| SooperKanoon Citation | sooperkanoon.com/21295 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | Mar-08-2001 |
| Appellant | Cce, Chandigarh |
| Respondent | M/S. Dogra Distilleries (P) Ltd. |
Ltd., (who have filed cross objections), and in Appeal No.E/3035/2000 D and No.E/3077/2000 D, the respondents are M/s. Kashmir Distilleries Pvt. Ltd., (who have also filed separate cross objections in each appeal). The matter relates to the eligibility of the procurers of khandsari molasses to the benefit of small scale exemption under Notification No.1/93 CE dated 28.2.93. All the three appeals were heard together and are being disposed of by this common order.
2. The Commissioner of Central Excise (Appeals) in his order-in-appeal dated 28.6.2000 (Appeal No.E/3035/2000-D and Appeal No.E/3077/2000 D) had held that the procurers of the khandsari molasses were entitled to the small scale exemption under Notification No.1/93 CE dated 28.2.93.
A similar view has been taken by him in the order-in-appeal dated 24.12.99. Para-4 of the order-in-appeal dated 6.10.99 is extracted below:- "4. I have considered the matter. I find that it has very clearly been stated in the Rule 7 A of CE Rules, 1944, that the molasses procured by the appellants are treated as if manufactured by the appellants. Since the Notification No.1/93 CE does not debar the procurer - manufacturers from its benefit as is done in the case of inputs which are cleared by a manufacturer of final product and are treated as if manufactured by the manufacture of final products.
Accordingly, I hold that the appellants are entitled to SSI exemption benefit if otherwise admissible keeping in view the value of molasses utilised in a financial year + value of other excisable goods manufactured by the appellants as also any other conditions of notification. The appeals are allowed subject to quantification of duty leviability after determination of applicability of SSI exemption notification in respect of conditions other than the one decided here in before. The party be heard in person before redetermination of duty, if any." In separate appeals, the Revenue had pleaded that the constitutional validity of Rule 7 A and Rule 9 C of the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules') inserted in the Rules, vide Notification No.6/97 CE (NT) dated 1.3.97, had been up-held and the leviability of duty on procurers of khandsari molasses for the manufacture of alcohol, has been confirmed by the Jammu and Kashmir High Court. The duty on khandsari molasses was being paid by the procurers under a deeming provision. The various provision of small scale exemption Notification No.1/93 CE dated 28.2.93 could not be complied with by the procurers. The alcohol for whose production the khandsari molasses were being procured were not excisable commodity and the place where alcohol was produced, was not a factory for the purposes of small scale exemption under Notification No.1/93 CE.In the cross objections filed by M/s. Kashmir Distilleries Pvt. Ltd., it had been stated that the Commissioner of Central Excise (Appeals), who had passed orders for filing the present appeal, was the appellate authority, who had passed the impugned order-in-appeal in this case.
The molasses was a specified commodity for small scale exemption. The procurers of khandsari molasses have been given the status of a manufacturer of excisable goods and thus, they were eligible to avail of the benefit of small scale exemption. In para-13, it was stated that the respondents have never refused to pay duty but were ready to pay the central excise duty after availing SSI exemption as pleaded by them Similar cross objections have been filed by M/s. Dogra Distilleries Pvt. Ltd. 3. All the three appeals were heard on 15.02.2001 when Shri Ashok Mehta, SDR submitted that the matter was entirely covered in favour of the Revenue by the Tribunal's decision in the case of Collector of Central Excise, Chandigarh Vs. Dewan Modern Breweries Ltd. and M/s.
Gupta Modern Breweries Ltd. Under their Final Order No.28-30/2001 D dated 12.1.2001 while disposing of the appeals Nos.E/2844/2000 D, E/2845/2000 D and E/2694/2000 D, the Tribunal has taken a view that the benefit of small scale exemption under Notification No.1/93 CE dated 28.2.93 (as amended) is not available to the procurers of khandsari molasses.
In reply, the counsels for the respondents submitted that the same officer, who had passed the impugned order-in-appeal, had passed orders for filing the present appeal and pleaded that on this ground alone, the appeals filed by the Revenue were not maintainable.
