Collector of Central Excise Vs. Pushfab Industries - Court Judgment

Excerpt:
1. this is a revenue appeal. when the case was called none was present for the respondent and it is seen from the record that notice to the respondent has been received back undelivered with postal remark "party left".2. we are proceeding to dispose of the matter after hearing the ld.sdr, shri a.k. agarwal.3. ld. sdr submitted that the present appeal is against the order-inappeal dated 28-11-1990 passed by the collector of central excise (appeals), madras. the collector (appeals) had by the said order set aside the order of the assistant collector confirming a duty demand of rs. 30,771.10 as basic excise duty and rs. 1,535.76 as special excise duty on items falling under chapter 8607.00 against the respondents. 4.1 the respondents m/s. pushfab industries are manufacturers of two items falling under chapter sub-headings 8431.00 and 8607.00 respectively of the schedule to central excise tariff act, 1985. in respect of item 8431.00 they availed full exemption limit of rs. 15 lakhs in terms of notification no. 175/86-ce. upto 12-7-1989. as regards items falling under sub-heading 8607, they availed exemption only after a few days later, i.e., on 3-8-1989 after they had reached the 15 lakhs exemption limit on the said item. during the period from 12-7-1989 to 3-8-1989, they did not also pay duty on the clearances of item falling under sub-heading 8607. as regards item under sub-heading 8431.00, they paid duty under para (a)(i) of the exemption notification no. 175/86 after availing modvat credit on the said inputs whereas in respect of the articles falling under chapter sub-heading 8607.00 they availed full exemption. when both the items reached the full exemption limit of rs. 30 lakhs on 3-3-1989, they started paying duty on both the items as applicable under notification no. 175/86. the respondents contend that in terms of paragraphs (a) and (b) of notification 175/86 full exemption to the rate of duty is applicable to each of the specified goods and in their case there were two different specified goods. the assistant collector who adjudicated the matter had denied exemption on the articles falling under chapter sub-heading 8607 even within the rs. 15 lakhs limit on the ground that as per notification 175/86, where a manufacturer was availing modvat facility in respect of specified goods covered under the notification, then the concessional rate of normal duty minus 10 per cent apply if the value of clearance does not exceed rs. 30 lakhs. since there was no one to one correlation between the inputs and final products, the assistant collector held that it was not possible to allow at the same time modvat credit in respect of one item and permit availment of exemption for the other item. the adjudicating authority held that under notification 175/86, when modvat credit was availed for one product, there cannot be any exemption for another product upto rs. 15 lakhs since modvat has to be availed simultaneously for all the products. the assistant collector had further held that under notification 175/86, full duty exemption will be available for value of clearances upto rs. 15 lakhs where only one product is manufactured in the factory. when two or more products are manufactured in the same factory then full exemption will be available for a total value of clearances upto rs. 30 lakhs. the value of clearances had to be taken sequentially. he had also held that it was not possible to avail of exemption under one chapter and to clear the goods on payment of duty at the same time under other chapter headings as the duty liability will have to be discharged on clearances exceeding rs. 30 lakhs. 4.2 in appeal the collector (appeals) set aside the assistant collector's order by observing that there was nothing in notification no. 175/86 to infer that total value of clearances upto rs. 30 lakhs has to be taken sequentially, relying on the tribunal decision in the case of el. p. em. industries v. c.c.e. reported in 1989 (43) e.l.t. 599 and in the case of purushotham goculdas plywood co. v. c.c.e. reported in 1990 (47) e.l.t. 30. the collector (appeals) held that within the overall value of the first clearances upto rs. 30 lakhs, a manufacturer of the specified goods falling under one or more sub-headings is eligible for enjoying the full exemption upto rs. 30 lakhs irrespective of any combination of the value of clearances of different goods. further, if a manufacturer manufactured excisable goods falling under more than one tariff heading, he will be eligible to avail of full exemption upto rs. 30 lakhs subject to the condition that the value of clearances under full exemption shall not exceed rs. 15 lakhs in respect of any one heading.5. in the appeal filed before us it has been submitted that notification no. 175/86 provided