Indian Organic Chemicals Ltd. Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. the issue in the appeal relates to demand of duty in respect of tow and tops out which polyester fibre which was manufactured and cleared under exemption notification 191/85, dated 28-8-1985 for the reason that duty on tow was not payable under notification 84/87 only if polyester fibre made out of tow was cleared on payment of duty. the learned lower appellate authority has held that inasmuch as polyester fibre was cleared under exemption notification without payment of duty, tow would not be entitled to the benefit of exemption notification 84/87.2. shri c. chidambaram, the learned consultant for the appellants has pleaded that exemption in respect of polyester fibre under notification 191/85 was allowed to meet the special requirement of the units which were functioning under the khadi and village industries corporation under the programme approved by the textile commissioner and the effect of this notification will be nullified in case duty on tow out of which the fibre emerged was charged to duty. as it is, he has pleaded that under a different notification in case duty is paid on tow, polyester fibre is eligible for the duty free clearance while in case polyester fibre is cleared on payment of duty the tow cleared in terms of notification 84/87 will be eligible for exemption. he has pleaded that subsequently by issue of notification no. 76/92, dated 1-7-1992 duty on tow used for fibre manufactured for use in terms of notification 191/85 by insertion of sl. no. 54 in notification 53/91, dated 27-5-1991 was exempted. he has pleaded that this notification should be taken to be clarificatory and should be made applicable to tow out of which polyester fibre which was supplied to kvic free of duty under notification 191/85 in the past also.3. shri s. murugandi, the learned dr has pleaded that tow is described as a separate commodity under the tariff and the same can be cleared without payment of duty only if there is exemption for clearance of the same at the relevant time. notification 84/87 envisages duty free clearance only in the event of the polyester fibre manufactured out of the same being cleared on payment of duty. in the present case, he has urged that since polyester fibre was being cleared under notification 191/85 without payment of duty, the tow which is relatable to this polyester fibre therefore had to be cleared on payment of duty.4. we have considered the pleas made by both the sides. we observe that as a matter of social welfare, the government of india in public interest issued notification 191/85, dated 28-8-1985 exempting polyester fibre which was supplied to kvic. in the scheme of levy under tariff heading 5501.20, under which polyester staple fibre and tow figure, the duty envisaged was either at the tow stage or at the staple fibre stage. under notification 84/87 tow is exempted from duty in case polyester staple fibre manufactured out of the same is cleared on payment of duty and subject to the procedure laid down under rule 56a.likewise polyester staple fibre is exempted from duty in case the same is manufactured out of tow on which duty has been paid. thus the framers of the statute and the legislature have envisaged only one stage levy of duty i.e. either on tow or on staple fibre. therefore, notification 191/85 has to be taken to have been issued in this context of levy of duty. therefore, the exemption given has to be taken to be of the duty leviable either on the tow stage or at the staple fibre stage. even if under notification 191/85 exemption stipulated is in respect of duty payable on staple fibre what has to be read into this is that the exemption is in respect of duty which has to be paid either at the tow stage or at the staple fibre stage. to interpret the notification in the manner in which the revenue has sought to read will only defeat the very purpose of the notification 191/85. the plea of the revenue would have been valid in case there was two stage levy i.e.at the tow stage and the fibre stage separately. but the position here is different. by issue of notification the levy has been restricted to one stage i.e. at the tow stage or fibre stage. we, therefore, in the circumstances of the case, are of the view that exemption notification 191 /85 is in respect of duty which ultimately will be relatable to the staple fibre. this duty burden on the staple fibre is either relatable to the duty paid at the tow stage or the duty which will be paid at the staple fibre stage itself by use of tow which is cleared without payment of duty under notification 84/87. in the above view of the matter, no duty will be chargeable in respect of tow which has been used in the manufacture of polyester fibre which has been cleared without payment of duty under notification 191/85. the subsequent notification 76/92, dated 1-7-1992 issued in this regard exempting duty on tow used for fibre for supply to kvic by amending the notification 191/85 has to be held to be clarificatory in nature and will have retrospective effect. the appeal is therefore allowed.

