Judgment:
1. In these groups of matters, we are concerned with 3 Appeals and one Cross Objection. 2 appeals viz. Appeals Nos. 496/99-Mum and E/1424/2000-Mum have been filed by the assessee and Appeal No.E/195/01-Mum has been filed by the Department by means Central Board of Excise & Customs Review Order dated 6.11.2000. The above Appeals Nos.
E/1424/00-Mum and E/195/01-Mum have been filed against Order-in-Original dated 10.1.2000 whereas Appeal No. 496/99-Mum has been filed against Order-in-Original dtd. 3.11.98. Memorandum of Cross Objection No. E/CO-39/01-Mum has been filed by the assessee in Appeal No. E/195/01-Mum filed by the Department.
2. By Orders-in-Original dated 12.11.98 and 10.1.2000 the Commissioner of Central Excise, Mumbai VI has held that the assessee who is a manufacturer of synthetic detergents and who is registered as Co-operative Women Society and also registered under Khadi & Village Industries Act 1956, is not entitled to exemption claimed under Notification No. 88/88-CE as well as Notification No. 13/92-CE. The appellant is manufacturing, among other things, Laundry Soaps, technically known as "Synthetic Detergent" under brand name "SASA" falling under Chapter sub-heading NO. 3402.19. The said soap is manufactured by them in the form of cake, powder and liquids. They had been filing Classification Lists. C.L. No. 2/91-92 was filed with effect from 25.7.91 claiming the exemption under Notification No.80/91-CE, which amended Notification No. 88/88-CE. The case of the assessee is that they were manufacturing Laundry Soap, being an organization registered under Khadi & Village Industries act, 1956 as a Women Co-operative Society and hence they need not pay any duty in terms of the said Notification. This claim has been made by the appellant in response to a show cause notice dated 29.10.97, whereunder, the Adjudicating Authority denied the exemption claimed under Notification No. 88/88. In paragraph 4 of the said show cause notice it has been stated as follows: "During enquiry with the Authorities of Town Municipal Council, Mira Bhayander and Tahasildar, Thane, it is observed that the manufacturing unit does not fall in a rural area. As per the Census Report (Series 14 Maharashtra) of 1991, the population of Mira Bhayander is provisionally placed at 1,75,372. The population of Mira as per certificate NO. page 9 dated. 28.4.97 issued by Chief Executive Officer, Mira Bhayander Municipal Council is 11,573. By issue of Notfn. No. CON-1082/2953/CR/660/82/UD 11 dated 12.6.1985, which is published in the Maharashtra Govt. Gazette dated 12.6.1985, the area in which the manufacturing unit is located has been proclaimed by the Urban Development Department Maharashtra as a Municipal area. Hence the place i.e. Mira is not falling in a "rural area" as per the definition given is a said Notfn. issued by Govt.
of Maharashtra. Mira is well within the limit of Mira Bhayander Municipal Council. The exemption under Notfn. NO. 88/88 dated 1.3.88, as amended is hence not applicable to the aforesaid unit.
The said manufacturing unit has suppressed the fact, that, Mira is not in a rural area, with the intention to evade Central Excise duty amounting to Rs. 19,31,30,535.61 for the period 1.10.1992 to 30.9.1997" 3. The gist of the grounds mentioned above is that the Town Municipal Council Mira Bhayander is not a rural area. Therefore, the criteria fixed under Notification No. 88/88, as amended from time to time, will not inure to the benefit of the assessee as the population of the area in question is more than 10,000. It is also charged by the Adjudicating Authority that the assessee had suppressed facts by not bringing to the notice of the Adjudicating Authority about the Census report etc. Show cause notice also mentions various Notification issued by the Government of Maharashtra under the Maharashtra Municipalities Act, 1965 (Mah.XL of 1965). The thrust of the Department's case is that the area under which the assessee's operations are taking place did not fall within the rural area, therefore, exemption cannot be claimed. The assessee's case is that they have correctly availed of the exemption under the Notification No. 88/88, as amended from time to time, for the product in question viz. detergent cake and detergent powder and area "Mira" is a rural area and that the demand of Rs. 19,31,30,535.61 for the period from 1.10.1992 to 30.9.1997 cannot be made by the Department. The assessee also claimed in their reply that the larger period cannot be invoked in this case inasmuch as there was no fraud, collusion or willful misstatement or suppression of facts.
4. We have described only one show cause notice in respect of one Appeal, as we feel sufficient for us to refer to the same, as the common issues are involved in all these matters argued before us.
5. The Adjudicating Authority by his Order dated 12.11.98 has held in paragraphs 13 & 14 of the adjudicating order that the census report of 1991, population of Mira Bhayander was provisionally placed at 1,75,372. The population of Mira was certified as 11,573. Therefore, the population of the place Mira being more than 10,000, this place cannot be treated as rural are in terms of notification No. 88/88.
Therefore, benefit of exemption under notification No. 88/88 claimed by the assessee is not available to the assessee. As far as suppression is concerned, it is stated that the Notification published by Government of Maharashtra on 12.6.85 is a statute law and ignorance of the same cannot be pleaded as a defence. Therefore, there is suppression in this case and he confirmed the demand. He also distinguished the judgments of the Supreme Court in the case of Camphor Drugs & Liniments [1989 (40) ELT 276 (S.C.)]; Padmini Products [1989 (43) ELT 195 (S.C.)]; Tamil Nadu Housing Board [1994 (74) ELT 9 (SC) and Pushpam Pharmaceutical Co. [1995 (78) ELT 401 (SC)]. There are also other cases which were cited before the Adjudicating Authority and he distinguished the same on facts. Hence, these proceedings initiated before us by the assessee as well as the Department.
6. Ld. Counsel for the assessee contended in short that the assessee being a body registered under Khadi & Village Industries Act and Women Co-operative Society definitely comes within the parameters provided under Notification No. 88/88 issued under Rule 8(1) of the then existing Central Excise Rules. He also states that the gods manufactured by them were laundry soap in cake or in powder form and this has been mentioned in the classification lists filed on 25.7.91.
