Supreme Court of India
CC (PREVENTIVE) AMRITSARversusM/S. MALWA INDUSTRIES LTD
- Citation
- 2009 INSC 157
- Decided
- 12 February 2009
- Disposal
- Dismissed
- Bench
- S B SINHA
Holding
The phrase “same factory” refers to the factory where the imported goods are used, and if excise duty on a like article is nil, no additional duty is payable under Section 3(1) of the Customs Tariff Act, 1975.
Summary
The appellant, a customs preventive authority, challenged the exemption granted to M/s Malwa Industries Ltd under Notification No. 4/2006‑CE dated 1 March 2006, which provided a nil rate of additional duty on certain imported goods used in the same factory. The issue was whether the phrase “same factory” required the goods to be manufactured in that factory and whether Section 3(1) of the Customs Tariff Act, 1975 would still levy an additional duty when excise duty on the like article was nil. The Court held that “same factory” merely means the factory where the goods are used, not where they are manufactured, and that if excise duty is not leviable, no additional duty can be imposed. Consequently, the exemption notification applied and the Tribunal’s order was affirmed. The appeals were dismissed with costs.
Issues considered
- The meaning of “same factory” in Notification No. 4/2006‑CE – does it require manufacturing in the same factory?
- Whether Section 3(1) of the Customs Tariff Act, 1975 imposes additional duty on imported goods when the excise duty on a like article is nil.
- Whether the exemption notification should be construed strictly or liberally in light of its purpose.
Legislation cited
- Central Excise Act, 1944
- Central Excise Rules, 1944s. Chapter X, s. Rule 192
- Customs Tariff Act, 1975s. 3(1)
Subjects
customs dutyadditional dutyexemption notificationsame factoryinterpretation of statutescountervailing dutyexcise dutycaptive consumption
Judgment
(2009] 2 S.C.R. 120
A CC (PREVENTIVE) AMRITSAR y
V.
M/S. MALWA INDUSTRIES LTD
Civil Appeal Nos. 7076-7080 Of 2008
FEBRUARY 12, 2009
B
(S.8. SINHA AND DR. MUKUNDKAM SHARMA, JJ)
CUSTOMS TARIFF ACT, 1975:
+-
s. 3(1) - Additional duty - Exemption under notification
c dated 1. 3. 2006 to goods falling under Tariff Heading 3204 -
Assessee claiming exemption in respect of goods imported
and captively consumed - HELD : If excise duty is not levi-
able on manufacture of goods, no additional duty for import of
like goods would be leviable - Judgment of CESTAT holding
0 assessee entitled to benefit of exemption notification upheld
- Interpretation of statutes - Notification No. 412006- CE dated .._
1. 3. 2006 - Interpretation of
The respondent Industry was engaged in manufac-
turing textile goods. It imported certain items falling un-
E der Tariff Heading 32041559, for captive consumption. Ad-
ditional duty in terms of s. 3 of Customs Tariff Act, 1975
was charged on the assessable value of the imported
items. The appeals of the assessee contending that in view J.
of exemption Notification No. 4/2006-CE dated 1.3.2006
F no excise duty was payable, were allowed. The Customs
Excise and Service Tax Appellate Tribunal upheld the or-
der. '
In the appeals filed by the Revenue the question for
G consideration before the Court was: "Does the 'nil' rate
of duty, as provided for in the Notification No. 4/2006-CE ;
dated 1.03.2006, subject to the condition that the same
are used in the same factory would mean that the goods
H 120
CC (PREVENTIVE) AMRITSAR V. 121
M/S. MALWA INDUSTRIES LTD
):
which were to be used must be manufactured in the same A
factory?"
