1. This appeal has been filed against the O1O No. 1/98-C-II dated 5-3-1998 passed by the Commissioner of Central Excise & Customs, Cochin.
2. In the impugned order, the Commissioner has held that the appellant's company, M/s. Malabar Soap Works, a sole proprietary concern is not eligible for exemption from payment of excise duty on the Laundry Soap manufactured in their factory situated in a rural area in terms of Notification No. 88/88-C.E. dated 1-3-1988 for the period from 1-4-1993 to 30-11-1995 and/or Notification 28/64-C.E. as amended by Notification 12/94-C.E. dated 1-3-1994. The decision of the Commissioner is strongly challenged by the appellant.
2. Shri M. Balagopal, the learned Advocate, appeared for the appellants and Shri R.K. Singla, the learned JCDR, for the Revenue.
(i) The requirements for exemption under Notification 88/88-C.E. dated 1-3-1988 have been fulfilled by the appellant as the factory is in a rural area and the same is an 'institution' recognized by the Khadi and Village Industries Commission/State Khadi and Village Industries Board.
(ii) The Commissioner has held that the unit is not recognized by the Khadi and Village Industries Board and it is not an 'institution' as it has no private character and the unit is run for private profit. This view has been held by the Commissioner in spite of the fact that the District Khadi and Village Industries Office has issued a Certificate dated 10-8-1995 to the effect that the appellant's unit is an 'institution' financed and recognized by the State Khadi and Village Industries Board for manufacture of laundry soap, using non-edible oil and thus exempted from sales tax, purchase tax and Central Excise duty. Further, the Secretary, Kerala Khadi and Village Industries Board, Trivandrum, has also issued a similar Certificate dated 19-1-1996. The Commissioner, instead of relying on the above Certificates, has relied on a letter from the Project Officer, Malapu-ram addressed to the Superintendent of Central Excise stating that Flash Soap Works, Tanur and Malabar Soap Works, Kolupalam of Tirur Taluk are two proprietary concerns financed by Kerala Khadi and Village Industries Board. These units are not recognized as registered institutions for the purpose of Kerala Khadi and Village Industries Board's assistance.
(iii) The letter issued by the Project Officer, Malapuram, makes contradictory statements. The first part of the letter confirms that the appellant's unit has been financed by the Kerala Khadi and Village Industries Board. The second part of the letter states that the unit is not recognized as registered institution for the purpose of Kerala Khadi and Village Industries Board's assistance. The question is how then the unit was financed by the Khadi and Village Industries as claimed in the first part of the letter. Obviously, this letter was issued at the request of the Superintendent of Central Excise.
(iv) The Project Officer, Malapuram, on an enquiry made by the Secretary, Kerala Khadi and Village Industries Board, informed as per his letter dated 30-12-97, that the second sentence in his letter "which is not recognized as a registered institution" means that it was not a charitable society or cooperative society for availing Board's assistance. It is also submitted that the Project Officer appeared before the Commissioner and his oral evidence was recorded to the above effect. The Commissioner refused to accept the clarification given by the Project Officer and the evidence on record and held that the unit was not a recognized one by the Kerala Khadi and Village Industries Board. This finding of the Hon'ble Commissioner is contrary to facts and evidence.
(v) The Commissioner has held that to call a unit as an Institution, it must have a public character; as no public purpose is served in running the factory, it cannot be an institution. It is submitted that the Notification does not state that only cooperative societies and charitable institutions would be considered as institutions. It only states that the institutions recognized by the Khadi and Village Industries Board is eligible for the exemption from duty.
The fact remains as per evidence that the State Khadi and Village Industries Board has recognized the appellant's unit as an institution for promotion of Khadi and Village Industries.
(vi) The Commissioner is not correct in his finding that no public purpose is served by the appellant's unit. The very fact that the unit is located in a rural area serves the public purpose as it promotes the industrial activity and employment opportunity for the rural people in recognition of which alone, the Government has granted exemption for the unit set up in rural area.
(vii) Another proprietary concern viz. Flash Soap Works mentioned in the Project Officer's letter dated 20-11-1995 has been granted the exemption as available under Notification 88/88-C.E. and 28/64-C.E. holding that it is an institution recognized by the Kerala Khadi and Village Industries Board. The facts are parallel to that of the appellant.
(viii) The Commissioner has held that the appellant is not entitled for exemption in terms of Notification 28/64 dated 1-3-1964 as the appellant is using 30 HP diesel engine for the production of soap.