Therefore, there cannot be any suppression. It has also been emphasized during the arguments that so far as the powder form of laundry soap is concerned, it was manufactured without aid of power. It was further emphasized during the arguments that the Board's circular in the form of Trade Notice No. 2/96 dated 3.1.96, issued by Cochin Collectorate, reported in 1996 (81) ELT T-47 which states inter-alia "it is clarified that the exemption under Notification No. 88/88-CE dated 1.3.98 is available to the specified production units in the following category: "(i) specified production units in any area called "village" in revenue records irrespective of population of that village; (ii) specified production units in any area comprised in any town, the population of which does not exceed ten thousand or such figure as the Central Government may specified from time to time." 7. The Ld. Counsel for the assessee also argued that the evidence has been furnished in the form of certificate given by the Tahasildar, Thane to the effect that Village Mouje Mira, Penkarwada, Mahajanwadi, Ghodbundar and Varsova are the revenue village of Thane. This is available at page 103 Part 1 of the Paper Book received before us on 20.4.01 and also in the Appeal at Page 81 of the Paper Book. It is further contended by the ld. counsel that after the above Trade Notice issued by the Cochin Collectorate, the department cannot argue to the contrary. he relies on several decisions of the Supreme Court, one of which is Ranadey Micronutrients [1996 (87) ELT 19 (SC). he also states that Trade Notice issued by one Commissionerate is binding on all the other Commissionerates and he relies on the judgment of Hon'ble Supreme Court in the case of Steel Authority of India v. CCE [2000 (115) ELT 42 (SC). During the course of arguments, the ld. counsel rebutted the argument of ld. counsel for the department regarding the Constitutional Provision of Village in the following manner. He states that the decisions cited by the ld. counsel for the Revenue are all irrelevant in the context of the Trade Notice. The Constitutional Provisions relied on by the ld. counsel for the department are not relevant inasmuch as we are looking to the aspect of exemption Notification from the levy of excise duty on detergents. We cannot add anything to the words existing in the said Notification. The ld. Counsel emphasized that the assessees organization is a body recommended by the Khadi & Village Industries Commissioner as envisaged under the said notification and the manufacture has taken place in an area comprised or in a rural area as defined in the Revenue record. The Revenue record, it is emphasised before us, is maintained by the Tahasildar which authenticity could be taken judicial note of. The Notification issued under Maharashtra Municipality Act, it is submitted, is only establishes certain Municipal Councils as envisaged under that Act. The inclusion of Mira Village under Mira-Bhayander Municipal Council is for the purpose of getting various facilities under Municipalities Act and it does not itself erase the existence of village in such Municipal areas. The ld.Counsel also drew our attention to the meaning assigned to "rural area" under Explanation to the notification itself during different periods, particularly during the period 25-7-1991 to 21-2-2000, under which the period under dispute before us also covered, wherein it clearly states that "rural area" means the area comprised in any village, and includes the area comprised in any town, the population of which does not exceed ten thousand or such other figure as the Central Government may specify from time to time, and, hence, Mira Village is a rural area. He argued in an emphatic way that even in the city of Mumbai there are areas known as Worli village, Marol Village, etc. Without prejudice to the above arguments, it is contended that in terms of Notification, as amended from time to time, the rural area means any area comprised in any village and includes any town. He therefore states that even it comprises the Mira Municipal Council, the area does not consider as a municipal area. He also further states that Mira's population is 2417 as per Mira-Bhayander Municipal Council certificate duly signed by Mira Bhayander Nagarpalika as per page 112 of the paper book filed on 20.4.2001. It was further argued by the ld.counsel, without prejudice, that even if it is assumed that Mira is a town and the population is 11,573, as alleged by the Dept., still they are eligible for exemption in view of enhancement of population from 10000 to 20000 vide amending Notification No. 7/98 w.e.f. 2.6.98, and, hence, demand for the period from 2.6.1998 to Feb.2000 is not sustainable on this count alone. It is further argued by the ld.counsel that in any event, in terms of Notifications 19/84 and 12/94 and 8/96 and 5/97, the soap which is manufactured by them cannot be saddled with duty, as the same were exempted under those notifications. The only condition under those Notifications is that it should be an Organization approved by Khadi & Village Industries Commission, which is admitted to be so in this case, and it is not disputed in the show cause notice. It is further emphasised that with effect from 14.5.97, the Tariff Heading 3401.13 itself provides for the same.
8. As against this ld. Counsel for the Revenue argued and as indicated notes hereof as under: As far as the arguments of the Appellants that the A.C. had already approved the Classification List No. 2/91-92 dated 25.7.1991 claiming exemption, by his letter dated 16.8.1991 and hence, there is no scope of invoking the extended period, cannot stand on its legs because the appellants themselves have misdeclared the facts and claimed the exemption and Asstt. Commissioner, relying upon their declaration, gave the letter of approval dated 16.8.1991 and this definitely prove that appellants are guilty of mis-declaration as within 20 days of their filing classification list No. 2/91-92 they were granted approval without scrutiny. It is when the inquiries conducted by the Department, the authorities came to know that manufacturing unit of the appellant does not fall in "rural area", (a) because by a Notification No.CON-1082/2953/CR/660/82/VD11 dated 12.6.85 published in the official Gazette, Government of Maharashtra proclaimed the area in which appellants unit is located as a Municipal area and (b) in any case of the population of Mira-Bhayander is provisionally placed at 1,75,372/- as per the certificate issued by Chief Executive Officer and therefore Commissioner Central Excise, Mumbai VI, is justified in invoking the extended period.
9. Any declaration made should be true declaration. Oath defined in General Clause Act Section 3(37) covers declaration and believing the said declaration made the appellants true the approval by the department was granted: case law: Union of India v. Haim Aghajan AIR 1968 Bom 366 (see para 6).