Dismissing the appeals, the Court
HELD: 1.1 A notification like any other provision of a
statute must be construed having regard to the purpose
and object it seeks to achieve. For this purpose, the statu- B
tory scheme in terms whereof the notification has been
issued should also be taken into consideration. [para 12]
-· [ 127-D, E]
1.2 Section 3 of the Customs Tariff Act, 1975 on its
plain reading, provides that the goods imported into In- c
dia would be liable to additional duty. The object of levy
of the said duty is that an importer should not be placed
at some more advantageous position vis-a-vis the pur-
chasers/ manufacturers of similar goods in India. [para
11] [ 127-C, D] D
J
1.3 Where literal meaning leads to an anomaly and
absurdity, it should be avoided. When tha goods are im-
ported, evidently, the same would not be manufactured
in the same factory. It would, therefore, be impossible to
apply the provisions of s. 3(1) of the Act vis-a-vis the noti- E
fication issued in the case of imported goods. [para 13]
(127-E, F]
.l 1.4 The expression "same factory", therefore, would
mean the factory where the goods are actually manufac-
tured. It only means that the imported goods are required F
to be used in the factory belonging to the importer where
the manufacturing activity takes place. There is nothing
in s.3 of the Act and in particular the explanation appended
to Sub-section (1) thereof mandating actual production
or manufacture in the said factory itself. There cannot be G
any doubt -whatsoever that if excise duty is not leviable
on manufacture of goods, the question of the importer
paying any additional duty for import of like goods would
not arise. The instant case is covered by Thermax Private
Ltd and the point on which the matter has been referred
H
122 SUPREME COURT REPORTS [2009] 2 S.C.R.
A to a larger Bench does not arise for consideration horeln.
[para 14 and 21] [127·G, H; 128·A, B; 137·C] x
Thermax PrlvtJ_te Ltd. v. Collector of Customs 1992 (61)
E.L. T. 3!52 (SC) ..: (1992) 4 SCC 440; Hyderabadlndustrles
Ltd. v. Union of lndltJ 1999 (1 OB) fEL T 321 (SC): (1999) 5 SCC
B 15 Loh/a Sheet Products v. Commr. Of Customs, New Delhi
2008 (224) EL T 349 (SC); and Tata OJI Miiis Co. Ltd. v. Co/..
Jector of Central /Excise (1989) 4 SCC 541 • relled on.
Central Excise, Triohy v. Rukmanl Pakt<well Trti ~t1Jrs 2004 ,I-
(166) ELT 481=(2004) 11 SCC 801; Nations/ Aluminium Co.
c Ltd. v. Commissioner of Central Excise, Bhubaneswar 2000
(125) ELT 519; Sarsbhal M. Chemicals v. Commissioner of
Central Excise, Vadodara (2005) 2 SCC 188 : (200!5) 179 EL T
3; Plastic Processors v. Union of Ind/a 2002 (143) F.L r 521;
Commissioner of Central Excise, New Delhi v. Harl Chand
D
Shrl Gopal 2005 (188) !EL T 353; Collector of Central Excise,
Jaipur v. J. K. Synthetics 2000 (120) EL T 54 and Klrlosker •.
Brothers Ltd. v. Collector of. Central Excise, Pune 1997 (94)
EL T 176 (Tribunal); Kartar Rolling Miiis v. Commissioner of
Central Excise, New Delhi (2006) 4 SCC 772 : 2006 (197)
E ELT 151; and Eagle Flask Industries Ltd. v. Commissioner of
Central Excise, Pune (2004) 7 SCC 377: 2004 (171) ELT 296
- referred to.
Case Law Reference .l
F (1992) 4 sec 440 relled on para 3
(1999) s sec 16 rolled on para 3
2002 (143) ELT 621 referred to para 18
2008 (224) ELT 349 (SC) referred to para 18
G
(2004) 11 sec eo1 referred to para 19
(2oos) 2 sec 1sa referred to para 19
2008 (197) ELT 161 referred to para 20
H
CC (PREVENTIVE) AMRITSAR V. 123
MIS. MALWA INDUSTRIES LTD
(2004) 1 sec 377 referred to para 20 A
(1989) 4 sec 541 relied on para 20
2005 (188) ELT 353 referred to para 21
2000 (120) ELT 54 referred to para 21
B
2000 (125) ELT 519 referred to para 21
1997 (94) ELT 176
-~
(Tribunal) referred to. Para 21
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. c
7076-7080 of 2008
From the Judgement and Order dated 30.04.2008 of the
Hon'ble Customs, Excise and Service Tax Appellate Tribunal,
Principal Bench at New Delhi in Customs Appeals Nos. 43-47 D
~ of 2008
Harish Chandra, H. Ra1ghvendra Rao, Sanjeev K.