The above-mentioned engine was used for mechanical stirrer and no electricity was produced as there was no alternator. If any power was produced, the appellant ought to have obtained licence from the Electricity Board. The Commissioner failed to consider whether power or steam was used for the purpose of heating. In order to heat the soap with the aid of power or steam, there should be a boiler.
(ix) The Inspector of Factories and Boilers Grade II, Malapuram had issued a Certificate dated 10-9-1997 stating that the appellant's company is not using steam/electric power for heating in the manufacturing process. He has further stated that he has not seen any type of boilers installed in the factory and he could also observe from the records that the unit has not erected boiler since 1994 and hence no certificate has been issued for using boiler under Indian Boilers Act, 1923. The Commissioner has failed to consider the above evidence. It is submitted that the exemption is deniable only in such cases where the heating process is undertaken by power.Collector of Central Excise v. Ojas Corporation important to note is that the activity attracting duty under this notification is when power is used for heating and not otherwise. In the present case, there is no evidence to show that in the manufacture of soap chips the aid of power for the purpose of heating is taken. Therefore, on a plain reading of the notification itself we are inclined to think that the attempt to visit the respondent with the demand for duty cannot be sustained.
(xi) An OIO, demanding duty from the appellant for a later period from 1-12-1995 to 15-4-1997, has been set aside by the Commissioner of Central Excise (Appeals), Cochin, vide O1A No. 207/2001-C.E. dated 16-5-2001 holding that the appellant did not use power for heating and he was eligible for the benefit of Notification No. 28/64-C.E. dated 1-3-1964.
4. The learned JCDR reiterated the findings in the impugned Order-in-Original.
5. We have gone through the records of the case carefully. The Commissioner has denied the benefit of exemption notification 88/88-C.E. dated 1-3-1988 on the ground that a proprietary concern is not an institution. He has also held that since the appellant-unit is engaged in commercial activity, it cannot be held that it is an institution. Further, he has relied on a letter issued by the Project Officer, Malapuram ignoring the Certificates issued by District Khadi and Village Industries Office, and the Secretary, Kerala Khadi and Village Industries Board. We find that no definition or interpretation has been given to the word 'Institution' in the said Notification or elsewhere. As per the Hon'ble Supreme Court's judgment reported in AIR 68 SC 922, where a word is not defined in the Act, the ordinary dictionary meaning of the word must be taken. The meaning of the word 'Institution' given in Oxford Dictionary is "An establishment organization, or association instituted for the promotion of some object especially one of public or general utility, religious, charitable, educational etc." The Chambers 20th Century dictionary gives its meaning as "A society or organization established for some object, especially cultural, charitable or beneficient etc." From the above, it follows that the meaning given to the word institution is very wide in scope. It is by no means easy to give a very precise definition to this word. Its meaning depends upon the context in which it is found. In Notification 88/88, the word used is "institutions" recognized by the Khadi and Village Industries Commission or of State Khadi and Village Industries Board and there is no mention in the Notification of any charitable purpose to such an institution.
Therefore, we feel that even if the institution is engaged in commercial activities, there is no reason why the benefit of Notification 88/88 cannot be extended to it. Further, the very purpose of exempting certain goods manufactured in rural areas is to promote rural upliftment by promoting village industries etc. In the instant case, it is not disputed that the unit is located in a rural area. KVI Board Secretary vide certificate dated 19-1-1996 has certified that the unit is financed and recognized by KVI Board. Commercial activity is part and parcel of any manufacturing activity and where there is manufacture and sale, profit or loss is bound to occur. In the absence of any stipulation in the exemption notification that the institution should a charitable one, even if the profit or loss occurring goes to the account of the manufacturer, it does not in any way disqualify the unit from enjoying the benefit of Notification 88/88. By establishing a soap manufacturing unit in a rural area, the manufacturer is serving a public cause. Therefore, we are of the view that M/s. Malabar Soap Works is rightly eligible for the concessions under Notification 88/88.
5.1 As regards the benefit of Notification 28/64 dated 1-3-1964, in the appellant's own case for a later period, the Commissioner (Appeals) has given a clear finding that there is no evidence that the appellant used power or steam for heating in the process of manufacture of soap in the light of the decision of the Supreme Court in the case of Ojas Corporation (supra). The appellant is rightly entitled for the benefit of the Notification. Therefore, the finding of the Commissioner in this respect is not sustainable. In view of the above findings, the impugned order has no merits. Therefore, we allow the appeal with consequential relief by setting aside the impugned order.