Para 6. "Mr. Hegde for the respondent, supported the judgment of the learned trial judge contending that the words in Section 12(1) of the Act of 1947 viz. "the amount representing the full export value of the goods" musts necessarily indicate that there is some allowance for the error of margin and therefore the section cannot be read to mean that the declaration must be correct declaration.
Moreover, he says that this is a penal and restrictive provision and therefore it should be strictly construed. It is possible to assume that there may be a margin of error under certain circumstances. But that does not mean that the exporter is entitle to make deliberately a false declaration. This is made clear by Section 22 of the Act of 1947. It is impossible to construe the word "declaration" by itself and give its ordinary meaning which may mean any statement that a person make. This certainly could hardly be the intention of the legislature in making the enactment. The declaration under Section 12(1) of the said act is required for a specific purpose, the purpose being to ensure that the full export value of the goods is received in this country and no amount of the value of the goods exported is kept back in a foreign country. This provision is made in the interest of the economy of the country. The provisions of Sub-section (2)(b) of Section 12 prohibit the person exporting from taking any steps which would affect the securing the payment of the full value of the exported goods. Clause (b) gives power to the Reserve Bank to verify and examine whether the declaration made does in fact represent the full amount or the full value of the goods exported. This provisions clearly indicates that what is intended to be declared is the true and full value of the goods exported and any declaration irrespective of the correctness of the value. This is made equally clear by the provisions of Section 22 of the Act of 1947 which require that every declaration made under the Act must be a true declaration and not a declaration which is known to the maker to be untrue or which he has reason to be believe to the false which he has reason to believe to be false or untrue in any material particular. These provisions would suggest that the declaration must be true. Having regard to the purpose of the enactment of the Act of 1947 and to the relevant sections thereof the word "declaration" can have but one meaning and that is "a true declaration".
The whole purpose of intent of legislature will be lost if exemption are given to areas which are occupied by persons who are engaged mainly in commercial pursuits in rural areas in the vicinity of a town grow into a suburb of the town and then such areas are governed by rules applying to urban properties.
The argument of appellants with regard to 'village' has no legs to stand as 'village' is very clearly defined in Part IX of Constitution of India Article 243(g) clearly states that 'village' means a village specified by Governor by Public notification to be a 'village' for the purpose of this part and includes a group of village so specified.State of U.P. and Ors. v. Pradhan Sangh Kshettra Samiti and Ors.
- 1995 Suppg. (2) Supreme Court Cases 305.
2. Saij Gram Panchayat etc. v. The State of Gujarat and Ors. (1) Supreme Court.
In the same part Article 243-G describes the powers, authority and responsibility of panchayats and Article 243-H describes powers to impost taxes by funds of the panchayats.
Article 243(d) Panchayat defines - Panchayat means an institution (by whatsoever name called) of self-governed constituted under Article 243-B for the rural areas.
And if we see notification 88/88 under which appellants are claiming exemption it says goods are manufactured in 'rural area..... by registered co-operative societies and thereafter the rural areas are explained in explanation as area comprised in any village, and included the area comprised in any town, the population of which does not exceed 10,000.
The appellants have themselves claimed 'Mira' is village within the meaning of said explanation which is per say wrong as Mira has been declared by Order No. CON-1082/2953/CR.660/82/UD.II dated 12th June 1985 as Municipal area (page 38 of Appeal E/496 R-99) Bombay and thereby there shall be Municipal Council for that area by the name of the Mira-Bhayander Municipal Council (page 36 of Appeal No. E/597/R-99) and therefore there is no Panchayat in 'Mira' to function as institution of self-government and hence 'Mira' cannot be called a village in rural area. It is further very clear under Article 243-B(1) which is as under: (i) There shall be constituted in every State, Panchayats at the village intermediate and district levels in accordance with the provisions of this part.
With the plain reading of above, it is noticed that word 'shall' is used which says that there 'shall' be Panchayats at the village and therefore if there is no panchayat it cannot be village under the Constitution of India.
As there is Municipal Council under Article 243-Q for 'Mira-Bhayander' Municipal area hansom 'Mira' cannot be termed as 'village' by any stretch of imagination, irrespective of certificates given by Tahasildar and others local officers.
Case law: AIR 1995 Supreme Court 2348 (para 15, page 23) Vinay Chandra Mistra v. Union of India.
In view of these observation of the latter Constitution bench on the point, the observation made by the majority in Prem Chand Garg's case (AIR 1963 SC 996) (supra) are no longer a good law. This is also pointed out by this Court in the case of Mohammed Anis v. Union of India. (1994) Supp. 1 SCC 145, by referring to the decisions of Delhi Judicial Services v. State of Gujarat (1991 AIR SCW 2419) (supra) and Union Carbide Corporation v. Union of India (AIR 1992 SC 248) supra by observing that statutory provisions cannot override the constitutional provisions and Article 142(1) being a constitutional power it cannot be limited or conditioned by any statutory provisions.
11. If no statutory provision can override constitutional provision then how certificates by Tahsildar and other local authority can override the constitutional provisions. And also Notification of Government of Maharashtra declaring "Mira-Bhayander" as Municipal area.
In any case appellants are paying various Municipal taxes which cannot be denied.
Interpretation of statute - Notification 88/88-CE as on 21.2.2000 Explanation (a)(i) and (a)(ii) clearly states as under: - (a) 'rural area' means the area comprised in a village as defined in the land revenue records, excluding - (I) the area under any municipal committee, municipal corporation, town area committee, cantonment board or notified area committee, or (ii) any area that may be notified as an urban area by the Central Government or a State Government. Case law - 1997 (92) ELT 23 (S.C.) Johnson and Johnson v. Commissioner of C.Ex.
