1. This appeal is directed against the Order dated 16.7.97 of Commissioner of Central Excise, Calcutta Commissionerate I wherein she disallowed money credit of Rs.99, 64,075/- under rule 57 P of the Central Excise Rules, 1944 and ordered its recovery, and also imposed penalty of Rs.10,00,000/- under Rule 173 Q(bb) ibid on M/s Hindustan Lever., Calcutta.
2. The facts in brief are that the appellants are engaged in the manufacture of "Soap Lifebuoy tablets. They availed benefit of rule 56B upto 30.11.87. However, since December, 1987, the appellants switched over to money credit procedure under Rule 57K ibid and started clearing the soap noodles after availing credit on vegetable oils/minor oils used in the manufacture of the soap noodles. Simultaneously, the processor filed a declaration under Rule 57G for availing modvat credit on the lifebuoy soap noodles as input and availed modvat credit since then. As per the agreement, the processor receives duty paid soap noodles and carry out certain processes to convert the same into cake and remove the same to the appellant on payment of Central Excise duty under the authorized of Notification No.305/77. The processes undertaken by the processor include plodding, extrading, cutting, stamping wrapping in wrappers and packing in corrugated boxes.
2.1. The appellants were issued a Show-cause Notice dated 31.3.93 alleging that during the period from January 1988 to December 1992 they availed money credit irregularly for an amount of Rs.99,64,075.08 on minor oils used in the manufacture of soap noodles in contravention of Rule 57K, 57M and 57O read with Notification Nos.192/87 dated 12.8.87 and 46/89 dated 11.10.89 and the said amount was sought to be recovered. The money credit was sought to be disallowed on the ground that--(i) the soap noodles were not "finished products" but "semi-finished products" when cleared from the appellant's factory; and (ii) all the processes relating to the manufacture of soap starting from vegetable oil (minor oils used) were not done in the same factory.
The appellants explained that "Soap noodles are nothing but "soap" and same are rightly classifiable under sub-heading 3401.10. This explanation (SIC)did not continue the commission and accordingly disallowed the money credit of Rs.99,64,075.08 and ordered recovery of the said amount. A penalty of Rs.10,00,000/- was also imposed on the appellants under Rule 173Q(bb) ibid. Hence, this appeal before us.
3. Shri Anoop Bose, learned Advocate, appearing for the appellants, at the outset, submits that the Show-cause Notice which culminated in the impugned order did not disclose the provision under which the money credit availed by the appellants was sought to be disallowed and it did not contain any specific allegation whatsoever of any fraud, collusion, wilful misstatement or suppression of facts or contravention of any of the provisions of Central Excise Act and the Rules made thereunder with intent to evade payment of duty. He further submits that in any event the appellants are not guilty of willful suppression and / or misstatement and there was no surreptitious of clandestine activity on the part of the appellants. He contends that every activity relating to the manufacture and clearance of the impugned goods was known to the Department. The appellants filed proper declarations under Rule 57-0, submitted classification lists which were only approved and the concerned RT-12 returns were assessed without any objection. He, therefore, contends that the demand was time-barred and as such ought to be dropped. In support of his contention, he relies on the following case-law: (i) Tata Iron & Steel Company Ltd. Vs. U.O.I.: 1988 (35) ELT 605 (SC)Collector of Central Excise, Hyderabad vs. M/s Chempar Drugs and LinimentsPadmini Products vs. C.C.E., Bangalore: 1989 (43) ELT 195 (SC);Pushpam Pharmaceuticals Company vs. C.C.E., Bombay: 1995 (78) ELT 401 (SC); (vi) Mac Laboratories (P) Ltd. Vs. C.C.E. Bombay: 1985 (19) ELT 307 (CEGAT); (vii) Ashwini Vanaspati Industries (P) Ltd. Vs. Collector of Central Excise: 1991 (56)ELT 214 (CEGAT); and (viii) Geep Industrial Syndicate Ltd. Vs. Collector of Central Excise, Allahabad: 1999 (114) ELT 850 (CEGAT).
