1. These appeals relate to common issues. The same were, therefore, heard together and are being disposed of by this common order.
2. The appellants are manufacturers of cellulosic spun yarn/non-cellulosic spun yarn in their factories. They cleared the goods on payment of Central Excise Duty. Special Excise Duty and Additional Duty of Excise under Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. The yarn manufactured by them was captively consumed in the same factory in the manufacture of fabrics.
In the civil writ petition No. 664 of 1979 filed by M/s. J.K. Cotton Spinning and Weaving Mills Co. Ltd. -1981 (8) ELT 887 (Del.). Delhi High Court decided on 16-10-1980 that no duty was payable on the yarn produced by the assessee in its spinning and weaving mill and which was utilised for the purpose of weaving the fabrics manufactured by it. In paragraph 6 of the judgment, the Honourable High Court observed that if there was one single process of manufacture then the mere fact that at some stage during that process an excisable commodity emerged, would not make it liable to excise duty, unless it was removed for the purpose of consumption or sale. It was also observed that in that context, consumption refers to the utilisation of the commodity for a different purpose and not the mere conversion of the same commodity into another product. In paragraph 6 of the judgment the discussions of the Honourable High Court were as follows : "6. We are of opinion that the contention of the learned counsel for the petitioners is well founded and directly covered by a number of earlier decisions of this court. As mentioned earlier, the contention of the petitioners is based on the decision in the case of The Delhi Cloth & General Mills Co. Ltd. 1978 (2) ELT J 121 which has been earlier referred to. This case has been followed and the relevant principles discussed and illustrated in the judgment of this court in Caltex Oil Refining (India) Limited v. Union of India 1979 (4) ELT J 581, to which one of us was a party. The same principle has also been enunciated by this court in the case of Modi Carpets Limited and Anr. v. Union of India 1980 (6) ELT 320 Delhi This Bench has also had an occasion to consider the same questions in the cases of The Collector of Central Excise v. J.K. Synthetics Ltd. LPA 21/77 : 1981 (8) ELT 5 and Devi Dayal Electronics & Wires Ltd. and Anr. v. Union of India CW 219/78. In view of these decisions we do not consider it necessary to discuss the matter elaborately once again. It has been pointed out in these decisions that under Section 3 of the Act the levy and collection of excise duty has to be in the manner prescribed under the Act. The section therefore, has to be read along with the relevant Rules which are Rules 9, 47 and 49. Such a joint reading of the Act and the Rules makes it clear that if an excisable commodity is manufactured by one process and it is thereafter either marketed or removed for the purpose of manufacturing another commodity by a different process then excise duty will be leviable on the first commodity when it is removed from the first stage of manufacture to the second. On the other hand, if there is one single process of manufacture then the mere fact that at some stage during that process an excisable commodity emerges will not make it liable to excise duty unless it is removed for the purpose of consumption or sale. In this context consumption refers to the utilisation of the commodity for a different purpose and not the mere conversion of the same commodity into another product. Thus, for example, in the Caltex case it was held that the furnace oil which was produced at an intermediate stage in the manufacture of various petroleum products would be excisable when it was used as a fuel and consumed as such at a later stage in the process of manufacture. But when the said oil continues in the pipeline and is utilised in the production of the final petroleum products it will not be liable to duty. Similarly in the case of Modi Carpets it was held that the slivers which were utilised for the manufacture of carpets would not be excisable as there was no removal from the place of manufacture within the meaning of Rules 9 & 49. To a similar effect is the position in the other writ petition and LPA referred to earlier. In the light of these decisions we are of opinion that in the present case the assessee's contention is well founded. The assessee is running a composite textile mill in which it is licensed to manufacture and produce man-made fabrics. There is only one process for which the assessee has been licensed and the entire factory is the place of manufacture the removal from which will attract excise duty. But there is no such removal within the meaning of the rule at all. The yarn produced by the petitioner company is passed on to the warp beams wherefrom are made to attribute several processes before the final fabric emerges. This, in our opinion, is a case where there is a single end-product, and the various processes are all towards the emergence of that end-product. No doubt if the yarn that is wound upon the cones is removed by the assessee for the purpose of sale or for the purpose of consumption otherwise the goods so removed would attract duty and that is not denied by the petitioner itself. But so long as the cone are not removed from the pipeline and they continue to wound on the cones, transferred to the warp beams and thereafter sent in for the process of weaving, it is difficult to see how there can be said to be a removal of the goods within the meaning of the Act and the Rules. We are, therefore, of opinion that the yarn produced by the assessee in its spinning and weaving mill and which is utilised for the purpose of weaving the fabric manufactured by the petitioner company." 3. After the judgment of Delhi High Court (Supra) was delivered, the appellants filed the following refund applications claiming refund of Central Excise Duty as indicated against each claim. Although some of the refund claims were filed within the statutory time limit of six months, some of the claims were partly beyond the period of six months and hence, those were partly barred by limitation. The extent of the claims barred by limitation has been indicated against the relevant claim. All the refund claims were rejected by the Assistant Collector of Central Excise, vide his order in original number and date as indicated against each claim:-----------------------------------------------------------------------------------------------Sl.
Appeal Appellants and description of Date of Period ofclaimNo.No. goods filing refund-----------------------------------------------------------------------------------------------(1) (2) (3) (4) (5)-----------------------------------------------------------------------------------------------1.
E/645/84- Shree Madhusudan Mills cel- 8-6-81 1-1-81 -19-05-812.