Aurangabad. Interpretation of taxing statute - Exemption - In interpreting an earlier notification, when the question is whether a narrow view or a broader view would be more appropriate, intention of the authorities could be gathered from the subsequent notification - Section 5A(1) of Central Excise Act, 1944. [para 10] Para 10. Mr. Subha Rao contended that needle by itself could have fallen within Item 90.18 as an appliance but the needle along with the suturing material could not be said to be a surgical appliance and would not be attracted by the said item because suturing material stood specifically covered by Note 3 of Chapter 30 and would, therefore, fall within Entry 30.05, namely, pharmaceutical goods not elsewhere specified and would be attracted by the residuary clause in Item 3005.90. We find it difficult to accept the contention urge don behalf of the Revenue, if the needle by itself fell within Entry 90.18 as a surgical appliance we find it difficult to conclude that if suturing material is affixed thereto, it ceases to be a surgical appliance and would fall within the term suturing material in Note 3 of Chapter 30. Suturing material by itself may have attracted that item but the composite item comprising the needle as well as the suturing material appended thereto could not fall within the expression suturing material and would not be outside the expression surgical appliance. As the relevant point of time these two were separately dealt with, needle simplicitor falling within the expression 90.18 and suturing material simplicitor falling within Clause 'a' of Note 3 of Chapter 30 and consequently under Item 3005.90. But when the suturing material and the needle form an integrated single item used for surgical purposes it would not be proper to adopt a narrow construction to place it under the heading of suturing material removing it from the broader terminology of surgical appliance under Item 90.18. It was possibly for this reason that by the subsequent Notification the position was made clear and the ambiguity was removed. We are, therefor,e of the opinion that the items produced by the appellant company would fall within Entry 90.18 as the terminology suturing appliances has a broader compass than the terminology surgical appliances of Chapter 30 of the Excise Tariff. As far as the decision in Jain Engineering (supra) is concerned, the facts show that the Notification provided that the article specified in the table annexed to the Notification and falling under Heading 84.06 were exempt from payment of certain portion of customs duty. The table not only mentions internal combustion piston engines forming the subject matter of Heading 84.06 but also mentions 'parts thereof'. it was construed that the Notification intended to grant exemption to the parts also. The court, therefore, turned down the Revenue's contention that the Notification was inapplicable to parts of the excisable item manufactured by the appellant. The Tribunal extracted Paragraph of the judgment but merely stated that in the facts of the case the ratio was not applicable. We are afraid that the tribunal failed to come to grips with the question. The submission was that the Notification not only intended to grant exemption internal combustion piston engines but also to parts thereof and once this intention was clear it was unreasonable to take a narrow view of the Notification and to refuse to extend the benefit to the manufacturer. In the instant case also, we are of the opinion that the intention of the authorities was to grant exemption to certain life saving and sight saving articles manufactured in the country and once this intention is clear from the subsequent Notifications issued under Section 5A of the Act in 1995, we do not see any reason why we should take a narrow view to confine the two items produced by the appellants to Entry 3005.90 rather than place them in the wider connotation of surgical appliances in Entry 90.18 of Chapter Interpretation of statute - Exemption being in the nature of exception to be construed strictly at the stage of determination whether assessee falls within its terms or not and in case of doubt or ambiguity, benefit of it must go to the State - But once the provision is found applicable to him, full effect must be given to it - Section 5A of Central Excises and Salt Act, 1944 - Section 25 of Customs Act, 1962.In Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner of Commercial Takes and Ors. (1991 (55) ELT 437 (SC) = 1992 Suppl.
(1) SCC 21), a Bench of this Court comprising M.N. Venkatachaliah, J. (as the learned Chief Justice then was) and S.C. Agarwal, J. stated the relevant principle in the following words:CCE v. Parle Exports (P) Ltd. (1988 (38) ELT 741 (SC) = 1989 (1) SCC 345, in support of strict construction of a provision concerning exemptions. There is support of judicial opinion to the view that exemptions from taxation have a tendency to increase the burden on the other unexempted class of tax payers and should be construed against the subject in case of ambiguity. It is an equally well known principle that a person who claims an exemption has to establish his case. Indeed, in the very case of Parle Exports (P) Ltd. relied upon by Shri Narasimhamurthy, it was observed: "While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It must, however, be borne in mind that absurd results of construction should be avoided".
The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. If the words are plain and clear and directly convey the meaning, there is no need for any interpretation. It appears to us the true rule of construction of a provision as to exemption is the one stated by this Court in Union of India v. Wood Paper Ltd. (1990 (47) E.L.T. 500 (SC) - 1990 (4) SCC 256: "...Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stage of interpreting it.
When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exemption 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..." 15. This was also the view expressed in the Commissioners of Inland Revenue v. James Forrest [(19890) 15 A.C. 334] where Lord Halsbury, L.C. observed: "all exemptions from taxation to some extent increase the burden on other members of the community..." and in Littman v. Barron (Inspector of Taxes) (1951 (20 A.E.R. 393), a decision of the court of Appeal where Cohen, L.J. said: "the principle that in case of ambiguity a taking statute should be construed in favour of a taxpayer relief in certain cases from a section clearly imposing liability".
16. It is true that in some decisions a contrary view appears to have been expressed. In Caroline M. Armytage and Ors. v. Frederick Wilkinson [1878) 3 A.C. 355], a decision of the Privy Council, it was observed: "Their Lordships have now to consider whether the decision of Mr.
Justice Mleswarth upon the merits of the application to him is correct.
They must be begin by expressing their dissent from the principle which seems to have influenced Mr. Justice Molesworth in this and some of the earlier case, viz., that the provisions of the 24th section, because they establish an exemption to the general rule, are to be construed strictly against those who invoke their benefit.
That principle is opposed to the rule expressed by Lord Ellenborought in Barrington v. Furbor 8, East 242) and followed and confirmed in Hobson v. Ncale (17, Beav. 189). Lord Ellenborough's words are - "I think that when the subject is to be charged with a duly, the cases in which it is to attach ought to be fairly marked out, and we should give a liberal construction to words of exception confining the operation to the duty." It is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction need arise".