3.1. Advancing his arguments on merits of the case, the learned Advocate contends that the expression "soap in any form" used in sub-heading 3401.10 of the Central Excise Tariff is used without any qualification and must be taken to include all kinds of soap. According to him, the tariff sub-heading must be interpreted strictly in accordance with the well-known rule of strict interpretation of statutes, which states that a taxation statute has to be interpreted strictly in accordance with the express language of the statute. He submits there is no room for any intendment or implication of the words. He refers to the judgment of Hon'ble High Court of Allahabad in the case of Ganges Soap Works Pvt. Ltd. Vs. U.O.I.: 1992 (43) ECR 707 (All), which held that the soap noodles fall within the purview of sub-heading 3401.10 and further held that the assessee company was entitled to avail the benefit of Notfn. No.46/89-CE. The Hon'ble Allahabad High Court observed that if a commodity is made excisable or a concession is available for the commodity, its shape, size, and form or mould could be immaterial so long as it remains the very same commodity. There is no contrary decision of any High Court on this point and accordingly the decision of the Hon'ble Allahabad High Court has a binding effect. It is settled that the law declared by the High Court, though of another state, under a statute of All - India application, is the final law of land, unless contrary decision is given by any other High Court. He relies upon the following case law in support of the above contentions: (i) Polestar Co. Ltd. Vs.Addl. Commissioner of Sales Tax, New Delhi: 1978 SC 897;Collector of Central Excise vs. Neoli Sugar Factory: 1993 (65) ELT 145 (SC); (vi) Rajasthan Spg. & Wvg. Mills Ltd. Vs. Central Excise 1995 (77) ELT 474; (vii) The Tata Oils Mills Co. Ltd. Vs. Collector of Central Excise: 1989 (43) ELT 183 (SC);Commissioner of Income Tax vs. Smt. Godavari Devi Saraf: 1978 ELT J 624; (x) Hindustan Lever Ltd. Vs. C.C.E., Calcutta-I: 1998 (75) ECR 721 (CEGAT); (xi) Jocil Ltd. Vs. Collector of Central Excise, Guntur: 1997 (89) ELT 99; and 3.2. The learned Advocate invites attention to rule 2 (a) of the Rules of Interpretation which specifically provides that "Any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished goods have the essential character of the complete or finished goods." Based on classification as contained in the said rule, the learned Advocate contends that even if the stand taken by the excise authorities to the effect that soap noodles are semi-finished or intermediate products is accepted for the sake of argument only, it cannot by any stretch of imagination be contended that soap noodles do not have the essential character of the complete or finished goods, viz., soap. He has also advanced an alternative argument to the effect that the soap noodles being "most akin" to soap, the noodles shall be classified under the heading appropriate to the soap and thus fall under the sub-heading 3401.10.
3.3 Continuing his arguments, the learned Advocate refers to Note 1 of the General Explanatory Notes which forms part of the Schedule to the Central Excise Tariff Act which provides that "Where in column (3) of this schedule, the description of an article or group of articles under a heading is preceded by '-', the said article or group of articles shall be taken to be sub-classification of the article or group of articles covered by the said heading," The word "Soap in any form" are preceded by a '-'. Accordingly, if soap noodles fall within the purview of the words "soap in any form", as is the stand of the appellants, soap noodles must be taken to be a sub-classification of the articles or group of articles covered by the main heading, viz., "soap, organic surface active products and preparations for use as soap, in the form of bars, cakes moulded pieces or shapes, whether or not containing soap; paper, wadding, felt and non-wovens, impregnated, coated or covered with soap or detergent." Further, Note 2 of the Notes to Chapter 34 of the Tariff Act clearly lays down that "for the purposes of heading No.34.01, 'soap' applies only to soap soluble in water. It is an undisputed position that soap noodles are soluble in water. The learned Advocate, therefore, emphatically argues that soap noodles clearly fall within the scope of sub-heading 3401.10.
3.4. The learned Advocate elaborately explains the legislative intent in introducing Section AAA encompassing rules 57K to 57P of the Central Excise Rules and Notfn.192/87-CE dated 12.8.87 and 86/89-CE dated 11.10.89 which grant a rebate to manufacturers of soap by way of an incentive to encourage greater utilization and consumption of non-traditional oils in the manufacture of soap by applying the well-known rule of contemporanea exposita. He contends that the real object and purpose of introducing the new Section AAA and issuing the Notifications, as ascertained from the highly persuasive speech of the Union Finance Minister while introducing the Union Budget for the year 1987-88, would be defeated and frustrated if the interpretation sought to be taken by the department in the instant case is accepted. He further argues that if such interpretations were to be accepted, the money credit envisaged for the benefit of manufacturers soap by way of an incentive for greater consumption and utilization of non-conventional oils in the manufacture of soap would be rendered wholly illusory and would be reduced to a mere "paper" credit. In this connection, he relies on the undermentioned case law: (i) Deshbandhu Gupta vs. Delhi Stock Exchange Association Ltd.: AIR1979 SC 1049;Addl. Commissioner of Income Tax vs. Surat Art Silk Manufacturers Association (iii) K.P. Vergese vs. Income Tax Officer, Ennakulam; AIR 1981 SC 1922;Collector of Central Excise, Hyderabad vs. Uma Laminated Products (P) Ltd., HyderabadJai Hind Process & Printing Depot, Rajkot vs. Collector of Customs & Central Excise, Ahmedabad 3.5. The learned Advocate argues that an exemption Notification has to be construed strictly according to the express language of such Notification. In both the Notifications, the expression "final product" (and not "finished product") is used without any qualification and its scope is of the widest amplitude. Soap Noodles are clearly of the nature of "final product: entitled to the benefit of the Notifications.
