1. In this appeal, the issue for determination is whether concessional rate of duty under Notification 128/77, dated 18-6-1977 on the basis of annual installed capacity is available to the appellants or not.
2. The facts of the case, in brief, are that the appellants are engaged in the manufacture of paper. The appellants claimed concessional rate of duty under Notification No. 128/77, dated 18-6-1977 on the ground that the annual installed capacity of mill in respect of all varieties of paper and paper board was not exceeding 5,000 MT. The Department was of the view that the annual installed capacity of the mill was more than 5,000 MT and they were not eligible to concessional rate of duty under Notification No. 128/77, dated 18-6-1977. Accordingly, a show cause notice was issued on 12-12-1979 to the appellants asking them to show cause to explain as to why the differential duty of Rs. 13,21,559.30 should not be demanded from them, on the goods cleared during the period 1-1-1978 to 30-10-1979. The Assistant Collector adjudicated the case and held that annual installed capacity for the mill exceeds 5,000 MT but does not exceed 10,000 MT. The Collector (Appeals) upheld the order of the Assistant Collector and also held that longer period of five years would be attracted in the case. On appeal to the Tribunal, the Tribunal remanded the case back to the Assistant Collector for readjudication. The Assistant Collector again adjudicated the case on 23-7-1986 and concluded that the annual installed capacity of the mill was more than 10,000 MT and confirmed the demand. On appeal to Collector (Appeals), the case was sent for decision to Collector, Central Excise. The Collector, Central Excise confirmed the demand.
3. Shri M.L. Lahoty, the learned Advocate appeared for the appellants and Shri J.M. Sharma, the learned JDR for the respondent.
4. The appellants argued before us that a show cause notice was issued under Rule 10 which is no more valid and Section 11A requires only a maximum period of five years and now the show cause notice under Section 11A can only be issued by the Collector. In this case, the demand cannot be raised for the past period. In support of their contention, they cited and relied upon the judgment in the case of Mahendra Mills Ltd. v. Union of India reported in 1988 (36) E.L.T. 563 in which the Hon'ble Gujarat High Court had held that "Rule 10 which was enacted on 6-8-1977 got omitted on 17-10-1988. As per sub-rule (2) of Rule 10 the concerned authority after considering the representation, if any, made by the person on whom the notice is served under sub-rule (1), shall determine the amount of duty or charges due from such person. But Rule 10(2) got omitted along with sub-rule (1) of Rule 10. Therefore, adjudications made in the light of the earlier notices under Rules 10 and 10A could not survive, after 7-10-1980 despite the fact that almost analogous statutory provisions were enacted in the Act by bringing in Section 11A from that very date. This is so because there is no express saving clause in the notification whereby Rule 10 came to be omitted from 17-11-1980. The omission of Rule 10 from the Rules would also not attract Section 6 of the General Clauses Act and the same cannot apply to save the pending proceedings initiated earlier under the omitted rule. [AIR 1970 SC 494 and 1985 (21) E.L.T. 24 (Guj.) rel. on; 1986 (24) E.L.T. 205 (Del.) impliedly over-ruled by AIR 1970 SC 494 ignored." We also find that in the case of Gwalior Rayon Mfg. (Wvg.) Co. v. Union of India and Ors. reported in 1982 (10) E.L.T. 844, the M.P. High Court had held: "Since a rule framed under the Act was a part thereof, therefore, even though Rule 10 was omitted from 17-11-1980, Section 11A having similar wording came into force simultaneously maintaining its continuity. Therefore, there was neither any repeal nor omission of an enactment but continuance of the same provision as part of the Act, the only difference being that prior to 17-11-1980, it was in one part of the Act and subsequent to that, it was another part of the same Act. Therefore, it is difficult to appreciate how the principles relating to repeal or omission of an enactment can apply or a saving clause is needed to continue the proceedings initiated prior to such a change.
It is well settled that a rule framed under the Act is a part thereof and has to be construed as such for all purposes. Therefore, rules made under a statute must be treated as if they were in the Act itself both for the purpose of construction and also for the purpose of obligation." We find that no doubt, Rule 10 was omitted with effect from 17-10-1980.
We observe that Section 11A having similar wordings came into force simultaneously thus, maintaining its continuity. It is well settled principle of law that Rule framed under the Act is a part of the Act and has to be construed as such for all purposes. Having regard to this fact, we hold that the show cause notice was legal and proceedings under the show cause notice could be continued after 17-11-1980. On the-question of annual installed capacity of the paper mill, the appellants argued that the paper mill was set up in the backward region of Marathwada and the production was commissioned in January, 1979.