With regard to the SDR's reliance on the Tribunal's earlier decision dated 12.01.2001, it was submitted that full and correct legal position was perhaps was not placed before the Tribunal while passing orders-in-appeal nos.E/2844/2000 D, E/2845/2000 D and E/2694/2000 D. It was pleaded that when the procurer of khandsari molasses was deemed to be a manufacturer then his premises are deemed to be a factory also.
Reference was made to the cross objections filed by the respondents.
Reliance was placed on the following decisions:- (1) J.K. Spinning and Weaving Mills Ltd. Vs. Union of India - 1987 (32 ELT 234 (SC).
- A deeming provision is an admission of the non-existence of the fact deemed. The legislature is quite competent to enact a deeming provision for the purpose of assuming the existence of fact, which does not really exist.
(2) Collector of Central Excise Vs. Titaghar Paper Mills Co. Ltd. - 1989 (44) ELT 667 (Tribunal) - Unless there were some new facts or material, which if they had been taken into consideration, would have rendered the impugned order illegal or improper, the same officer in a superior capacity could not review his own order passed when he was working in a lower capacity.
In rejoinder, Shri Ashok Mehta, SDR replied that the direction to file the present appeals has been given by the Commissioner of Central Excise under the legal provision applicable, and that the orders appealed against were passed by the Commissioner of Central Excise (Appeals) when the Commissioner was working in different capacity. The name of the appellate authority and the Commissioner, who had given necessary directions for filing the appeals was not material. There was sufficient material before the Commissioner of Central Excise to issue necessary directions. The legal provisions were clear and the procurer was deemed to be a manufacturer only for the limited purpose of collection of central excise duty. The benefit of small scale exemption was on a different footing and it was not even claimed by the procurers when they had challenged the imposition of levy. He also referred to the Tribunal's decision in the case of Collector of Central Excise Vs.
Titaghar Paper Mills Co. Ltd. - 1989 (44) ELT 667 (Tribunal). On this decision, the respondents have also placed reliance. It was his submission that the powers exercisable under Section 35 B (2) of the Central Excises Act (hereinafter referred to as the 'Act') were not by an authority superior in the hierarchy to the Commissioner of Central Excise (Appeals). Both Commissioner of Central Excise (Appeals) and the Commissioner of Central Excise were of equal rank. Thus aforesaid decision of the Tribunal in no way snatched away the powers vested in the Commissioner of Central Excise to issue necessary directions for filing the appeal with the Tribunal to the proper officer of the Department. The decision in that case by the Tribunal was with regard to the erstwhile Section 35 E(1) of the Act.
On merits, we find that the matter is already covered by the Tribunal's decision ni the case of Commissioner of Central Excise, Chandigarh Vs.
Dewan Modern Breweries Ltd. and M/s. Gupta Modern Breweries Ltd. - Appeal Nos.E/2844/2000 D, E/2845/2000 D and E/2694/2000 D - Final Order No.28-30/2001 D dated 12.01.2001.
5. We may add that the use of the device known as a legal fiction -fictio juris - is for certain specific purposes by which the law deliberately departs from the truth of things. In the Principles of Statutory Interpretation - 3rd Edition - Chief Justice, Shri G.P. Singh has so explained the scope of legal fiction:- " In interpreting a provision creating a legal fiction, the Court is to ascertain for what purpose the fiction is created; [refer Ex Parte Walton, In re Levy, (1881) 17 Ch D 746, p 756, State of Trav-Co v. Shanmugha Vilas Cashewnut Factory, Quilon, AIR 1953 SC 333, pp 342, 343, State of Bombay v Pandurang Vinayak, AIR 1953 SC 244, p 246], and after ascertaining this, the Court is to assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction, [refer East End Dwelling Co. Ltd. V. Finsbury Borough Council, (1951) 2 All ER 587, (HL) p 599; State of Bombay v. Pandurang Vinayak, supra p 246; CIT, Delhi v S Teja Singh, AIR 1959 SC 352, p 355; Chief Inspector of Mines v Karam Chand Thaper, AIR 1961 SC 838, p 845]. But in so construing the fiction it is not to be extended beyond the purpose for which it is created. [refer In re, Coal Economising Gas Company, (1875) 1 Ch D 182, pp 188, 189; Hill v East and -West India Dock Co, (1884) 9 AC 448 (HL) p 458; Bengal Immunity Co. Ltd. v. State of Bihar, AIR 1955 SC 661, p 680; CIT, Bombay v. Amarchand N. Shroff, AIR 1963 SC 1448, p 1452: Mandalasa Devi v. M. Ramanarain Pvt. Ltd. AIR 1965 SC 1718, p 1720; M.K. Balakrishna Menon v. Asstt.