Accordingly, the expression "final product" cannot be restricted or narrowed down so as to make the availment of the money credit impossible in the case of soap noodles. Applying the rule of the strict interpretation, the appellants are entitled to avail the benefit of the Notifications in the case of soap noodles manufactured by them. The plea that soap noodles were semi-finished or intermediate goods has been raised only to frustrate the valid and legitimate availment of the money credit in strict compliance of the mandatory requirements thereof. The transplantation of such a plea into the plain, unambiguous language of the Notifications by presumption or assumption would be wholly unjustified and untenable in law. In this connection, he relies upon the judgments in the case of Coromandel Fertilizers Ltd. Vs. UOI: 1979 ELT ((J-501) (A.P.); Superintendent of central Excise vs. R.K.Chemicals Industries Pvt. Ltd.: 1987 (30) ELT 641 (Cal); UOI vs.
Pillaiyar Soda Factory; 1994 (52) ECR 479 (Madras); and Maharashtra Glass & Agro Ltd. Vs. Commissioner of Central Excise, Pune: 1999 (112) ELT 847 (CEGAT).
3.6. The learned Advocate pleads that an exemption Notification should be construed literally. He states that it is improper to read an exemption in a limited sense so as to deprive the appellants of the advantage of the notification. It is well settled that an exemption notification must be construed strictly and once the produce falls within the ambit of an exemption notification by applying the rule of strict interpretation. The test of strict construction applies at the entry, that is whether a particular product is capable of falling within its scope, but once it falls within such scope, the notification has to be construed broadly and widely. In support of this plea, he relies upon the decision in the case of Bombay Chemical Pvt. Ltd. Vs.
C.C.E.: 1995 (77) ELT 3 (SC); Haldyn Glassworks Pvt. Ltd. Vs. M.L.
Badhwar: 1980 ELT 291 (Bom; and Mechanical Packing Industries Ltd. Vs.
C.L. Nangia: 1981 ELT 144 (Bom). He further argues that in taxation matters, if two interpretations are possible, the interpretation, which is beneficial to the assessee, must be adopted even if it results in an advantage to the assessee. Applying this principle, where an exemption notification is capable of more than one interpretation or there is doubt in relation to its interpretation, the interpretation which would reduce the incidence of tax or enlarge the ambit of the exemption should be adopted and the benefit must go to the assessee so that his tax burden is lessened. The learned Advocate takes support for the above plea from the decisions in the cases of Dewan Brothers vs.
Central Bank of India: AIR 1976 SC 1503; Petron Engineering Construction Pvt. Ltd. Vs. Central Board of Direct Taxes: AIR 1989 SC 501; Poulose and Mathen vs. C.C.E.: 1997 (90) ELT 264 (SC); Sun Export Corporation vs. C.C., Bombay: 1997 (93) ELT 641(SC); C.C., Calcutta s.
Mitsunny Electronic Works: 1987 (30) ELT 345 (Cal); Deccan Sales Corporation vs. R. Parthasarathy: 1982 (10) ELT 885 (Bom); T.I. Miller Ltd. Vs. UOI: 1987 (31) ELT 344 (Bom); Iron Master (India) Pvt. Ltd. Vs. UOI : 1999 (114) ELT 792 (Del); and Indye Chemicals vs. Collector of Central Excise 3.7. Arguing that it is not open to the Revenue authorities to change their stand in the matter of classification without any cogent reasons, the learned Advocate submits that it leads to a divergent classification in other Commissionerates resulting in unfair discrimination of taxes in respect of the same goods. If the stand now taken by the excise authorities is accepted, a manufacturer of soap noodles would never have been able to avail the benefit of the above notifications. In this connection, he relies upon the decision/judgments in the case of the Central India Spinning and Weaving Manufacturing Co. Ltd. And the Express Mills, Nagpur vs.
Municipal Committee, Wardha: AIR 1958 SC 341; C.C.E. Vs. Parle Exports (P) Ltd.: 1988 (38) ELT 741 (SC); and Swadeshi Polytex Ltd. Vs. C.C.E.1989 (44) ELT 794 (SC); C.C., Bombay vs. United Electrical Industries Ltd.: 1999 (108) ELT 609 (SC); Mangalore Chemicals & Fertilizers Ltd. V. Deputy Commissioner 1991 (55) ELT 437 (SC); Punjab Rubber & Allied Industries vs. UOI: 1983 (12) ELT 54 (P & H); P.K. Nimel vs. Assistant Collector of Central Excise: 1988 (36) ELT 482 (Kerala); Alembic Glass Industries Ltd. Vs. Union of India: 1992 (59) ELT 207; Akbar Badruddin Jiwani vs. C.C.: 1990 (48) ELT 441 (CEGAT); TTK Pharma Ltd. Vs. C.C.E.: 1993 (63) ELT 446 (CEGAT); and C.C.E., Calcutta-I & II vs. Black Diamond Beverages Ltd.: 1998 (103) ELT 655 (CEGAT).