Judgment:
1. The issue in the appeal relates to demand of duty in respect of tow and tops out which polyester fibre which was manufactured and cleared under exemption Notification 191/85, dated 28-8-1985 for the reason that duty on tow was not payable under Notification 84/87 only if polyester fibre made out of tow was cleared on payment of duty. The learned lower appellate authority has held that inasmuch as polyester fibre was cleared under exemption notification without payment of duty, tow would not be entitled to the benefit of exemption Notification 84/87.

2. Shri C. Chidambaram, the learned Consultant for the appellants has pleaded that exemption in respect of polyester fibre under Notification 191/85 was allowed to meet the special requirement of the units which were functioning under the Khadi and Village Industries Corporation under the programme approved by the Textile Commissioner and the effect of this Notification will be nullified in case duty on tow out of which the fibre emerged was charged to duty. As it is, he has pleaded that under a different notification in case duty is paid on tow, polyester fibre is eligible for the duty free clearance while in case polyester fibre is cleared on payment of duty the tow cleared in terms of Notification 84/87 will be eligible for exemption. He has pleaded that subsequently by issue of Notification No. 76/92, dated 1-7-1992 duty on tow used for fibre manufactured for use in terms of Notification 191/85 by insertion of Sl. No. 54 in Notification 53/91, dated 27-5-1991 was exempted. He has pleaded that this Notification should be taken to be clarificatory and should be made applicable to tow out of which polyester fibre which was supplied to KVIC free of duty under Notification 191/85 in the past also.

3. Shri S. Murugandi, the learned DR has pleaded that tow is described as a separate commodity under the tariff and the same can be cleared without payment of duty only if there is exemption for clearance of the same at the relevant time. Notification 84/87 envisages duty free clearance only in the event of the polyester fibre manufactured out of the same being cleared on payment of duty. In the present case, he has urged that since polyester fibre was being cleared under Notification 191/85 without payment of duty, the tow which is relatable to this polyester fibre therefore had to be cleared on payment of duty.

4. We have considered the pleas made by both the sides. We observe that as a matter of social welfare, the Government of India in public interest issued Notification 191/85, dated 28-8-1985 exempting polyester fibre which was supplied to KVIC. In the scheme of levy under Tariff Heading 5501.20, under which polyester staple fibre and tow figure, the duty envisaged was either at the tow stage or at the staple fibre stage. Under Notification 84/87 tow is exempted from duty in case polyester staple fibre manufactured out of the same is cleared on payment of duty and subject to the procedure laid down under Rule 56A.Likewise polyester staple fibre is exempted from duty in case the same is manufactured out of tow on which duty has been paid. Thus the framers of the statute and the legislature have envisaged only one stage levy of duty i.e. either on tow or on staple fibre. Therefore, Notification 191/85 has to be taken to have been issued in this context of levy of duty. Therefore, the exemption given has to be taken to be of the duty leviable either on the tow stage or at the staple fibre stage. Even if under Notification 191/85 exemption stipulated is in respect of duty payable on staple fibre what has to be read into this is that the exemption is in respect of duty which has to be paid either at the tow stage or at the staple fibre stage. To interpret the Notification in the manner in which the Revenue has sought to read will only defeat the very purpose of the Notification 191/85. The plea of the Revenue would have been valid in case there was two stage levy i.e.

at the tow stage and the fibre stage separately. But the position here is different. By issue of Notification the levy has been restricted to one stage i.e. at the tow stage or fibre stage. We, therefore, in the circumstances of the case, are of the view that exemption Notification 191 /85 is in respect of duty which ultimately will be relatable to the staple fibre. This duty burden on the staple fibre is either relatable to the duty paid at the tow stage or the duty which will be paid at the staple fibre stage itself by use of tow which is cleared without payment of duty under Notification 84/87. In the above view of the matter, no duty will be chargeable in respect of tow which has been used in the manufacture of polyester fibre which has been cleared without payment of duty under Notification 191/85. The subsequent Notification 76/92, dated 1-7-1992 issued in this regard exempting duty on tow used for fibre for supply to KVIC by amending the Notification 191/85 has to be held to be clarificatory in nature and will have retrospective effect. The appeal is therefore allowed.