Bhardwaj, Shreekant N. Terdal, for the Petitioner.
Ajay Aggarwal, Ranjan Narain, for the Petitioner. E
The Judgement of the Court was delivered by
+- S.B. SINHA, J :
1. Interpretation of an exemption notification bearing No. F
4/2006-CE dated 1.03.2006 is in question in these appeals
which arise out of a judgment and order dated 30.04.2008
passed by the Customs, Excise and Service Tax Appellate Tri-
bunal (for short "the Tribunal"), Principal Bench, New Delhi in
Custom Appeal Nos. 43-47 of 2008. G
2. Respondent is engaged in the business of textile and
manufacturing of textile goods, viz., Dystar Indigo VAT 40 per
cent SOL/Indigo Powder 90 per cent Wettable. The said im-
ported goods fell under Tariff H13ading 32041559. Additional H
124 SUPREME COURT REPORTS [2009] 2 S.C.R.
A Outy (CVD) was charged on the assessable value of the goods
purported to be in terms of Section 3 of the Customs Tariff Act,
1975 (for short "the Act").
Urging that no excise duty was payable on the said goods
in view of the notification dated 1.03.2006, the respondent pre-
B ferred appeals aggrieved thereby. The said contention was
upheld. Appellant approached the Tribunal thereagainst. The
said appeal, by reason of the impugned judgment, has been
dismissed.
c 3. Mr. Harish Chandra, learned senior counsel appearing
on behalf of the appellant, submitted that:-
(i) The appellate authority as also the Tribunal committed
a serious error in passing the impugned judgment
insofar as they failed to take into consideration that
D an exemption notification should be construed strictly.
(ii) An assessee would be entitled to the benef!t of an ~
exemption notification only in the event the conditions
precedent therefor are satisfied. ·
E (iii) As the raw material was required to be a product of
the same factory, the impugned notification, the
learned counsel argued, was not attracted.
(iv) In any event, the Tribunal having based its .decision
on a judgment of a Three-Judge Bench of this Court
F in Therrnax Private Ltd. v. Collector of Customs [1992
(61) E.L.T. 352 (SC) : (1992) 4 sec 440], the
correctness whereof having been doubted and
referred to the Constitution Bench in Hyderabad
Industries Ltd. v. Union of India [1999 (108) ELT 321
G (SC): (1999) 5 SCC 15], the impugned judgment is
wholly unsustainable. 1
4. The learned counsel appearing for the respondent, how-
ever, supported the impugned judgment.
H 5. We may, however, notice that part of the judgment in
CC (PREVENTIVE) AMRITSAR V. 125
M/S. MALWA INDUSTRIES LTD [S.8. SINHA, J.]
Thermax Private Ltd. (supra), in terms whereof the manner in A
which Chapter X of the Act is to be applied has merely been
referred to the Constitution Bench and not the question which is
involved herein.
6. Parliament enacted the Act; Section 3(1) whereof pro-
vides for levy of additional duty equal to excise duty. B
7. Indisputably, if it is found that the notification dated
1.03.2006 is applicable in relation to the import of the goods in
question by the respondent herein, the excise duty thereon be-
ing 'nil', no additional duty would be payable. The said provi- C
sion reads, thus:
"3. Levy of additional duty equal to excise duty.- (1)
Any article which is imported in India shall, in addition, be
liable to a duty (hereinafter in this section referred to as
the additional duty) equal to the excise duty for the time D
being leviable on a like article if produced or manufactured
in India and if such excise duty on a like c:lrticle is leviable
at any percentage of its value, the additional duty to which
the imported article shall be so liable shall be calculated
at that percentage of the value of the imported article. E
Explanation - In this section, the expression 'the excise
duty for the time being leviable on a like article if produced
or manufactured in India' means the excise duty for the F
time being in force which would be leviable on a like article
if produced or manufactured in India, or, if a like article is
not so produced or manufactured, which would be leviable
on the class or description of articles to which the imported
article belongs, and where such duty is leviable at different G
rates, the highest duty."