3.8. As regard penalty imposed on the appellants, the learned Advocate argues there is no shared of evidence to justify imposition of penalty under Rule 173 Q (1)(bb) ibid. Moreover, there is nothing on record to show that there was any mala fide intention on the part of the appellants or the appellants acted deliberately in defiance of law or were guilty of dishonest or contumacious conduct. In the absence of any mens rea, as in fact there is none in the instant case according to the learned Advocate, penalty cannot be imposed on the appellants.
4. Shri R.K. Roy, learned JDR appearing for the appellants, reiterates the reasoning contained in the impugned order.
5. We have carefully considered the submissions from both sides and perused the relevant evidence on record. The principal issue for consideration is whether the "soap noodles" merit to be considered as the "final product" so as to be eligible for the money credit scheme.
Whereas the appellants contend that the "soap noodles being nothing but "soap" and as such are eligible "final product", the department holds that the same are "semi-finished products" by reason of which disentitle them to avail the money credit under the provisions of Rule 57K ibid. The appellant's argument is that in both the notifications the expression "final product" (and not "finished product") is used without any qualification and its scope is of the widest amplitude. In their view, the soap noodles are clearly of the nature of "final product" entitled to the benefit of the said notifications. They allege that the department has come out with the plea of soap noodles being semi-finished goods only with an intention to frustrate the valid and legitimate availment of the money credit by the appellants. In this connection, we have perused the tariff entry 34.01 and notice that the expression "soap in any form" has been mentioned therein. We observe that in both the aforementioned notifications the goods to which the benefit of money credit is available are referred to as the "final products" with an amplification "namely, soap". As the 'final products' in the said notifications have been expressly specified to be 'soap', the discussion whether 'final products' mentioned therein would mean "finished products" is strictly irrelevant. The "final products" having been specifically identified as "soap", the benefit of the above notifications has to be made available to the products, which fall within the scope of the expression "soap". A little while ago we observed that the tariff entry 34.01 relates to the "soap in any form".
In the instant case, the form in which the soap is manufactured and cleared by the appellants is "noodles" and the classification of it in that form as "soap" was duly approved by the Department. This unassailable factual position militates against the department's changed stand that the goods cleared from the appellant's factory were in semi-finished form. We are of the opinion that there is no rational basis to deny the benefit of the said notifications in respect of the impugned goods. Our opinion draws support from the judgment of Hon'ble High Court of Allahabad in the case of Ganges Soap Works Pvt. Ltd. And Another vs. UOI and others: 1992 (43) ECR 707: Wherein it was held that money credit cannot be denied to minor oils used in the manufacture of soap in the form of noodles. The Hon'ble High Court of Allahabad observed: " We are of the view that the opposite parties erred in disallowing the utilization of cash credit under the above noted notifications on the ground that some consumers use the product as their raw material for preparing some better quality soap cake and bar. The basic fact remains that the petitioners use specified vegetables oils as input in manufacture of "soap noodles", excisable as final product covered under the expression "soap in any form". Such a product is entitled to the benefit of the notification. The use of the word "noodles" only indicates the form or shape of the product, on the basis of which no distinction can be made. It may also be pointed out that in such fiscal statutes or provisions it is not possible to draw inferences or to go behind a provision which is clear on the face of it, to find out the intention of the legislature. In this connection, we may further point out that if the Government has any different intention than one expressed in the notifications, it can always amend the tariff, its heading, sub-heads or notification, but so long the provision stands as it is, it would not be possible to give any different meaning inferring some other intention of the legislature of the Government, as was submitted on behalf of the opposite parties ".
We draw support also from the decisions of the Hon'ble Tribunal in a similar case of Wipro Ltd. Vs. C.C.E., Bangalore; 1997 (92) ELT 663 (Tribunal): wherein it was held that the benefit of notification has to be made available so long as it is shown that the processes which give rise to the product which answers to the description of the soap have been carried out in the appellant's factory. In the instant case, as in the case of Wipro Ltd., the "noodles" which emerged answer to the description of "soap" and all the process relating to the manufacture of soap, starting from vegetable oils, have been carried out in the appellant's factory. This factual position makes it abundantly clear that the benefit of the said notifications cannot be denied to the appellants. The clearance of "soap noodles' to their job worker for conversion into soap cake and bar does not alter the position as the same are operations done on manufactured goods.
6. In view of the above findings, we find force in the argument, advanced on behalf of the appellants and hence accept the same.
Consequently, the appeal deserves to be allowed. Accordingly, we do so.
6. In the result, the appeal is allowed with consequential (SIC)relief, if any, to the Appellants.