17. To the same effect is the view expressed by Sir Raymond Evershed in Routledge v. Mckau and Ors. (1954 (1) A.E.R. 855). The learned Master of Rolls observed; "on the authorities, that exemption, as I understand, should be liberally interpreted.' 18. We are, however, of the opinion that, on principle, the decision of this Court in Mangalore Chemicals - and in Union of India v. Wood Papers referred to therein - represents the correct vie of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee - assuming that the said principle is goods and sound - does not apply to the construction of an exemption or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to State. This is for the reason explained in Mangalore Chemicals and other decisions, viz., each such exception/exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision in found applicable to him, full effect must be given to it. As observed by a Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave (1978 (2) E.L.T. (J.350) (SC) = 1969 (2) S.C.R. 253) that such a Notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e. by the plain terms of the exemption.
12. Interpretation of explanation of 'rural area' given in the notification: (i) Object of the Notification is to give boost to Rural industries and for job creation and other ancillary things and also to prevent migration to big-cities and towns. Exemption notification should be given their due effect, keeping in view the purpose under lying therein:CCE v. Neoli Sugar Factory (ii) Notification should be read as a whole and not in piecemeal manner. Clauses must be read in isolated manner.
14. The object and purpose of Notification should be kept in mind.
Notification should be constructed literally but reasonably.
15. With regards to additional pleas of Appellant about change of classification to laundry soap and not using power is impermissible at this stage, more so as it is to even pleaded in Memo of Appeals. The Appellant themselves are marketing their product as Synthetic Detergent.
2. The appellant manufactures that it calls "Halls Ice Mint Tablets". It classified these tablets as "Ayurvedic medicines" under Heading 3003.10 of the Central Excise Tariff. It was issued a notice to show cause why these tablets should not be classified under Tariff Heading 3003.19 as "patent or proprietary medicines". The Assistant Collector, after hearing the appellant, hold that the tablets were patent or proprietary medicines classifiable under Heading 3003.19. In appeal by the appellant, the Collector of Central Excise (Appeals) held that the tablets were Ayurvedic medicines classifiable under Heading 3003.30. The Excise Authorities went in appeal to the Tribunal and, for the first time, took the stand that the tablets were correctly classifiable under Heading 17.04 as "confectionery". The appellant, of course, stuck to its stand that the tablets wee Ayurvedic medicine classifiable under Heading 3003.19. The Tribunal noted that the Assistant Collector had classified the tablets under Heading 3003.19 (sic 3003.10), that is, as patent or proprietary medicines. This was clear indication that the stand of the Excise Authorities prior to the stage of the appeal to the Tribunal was that the tablets were patent or proprietary medicines classifiable under Heading 3003.19. The Tribunal also noted that "both sides have not adduced any detailed arguments as to why these tablets can be considered as confectionery item or otherwise although a plea is there form he Collector in the grounds of appeal that the goods are assessable under Tariff Heading 17.04".
In our opinion, the Tribunal was quite wrong in these circumstances in allowing the appeal of the Excise Authorities and classifying the mint tablets as items of confectionery under Heading 17.04. The correct course for the Tribunal to have followed was to have dismissed the appeal to the Excise Authorities making it clear that it was open to the Excise Authorities to issue a fresh Show-Cause Notice to the appellant on the basis that the tablets were classifiable under Heading 17.04 as items of confectionery. This would have given the appellant the opportunity to place on record such material as was available to it to establish the contrary. It is impermissible for the Tribunal to consider a case that is laid for the first time in appeal because the stage for setting out the factual matrix is before the authorities below.
3. In the result, the appeal is allowed. The judgment and order of the Tribunal under appeal is set aside and the appeal field by the Excise Authorities before the Tribunal is dismissed. It shall be open to the Excise Authorities to issue to the appellant a notice to show cause why the tablets should not be classified as item of confectionery under Heading 17.04, provided it is open to the Excise Authorities to do so in law.
3. What is now argued before us is base don the Show-Cause Notice which stated that the material had been manufactured from imported copper scrap and the words "old scrap of copper" in the aforesaid Clause (i) Even though the case before the Tribunal was an entirely different basis, it was submitted that, having regard to the terms of the Show-Cause Notice, the appellants were not stopped from arguing on the different basis. We do not agree. The appellants cannot be permitted to resile in this Court from the basis on which they argued their case before the Tribunal.
16. The Appellants have all along and including in their classification list filed by them, have claimed that they are manufacturing synthetic detergents and claimed exemption under notification 88/88-Central Excise and have been consistent of the same till filing of appeal in CEGAT. Changing of classification at oral argument stage cannot be permitted.
17. The point raised by the Appellants that they are not using power in manufacturing of detergent:- Though no new plea is permissible yet this exemption is applicable to soaps and not synthetic detergents.
18. MODVAT cannot be decided at the Appellate stage as the MODVAT benefit can only be granted subject to fulfilment of requirement laid under the rule and relevant order.
19. If at the all the Hon'ble CEGAT comes to conclusion that 'Mira' is falls within Municipal area and is not village in that case also the Show Cause Notice is barred by limitation as department being in the same area had knowledge of the same. The Respondents contention regarding this point of limitation.
This argument of limitation will hold not water as the department believed in the declaration filed by the appellant. It is duty of the Assessee to furnish true and correct fact, more so when they are claiming exemption. In any case it has been decided in 1999 (114) E.L.T. 429 (Tribunal) (Larger Bench) Demand - Limitation of five years available even when department had knowledge about suppression, fraud etc. - Relevant date in case of suppression etc. - Period of five years provided under proviso to Section 11A(1) for demanding duty not curtailable because the department had knowledge about the fraud, suppression etc. committed by the assessee - There is nothing in the language of Section 11A(1) proviso or the definition of the term "relevant date" under Sub-section (3) of Section 11A to take the date of the department's knowledge of the alleged irregularity as statutory period of limitation - Section 11A of Central Excise Act, 1944.