8. The notification dated 1.03.2006, interpretation whereof
falls for our decision, reads, thus:
"In exercise of the powers conferred by Sub-section (1) of H
t
l
126 SUPREME COURT REPORTS [2009J 2 S.C.R.
A Section SA of the Central Excise Act, 1944 (1 of 1944),
the central Government, on being satisfied that It Is
necessary In the public interest so to do, hereby exempts
excisable goods of the description specified in column
(3) of the Table below ......... as are given In the
8 corresponding entry In column (2) of the said Table, from
so much of the duty of excise specified thereon under the ,._
'
First Schedule to the Central Excise Tariff Act, as is in I
excess of the amount calculated at the rate specified in ~
the corresponding entry in column (4) of the said Table J-
c and subject to the relevant conditions specified in the
Annexure to this notification, and the Condition number of
which Is referred to In the corresponding entry in column
(5) of the Table aforesaid.
CC (PREVENTIVE) AMRITSAR V. 127
MIS. MALWA INDUSTRIES LTD [S.B. SINHA, J.]
9. The short question which arises for consideration is: A
;. Does the 'nil' rate of duty, as provided for in the said notification
dated 1.03.2006, subject to the condition that th~ same are used
in the same factory would mean that the goods which were to
be used· must be manufactured in the same factory?
10. An exemption notification should be read literally. A B
person claiming benefit of an exemption notification must show
that he satisfies the eligibility criteria. Once, however, it is found
that the exemption notification is applicable to the case of the
assessee, the same should be construed liberally.
c
11. Section 3 of the Act, on its plain reading, provides that'
the goods imported into India would be liable to additional duty.
The object of levy of the said duty is that an importer should not
be placed at some more advantageous position vis-a-vis the
purchasers/ manufacturers of similar goods in India.
D
12. A notification like any other provision of a statute must
r be construed having regard to the purpose and object it seeks
to achieve. For the aforementioned purpose, the statutory
scheme in terms whereof such a notification has been issued
should also be taken into consideration. E
13. It is a wen.:settled principle of law that where literal
meaning leads to an anomaly and absurdity,· it should be
avoided. When the goods are imported evidently, the same
j would not be manufactured in the same factory. It would, there-
fore, be impossible to apply the provisions of Section 3(1) of F
the Act vis-a-vis the notification issued in the case of imported
goods.
- 14. The expression "same factory", therefore, in our opin-
ion, would mean the factory where the goods are actually ma nu- G
factured. It only means that the imported goods are required to
be used in the factory belonging to the importer where the manu-
facturing activity takes place. There is nothing in Section 3 of
the Act and in particular the explanation appended to Sub-sec-
tion (1) thereof mandating actual production or manufacture in H
128 SUPREME COURT REPORTS (2009] 2 S.C.R.
A the said factory itself. There cannot be any doubt whatsoever
that if excise duty is not leviable on manufacture of goods, the
question of the importer paying any additional duty for import of
like goods would not arise.
That is principally the question which fell for determination
B in Thermax Private Ltd. (supra) and answered in the following
terms:
"6. It is common ground that customs duty is payable and
has been paid on the imported goods under customs tariff
c Item No. 84.17(1) at 40 percent of the value of the imported
goods plus a surcharge of 25 per cent thereon. The rate .
of CVD, however has to be determined on the basis of
Item No. 29-A of the central excise tariff. It is common
ground that "chillers" fall under sub-item (3) of Item No. 29-
A and that the basic excise duty payable thereon was at
D
80 per cent of the value of the goods under the above item
read with Notification No. 42of1984/C.E. dated March 1,
1984.
*** *** ***
E 9. The assessee's claim for concession has, however,
been rejected not on the ground that the second of the
above conditions has not been fulfilled but on the broader
ground that the procedure of Chapter X is designed to
facilitate clearances only for the purposes of central excise
F and that the said procedure cannot be fulfilled at all in the
·case of an importer. In other words, the view was that the
second condition was such that it was attracted only for
purposes of central excise and could not at all be invoked
to claim a concession in CVD. It is the correctness or
G otherwise of this conclusion that has to be determined in
these appeals."