E/646/84- -do- 25-6-81 20-5-81 - 04-06-813.
E/647/84- Cellulosic spun yarn non- 05-8-81 April 74- 19-05-814.
E/648/84- Cellulosic spun yarn 08-6-81 01-01-78- 31-12-805.
E/549/84- M/s. Finlay Mills 23-12-80 20-06-80- 30-06-80 D non-cellulosic yarn 03-07-80- 13-08-806.
E/667/84- Podar Mills Ltd. non-cellulosic 06-01-81 01-01-78- 31-12-807.
E/678/84- non-cellulosic spun yarn 06-01-81 01-01-78- 31-12-808.
E/679/84- M/s. Podar Mills Ltd. 06-01-81 01-01-78- 31-12-809.
E/680/84- M/s. Podar Mills Ltd. 06-01-81 01-01-78- 31-12-8010.
E/1920/84- M/s. Gold Mohar Mills 28-01-81 17-10-80- 31-12-8011.
E/2281/84- -do- 24-04-81 16-10-80- 31-12-8012.
E/2282/84- -do- 28-04-81 03-11-80- 31-11-8013.
E/2283/84- -do- 06-05-81 01-01-81- 30-04-8014.
E/2284/84- -do- 07-08-81 01-12-80- 30-05-81-----------------------------------------------------------------------------------------------Amount Period time-barred AC's Order No. & Date----------------------------------------------------------------------------------------------(6) (7) (8)-----------------------------------------------------------------------------------------------1,25,542.41 Nil V(18 III)/18-l/87/6149 dt. 01-07-8213,367.66 Nil V(18 III)/18-4/87/6147 dt. 01-07-8272,12,496.32 April 74 to 4-2-81 V(18 E)/18-4/87/6133 dt. 01-07-8235,13,419.00 01-01-78 to 08-12-80 V(18 III)/18-2/87/6145 dt. 01-07-822,56,973.76 Nil V(18 E)/18-4/81/447 dt. 27-01-821,22,756.88 16-10-80 to 23-10-80 - do -3,54,019.92 Nil - do -2,02,204.60 Nil - do -1,06,265.00 Nil - do -2,83,540.80 01-01-78 to 05-07-80 V(18 E) 18-4/81/295 dt. 15-05-8138,97,746.42 01-01-78 to 05-07-80 V(18 A) 18-2/81/371 dt. 16-05-811,32,406.74 01-01-78 to 05-07-80 V(18 A) 18-1/81/273 dt. 16-05-817,52,584.80 01-01-78 to 05-07-80 V(18) 1/81/647 dt. 23-05-8137,255.56 - V(18E) 18-15/81/417 dt. 23-01-821,18,307.70 16-10-80 to 23-10-80 - do -93,719.35 - - do -1,97,238.84 - - do -24,30,988.89 01-12-80 to 06-02-81 - do ------------------------------------------------------------------------------------------------ 4. The refund claims were rejected by the Assistant Collector of Central Excise for the following reasons: (a) The appellants' units were composite mills. All the operations involved, right from spinning to manufacture of fabrics were carried out in different departments.
The manufacturing process of yarn was completed at spindle point in the spinning department. The process was not continuous inasmuch as cotton was not fed at one end and the fabrics obtained at the other end. Thus, there was physical clearance of yarn manufactured in the spinning department to weaving department for fabrication. (b) Duty on the spun yarn was paid under the Central Excise Tariff, since it was covered by the Tariff entry in the First Schedule to the Central Excises and Salt Act, 1944. Rules 9 and 49 of Central Excise Rules, 1944 stipulate time and manner of payment of duty on goods manufactured and that duty is chargeable only on removal of goods from the factory premises or a particular place of storage, respectively. (c) As per amendment to Rules 9 and 49, vide Notification No. 20/82-C.E., dated 20-2-82, goods consumed/utilised within the factory of production are deemed to have been removed in these terms of these rules. (d) The aforesaid amendments to Rules 9 and 49 of Central Excise Rules shall be deemed to have always had effect on and from the date on which the Central Excise Rules, 1944 came into force. (e) Therefore, duty at appropriate rate was payable on the yarn manufactured and utilised for fabrication under Rules 9 and 49, ibid.
Some of the claims were, inter alia, rejected as time-barred where the claims were beyond the period of six months prior to the demand show-cause notice.
5. The orders of the Assistant Collector of Central Excise were upheld by the Collector of Central Excise (Appeals) in the impugned orders.
While holding that duty was payable by the appellants on the yarn in question, the Collector (Appeals) relied on an earlier order-in-appeal No. A-796-856/BI-178-238/83 issued under file No. V (18) (1680/82). In paragraph 3 of the aforesaid earlier order No. A-796-856/BI-178-238/83, the Collector (Appeals) observed as follows : "3. I have carefully considered the various submissions made by the appellants. An intermediate product which by itself is an excisable article is liable to excise duty even though it is not removed from the factory [See 1978 (2) ELT J-618 and 1979 (4) ELT J. 581 (Del.)].
Similar view was held by the Allahabad High Court in the case of Central Distillery & Chemical Works v. Inspector of Central Excise.