Controller of Estate Duty, Ernakulam, AIRCIT, Gujarat v. Vadilal Lallubhai, AIR 1973 SC 1016, p 1019] or beyond the language of the section by which it is created. [refer CIT, Bombay City II v. Shakuntala, AIR 1966 SC 719. p 722]. It cannot also be extended by importing another fiction. [refer CIT, (Central) Calcutta v. Moon Mills Ltd. AIR As was observed by JAMES, L J: "When a statute enacts that something shall be deemed to have been done, which in fact and in truth was not done, the court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to". [refer Ex parte Walton, In re Levy, (1881) 17 Ch D 746 p 756; referred to in Hill v East and West India Dock Co. (1884) 9 AC 448 (HL), pp 456, 458; State of Trav-Cochin V. Shammugha Vilas Cashewnut Factory, AIR 1953 SC 333 p 343]. "when a legal fiction is created", stated S R DAS, J "for what purpose, one is led to ask at once, is it so created?" [refer State of Trav-Co v Shammugha Vilas Cashewnut Factory, Supra, p 342]." 6. We may specifically refer to the Supreme Court's decision in the case of M/s. Bengal Immunity Co. Ltd. Vs. State of Bihar - AIR 1955 (SC) 661. The Hon'ble Supreme Court at page 677 of the AIR after referring to the explanation in Article 286 (1)(a) of the Constitution observed that when the legal fiction was only for the purpose of sub-clause (a), it could not be extended to any other purpose. It should be limited to its avowed purpose. In para-31, the Hon'ble Supreme Court had held as under:- The Apex Court affirmed the view that a legal fiction is to be limited to the purpose for which it was created and should not be extended beyond the legitimate filed. Same conclusions have been drawn in para-33 and para-107 of the said judgement. Para-107 is extracted below:- "107. As to reason (5): the argument totally ignores the purpose and efficacy of a legal fiction. A legal fiction pre-supposes the correctness of the state of facts on which it is based and all the consequences which flow from that state of facts have got to be worked out to their logical extent. But due regard must be had in this behalf to the purpose for which the legal fiction has been created. If the purpose of this legal fiction contained in the Explanation to Article 286 (1) (a) is solely for the purpose of sub-clause (a) as expressly stated it would not be legitimate to travel beyond the scope of that pupose and read into the provision any other purpose howsoever attractive it may be.
The legal fiction which was created here was only for the purpose of determining whether a particular sale was an outside sale or one which could be deemed to have taken place inside the State and that was the only scope of the provision. It would be an illegitimate extension of the purpose of the legal fiction to say that it was also created for the purpose of converting the inter-State character of the transaction into an intra-State one. This type of conversion could not have been in the contemplation of the Constitution -makers and is contrary to the express purpose for which the legal fiction was created as set out in the Explanation to Art. 286 (1) (a)." 7. For the purpose of the present controversy, the legal fiction has been created by Rule 9 C of the rules as under:- "Rule 9 C - Rules to apply to procurer - The provisions of these rules shall apply to a procurer of molasses as if such molasses has been manufactured by him." The purpose for which the above legal fiction was created has been discussed in paras 5 and 6 of the Tribunal's Order dated 12.01.2001 relied upon by the ld. SDR. Both paras 5 and 6 are extracted below:- 5. Although by legal fiction, the procurer of khandsari molasses was deemed to be a manufacturer of such molasses, the expression used for such a procurer was not that of a manufacturer but only of a procurer in Rule 9 (providing for the time and manner of payment of duty) and in Rule 9 A providing for determination of duty and Tariff valuation).
mThe change was made as a part of 19(SIC) Budget wherein it was explained [at page A 76 of (SIC) (90) ELT] as under:- (1) Valuation on the basis of maximum retail price indicated on packaged commodities. -A new Section 4A has been inserted in the Central Excise Act with the objective of enabling the Government to charge excise duty with reference to maximum retail price. The section will apply to such commodities as may be notified by the government in the official gazette. This section can be invoked for a commodity on which the retail price is required to be indicated as a statutory obligation.