20. If this Hon'ble Court decides in favour of the Revenue penalty and interest must be of the Revenue penalty and interest must be granted as per Sections 11AC and 11AB respectively.
Under the above circumstances it is most humbly submitted that the appeals be dismissed with costs.
21. We have considered the arguments of both sides. The assessee's Organization before us is an organization recommended by the Khadi & Village Industries Commissioner. The certificate dated 7-1-1993 shows at page 74 of the appeal.
Notification No. 88/88 reads as follows: "In exercise of powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods of the description specified in column (3) of the Table.....
provided that such goods are manufactured in rural areas by registered co-operative societies, or by women's societies or by institutions recognised by the Khadi & Village Industries Commission or the State Khadi & Village Industries Board....." Explanation: In this Notification - (a) the expression "rural areas" means areas other than those areas which are included in any body established under any municipal law in a State.
22. When we look into the further amendment, this is what it mentioned in Notification dated 1-3-88. Subsequently, from 1990 onwards i.e. by Notification 80/91 'rural areas' read as - "rural area" means the area comprised in any village, and includes the area comprised in any town, the population of which does not exceed twenty thousand or such other figure as the Central Government may specify from time to time." Shri Chattarji, Ld. counsel invited our attention to the case of Diwan Chand v. Nizam Din and Ors. [1924 Lahore 662(1) where the Lahore High Court defined the Village as - "The expression 'village' connotes ordinarily an area occupied by a body of men mainly dependent upon agriculture or occupations subservient thereto." In that case, it was not a point which is arising in the instant case.
That was a case under Punjab Preemption Act. The Court held that 'rural areas' becomes urban depending upon growing commercial pursuits. So the ratio of the said judgment may not be applicable to the facts of this case.
23. In the instant case, we are mainly concerned with the definition of the term "rural area" as defined under various Exemption Notifications.
We have to interpret the words as contained in the body of the Notifications, viz. proviso and explanation. In the proviso, there is a reference to Khadi & Village Industries Act. One of the important things we have to consider in this matter is about the parliamentary enactment in Khadi & Village Industries Commission Act, 1956. The said Act has been enacted for development promoting Khadi & Village Industries. In the said Act, 'village industry' has been defined as: "(I) any industry located in a rural area which produces and goods or renders any service with or without the use of power and in which the fixed capital investment per head of an artisan or a worker does not exceed fifteen thousand rupees or such other sum as may, by notification in the Official Gazette, be specified from time to time by the Central Government.
Provided that any industry specified in the schedule and located in an area than a rural area and recognised as a village industry at any time before the commencement of the Khadi & Village Industries Commission (Amendment) Act, 1987 shall, notwithstanding anything contained in this sub-clause, continue to be a village industry under this Act." In the Schedule to the said Act, Cottage Soap Industry has been mentioned in item No. 4. The reference to this Act is necessary because in Notification No. 88/88, the proviso provides for the goods being manufactured by Institution recognised by Khadi & Village Industries Commission. In the certificate given by Khadi & Village Industries Commission dated 7.1.1993, it specifically mentions Khadi & Village Industries Commission and it also refers to Schedule to the Khadi Village Act. As mentioned by us, the Schedule to the said Act provides for Laundry Soap. Therefore, it cannot be argued that it is not a village industry. it is true that it cannot be argued that the condition mentioned in the Notification has not been complied with. The reference has been made to the 'village industry' as contained in the said Act. Then problem would be whether such a reference could be made? No doubt, no party has argued this point. To our view, the reference to that particular clause 'village industry' as defined in the said Act may not be necessary because that is not what is contemplated under the Notification. Therefore, we are not looking into the definition contained in the said Act nor are we concerned with definition contained in the Bombay Khadi & Village Industries act, 1960. For the reasons stated in respect of the Khadi and Village Parliamentary Enactment, we do not seem it necessary refer to this Act.
24. The next point for our consideration is in respect of village, panchayat, etc. which was vehemently argued by the ld. counsel for the department. The Ld. counsel for the Revenue referred to Part IX of the Constitution dealing with Panchayats. He refers to the terms 'village' as defined in Article 243(g) of the Constitution. The said clause provides as 'village' means a village specified by the Governor by public notification to be a village for the purpose of this Part and includes a group of villages so specified. He submitted before us in a very strenuous way that a Constitution being a superior legal document will have priority over all other legal instruments. Therefore, what is contained in constitution should be followed. In our view, the words contained in any Act, if it is not defined in that Act, then we have to resort to dictionaries/treatises for meaning. Part IX of the Constitution deals with political and administrative set up as contained in Article 243A, Article 243B which deals with constitutional aspect of panchayat, Article 243C deals with composition of panchayat, Article 243D deals with reservation of seats in the said panchayat etc.
It does not mean that we have to rely on what is contained in Article 243A for the purpose of meaning assigned to the term "village". We have to refer to dictionaries for that purpose. Hence, we reject the arguments made by the Ld. counsel for the department on this count. It is emphasised here that such part deals with administrative and political set up and not for purpose of interpreting the Notification issued under Central Excise Act. That take up to another area which has been strongly argued for the department. he cited several judgments viz. UOI v. Haim Aghajan [Air 1968 Bom 366; CCE v. Neoli Sugar Factory [1993 (65) E.L.T. 145 S.C; State of U.P. v. Pradhan Sangh Kshettra Samiti [1995 (Supp(2) SCC 305]; Ublum Electrical v. CC, Bombay [1997 (94) E.L.T. 449 (S.C.) and other series of cases. We are of the view that those cases relied upon by the Ld. Counsel are not at all relevant for the purpose of consideration of the question before us. The Ld.