That they imported second hand machinery and the production during the first six months was only 1113 tonnes, a proposal was made to the financial institution in July, 1979 for installation of Bleach Plant to increase the capacity from 3750 tonnes to 4750 tonnes during the period of six months; that renovation of the Plant was carried out in February, 1982 and the production during 1982 increased to 4822 tonnes; that the installed capacity as given in Industries (Development & Regulation) Act, 1951 under Section 10(3), which provides that the installed capacity of the plant is basically the production capacity and it is to be worked out on the basis of optimum utilisation of machinery and not on the basis of maximum utilisation; that Notification No. 128/77 does not prescribe any authority for availing of exemption; that their installed capacity was limited to 14.05 tonnes per day based on maximum drying capacity of their machine. The appellants referred to the decision of the Tribunal in the case of Aurangabad Paper Mills Ltd, v. CCE, Bombay reported in 1984 (17) E.L.T.554 wherein the Tribunal had held: "The Notification No. 128/77 inter alia granted exemption of 60% of the duty in respect of paper mills whose annual installed capacity did not exceed 5000 tonnes. In this case, the licence issued to the appellants refers to capacity as 5000 MT. The import licence for the machinery was also given approving this above quantity. The machine was also inspected by the DGTD who unequivocally certified the capacity was 5000 tonnes per annum. Although the DGTD subsequently issued another certificate setting out a higher out-turn, yet much emphasis cannot be placed on that opinion when there was no inspection of the factory by the issuing authority, and thus such calculation was merely based on conjectures, assumptions and surmises. Similarly a mechanical calculation by the Department to multiplying 20 tons per day X 330 days is without any basis and is without any technical support. Normally the installed capacity is the designed capacity of the machinery supported by the production on a sustained basis, therefore, the installed capacity of a machine or the designed capacity of the machine cannot be equated to. the working capacity. Hence, the paper mill was eligible for the concession under the aforesaid notification." The learned counsel also cited and relied upon the judgment of the Tribunal in the case of Upper India Couper Paper Mills Co. Ltd. reported in 1991 (51) E.L.T. 471 wherein the Tribunal had held: "The respondent besides the certificate of DGTDs to installed capacity being 2000 mertic tonnes or less than also filed certificate of Chartered Engineer as also from Saharanpur Institute of Paper Technology. The DGTD is a highly responsible body of Government in whom Govt. reposes the greatest trust. A certificate issued by DGTD should not be thrown out on certain hypothetical arguments. In their correspondence with DGTD the respondents had disclosed the production figures for 10 years, out of which in five years, it did not exceed 2000 MT. After having considered all the salient facts and data, the Ministry of Industry had issued a certificate of registration for 2000 MT annual capacity. It may also be pointed out the prescribed form of application has no column like the installed capacity which may have relevance with reference to Notification 128/77. This apart it appears that the annual production may not correspond with installed capacity. From Shri Iyengar's letter it appears that ordinarily the licensed capacity should be treated as installed capacity and accordingly to the endorsement on the respondent's licence the capacity is about 2000 metric tonnes. The certificate issued by DGTD should not be discarded on the ground that it was issued for the quantity requested by the respondent. If Revenue has any reservation about the certificate, the proper thing to do is not to discard the same but to call upon the DGTD to offer clarification or explanation.
This apart, the Ministry of Industry is primarily concerned with licensing of industries, their industrial capacity and other allied matters under Industries Development & Regulation Act, 1951. Due weight must be given to their views as reflected in Shri Iyengar's letter as also to the certificate. As against this there is no evidence on behalf of Revenue to rebut the respondent's evidence.
Preponderance of evidence against none from Revenue shows installed capacity of the respondent's unit as not exceeding 2000 metric tonnes. The benefit of notification is available on this score.