(2) Cost audit.-Another new Section 14AA has been introduced to enable to Commissioners to order for cost audit in case of misuse of Modvat credit or where the Modvat credit is far in excess of normal limits. This new section shall also come into force on the enactment of the Finance Bill, 1997.
(3) Khandsari molasses. - One striking feature of this year's change is to provide for collection of excise duty at the consumption point in the case of khandsari molasses. Relevant rules of the Central Excise Rules, 1944 have been amended to provide for the manner of collection and the time of collection of duty in respect of khandsari molasses. The intention is to collect the excise duty on such khandsari molasses which finds use ni the manufacture of alcohol. Khandsari molasses going for other uses are not intended to be charged to excise duty. Further, the khandsari producers are not required to pay any excise duty. The liability to pay duty has been put on the distilleries. The excise duty is to be paid by the distilleries on the date of receipt of khandsari molasses. Duty is to be collected on the entire quantity of molasses irrespective of the fact the alcohol manufactured by the distillery is for potable or industrial use. However, Modvat of duty paid on khandsari molasses is admissible to the exten(SIC) is used for the manufacture of dutiable excisable goods.
6. The legal fiction to deem the procurer of khandsari molasses as a manufacturer was to give effect to the legislative intention to levy and collect duty at the consumption point (and not on the manufacturing point) on such khandsari molasses which were used in the manufacture of alcohol. Khandsari molasses used for manufacture of goods other than alcohol remained exempt vide Sl.No.1 of the Table i(SIC) Notification No.4/97 CE dated 1.3.97. No change in this context was made in the scheme of small scale industries exemption where the application of exemption continued to remain to the manufacturers and not to the procurers of khandsari molasses, who in fact were not the manufacturers but were deemed to be so by virtue of the legal fiction. Under Notification No.7/97 CE dated 1.3.97, clearances as specified for home consumption were eligible for exempted/slab concessional rate of duty as specified in the Table in that Notification. In para-2, the exemption was made applicable subject to various conditions as related to the manufacturer and his factories. Para-2 from that Notification is extracted below:- 2. The exemption contained in this notification shall apply only subject to the following conditions, namely:- (i) A manufacturer has the option to not avail the exemption under this notification and to pay the appropriate duty of excise leviable, under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) read with any notification issued under sub-section (1) of section 5A of the said Central Excise Act, but for the exemption contained in paragraph 1, and such option once exercised in a financial year cannot be withdrawn in the same financial year under any circumstances.
(ii) The manufacturer does not avail credit of duty (under rule 57A of the Central Excise Rules, 1944) paid on inputs used in or for the manufacture of the specified goods, the aggregate value of first clearances of which does not exceed rupees one hundred lakhs in the relevant financial year.
(iii) The aggregate value of clearances of all excisable goods for home consumption (including clearances for export to Bhutan or Nepal) by a manufacturer from one or more factories, or from a factory by one or more manufacturers, has not exceeded rupees three hundred lakhs in the preceding financial year: Provided that for the purpose of determining the aggregate value of clearances, the following clearances shall not be taken into account:- (a) any clearances, which are exempt from the whole of the excise duty leviable thereon (other than an exemption based on quantity or value of clearances) under any other notification or on which no excise duty is payable for any other reason; (b) any clearances bearing the brand name or trade name of another person, which are ineligible for the grant of this exemption in terms of paragraph 3 below; (c) any clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods. Such clearances of specified goods used as inputs shall be deemed to be exempt from the whole of the duty of excise leviable thereon; (d) any clearances of strips of plastics used within the factory of production for weaving of fabrics or for manufacture of sacks or bags made or polymers of ethylene or propylene.