for two circumstances namely, (i) where the manufacturer availed himself of the credit of duty on inputs used in manufacture of specified goods under rule 57a and (ii) where he does not avail such credit facility. in cases where the manufacturer avails himself of the credit facility under rule 57a, the exemption under this notification is available only to the extent of an amount calculated at the rate of 10% ad valorem. a manufacturer can avail of full exemption under the notification only when the manufacturer is not availing modvat credit facilities. these rates are applicable in respect of first clearances of the specified goods upto an aggregate value of rs. 30 lakhs subject to the condition specified in proviso to paragraph 1 of the notification. it is contended further on behalf of the department that even though the value of the overall clearances is within the upper limit of rs. 30 lakhs, if the manufacturer avails of modvat credit facilities, even in respect of any one of the specified goods, the full exemption as per clause (a)(ii) of para 1 of the notification will not be available to other specified goods manufactured and cleared by them. reliance has been placed on the tribunal decision in the case of kharia cement works v. collector of central excise reported in 1989 (42) e.l.t. 696 (tribunal). it is also contended on behalf of the appellant collector that the question where full exemption under paragraph l(a)(ii) of the notification would be available in respect of specified goods when the manufacturer avails of modvat credit facility in respect of goods other than specified goods was not a matter for decision in the two decisions cited by the collector (appeals) in the impugned order. the appellant collector has therefore, prayed for the setting aside of the impugned order and the upholding of the assistant collector's order.6. we have heard the ld. sdr who reiterated the department's views as mentioned in the grounds of appeal.7. the question relating to eligibility for exemption from duty for ssi units in respect of first clearances made by them during any financial year upto the aggregate value of rs. 30 lakhs allowed under notification no. 175/86 was considered by the larger bench of this tribunal in ramakrishna engineering works v. collector of central excise, bolpur -1996 (83) e.l.t. 346. disposing of a number of appeals raising the same question of law, namely, the interpretation of the words "first clearances" occurring in paragraph l(a) of notification no. 175/86, the tribunal reviewed the earlier decisions as well as the relevant notices issued by the various collectorates. the tribunal had summed up the legal position as under :- "13. the exemption under notification is for specified goods cleared for home consumption on or after the first day of april in a financial year. the limit of rs. 30 lakhs is placed on the aggregate value of first clearances on specified goods. within the first clearances on specified goods upto rs. 30 lakhs the aggregate value of exemption is available only upto rs. 15 lakhs in respect of aggregate value of clearances on specified goods under clause (a)(ii) of in any chapter of the schedule. in other words, the ceiling of rs. 15 lakhs is within the ceiling of rs. 30 lakhs for the first clearances. therefore the question of clearances on specified goods in respect of any one chapter of the schedule going beyond the first clearances of rs. 30 lakhs will not arise. the ceiling of rs. 75 lakhs is also prescribed on the aggregate value of clearances in terms of clauses (a) and (b) together. this will relate to first clearances of first rs. 30 lakhs and succeeding clearances upto rs. 45 lakhs. the stress on the reckoning of clearances on or after first of april in any financial year and the qualification of clearances by the word "first" would clearly indicate that the first clearances means clearances in a chronological order upto a limit of rs. 30 lakhs as indicated by the madhya pradesh high court. if within the first clearances of rs. 30 lakhs, any goods are cleared on payment of duty, the same cannot be excluded from reckoning. the limit of rs. 75 lakhs is on reckoning the first clearances of rs. 30 lakhs on full exemption under clause (a) and succeeding clearances of rs. 45 lakhs under clause (b) of the notification on partial exemption. if out of the first clearances upto rs. 75 lakhs, any goods have been cleared on payment of duty, the same cannot be excluded from the reckoning. in the light of what we have indicated above, the view taken in the impugned orders in appeal e/289/90, e/100/91 and e/4423/94 is correct and the view taken in appeal e/524/91 and e/530/91 is erroneous.8. following the ratio of the aforesaid decision which covers the case in favour of the respondents, we find no merit in the present appeal filed by the revenue.

