Full Judgment
2. Learned Counsel, Shri Vinay Garg appearing for the appellant submitted that the issue relates to the interpretation of exemption Notification No. 108/95. The said exemption Notification provided for total exemption from excise duty on all goods falling under the Schedule to the Central Excise Tariff Act, 1985 when such goods are supplied to the United Nations or an international organisation for their official use or supplied to the projects financed by the United Nations or an international organisation and approved by the Government of India. The proviso to the said notification reads as under :- "Provided that before clearance of the said goods, the manufacturer produces before the Assistant Collector of Central Excise having jurisdiction over his factory a certificate from the United Nations or an international organisation that the said goods are intended for official use by the said United Nations or the said international organisation or are to be supplied to a project financed by the said United Nations or the said international organisation and the said project has duly been approved by the Government of India." 3. Learned counsel submitted that the appellants were manufacturing patent or proprietary and other medicines falling under Central Excise Tariff Heading 3003.10 and 3003.20. Under a project financed by the World Bank called "World Bank Assisted Child Survival and Safe Motherhood Project", the appellants had taken up a project for the manufacture of certain medicines with the due approval of the Government of India and after complying with the procedure for entering into a contract for the purpose. By show cause notice dated 2-12-1996, the appellants' claim for duty exemption under Notification No. 108/95 was sought to be denied on the ground of their not submitting the certificate as required in the proviso to the Notification No. 108/95 along with the declaration filed under Rule 173B. In the adjudication before the Assistant Commissioner appellants had explained that they had complied with the formalities of tender floated by the Rail India Technical and Economic Services Ltd. (RITES) of the Government of India and their tender had been accepted with the approval of the World Bank who was financing the project. They had also satisfied the condition of the project being approved by the Government of India. They further claimed that they were entitled to the benefit of Notification No.108/95. The Assistant Commissioner, after discussing the arguments and scope of the exemption Notification, held that the exemption under Notification No. 108/95 is to be allowed only on production of the requisite certificate from the United Nations or an international organisation before clearance of the said goods. He observed that the World Bank itself by its letter dated 4-2-1997 addressed to RITES had expressed their inability to issue such a certificate. Since a notification has to be construed strictly in terms of the wordings therein, the Assistant Collector held that in the absence of the certificate from the United Nations or an international organisation as envisaged in the proviso to the notification, benefit of the exemption under Notification No. 108/95 cannot be allowed. In the order-in-appeal, the Commissioner of Central Excise (Appeals) had confirmed the order of the Assistant Commissioner.
4. Learned counsel submitted that the correspondence between RITES and the World Bank clearly showed that the project and the tender submitted by the appellants had the approval of the World Bank. He referred to a particular letter dated April 9,1996 from the World Bank giving a 'no objection' certificate to the acceptance of the tender submitted by the appellants for the award of the contract to the appellants and their further letter dated April 18, 1996 in relation to another contract for supply of goods by the appellant. Learned counsel submitted that this would clearly show that the clearances made by the appellants were in pursuance of a project financed by the World Bank and the conditions relating to the notification had been substantially satisfied. As regards the requirement of a certificate from the United Nations or an international organisation referred to in the proviso to the notification, learned counsel submitted that the notification did not prescribe any format for the issuance of any such certificate and the letters referred to above would clearly indicate that the World Bank has given its approval to the project pursuant to which the appellants had undertaken manufacturing of the medicines and supply them for a purpose envisaged under the notification. He, therefore, submitted that the denial of the benefit of the notification by way of duty exemption merely for the reason that a certificate from the United Nations or an international organisation had not been produced, should not come in the way of conferring the benefit envisaged under the notification.
Learned counsel also submitted that the Commissioner (Appeals) had in effect agreed with the appellant's submission that the requirement of producing a certificate from the United Nations or an international organisation had been complied with substantially in view of the two letters referred to above sent by the World Bank to RITES allowing the acceptance of the appellants' tender and confirmation of the same by letter dated 4-2-1997. In this connection, he drew our attention to two Supreme Court decisions, namely, Union of India v. Wood Papers Ltd. reported in judgments Today 1991 (1) JT 151 (S.C.) in which the Supreme Court had held that a notification should be construed strictly at the stage of considering availability of the benefit of the Notification to an assessee. However, once that issue was held in favour of the assessee, then a liberal intepretation should be given as to the availability of the entire benefit to an assessee. He also referred to the Apex Court judgment in Mangalore Chemicals and Fertilisers Ltd. v.Deputy Commissioner, reported in 1991 (55) E.L.T. 437 (S.C.) in which the Apex Court held that a distinction should be made between the substantive part of a statutory provision and the part which deals with only procedural matters.