There is no doubt that the Central Excise Tariff (First Schedule) has specific tariff entries for the various yarns which are commercially identifiable commodities. In the circumstances, I hold that the duty was correctly paid on the yarns even if used captively for the manufacture of fabrics. Doubts, if any, have further been removed by the amendments of Rules 9 and 49, ibid, with retrospective effect vide Notification No. GSR-74(E) dated 20-2-1982 read with Section 51 of the Finance Act, 1982. These amendments make it clear beyond doubt that duty is leviable on the goods consumed or utilised within the factory of production itself. Further the validity of the amendments with retrospective effect has been upheld by the Delhi High Court in the case of J.K. Cotton Spinning & Weaving Mills - 1983 (12) ELT 239 (Del.). While upholding the validity, Court has concluded that duty is leviable even on an intermediate product or 'in process product' though the same is utilised in the Composite Mill for the manufacture of an end-product! The Court further observed that indeed, in one way of looking at it, there will always be physical removal, either bodily or mechanically, when goods go out of the pipeline for being utilised to be converted into another type of goods. There is, thus, no room for any doubt that now even the goods obtained at an intermediate stage in a continous or integrated process, if used for manufacture of goods, have to pay duty. This position is now unassailable." The Collector (Appeals) also observed that Rules 9 and 49 of the Central Excise Rules, were amended retrospectively by Section 51 of the Finance Act, 1982 and an explanation was added below each of these two rules, by virtue of which captive consumption of excisable goods amounts to removal for the purposes of these rules. Section 51(2) of the Finance Act, ibid, laid down that "any action or thing taken or done purporting to have been taken or done before the 20th February, 1982 under the Central Excises Act and the Central Excise Rules, 1944, shall be deemed to be, and to have always been for all purposes, as validly and effectively taken or done, as if the amendments referred to in Sub-section (1) had been in force at all material times... As regards limitation of the refund claims, the Collector (Appeals) held that the general law of limitation was not applicable in the case of refunds under Central Excise Laws and hence, the time limit of six months was applicable. He, therefore, upheld the Assistant Collector's order on limitation as well.
6. A miscellaneous application No. E/Misc./628/89-D was filed by Shri Gopal Prasad in these appeals on 23-6-1988, by which the following additional grounds were sought to be incorporated in the grounds of appeals :- "(i) In any event and without prejudice to the aforesaid, it is submitted that Section 51(1) of the Finance Act, 1982 is an independent provision. It has not become part of the Central Excise Act. For the Levy and Collection of Special Excise Duty and Additional Excise Duty leviable under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, only the provisions of Central Excises & Salt Act, 1944 and Rules made thereunder are applicable. The provisions of Section 51 of Finance Act, 1982, being an independent provision, is not therefore, available for Levy and Collection of AED, (TTA) and SED. Hence, Levy and Collection of AED and SED have to be decided independent of Section 51 of Finance Act and in the light of judgment of Delhi High Court in J.K. Cotton Spinning and Weaving Mills Co., Ltd. [1982 (10) ELT 887] for the period prior to 20-2-1982.
Section 3(3) of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 makes provision that Central Excises and Salt Act, 1944 and Rules made thereunder will apply in relation to the Levy and Collections of duties of excise leviable under that Act Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 but not under the Finance Act, 1982 which has become part of the Central Excises and Salt Act, 1944.
(ii) In any event and without prejudice to the aforesaid it is submitted that while Section 51(2) of the Finance Act, 1982 validates the collection of duties under the Central Excise Act before the 20th day of February, 1982 it does not validate the collection of duties like that leviable under Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 levy of SED is the relevant Finance Act. Similarly levy of AED is under Additional Duty of Excise (Textiles and Textile Articles) Act, 1978. Such levy is different from Excise Duty levied under Central Excise Act [see Modi Rubber Ltd. v. Union of India 1986 (25) ELT 849]. Unless the Act made provision for retrospective collection of duties leviable under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 and other similar Central Acts, it cannot be said that collection of duties under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 or of Special Excise Duty under another Central Act was collection under the Central Excises and Salt Act, 1944. It seems that the legislature has failed to make suitable provision for retrospective collection of duties leviable under Acts other than Central Excises and Salt Act. See AIR 1960 SC 1022. Accordingly as per the Hon'ble Delhi High Courts judgment the collection of the aforesaid duties on captive consumption of the yarn was not valid. Such unauthorised collection was liable to be refunded." Arguments of the learned Advocate and the learned Departmental Representative on this Miscellaneous application and the appeals were heard by this bench on 30-1-1990. After their arguments were over, it came to the notice of the Bench that except in the case of Finlay Mills (Appeal No. E/549/84-D), in which the claim was lodged for basic excise duty, Special Excise Duty and Additional Excise Duty, in all other appeals, the claims appeared to be in respect of "excise duty". The orders of the lower authorities in other appeals did not mention anything about Special Excise Duty and Additional Duty of Excise. When this was pointed out by the Bench to the learned Advocate, Shri Sridharan, he stated that the refund claims related to Basic Excise Duty, Special Excise Duty and Additional Duty of Excise under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978.
He was, however, not able to show any material to this effect in the papers filed before the Bench. Smt. Zutshi, learned Departmental Representative also could not throw any light in the matter. In these circumstances, the learned Advocate wanted time to file necessary papers. The matter was then adjourned and listed for mention on 5-7-1990, as both sides wanted two months' time each, for obtaining the information and verifying the facts, respectively. These matters ultimately came up for hearing on 14-9-1990 before the same Bench. In the meantime, on 13th August, 1990, Shri Gopal Prasad, Counsel for the appellants filed an application enclosing therewith certain statements showing the break-up of the refund amounts into Basic, Special and Additional Duties of Excise. It was stated by the learned Advocate Shri Sridharan that the totals of these break-up tallied with the amounts claimed by the appellants in various refund applications. This shows that the appellants claimed refund not only of Basic Excise Duty, but also of Special and Additional Duties of Excise. This argument was not disputed by the learned Departmental Representative Smt. Zutshi. She also did not dispute the figures and the break up given in the statements. On 14-9-1990, Shri Sridharan and also Smt. Zutshi did not advance any further fresh arguments, but they adopted the arguments advanced by them before the Bench on 30-1-1990. In view of this, orders were reserved on all these appeals.