(iv) Where a manufacturer clears the specified goods from one or more factories, the exemption in his case shall apply for the total value of clearances mentioned against each f the serial numbers in the said table and not separately for each factory.
(v) Where the specified goods are cleared by one or more manufacturers from a factory the exemption shall apply for the total value of clearances mentioned against each of the serial numbers in the said Table and not separately for each manufacturer.
8. We consider that the matter has been discussed in considerable detail in that Tribunal's decision and there is no force in the arguments advanced by the respondents in this regard.
9. We again reiterate that the exemption notification No.1/93 CE dated 28.2.93 was a conditional exemption notification. The benefit of exemption notification could not be extended to the procurers of khandsari molasses only on the sole ground that under Rule 9 C of the rules, the procurer of molasses was deemed to be a manufacturer. The procurer could not be said to have cleared the khandsari molasses for home consumption, which was an important condition in the notification.
The procurer of khandsari molasses could not be deemed to have the factory where the khandsari molasses were produced. In no case, the place of producing alcohol could be considered as a factory for the purposes of excise law. We, therefore, consider that the conditions subject to which the benefit of small scale exemption under Notification No.1/93 CE was available to manufacturers of excisable goods could be made applicable to the procurers of khandsari molasses.
10. In the light of our above discussion, we do not agree with the view taken by the ld. Commissioner of Central Excise (Appeals), that eh respondents were eligible for the benefit of small scale exemption under Notification No.1/93 CE dated 28.2.93.
11. As regards the argument that the same incumbent who had passed the impugned order-in-appeal, had given orders for filing of the appeals against his own orders, we find no force in this argument also. The name of the officer is of no consequence for the purposes of Section 35 B (2) of the Act, which is extracted below:- "Section 35 B (2): The Commissioner of Central Excise may, if he is of opinion that an order passed by the Appellate [Commissioner of Central Excise] under Section 35, as it stood immediately before the appointed day, or the [Commissioner (Appeals)] under Section 35 A, is not legal or proper, direct any Central Excise Officer authorised by him in this behalf (hereinafter in this Chapter referred to as the authorised officer) to appeal on his behalf to the Appellate Tribunal against such order." The respondents have referred to the Tribunal's decision in the case of Collector of Central Excise Vs. Titaghar Paper Mills Ltd. - 1989 (44) ELT 667 (Tribunal). In that decision, the provision under discussion was Section 35 E (1) of the Act, which was couched in the following terms:- " The Board may, of its own motion, call for and examine the record of any proceeding in which a Collector of Central Excise as an adjudicating authority has passed any decision or order under this Act for the purpose of satisfying itself as to the legality or propriety of any such decision or order and may, by order, direct such Collector to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the Board in its order." The Tribunal had taken a view that the order o review passed by the Collector in his capacity as "Collector" was not reviewable by him on appointment as Member of the Board. In the present case, the power was exercised under the provisions of Section 35 B (2) as already extracted above. We do not find any illegality in this regard.
12. The respondents were required to pay duty which they did not pay.
The imposition of penalty was called for and in the facts and circumstances of these cases was justified.. However, in the facts and circumstances of the case, the amount of penalty in Appeal No.E/3034/2000 D is reduced from Rs.4,01,517/-- to Rs.2,00,000/- (Rupees Two lakhs only), and in Appeal No.E/3035/2000 D from Rs.4,00,000/- to Rs.3,00,000/- (Rupees Three lakhs Only). As regards Appeal No.E/3077/2000 D, a penalty of Rs.50,000/- (Rupees Fifty Thousand only) was imposed when the duty liability was of Rs.1,23,555/-. No change in the amount of penalty of Rs.50,000/- (Rupees Fifty Thousand only) is called for in this appeal.
13. As a result, both the impugned orders-in-appeal are set aside and the orders-in-original are restored subject to the reduction in the amount of penalties in the two cases as above.
14. All the three appeals filed by the Revenue are thus allowed in the above terms. The cross objections filed by the respondents are also disposed of accordingly.