K.S. Venkataramani, Member (T) -
(1.) THESE two appeals arise out a common impugned order of the Collector of Central Excise (Appeals), Madras dated 23 -10 -1987. The facts in brief are that the appellants had obtained impure form of carbonic gas/carbon dioxide under Notification No. 235/85. The resultant product after verification was cleared with full duty exemption under Notification No. 40/85 and 175/86. Demands were raised, subsequently, by the Department by a show cause notice dated 22 -9 -1986 alleging that the appellants had removed carbon dioxide by availing the benefit of Notification 40/85 and 175/86 without paying duty which was not in conformity with the conditions of the Notification 235/85, according to which carbon dioxide manufactured from the impure carbon dioxide must be cleared on payment of appropriate duty of Central Excise whether in whole or in part under Section 3 of the Central Excises and Salt Act, 1944. The Assistant Collector confirmed the demand for Rs. 7,12,546.00 holding that the conditions under which impure carbon dioxide had been obtained duty -free, had not been fulfilled. The Collector (Appeals) upheld the order of the Assistant Collector rejecting the further contention made before him that if Notification 235/85 is not available, alternatively, the appellants were eligible for exemption under Notification No. 40/85 which exempts carbon dioxide used for industrial purposes on the condition that procedure under Chapter X is followed. The Collector (Appeals) held that Notification 235/85 is specific for exempting carbon dioxide not conforming to ISI specification and he, further, observed that if Notification No. 40/85 was available also for impure form of carbon dioxide, there was no necessity for the Government to issue another specific Notification, subsequently.
(2.) SHRI V. Sridharan, Ld. Counsel appearing for the appellants, contended that the appellants in this case had been permitted from 1978 onwards to avail of Rule 56B Procedure for the movement of semi -finished goods between the factories without payment of duty. However, this facility was withdrawn from them on 19 -12 -1981 by the Collector holding that there was sale of impure carbon dioxide by M/s. Coramandal Fertilisers Ltd. to the appellants and Rule 56B will not apply to such a situation. This was challenged before the High Court and ultimately before the Tribunal and on a remand of the case to the Collector of Central Excise, Guntur by his order dated 5 -1 -1988, the Collector held that the withdrawal of the permission under Rule 56B is incorrect and the appellants are eligible for availing of the Rule 56B Procedure. Meanwhile since the facility had been withdrawn and with the issue of Notification 235/85, which itself was in response to representation made by the industry, the appellants complied with Chapter X Procedure and opted for the exemption under Notification 235/85. The Ld. Counsel, vehemently, urged that in such a factual background, if the Department seeks to deny now, the exemption under Notification 235/85 to the appellants, then the justice and fairness will demand that the benefit of Rule 56B Procedure should be extended to the appellants even for the impugned period. Arguing further, the Ld. Counsel relied upon the decision of the Tribunal in the case of l.E.L. Ltd. v. Collector of Central Excise -1988 (35) ELT 142. The Tribunal was considering Notification 101/66 at SI. No. 4 thereof and observed that when the condition for exemption is that the duty on final product is exempted only when appropriate duty had been paid on raw -materials, such appropriate duty will include nil duty in terms of exemption Notification. Similarly, in the case of Tata Yodogawa v. Union of India - 1987 (32) ELT 521 (Pat.) the Patna High Court held, while interpreting Notification 66/73, that the words 'already paid' in the Notification would mean 'contracted to be paid' or 'ought to have been paid'. Therefore, the clearance of the product, from the appellants' factory at nil rate of duty under exemption, will also amount to payment of appropriate rate of duty and in this view of the matter, according to the appellants, there has been no violation of the condition of exemption under Notification 235/85. In the alternative, there is another Notification available to the appellants, namely 40/85 which exempts carbon dioxide used for industrial purposes from duty on following the Chapter X Procedure. The appellants had, admittedly followed the Chapter X Procedure in this case. It was also contended that wherever two Notifications are available, it was open to the asses -see to avail of that which is advantageous to him relying on the Tribunal decison in the case of Dunbar Mills Ltd. v. Collector of Central Excise -1989 (44) ELT 500.