7. The grounds sought to be raised by the Miscellaneous Application are legal grounds. We, therefore, allow the application. Consequently, the arguments of both sides which were mainly with reference to the legal points, have to be considered and decision taken on the issues raised.
8. The gist of the arguments of the learned Advocate for the appellants is that the amendments of Rules 9 and 49 of the Central Excise Rules, by Notification of 1982 will not affect Special Excise Duty and the Additional Excise Duty in these cases. Special Excise duty is imposed by the relevant provisions of the Finance Act from year to year. The Additional Excise Duty in these cases was levied under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. These two Acts are different from the Central Excise Act and the rules made thereunder. Rules 9 and 49 of Central Excise Rules relate to basic excise duty leviable under Section 3 of the Central Excises and Salt Act. He also argued that the amendments made to Rules 9 and 49, ibid, were given retrospective effect by Section 51 of the Finance Act, 1982, which is not a part of the Central Excises and Salt Act and the Central Excise Rules, 1944. Therefore, according to him, the amendment of these Rules with retrospective effect should not apply to Special Excise Duty and the Additional Excise Duty in these cases. In support of these arguments, the learned Advocate drew our attention to Rules 9 and 49 of the Central Excise Rules, Notification No. 20/82-C.E., dated 20-2-1982, and Section 51 of the Finance Act, 1982 and he also relied on the following judgments :(SC)- Associated Cement Co. Ltd. v. Director of Inspection, Customs and Central Excise, New DelhiUnion of India and Ors. v. Modi Rubber Ltd. and Ors.
(iii) 1976 (37) STC 382 at 387 - The Khardah Co. Ltd. v. Commercial Tax Officer, Esplanade Charge, Calcutta and Ors.
(iv) 1982 (9) ELT B-53, B-54 - The Central Excise Laws (Amendment and Validation) Act, 1982 (v) 1980 (5) ELT - B-3 -The Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980Commissioner of Income Tax, Bombay v. Khatau Makanji Spinning & Weaving Co. Ltd., Bombay.
8A. For the Revenue, Smt. Zutshi argued that Article 365 of the Constitution read with Entries 83 and 84 of List 1 of the 7th Schedule to the Constitution, refers to "duties" and not "duly". The preamble of the Central Excises and Salt Act also says "duties of Excise". Section 3 of the Act, which is the charging section for Central Excise Duty, also says "duties of Excise". The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 also refers "Additional Duties of Excise". Therefore, she has argued, the Central Excise Duty referred to in Rules 9 and 49 and Section 51 of the Finance Act, 1982 covers Basic Excise Duty, Special Excise Duty and the Additional Excise Duty.
Referring to Sub-section (3) of Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, she has argued that this sub-section incorporates the Central Excises and Salt Act and Central Excise Rules, 1944 in this Additional Duties of Excise Act, 1978. In support of this argument, she referred to Page 16 of the Principles of Statutory Interpretation by Justice G.P. Singh, 4th Edition, which deals with incorporation of an earlier Act, into a later Act by reference. She has, therefore, contended that the retrospective amendment of Rules 9 and 49 of Central Excise Rules, by Section 51 of the Finance Act, should cover Special Excise Duty and the Additional Duty of Excise also. In support of her argument, she has relied on Tribunal's decision reported in (i) 1989 (23) ECR Page 385 - Paras 33,127,129 and 130 (ii) 1987 (28) ELT 126 (Tribunal), 1987 (11) ECR 632 (Tribunal) (iii) 1987 (11) ECR 228 (Madras) and (iv) 1987 (32) ELT 234 (SC), Headnote 2.
9. Section 3 of the Central Excises and Salt Act provides for levy and collection of duties of Excise on all excisable goods other than salt, which are produced or manufactured in India at the rates set forth in the Schedule to the Central Excises and Salt Act, 1944 (at present Schedule to the Central Excise Tariff Act, 1985). Rule 9 provides for the time and manner of payment of duty. Rule 49 lays down that Central Excise duty is chargeable only on removal of goods from the factory premises or from a particular place of storage. These two rules, as they existed prior to their amendment by Notification No. 20/82-C.E., dated 20-2-1982 read as follows : "9. TIME AND MANNER OF PAYMENT OF DUTY. - (1) No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appertenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export or manufacture of any other commodity in or outside such place, until the excise duty leviable (hercon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form: Provided that such goods may be deposited without payment of duty in a store-room or other place of storage approved by the Collector under Rule 27 or Rule 47 or in a warehouse appointed or licensed under Rule 140 or may be exported under bond as provided in Rule 13 : Provided further that such goods may be (removed without payment or on part-payment of duty leviable thereon if the Central Government, by notification in the Official Gazette, allow the goods to be so removed under Rule 49 :) (Provided also) that the Collector may, if he thinks fit instead of requiring payment of duty in respect of each separate consignment of goods removed from the place or premises specified in this behalf, or from a store-room or warehouse duly approved, appointed or payable thereon and such account shall be settled at interval, not exceeding one month and the account-holder shall periodically make deposit therein sufficient in the opinion of the Collector to cover the duty due on the goods intended to be removed from the place of production, curing, manufacture or storage.