Judgment:
1. This is a Revenue Appeal. When the case was called none was present for the respondent and it is seen from the record that notice to the respondent has been received back undelivered with postal remark "party left".

2. We are proceeding to dispose of the matter after hearing the ld.SDR, Shri A.K. Agarwal.

3. Ld. SDR submitted that the present appeal is against the Order-inAppeal dated 28-11-1990 passed by the Collector of Central Excise (Appeals), Madras. The Collector (Appeals) had by the said order set aside the order of the Assistant Collector confirming a duty demand of Rs. 30,771.10 as Basic Excise Duty and Rs. 1,535.76 as Special Excise duty on items falling under Chapter 8607.00 against the Respondents.

4.1 The Respondents M/s. Pushfab Industries are manufacturers of two items falling under Chapter sub-headings 8431.00 and 8607.00 respectively of the Schedule to Central Excise Tariff Act, 1985. In respect of Item 8431.00 they availed full exemption limit of Rs. 15 lakhs in terms of Notification No. 175/86-CE. upto 12-7-1989. As regards items falling under sub-heading 8607, they availed exemption only after a few days later, i.e., on 3-8-1989 after they had reached the 15 lakhs exemption limit on the said item. During the period from 12-7-1989 to 3-8-1989, they did not also pay duty on the clearances of item falling under sub-heading 8607. As regards item under sub-heading 8431.00, they paid duty under Para (a)(i) of the Exemption Notification No. 175/86 after availing Modvat credit on the said inputs whereas in respect of the articles falling under Chapter sub-heading 8607.00 they availed full exemption. When both the items reached the full exemption limit of Rs. 30 lakhs on 3-3-1989, they started paying duty on both the items as applicable under Notification No. 175/86. The respondents contend that in terms of paragraphs (a) and (b) of Notification 175/86 full exemption to the rate of duty is applicable to each of the specified goods and in their case there were two different specified goods. The Assistant Collector who adjudicated the matter had denied exemption on the articles falling under Chapter sub-heading 8607 even within the Rs. 15 lakhs limit on the ground that as per Notification 175/86, where a manufacturer was availing Modvat facility in respect of specified goods covered under the Notification, then the concessional rate of normal duty minus 10 per cent apply if the value of clearance does not exceed Rs. 30 lakhs. Since there was no one to one correlation between the inputs and final products, the Assistant Collector held that it was not possible to allow at the same time Modvat credit in respect of one item and permit availment of exemption for the other item. The adjudicating authority held that under Notification 175/86, when Modvat credit was availed for one product, there cannot be any exemption for another product upto Rs. 15 lakhs since Modvat has to be availed simultaneously for all the products. The Assistant Collector had further held that under Notification 175/86, full duty exemption will be available for value of clearances upto Rs. 15 lakhs where only one product is manufactured in the factory. When two or more products are manufactured in the same factory then full exemption will be available for a total value of clearances upto Rs. 30 lakhs. The value of clearances had to be taken sequentially. He had also held that it was not possible to avail of exemption under one Chapter and to clear the goods on payment of duty at the same time under other Chapter headings as the duty liability will have to be discharged on clearances exceeding Rs. 30 lakhs.

4.2 In Appeal the Collector (Appeals) set aside the Assistant Collector's order by observing that there was nothing in Notification No. 175/86 to infer that total value of clearances upto Rs. 30 lakhs has to be taken sequentially, relying on the Tribunal decision in the case of EL. P. EM. Industries v. C.C.E. reported in 1989 (43) E.L.T. 599 and in the case of Purushotham Goculdas Plywood Co. v. C.C.E. reported in 1990 (47) E.L.T. 30. The Collector (Appeals) held that within the overall value of the first clearances upto Rs. 30 lakhs, a manufacturer of the specified goods falling under one or more sub-headings is eligible for enjoying the full exemption upto Rs. 30 lakhs irrespective of any combination of the value of clearances of different goods. Further, if a manufacturer manufactured excisable goods falling under more than one Tariff Heading, he will be eligible to avail of full exemption upto Rs. 30 lakhs subject to the condition that the value of clearances under full exemption shall not exceed Rs. 15 lakhs in respect of any one heading.