Counsel for the assessee argued that in any case even the Board's circular contained in Trade Notice No. 2/96 dated 3-1-96 reflected in 1996 (81) ELT T-47, in paragraph 2, the words start with the term 'doubts have been raised' and it ends with in paragraph 3 with 'specified production units in any area comprised in any town, the population of which does not exceed ten thousand'. In the impugned order, the Commissioner refers to in paragraph 10, 11 and 12 of the order in respect of this question which is reproduced as below: "The main allegations in the Show Cause Notice is that the assessee has wrongly claimed exemption from payment of Central Excise Duty under notification No. 88/88 dated 1.3.98 as amended, vide their classification list No. 2/91-92 dated 25.7.91 for their product viz.
"Synthetic Detergents" falling under Chapter Sub-heading 3402.90.
The exemption from Central Excise duty under Notification No. 88/88 dt. 1.3.98, as amended, is conditional i.e. it is applicable only to the goods manufactured in a rural area by a registered co-operative society etc. The definition of "rural area" is given in the explanation appended to the said Notification. "Rural area" means "the area comprised in any village and includes the area comprised in any town, the population of which does not exceed ten thousand or such other figure as the Central Govt. may specify from time to time." The manufacturing unit of the assessee is situated at Mira, falls in the Mira-Bhayander Municipal area. As per census report (Series 14 Maharashtra) of 1991 the population of Mira-Bhayander is provisionally placed at 1,75,372. The population of Mira as per the Certificate No. Napa/Sasa/24/586/97-98 dated 28.4.97 issued by Chief Executive Officer, Mira Bhayander Municipal Council is 11,753. By issue of Notification No. CON-1082/2933/CR/660/82/UD 11 dated 12.6.85, which was published in the Maharashtra Govt. Gazette dtd.
12.6.1985, the area in which manufacturing units are located has been proclaimed by the Urban Development Department of Maharashtra as a municipal area. Hence, the place where the production unit is located cannot be said as 'rural area'.
11. The assessee's contention is that 'Mira' is a rural area and they have rightly claimed benefit of Notification No. 88/88 dt.
1.3.88. In support of their stand they relied upon the Trade Notice No. 2/96 dt. 3.1.96 by the Commissioner of Central Excise & Customs.
Cochin, which reads as follows: "1. It is clarified that the exemption under Notification No. 88/88-CE dtd. 1.3.98 is available to the specified production units in the following category; (i) specified production units in any area called "village" in revenue records irrespective of population of that village; (ii) Specified production units in any area comprised in any town, the population of which does not exceed ten thousand or such figure as the Central Government may specify from time to time. 2. Hence, the specified production units engaged in the manufacture of goods specified in the notification and located in areas comprised in a village which is recognised in revenue records as "village" are eligible for the exemption under Notification No. 88/88-CE, dated 1.3.88. The population of such recognised village will not be taken into consideration for the purpose of granting the exemption under the said notification".
12. It is observed that the said Trade Notice speaks about production unit in any VILLAGE which is called a 'village' in revenue records irrespective of population of that village. Whereas in present case, the Government of Maharashtra has issued notification No. CON-1082/2953/CR/660/82UD11 dated 12.6.85, which was published in the Maharashtra Govt. Gazette dt. 12.6.85, wherein the area in which the manufacturing unit of the assessee is located has been proclaimed by Urban Development Department, Maharashtra as "Municipal area" i.e. "the local area within the limits of the revenue villages Mira, Mahajanwadi. Penpada, Bhayander, Navghar, Goddev, Khari, Kashi and Ghodbunder in Thane District is declared ad the 'Mira Bhayander Municipal Council area'. From the above it is evident that Mira is no more revenue village in the revenue records with effect from 12.6.85 and it is a municipal area as stated in the above Notification issued by Govt. of Maharashtra. Hence, the assessee's contention that 'Mira' is a 'rural area' is not acceptable." 25. When we look into the findings given by the Commissioner, we have to refer to the effect of the Notification issued by the Government of Maharashtra on 12.6.1985 under the Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act, 1965. The various Notifications issued from there, it only provides for population of village panchayat and creation of Municipal Councils. That does not mean the village as such as has been erased. Nowhere in the State enactment provides for population of any village as such. The amendment of the Municipal Council has been enshrined under the said Act of 1965.
The legal and administrative set up should follow what is contained in the said Act. That is ll and not for any other thing. As is evident from the certificate given by the Chief Officer of Mira-Bhayander Municipal Council dated 28.4.97 (available at page 111 of the Paper Book filed on 20-4-2001), the population is less than 10,000. Once that has been confirmed, the parameters provided under the exemption Notification 88/88 have been complied with viz. the population is less than 10,000. As stated earlier, we are not concerned with Mira Bhayander Municipal Council but here we are concerned only Mira village. The inclusion of Mira Village under Mira-Bhayander Municipal Council is for the purpose of getting various facilities under the Maharashtra Municipal Council, Nagar Palika & Industrial Township Act and it does not itself erase the existence of village in such Municipal areas. From 25.7.91 to 21.2.2000, the term 'rural area' has been assigned a meaning as an area comprised of village determined in Land Revenue record including any area covered under a Municipal Committee, Municipal Corporation. The department did not produce any records to show that Mira is not a village defined in Land Revenue Record as against the certificate given by Mira-Bhayander Municipal Council and also Tahasildar, Thane (at page 81 of the paper book) produced by the assessee. It is true that population was not a criteria under the Notification after 25.7.91. We are, therefore, of the view that Mira village where the assessee's factories are located falls under the term "rural area" within the meaning assigned in Notification No. 88/88-CE and, hence, this point merits decision in favour of the assessee.
26. That takes us to the next point, viz. "Laundry Soaps" Laundry Soap is exempted under Notification Nos. 19/84, 12/94, 8/96 and 5/97 and w.e.f. 14-5-1997 in the Tariff itself under Sub Heading No. 3401.13.