[(1A) Where a person keeping an account-current under the third proviso to sub-rule (1) makes an application to the Collector for withdrawing an amount from such account-current, the Collector may, for reasons to be recorded in writing, permit such person to withdraw the amount in accordance with such procedure as the Collector may specify in this behalf.] (2) If any excisable goods are, in contravention of sub-rule (i) deposited in or removed from any place specified therein, the producer or manufacturer thereof, shall pay the duty leviable on such goods upon written demand made (within the period specified in Section 11A of the Act, by the proper officer, whether such demand is delivered personally to him, or is left at his dwelling house, and shall also be liable to a penalty which may extend to two thousand rupees, and such goods shall be liable to confiscation.)" "49. DUTY CHARGEABLE ONLY ON REMOVAL OF THE GOODS FROM THE FACTORY PREMISES OR FROM AN APPROVED PLACE OF STORAGE. - (1) Payment of duty shall not be required in respect of excisable goods made in a factory until they are about to issue out of the place on premises specified under Rule 9 or are about to be removed from a store-room or other place of storage approved by the Collector under Rule 47: Provided that the manufacturer shall on demand pay the duty leviable on any goods which are not accounted for in the manner specifically provided in these rules, or which are not shown to the satisfaction of the proper officer to have been lost or destroyed by natural causes or by unavoidable accident during handling or storage in such store-room or other approved premises : Provided further that the proper officer may not demand duty due on any goods claimed by the manufacturer as unfit for consumption or for marketing subject to such conditions as may be imposed by the Collector by order in writing.
(2) Notwithstanding anything contained in sub-rule (1), excisable goods made in a factory to which provisions of Chapter VII of these rules have been extended by the Central Government by notification in the Official Gazette, may be removed from the factory in which they are made to any warehouse licensed under Rule 140 for the storage of such goods and situated outside the licensed premises of the factory and subject to such exemptions, limitations and conditions as may from time to time be specified in this behalf by the Central Government.
[(3) Notwithstanding anything contained in sub-rule (1), the Central Government may, under circumstances of exceptional nature, allow, by notification in the Official Gazette, any excisable goods to be removed from the factory in which they are produced (without payment of or only on part payment of duty) leviable thereon subject to such conditions and limitations (including payment of interest on the balance amount of duty) as may, from time to time be specified by the Central Government. The manufacturer of such excisable goods shall execute a bond in the proper Form with (such surety or security) as the Collector may approve.] 10. Rules 9 and 49 were amended by Notification No. 20/82-C, dated 20-2-1982. The text of this Notification is as follows : - In exercise of the powers conferred by section 37 of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government hereby makes the following rules further to amend the Central Excise Rules, 1944, namely: - 1. (1) These rules may be called Central Excise (4th Amendment) Rules, 1982.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In Rule 9 of the Central Excise Rules, 1944 (hereinafter referred to as the said rules), the following Explanation shall be inserted at the end, namely :- "Explanation. - For the purposes of this rule, excisable goods produced, cured or manufactured in any place and consumed or utilised - (i) as such or after subjection to any process or processess; or (ii) for the manufacture of any other commodity, whether in a continuous process or otherwise, in such place or any premises appurtenant thereto, specified by the Collector under sub-rule (1), shall be deemed to have been removed from such place or premises immediately before such consumption or utilisation." 3. In Rule 49 of the said rules, the following Explanation shall be inserted at the end namely: - "Explanation. - For the purposes of this rule, excisable goods made in a factory and consumed or utilised - whether in a continuous process or otherwise, in such factory or place or premises specified under Rule 9 or store-room or other place of storage approved by the Collector under Rule 47, shall be deemed to have been issued out of, or removed from such factory, place, premises, store-room or other place of storage as the case may be, immediately before such consumption or utilisation." Note:- This notification adds an Explanation to Rules 9 and 49 so as to clarify that goods consumed or utilised within the factory of production shall be deemed to have been removed in terms of these rules." The effect of these amendments is that explanation was incorporated below Rules 9 and 49, by virtue of which excisable goods produced, cured or manufactured in any place and consumed or utilised for the manufacture of any other commodity, whether in a continous process or otherwise, should be deemed to have been removed from such place or premises immediately before such consumption or utilisation. This amendment was given retrospective effect by Section 51 of the Finance Act, 1982. The provisions of this Section are reproduced below: 51. RETROSPECTIVE EFFECT FOR CERTAIN AMENDMENTS TO CENTRAL EXCISE RULES AND VALIDATION. - (1) The amendments made in Rules 9 and 49 of the Central Excise Rules, 1944, by the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. GSR 74(E) dated the 20th day of February, 1982, shall be deemed to have, and to have always had, effect on and from the date on which the Central Excise Rules, 1944 came into force.
(2) Any action or thing taken or done or purporting to have been taken or done before the 20th day of February, 1982 under the Central Excise Act and the Central Excise Rules, 1944 shall be deemed to be, and to have always been, for all purposes, as validly and effectively taken or done as if the amendments referred to in Sub-section (1) had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any Court, Tribunal or other Authority, - (a) all duties of excise levied, assessed or collected or purporting to have been levied, assessed or collected before the 20th day of February, 1982 on any excisable goods under the Central Excise Act, shall be deemed to be, and shall be deemed to have always been, as validly levied, assessed or collected as if the amendments referred to in the Sub-section (1) had been in force at all material times; (b) no suit or other proceeding shall be maintained or continued in any court for the refund of, and no enforcement shall be made by any court of any decree or order directing the refund of, any such duties of excise which have been collected and which would have been validly collected if the amendments referred to in Sub-section (1) had been in force at all material times; (c) refund shall be made of all such duties of excise which have been collected but which would not have been so collected if the amendments referred to in Sub-section (1) had been in force at all material times; (d) recovery shall be made of all such duties of excise which have not been collected or, as the case may be, which have been refunded but which would have been collected or, as the case may be, would not have been refunded, if the amendments referred to in Sub-section (1) had been in force at all material times.
