claimed
any refund of the said duty. Accordingly, it cannot be
claimed by them that the goods were exempted from payment
of duty. The value of the clearance of goods falling under
Heading 84.37 being cleared on payment of duty has to be
taken into account by computing the value of clearances for
the purpose of Notification No.175/86.”
13. The sum and substance of the reasoning of the Tribunal appears to
be that merely because the assessee has paid the excess duty on
those items which he was not supposed to pay in view of the
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exemption notification dated 1.3.1988 and merely because the
assessee has not claimed the refund of the excess duty paid, that
amount paid by him under the Notification dated 1.3.1988 requires
to be taken for the purpose of computing the aggregate value of the
clearances under the notification No.175/86-CE. In our view,
merely because the assessee, maybe, by mistake pays duty on the
goods which are exempted from such payment, does not mean that
the goods would become goods liable for duty under the Act.
Secondly, merely because the assessee has not claimed any refund
on the duty paid by him would not come in the way of claiming
benefit of the Notification No.175/86-CE dated 1.3.86.
14. In Union of India v. Wood Papers Ltd., (1990) 4 SCC 256, this
Court has observed:
4. Literally exemption is freedom from liability, tax or duty.
Fiscally it may assume varying shapes, specially, in a growing
economy. For instance tax holiday to new units, concessional
rate of tax to goods or persons for limited period or with the
specific objective etc. That is why its construction, unlike
charging provision, has to be tested on different touchstone. In
fact an exemption provision is like an exception and on normal
principle of construction or interpretation of statutes it is
construed strictly either because of legislative intention or on
economic justification of inequitable burden or progressive
approach of fiscal provisions intended to augment State
revenue. But once exception or exemption becomes applicable
no rule or principle requires it to be construed strictly. Truly
speaking liberal and strict construction of an exemption
provision are to be invoked at different stages of interpreting
it. When the question is whether a subject falls in the
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notification or in the exemption clause then it being in nature
of exception is to be construed strictly and against the subject
but once ambiguity or doubt about applicability is lifted and
the subject falls in the notification then full play should be
given to it and it calls for a wider and liberal construction.
5. … A construction which results in inequitable results and is
incongruous, has to be avoided.
15. In Associated Cement Companies Ltd. v. State of Bihar, (2004) 7
SCC 642, this Court while explaining the nature of the exemption
notification and also the manner in which it should be interpreted
has held:
“12. Literally “exemption” is freedom from liability, tax or
duty. Fiscally it may assume varying shapes, specially, in a
growing economy. In fact, an exemption provision is like an
exception and on normal principle of construction or
interpretation of statutes it is construed strictly either
because of legislative intention or on economic justification
of inequitable burden of progressive approach of fiscal
provisions intended to augment State revenue. But once
exception or exemption becomes applicable no rule or
principle requires it to be construed strictly. Truly speaking,
liberal and strict construction of an exemption provision is to
be invoked at different stages of interpreting it. When the
question is whether a subject falls in the notification or in the
exemption clause then it being in the nature of exception is to
be construed strictly and against the subject but once
ambiguity or doubt about applicability is lifted and the
subject falls in the notification then full play should be given
to it and it calls for a wider and liberal construction. (See
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Union of India v. Wood Papers Ltd. and Mangalore
Chemicals and Fertilisers Ltd. v. Dy. Commr. of Commercial
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Taxes to which reference has been made earlier.)”
16. In view of the above, we cannot sustain the judgment and order
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passed by the Tribunal in Appeal No.E/1352/2002-B, dated
25.10.2002.
17. Accordingly, we allow this appeal, set aside the judgments and
orders passed by the Tribunal and the adjudicating authority. We
direct the adjudicating authority to apply the Notification dated
1.3.86 in the assessee's case without taking into consideration the
excess duty paid by the assessee under the Notification dated
1.3.1988. No costs.
Ordered accordingly.
.....................................J.
(H.L. DATTU)
.....................................J.
(ANIL R. DAVE)
NEW DELHI,
FEBRUARY 14, 2012.
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