5. The learned SDR, Shri H.K. Jain, submitted that the authorities below had correctly held that for deriving the benefit of the Notification the essential condition of producing a certificate from the United Nations or an international organisation was a pre-condition. The appellants have themselves admitted that no such certificate had been produced and, therefore, one of the substantive conditions of the notification had not been complied with. As regards the argument of the apellants that the Commissioner (Appeals) had in effect accepted their submission that the two letters issued by the World Bank to RITES giving approval to their tender and confirming the same had to be deemed to be a certificate from the World Bank, the learned SDR submitted that the Commissioner (Appeals) had dealt with these two letters only in the context of the two grounds of appeal taken before the Commissioner (Appeals) and this cannot be deemed to be an acceptance of the appellants' contention that the Commissioner (Appeals) had given any finding in favour of the appellants that the two letters from the World Bank can be deemed to be a certificate as envisaged in the proviso to the Notification. He relied on two judgments of the Supreme Court, namely, Mihir Textiles Ltd. v.Collector of Customs, Bombay(S.C.) and Rajasthan Spinning and Weaving Mills v. Collector of Central Excise reported in 1995 (77) E.L.T. 474 (S.C). In Mihir Textiles Ltd. (supra), the Apex Court had held that where the exemption Notification lays down any conditions, the conditions have to be complied with for claiming the eligibility for such exemptiom. In the Rajasthan Spinning and Weaving Mills, the Apex Court had held that notifications have to be construed strictly. Having regard to the above submissions, learned SDR submitted that the stay application may be rejected.
6. We have considered the above submissions. We observe that the proviso to the Notification clearly lays down that the manufacturer has to produce before the Assistant Commissioner a certificate from the United Nations or an international organisation that the goods are intended for official use by the United Nations or an international organisation. It is not in dispute that the appellants have not been able to produce any such certificate from the United Nations or an international organisation. The two letters which have been relied upon by the appellants are letters from the World Bank addressed to RITES, the Government of India organisation, which had been entrusted with the job of floating tenders for the project and for processing the matter further. The letter from the World Bank dated February 4,1997 clearly states that the World Bank is not in a position to issue a certificate of the type requested for by RITES in the context of the exemption notification. The further two conditions in the proviso to the said notification, namely, that the goods are to be supplied to a project financed by the United Nations or an international organisation and that the project has been duly approved by the Government of India cannot be taken as a substitute for the condition of obtaining a certificate from the United Nations or an international organisation as envisaged in the proviso. During the submissions, the learned counsel had shown us a copy of a further Notification No. 33/98, dated 13th October, 1998 which had amended Notification No. 108/95 and had now laid down the condition of the certificate being issued by a Deputy Secretary to the Government of India to the effect that the goods were required for the execution of a project financed by the United Nations or an international organisation and that such project had the approval of the Government of India. Learned counsel submitted that this amending notification would clearly show that the intention of the Government was to grant exemption to manufacturers of goods intended for supply to the United Nations or a project of the kind under dispute. While we take note of the amendment made by Notification No.33/98 regarding the certificate being given by the Deputy Secretary to the Government of India in respect of the United Nations as envisaged under the notification before the amendment, the fact remains that the notification as it stood at the relevant time, provided for the production of a certificate issued from the United Nations or an international organisation. In view of the said position, we are unable to agree with the appellants' contention that the other conditions having been satisfied, they should have been allowed the benefit of the said notification and, therefore, they have a prima facie case for total waiver of the requirement of pre-deposit of the duty demand and the penalty.
7. Taking into account all the above factors, we are of the view that the ends of justice will be met in this case if the applicants are required to pre-deposit an amount of Rs. 6 lakhs before their appeal is heard on merits. In view of the peculiar circumstances, we feel that there is no need for requiring the pre-deposit of any part of the penalty amount.
8. The applicants shall deposit the aforesaid amount within a period of eight weeks from today. On complying with the above condition, recovery of the balance amount of the duty and the penalty amount shall remain stayed till the disposal of the appeal.