Explanation. - For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force." The effect of this amendment with retrospective effect is that the explanation incorporated below Rules 9 and 49 was effective from the date on which the Central Excise Rules, 1944 came into force. In other words, to say in simple language, excisable goods consumed or utilised captively for the manufacture of excisable goods in the same place or factory or any premises appurtenant thereto was liable to pay Central Excise Duty, as such consumption or utilisation should be deemed to be removal from such place or premises immediately before such consumption or utilisation. The validity of amendments of Rules 9 and 49, ibid, vide Notification No. 20/82-C.E. with retrospective effect in terms of Section 51 of the Finance Act, 1952, was upheld by the Honourable Supreme Court in the case of J.K. Spinning & Weaving Mills Co. Ltd. and Anr. v. Union of India and Ors., reported in 1987 (32) ELT 234 (SC). The controversy regarding levy and collection of duty on excisable goods for captive consumption has been set at right by this judgment of the Supreme Court and this has been made effective since the inception of the Central Excise Rules, 1944. The learned Advocate for the appellants has also not disputed the fact that basic Central Excise Duty was payable for captive consumption. His dispute is about levy of Special Excise Duty and the Additional Excise Duty in these cases.
11. The period for which the refund of Basic Excise Duty, Special Excise Duty and Additional Duty of Excise has been claimed, dates back from 1-1-1978 and the period extends upto June, 1981. However, the period vary from case to case. Special Excise Duty is levied at a percentage of the Basic Excise Duty, from time to time by the provisions of the respective Finance Act. In this context, we refer to Section 50 of the Finance Act, 1982, which relates to levy of Special Duties of Excise during the Financial year 1982-83. The text of this Section is as follows : "50. SPECIAL DUTIES OF EXCISE. - (1) In the case of goods chargeable with a duty of excise under the Central Excises Act, as amended from time to time, read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable, there shall be levied and collected a special duty of excise equal to ten per cent of the amount so chargeable on such goods.
(2) Sub-section (1) shall cease to have effect after the 31st day of March, 1983, except as respects things done or omitted to be done before such cesser; and Section 6 of the General Clauses Act, 1897 (10 of 1897), shall apply upon such cesser as if the said sub-section had then been repealed by a Central Act.
(3) The special duties of excise referred to in Sub-section (1) shall be in addition to any duties of excise chargeable on such goods under the Central Excises Act or any other law for the time being in force.
(4) The provisions of the Central Excises Act and the rules made thereunder, including those relating to refunds and exemptions from duties, shall, as far as may be, apply in relation to the levy and collection of the special duties of excise leviable under this section in respect of any goods as they apply in relation to the levy and collection of the duties of excise on such goods under that Act or those rules, as the case may be." As can be seen from Sub-section (1) of this Section, this Special Excise Duty was levied at the rate of 10% of the amount of duty of Excise under the Central Excises and Salt Act read with any notification for the time being in force. Sub-section (2) of this Section provided that this levy shall be effective upto 31-3-1983.
Sub-section (4) of this Section 50 read with the provisions of the Central Excises Salt Act and the Central Excises Rules, 1944 shall apply in relation to levy and collection of this Special Excise Duty leviable under this Section in respect of any goods as they apply in relation to the levy and collection of duties of Excise on such goods under Central Excise Act or Central Excise Rules, as the case may be.
12. Additional Duties in these cases under appeals are leviable under Additional Duties of Excise (Textiles and Textile Articles) Act, 1978.
This Act was made effective from 4th October, 1978. Sub-section (1) of Section 3 of this Act provides that when goods of the description mentioned in the Schedule to this Act are chargeable with a duty of Excise under the Central Excises and Salt Act, 1944, read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable, or assessed to duty, there shall be levied and collected a duty of Excise equal to 15% of the total amount so chargeable on such goods. The yarn in dispute in the present cases was included in the Schedule to this Act.
"(2) The duties of Excise referred to in Sub-section (1) in respect of the goods specified in this Schedule shall be in addition to the duties of excise chargeable on such goods under the Central Excises and Salt Act, 1944 (1 of 1944), or any other law for the time being in force and shall be levied for the purpose of Union and the proceeds thereof shall be distributed among the States." "(3) The provisions of the Central Excises and Salt Act, 1944 (1 of 1944), and the rules made thereunder including those relating to refunds and exemptions from duties, shall, so far as may be, apply in relation to levy and collection of the duties of Excise leviable under this Section in respect of any goods as they apply in relation to the levy and collection of the Duties of Excise on such goods under that Act or those rules." Section 50(4) of the Finance Act in the case of Special Duties of Excise, as well as Section 3(3) of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, incorporated by reference the provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder in those sections for the purpose of levy and collection of Special Excise Duty and Additional Excise Duty. The effect of incorporation of an earlier Act, into a later one by reference has been very lucidly discussed by Justice G.P. Singh, Chief Justice of Madhya Pradesh High Court, as he then was, in his book "Principles of Statutory Interpretation", 3rd edition at pages 219 - 221 of the said book.