[1982 (10) E.L.T. 171 (Bom.) rel. on]" Again, the Tribunal considered the question of applicability of Notification 128/77. Having regard to the installed capacity in the case of Venus Paper Mills Ltd. v. CCE reported in 1990 (50) E.L.T. 410 wherein it was held : "The appellants have misdeclared the installed capacity of the mills in their letter dated 10-7-1980, based on which the AL-4 licence was renewed for 1980-83 subject to confirmation of installed capacity, The classification list as earlier approved and also the application for licence prior to 1979, when the Notification underwent a change, had mentioned 3600 MT as installed capacity and even the classification lists for the period 1973 to 1977 contained 3 categories. From this, it appears that subsequent to the issue of the Notification which altered the basis for concessional rate of duty from production to installed capacity, the appellants misdeclared the installed capacity which amounts to suppression of facts, entitling the Department to invoke the extended period of limitation. Regarding the issue of computation for differential duty the matter is remanded to the Collector for the purpose of determining the amount, after deduction of the amount of duty actually paid from the sale price, in accordance with the provision of Section 4(4)(d)(ii)." The Department had relied on the Government of India, Ministry of Industry letter while granting the industrial licence No. ILS No.49(75), dated 20-2-1975, this certificate shows that the industrial undertaking shall have the installed capacity of 6000 MT for wrapping paper and packing paper on the basis of maximum utilisation of plant and machinery; that the words 6000 MT was substituted by 9000 MT under letter dated 24-12-1975. The Department also contested that the Ministry of Industry in their letter No. V(132) 74 Paper, dated 12-1-1978 had informed the assessee that the Government of India had allowed some more time for taking effective step upto 31-8-1978. When the assessee was asked to obtain the certificate from DGTD about their installed capacity of the paper mill, they could not produce such certificate. However, the DGTD in their letter No . DPP-40(788)/74, dated 13-5-1980 communicated that the assessees had been permitted to import second hand plant with a capacity from 25 to 30 tonnes per day depending upon the substance range of the paper to be manufactured. The learned DR submitted that for arriving at the installed capacity, the following factors are considered : The speed of the machine was indicated by the DGTD as 500 ft. per minute; that the working hours for a day is taken as 22 hours. The total working days in a year is taken as 330 days as adopted by the assessee. The production of the machine for a year comes to 14,113 MT.The Department therefore, contested that the installed capacity of the mill comes to 14,113 MT per annum.
5. In the instant case, we find that the installed capacity of the paper mill of the appellants was indicated by the Ministry of Industry.
We also observe that DGTD had issued a letter stating that the daily production of the paper plant of the appellants varies from 25 to 30 MT. This certificate was issued on the basis of the permission accorded to the appellants at the time of import of the mill. If the DGTD certificate as held by the Tribunal in the case of Upper India Couper Paper Mills Co. Ltd. cited supra is accepted, then the capacity of the plant will be 330 X 25 which is much higher than the declared capacity.
In the case of Aurangabad Paper Mills Ltd., the Tribunal had held that the DGTD had inspected the paper mill and certified the capacity as 5000 MT per annum. In the instant case, we find that though there was no inspection by DGTD of the plant, however, on the basis of the permission accorded to the appellants for import of machinery, the DGTD gave a certificate that the daily production i should be between 25 to 30 MT per day. On this basis also the production was much higher than the one claimed by the appellants inasmuch as in the judgment, the Tribunal held that assuming a particular number of days work and particular number of hours of work in a day is only an estimate based on presumption and conjectures and therefore, such estimates should not be taken into account while arriving at the installed capacity of the paper mill. The Judgment of the Tribunal in the case of Venus Paper Mill cited supra relates to the correspondence exchanged between DGTD and the assessee. In the instant case, we find that industrial licence issued to the appellants clearly showed that the installed capacity of the plant shall be 6000 MT which was substituted by 9000 MT as was indicated in the letter of the Ministry of Industry. Having regard to the case-law, correspondence and the industrial licence issued by the Ministry of Industry and also the letter of DGTD, we find that the capacity of the paper mill is more than 5000 MT per year. We observe that the production of the paper mill never touched this figure but the question remains whether the installed capacity and quantity of the goods manufactured is the same. Of course, the installed capacity and production for a year are not same, they are entirely different terms.
The installed capacity is normally accepted on the basis of the industrial licence and the permission accorded for import of the goods.
These two communications clearly establish that the installed capacity of the plant exceeded 5000 MT may be the actual production, never went upto 6000 MT. Having regard to the fact that the installed capacity was indicated as 6000 MT in the letter dated 20-9-1975 issued by the Ministry of Industry which was subsequently enhanced to 9000 MT in the letter dated 24-12-1975, we hold that for the material period, the installed capacity of the paper mill in the instant case shall be taken as 9000 MT per year. We would also like to say that the calculation of the Department was that the installed capacity based on optimum production was 14,113 MT per year which is based on a number of assumptions and presumptions. The installed capacity cannot be determined on the basis of assumption and presumption, therefore, we are not prepared to accept the figure arrived at by the Department. In view of the above findings, we direct the Assistant Collector to recalculate the differential duty and recover the same. The impugned order is modified to the extent stated above and the appeal is disposed of accordingly.