Laundry Soap is exempted irrespective of the fact whether the manufacturing unit is in rural area or not. The soap being manufactured by the assessee is laundry soap meant for washing the clothes and commercially also it is known as Laundry Soap. The only condition under the notification is that "if produced by a factory owned by the Khadi & Village Industries Commission or any organization approved by the said Commissioner for the purpose of manufacture of such soaps." The fact that the assessee's organisation is approved by the KVIC is not at all disputed by the Department. This is only by way of alternative plea put forth by the ld. counsel for the assessee. The above arguments, we have to accept even if the question of rural area is decided against the assessee, because the condition relating to the rural area is not provided under these notifications. Except Notification No. 88/88, in all other Notifications, there is no bar for any person to claim exemption. Once it is held so, the question of claiming of duty does not arise. In view thereof, the penalty imposed on them does not arise.
We are, therefore, of the view that the question of limitation claimed by the assessee need not be answered by us.
27. We have not dealt with other arguments and cases mentioned in the note of learned counsel for Revenue as they are not relevant in our view. The assessee's appeals are therefore allowed and the department's appeal is dismissed. The cross-objection filed by the assessee stands disposed of.
28. I have perused the Order drafted by my learned brother. On the point limitation my views are as follows: 29. The Demand in this case is raised and confirmed on the ground that benefit of notification no. 88/88-C.E. dated 1.3.88 was not available to the Assessees and that the Assessees availed the benefit thereof by misrepresentation and suppression of facts.
30. The benefit of notification was available to assessees situated in "Rural Areas". In this notification the phrase has been specifically explained. The phrase 'Rural Areas" was interpreted as areas other than those areas which are included in any body established under any Municipal law in a State. This definition occurred in the notification from the period 1.3.88 to 25.7.91. This explanation was changed vide amending Notification No. 80/91 dated 25.7.91. The expression 'Rural Area' thus during the period 25.7.91 to 21.2.2000 (when the basic notification was yet again amended) read as follows: "(a) "rural area" means the area comprised in a village, and includes the areas comprised in any town, the population of which does not exceed then thousand or such other figures as the Central Government may specify from time to time." 31. The demands confirmed in the present proceedings related to the period 1.10.92 to 30.7.97 during which the above definition prevailed.
32. The learned Counsel for the Revenue spent very considerable time and energy in taking us through the constitutional provisions in defining the phrase 'Rural Area'. Although those explanations and arguments would have been very relevant when the interpretation of the 'Rural Area' was related to any Municipal law in a State, once the explanation was changed and explained the term demographically, his reliance on the constitutional law was unwarranted. That earlier definition was no longer in existence during the period involved in the present proceedings.
33. This phrase defining the 'Rural Area' during the material time was interpreted by the Board on the basis of which interpretation, various Commissionerates issued Trade Notices. Trade Notice No. 2/96 dated 3.1.96 (1996 (81) ELT T 47) issued by CCE, Cochin has been cited by the Assessees in this case.
34. Para 4 of the Trade notice says "hence the specified production units engaged in the manufacture of goods specified in the notification and located in areas comprised in a village which is recognised in revenue records as 'village' are eligible for exemption under notification 88/88-C.E. dated 1.3.88. The population of such recognized village cannot be taken into consideration for the purpose of granting the exemption under the said notification".
35. The Counsel for the assessee repeatedly referred to the Certificate given by the Revenue authorities referring to Mira as a Revenue Village. The said certificate was dated 26.11.77 and is signed by the Tahasildar of Thane.
36. In the Cochin Collectorate Trade Notice the eligibility of a village is defined as recognised in revenue records as village. The certificate of the Tahasildar shows that even if the geographical area of Mira was included in the Municipal Corporation of Bhayander, in the Revenue records it was shown as a village. In view of the trade notice therefore it qualified for the benefit of the Notification.
37. Very considerable case law has been cited by both sides on the interpretation of notification. It is been pleaded that in claiming the benefit of this notification the assessee has not made any deliberate misrepresentation but that they were in the genuine belief that they were eligible for the benefit of the notification. It was also claimed that the assessees are an association comprising of women who are barely literate and are in any event, not capable of interpreting the law.
38. The entire issue involved in this case evolves around the interpretation of the term 'village'. This phrase has been variously interpreted at different times in the very same notification and is capable of more different interpretation as was demonstrated by the two learned counsel appearing before us. Even at the end of a keenly fought legal battle, both sides maintained that their interpretation was correct.
39. In view of the complexity of the interpretation, in vie of the interpretation favourable to the assessees made in the cited trade notice and in view of the admitted lack of acumen with the body of the women i.e. the assessees unit, it cannot be held that the assessees knowing fully that the benefit of notification was not available to it, proceeded in a manner to claim the benefit thereof. Nor can the Revenue attempt to put their lack of knowledge into mala fides on parts of the Assessees. When the benefit of any notification is claimed it is the assessee to establish their case fully. Given the acumen of the assessees, the certificate of the Tahasildar was sufficient to sustain their claim. The fact that Mira was a part of a Municipal Corporation was not a secret from the Excise authorities. The Assessees took permission from the jurisdictional officer before taking the benefit of the notification. Rule 173B required approval to the be granted by the Assistant Commissioner after making due enquiry. His act of approval bears out against such investigation. In the case of Rainbow Ink & Varnish Mfg. Co. Ltd. v. CCE 1992 (59) ELT 593(T) the Tribunal held that after grant of such approval the consequences has to be borne by the revenue. The benefit of this judgment accrues to the assessees.
40. When both the Assessee and the Commissioner are unclear about a particular phrase of law the revenue cannot raise the bogie of suppression. This was brought out in the judgment in the case Ugar Sugar Works Ltd. v. CCE "4. In terms of Supreme Court decision in the case of Padmini Products, 1989 (43) ELT 195 (SC) where there was a scope for doubt regarding classification in view of Trade notices issued, the demand had to be restricted to past six months prior to the date of SCN. The present case also is squarely covered by the above decision, since in this case there was a Tariff Advice in favour of the classification claimed by the assessee which was subsequently changed, and the demand is restricted to six months prior to Show Cause Notice." 41. I therefore hold that the demand made under the proviso to Section 11A(2) does not sustain. I agree with the findings of my learned brother that the assessees appeals succeed and are allowed.