The relevant portions from those pages are incorporated below: When an earlier Act or certain of its provisions are incorporated by reference into a later Act, the provisions so incorporated become part and parcel of the later Act as if they had been "bodily transposed into it" [Ramsarup v. Munshi, AIR 1963 SC 553, p. 558].
The effect of incorporation is admirably stated by LORD ESHER, MR: "If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act as if they had been actually written in it with the pen, or printed in it." [Re: Wood's Estate ex parte, Works and Buildings Commrs. (1886) 31 Ch D 607, p. 615; Ram Kripal Bhagat v. State of Bihar, AIR 1970 SC 951, p. 957; Bolani Ores Ltd. v. State of Orissa, AIR 1975 SC 17, p. 29; Mahindra and Mahindra Ltd. v. Union of India, AIR 1979 SC 798, pp.
810, 811]. The result is to constitute the later act along with the incorporated provisions of the earlier Act, an independent legislation which is not modified or repealed by a modification or repeal of the earlier Act. [Narottatndas v. State of M.P., AIR 1964 SC 1667, p. 1670; Bolani Ores Ltd. v. State of Orissa, supra, Mahindra and Mahindra Ltd. v. Union of India, (supra)]. As observed by BRETT, J : "where a statute is incorporated, by reference, into a second statute, the repeal of the first statute by a third does not affect the second. [Clarke v. Bradlaugh, (1881) 8 QBD 63, p. 69; referred to in Ramsarup v. Munshi, AIR 1963 SC 553 p. 558; Collector of Customs, Madras v. Nathelal Sampathu Chetty, AIRJethanand Betab v. State of Delhi, AIR 1960 SC 89 pp. 91, 92; Mahindra and Mahindra Ltd. v. Union of India (supra)]. To the same effect is the statement by SIR GEORGE LOWNDES: "It seems to be no less logical to hold that where certain provisions from an existing Act have been incorporated into subsequent Act, can be deemed to be incorporated in it, at all events if it is possible for the subsequent Act to function, effectually without the addition," [Secretary of State v. Hindustan Co-operative Insurance Society Ltd., AIR 1931 PC 149, p.Chairman of the Municipal Commrs. of Howrah v. Shalimar Wood Products (Private) Ltd., AIR 1962 SC 1691, p. 1694; Mahindra and Mahindra Ltd. v. Union of India, AIR 1979, SC 798, pp. 810, 811]. Ordinarily if an Act is incorporated in a later Act, the intention is to incorporate the earlier Act, with all the amendments made in it upto the date of incorporation. [State of Maharashtra v. Madhavarao Damodar Patil, AIR 1968 SC 1395 p. 1400.] The rule that the repeal or amendment of the Act which is incorporated by reference in a later Act is not applicable for purposes of the later Act is subject to qualifications and exceptions. [See text and footnotes 28 to 36 at pp. 225 to 228].
13. A similar point came up for consideration before the Honourable Supreme Court in the case of Ujagar Prints etc. etc. v. Union of India and Ors., reported in 1988 (38) ELT 535 (SC). In the said case, the Honourable Supreme Court examined the effect of Section 3(3) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957.
Sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 reads as follows: "(3) The provisions of the Central Excises and Salt Act, 1944 (1 of 1944) and the Rules made thereunder, including those relating to refunds and exemptions from duty, shall, so far as may be, apply in relation to the levy and collection of the Additional Duties as they apply in relation to the levy and collection of the duty of Excise on the goods specified in Sub-section (1)".
This provision is similar to the provision of Section 3(3) of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 and Section 50(4) of the Finance Act, 1982 relating to Special Excise Duty. After examining the scope of Section 3(3) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Honourable Supreme Court held that Section 3(3) ibid, had the effect not only of attracting the procedural provisions of the Central Excises and Salt Act, but also all its other provisions including those containing the definition. In this connection, we reproduce below Paragraphs 49 and 50 of the said judgment: "49. The present case falls within the scope of these exceptions, even if Section 3(3) is construed as incorporating certain specific provisions of the 1944 into itself. The legislation presently in question is clearly in pari materia with the 1944 Act. It is also merely supplemental. While the 1944 Act imposes a general levy of excise duty on all goods manufactured and produced, and aim of the present Act is to supplement the levy by an additional duty of the same nature on certain goods. The duration of the applicability is undefined but the status is clearly enforceable as long as it is in the statue book side by side with the normal excise duties. The clear intention is that the same provisions shall govern both the levies except that the duty under the later Act is confined to certain goods only and its distributability among the States may perhaps follow a different pattern from the principal duty. There is no reason or logic why all the incidents attaching under the earlier legislation, in so far as they are not clearly inconsistent with the later one should not be extended to the later legislation as well.
As has been pointed earlier, the Finance Act which levied special or regular or additional excise duties contained in themselves all the elements of charge of duty. The goods were mentioned and the duty as to be levied either at a percentage of the value of the assessable goods as determined under the 1944 Act. All that was further needed was the applicability of the procedural provisions of the 1944 Act.
Here, however, the 1957 Act is incomplete as to the basis of the charge and its provisions would become totally unworkable unless the concepts of "manufacture" and "assessable value" as determined under the 1944 Act are carried into it.
50. In the circumstances, I agree that we should give full and literal effect to the language of Section 3(3) and hold that it has the effect not only of attracting the procedural provisions of the 1944 Act but also all its other provisions, including those containing the definition.