(3.) SHRI S.K. Roy, Ld. S.D.R. appearing for the Department contended that the question, here, is on recovery of duty on the impure carbon dioxide which had been cleared without payment of duty under Notification 235/85, but which had been purified and the final product cleared again under exemption. The condition in the Notification that the final product manufactured therefrom should pay duty in whole or in part under Section 3 of the Central Excises and Salt Act, 1944, is a clear condition in the Notification. So long as this is not fulfilled, the duty has to be recovered. The intention and the language of the Notification to this effect is very clear and unambiguous, calling for no need to go into the interpretation of the words in the Notification. As between the Notifications 235/85 and 40/85, it was pointed that Notification 235/85 was specific for impure carbon dioxide not conforming to ISI specification and has to be preferred.
The submissions made by both the parties have been carefully considered. The starting point of the dispute before us is the show cause notices issued to the appellants. These are to the effect that the appellants are obtaining impure carbon dioxide not conforming to ISI specification No. 307 -1966 falling under sub -heading 2802.40 Central Excise Tariff Act, 1985 is from M/s. Coramandal Fertilizers Ltd. under Chapter X Procedure and that the condition under Notification 235/85 that the bottling unit should clear the goods on payment of appropriate duty of excise leviable whether in whole or in part under Section 3 of the Central Excises and Salt Act, 1944, but it was found by the .Department that the appellants have cleared the purified carbon dioxide at nil rate of duty. The Notification 235/85 exempts carbonic acid (carbon dioxide) not conforming to I.S.I, specification No. 307 -1966 falling under Item No. 14H of the First Schedule of Central Excises and Salt Act, 1944 from the whole of the duty of excise leviable thereon under Section 3 of the Act when intended to be supplied for use in a bottling plant for the manufacture of liquid carbon dioxide or solid carbon dioxide conforming to ISI specification 307 -1966 and where the carbon dioxide so manufactured, is cleared on payment of appropriate duty of excise leviable, whether in whole or in part under Section 3 of the said Act. The explanatory memorandum was also issued to the Notification in Ministry's F. No. 105/7/85 -CX. 3 : "Notification No. 235/85 -Central Excises dated 15th November, 1985 seeks to provide full exemption from excise duty on carbon dioxide not conforming to ISI specifications, falling under Item No. 14H of the First Schedule of Central Excises and Salt Act, 1944, produced in a factory or a distillery and intended to be supplied for use in a bottling plant for the manufacture of carbon dioxide conforming to I.S.I, specifications on which the duty of excise is paid before its removal from the bottling plant". A reading of the text of the Notification as well as the Explanatory Memorandum which gives the object behind the Notification issued simultaneously with the Notification by the Government clearly shows that the exemption is designed to be granted to impure carbon dioxide when used in the manufacture of pure carbon dioxide conforming to I.S.I. specification and which is cleared on payment of duty whether in whole or in part. The Notification does not merely stop with saying that the carbon dioxide, manufactured out of impure carbon dioxide, should be cleared on payment of appropriate duty of excise leviable, but goes on to say "whether in whole or in part under Section 3 of the said Act." The Explanatory Note, further, confirms that the exemption is intended to such purified carbon dioxide on which the duty of excise is paid before its removal from the bottling plant. The wording to specify the condition that appropriate duty whether in whole or in part should have been paid on the final material, is something peculiar to this Notification No. 235/85 and which was not present in the Notifications considered by the Tribunal in the case of IEL or in the case of Tata Yodogawa relied upon by the appellants. The well -settled principle is also to be borne in mind that a strict reading of an exemption Notification is desirable to all who implement and interpret a taxation law, because by not doing so, one may confer an exemption on a commodity that really does not qualify for it. In the present case, the Government of India, at the time of issue of Notification itself, has made the intention clear that the final purified carbon dioxide, manufactured out of impure carbon dioxide, for which the exemption is given, must have paid duty before removal from the bottling plant. The intention is also clear and couched in unambiguous terms. Therefore, in such a view of the matter, the stand of the lower authority that duty is recoverable on that quantity of impure carbon dioxide, has a lot offerce and is upheld. An alternate plea has also been made that there is another Notification 40/85 dated 17 -3 -1985 which will also be available to the appellants. SI. No. 4 of the table to the Notification is relevant for this purpose -
4.(4) Carbonic Acid (ii) If - (Carbon Dioxide) (a) used for any industrial purposes; and (b) such use is elsewhere than in the factory production of carbonic acid, the procedure set out in Chapter I of the Central Excise Rules, 1944, is followed: Provided that the exemption contained in this notification shall not apply to carbonic acid which is used in the manufacture of beverages or aerated water." ;