5. In the Appeal filed before us it has been submitted that Notification No. 175/86 provided for two circumstances namely, (i) where the manufacturer availed himself of the credit of duty on inputs used in manufacture of specified goods under Rule 57A and (ii) where he does not avail such credit facility. In cases where the manufacturer avails himself of the credit facility under Rule 57A, the exemption under this notification is available only to the extent of an amount calculated at the rate of 10% ad valorem. A manufacturer can avail of full exemption under the notification only when the manufacturer is not availing Modvat credit facilities. These rates are applicable in respect of first clearances of the specified goods upto an aggregate value of Rs. 30 lakhs subject to the condition specified in Proviso to Paragraph 1 of the notification. It is contended further on behalf of the Department that even though the value of the overall clearances is within the upper limit of Rs. 30 lakhs, if the manufacturer avails of Modvat credit facilities, even in respect of any one of the specified goods, the full exemption as per Clause (a)(ii) of Para 1 of the notification will not be available to other specified goods manufactured and cleared by them. Reliance has been placed on the Tribunal decision in the case of Kharia Cement Works v. Collector of Central Excise reported in 1989 (42) E.L.T. 696 (Tribunal). It is also contended on behalf of the appellant Collector that the question where full exemption under Paragraph l(a)(ii) of the Notification would be available in respect of specified goods when the manufacturer avails of Modvat credit facility in respect of goods other than specified goods was not a matter for decision in the two decisions cited by the Collector (Appeals) in the impugned order. The Appellant Collector has therefore, prayed for the setting aside of the impugned order and the upholding of the Assistant Collector's order.

6. We have heard the ld. SDR who reiterated the Department's views as mentioned in the Grounds of Appeal.

7. The question relating to eligibility for exemption from duty for SSI units in respect of first clearances made by them during any financial year upto the aggregate value of Rs. 30 lakhs allowed under Notification No. 175/86 was considered by the Larger Bench of this Tribunal in Ramakrishna Engineering Works v. Collector of Central Excise, Bolpur -1996 (83) E.L.T. 346. Disposing of a number of appeals raising the same question of law, namely, the interpretation of the words "first clearances" occurring in Paragraph l(a) of Notification No. 175/86, the Tribunal reviewed the earlier decisions as well as the relevant notices issued by the various Collectorates. The Tribunal had summed up the legal position as under :- "13. The exemption under notification is for specified goods cleared for home consumption on or after the first day of April in a financial year. The limit of Rs. 30 lakhs is placed on the aggregate value of first clearances on specified goods. Within the first clearances on specified goods upto Rs. 30 lakhs the aggregate value of exemption is available only upto Rs. 15 lakhs in respect of aggregate value of clearances on specified goods under Clause (a)(ii) of in any chapter of the Schedule. In other words, the ceiling of Rs. 15 lakhs is within the ceiling of Rs. 30 lakhs for the first clearances. Therefore the question of clearances on specified goods in respect of any one chapter of the Schedule going beyond the first clearances of Rs. 30 lakhs will not arise. The ceiling of Rs. 75 lakhs is also prescribed on the aggregate value of clearances in terms of Clauses (a) and (b) together. This will relate to first clearances of first Rs. 30 lakhs and succeeding clearances upto Rs. 45 lakhs. The stress on the reckoning of clearances on or after first of April in any financial year and the qualification of clearances by the word "first" would clearly indicate that the first clearances means clearances in a chronological order upto a limit of Rs. 30 lakhs as indicated by the Madhya Pradesh High Court. If within the first clearances of Rs. 30 lakhs, any goods are cleared on payment of duty, the same cannot be excluded from reckoning. The limit of Rs. 75 lakhs is on reckoning the first clearances of Rs. 30 lakhs on full exemption under Clause (a) and succeeding clearances of Rs. 45 lakhs under Clause (b) of the notification on partial exemption. If out of the first clearances upto Rs. 75 lakhs, any goods have been cleared on payment of duty, the same cannot be excluded from the reckoning. In the light of what we have indicated above, the view taken in the impugned orders in Appeal E/289/90, E/100/91 and E/4423/94 is correct and the view taken in Appeal E/524/91 and E/530/91 is erroneous.

8. Following the ratio of the aforesaid decision which covers the case in favour of the respondents, we find no merit in the present appeal filed by the Revenue.