In the concluding sub-paragraph of Para 24 of the said judgment, the Honourable Supreme Court also observed as follows : "What appears, therefore, clear is that what applies to the main levy, applies to the Additional Duties as well." 14. In the light of the above, we hold that in view of Section 3(3) of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 and the relevant provision of the Finance Act, 1982, viz., Section 50(4) of the Finance Act, 1982, all the provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder are applicable to the levy and collection of Additional Duties of Excise and the Special Duties of Excise. We have already discussed that by Section 51 of the Finance Act, 1982, the amendments to Rules 9 and 49 of the Central Excise Rules, as effected by Notification No. 20/82-C.E., dated 20-2-1982 by inserting explanation below these rules, has been given retrospective effect to these amendments. As a result, the explanation below these rules came into force from the inception of the Central Excise Rules, 1944. By virtue the retrospective amendments, Central Excise Duty was chargeable for captive consumption of the yarn in question. Charging the Basic Excise Duty has not been disputed by the learned Advocate during the hearing before us. As a result of incorporation of the provisions of the Central Excises and Salt Act and the Central Excise Rules in the relevant provisions relating to levy and collection of Special Excise Duty and the Additional Excise Duty, these two duties were also chargeable on the yarn capatively consumed in the manufacture of fabrics in the factories of the appellants during the relevant periods. Therefore, on merits, the appellants do not have any case. On merits the appeals should be dismissed. We order accordingly.
15. Besides, some of the refund claims are hit by limitation as already indicated in the table given by us in Paragraph 3 (supra). The Collector (Appeals) correctly held that the limitation described in the Limitation Act is not applicable to the refunds under Central Excises and Salt Act, and the rules made thereunder. The Honourable Supreme Court has settled the question of limitation by their judgments in the case of Miles India Limited v. Assistant Collector of Customs, reported in 1987(30) ELT 641 (SC) and in the case of Collector of Central Excise, Chandigarh v. Doaba Cooperative Sugar Mills, reported in 1988 (37) ELT 641 (SC). The Honourable Supreme Court held that the time-limit prescribed under the Customs and Central Excise statutes was mandatory and that the time-limit prescribed in the Limitation Act was not applicable in the case of refund under the Customs Act and the Central Excises and Salt Act and the rules made thereunder. In the circumstances, some of the refund claims, as indicated, deserve to be rejected as time-barred.
16. The learned Advocate cited a few decisions in the course of his arguments. One of the decisions is the Supreme Court's judgment in the case of Associated Cement Co. Ltd. v. Director of Inspection, Customs and Central Excise, reported in 1985 (20) ELT 239 (SC). This judgment was delivered by the Honourable Supreme Court on 29-3-1985 and it related to the grant of tax credit certificate under Section 280ZD(1) of the Income Tax Act. This section entitled a manufacturer of the relevant goods to a tax credit certificate for an amount calculated at the rate not exceeding 25% of "the amount of duty payable by him" on that quantum of the goods cleared by him during the relevant financial year which exceeds the quantum of goods cleared by him during the base year. Clause (b) of Sub-section (6) of Section 280ZD defines the expression "duty of Excise" for the purpose of the aforesaid provision and it meant the duty of excise leviable under the Central Excises and Salt Act, 1944. In the said case, the Supreme Court held that the Special Excise Duty which was levied under Section 80 of the Finance Act, 1965 cannot be regarded as having been levied under the Excise Act. In the judgment reported in 1986 (25) ELT 849 (SC), Union of India and Ors. v. Modi Rubber Limited and Ors., the Honourable Supreme Court, while interpreting the scope of Notification No. 123/74-C.E., held that the exemption did not cover Special Excise Duty, Additional Excise Duty or Auxiliary Duty for the purpose of exemption. This judgment was delivered by the Honourable Supreme Court on 18-8-1986. The judgment of Honourable Supreme Court, in the case of Ujagar Prints etc. etc. v.Union of India and Ors. Was delivered on 4-11-1988. This judgment squarely covers the effect of incorporation of the provisions of an earlier Act in a later one by reference as has been done in Section 3(3) of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 and also in the relevant Finance Act. This being a later judgment, should be deemed to prevail over the earlier two judgments relied on by the learned Advocate. He also cited Calcutta High Court judgment in the case of The Khardah Co. Ltd. v. Commercial Tax Officer, Calcutta and Ors., reported in 1976 (37) STC - Page 382. This judgment has dealt with the point whether the provisions of Section 51 of the Finance Act, 1962 were permanent in nature. Strictly speaking, it is, therefore, not on the point at issue in the present case. Further, Supreme Court judgment in M/s. Ujagar Prints etc. etc. case has settled the point at issue before us. Calcutta High Court judgment relied on by the learned Advocate does not, therefore, help the appellants' cases in any way. The Supreme Court judgment cited by the learned Advocate, viz., AIR 1960 SC 1022 (Para 5), is also not on the point at issue before us. Moreover, as already observed by us, the later judgment of the Supreme Court in Ujagar Prints case has settled the dispute in question. Smt. Zutshi for the Revenue cited this Tribunal's decision reported in 1987 (9) ETR, 296 in the case of Hastings Mill Ltd. v.Collector of Central Excise, Calcutta. In this case, the Tribunal held inter alia that the cess under the Jute Manufactures Cess Rules, 1976 would be payable on the goods removed for captive consumption.
17. In view of the foregoing discussions, there are no merits in the appeals before us and accordingly the same are dismissed.