15. The aforementioned dicta was noticed and approved
by the Constitution Bench of this Court in Hyderabad Industries
H Ltd. (supra) wherein this Court noticed the following contention:
CC (PREVENTIVE) AMRITSAR V. 129
. M/S. MALWA INDUSTRIES LTD [S.B. SINHA, J.]
"6. An argument had been raised on behalf of the Union A
,.
'(
of India to the effect that the asbestos fibre imported by
the appellant was exigible to additional duty regardless of
the fact that it was not produced as a result of manufacture
and, therefore, not exigible to excise duty. In support of
this contention reliance was placed on this Court's judgment 8
in Khandelwal Metal & Engineering Works v. Union of
India. After discussing the said judgment the Bench was
.. of the view. that the decision in the case of Khandelwal
Metal & Engineering Works required consideration by a
larger Bench. It is pursuant to this direction that this Bench
has been constituted."
c
Answering the said contention, the Constitution Bench
expressly overruled the decision of this Court in Khandelwal
Metal & Engineering Works v. Union of India [1985 (20) ELT
222] wherein it had been observed: D
'The levy specified in Section 3(1) of the Tariff Act is a
supplementary levy, in enhancement of the levy charged
by Sectiorl 12 of the Customs Act and with a different
base constituting the measure of the impost. In other
words, the scheme embodied in Section 12 is amplified E
by what is provided in Section 3(1 ). The customs duty
charged under Section 12 is extended by an additional
duty confined to imported articles in the measure set forth
in Section 3(1). Thus, the additional duty which is
mentione~ in Section 3(1) of the Tariff Act is not in the F
nature of countervailing duty."
It was furthermore held:
"We are unable to accept the argument of the appellants
that Section 3(1) of the Tariff Act is an independent, G
charging section or that, the 'additional duty' which it speaks
of is not a duty of customs but" is a countervailing duty."
16. A Bench of the Delhi High Court in Plastic Processors
v. Union of India [2002 (143) ELT 521] opined:-
H
130 SUPREME COURT REPORTS [2009] 2 S.C.R.
A "8. As observed in,the aforesaid quoted portions by the
Apex Court, for the purpose of attracting additional duty "
. under Section 3 of the Tariff Act, on the import of a
manufactured or produced article, the actual manufacture
or production of a like article in India is not necessary.
B Said provision specifically mandates that CVD will be
equal to the excise duty for the time being livable on a like
article if produced or manufa9tured in India. This position
,.
\.-
.
was also elaborated in Thermax Private .
Limited case
(supra)." ".
c The special leave petition thereagainst was dismissed by
this Court stating:
"These Appeals can be disposed of by this common order.
Civil Appeal Nos.2578-2583 of 2001 are against the order
passed by the High Court of Delhi dated 12th September,
D
2000 whereas Civil Appeal No.91 of 2002 is against the
order dated 12th June, 2001 passed by the Customs,
Excise & Gold (Control) Appellate Tribunal, (in short
"CEGAT") New Delhi.
E The short question involv~d in these Appeals is ·'
regarding the validity of Circular· No.38/2000-Cus dated
10th May, 2000. By the two impugned orders the circulars
have been quashed. We are informed that apart from these
two matters the circular had also been challenged in the
F Gujarat High Court. The High Court of Gujarat by its ~
decision in the case of Lucky Star International v. Union of I
India reported in 2001 (134) E.L.T. 26 (Guj.) had also I
quashed the circulars. Against that decision Special Leave \
Petitions Nos ........... CC Nos.3434-3456 of 2001 had been
filed. That Special Leave Petitions got dismissed on 30th
G
July, 2001. '.
The circular had also been challenged in the Calcutta
. High Court. The Calcutta High Court by its Judgment dated
16th October, 2001 had also quashed the circular. Against
H the decision of the Calcutta High Court Special Leave
CC (PREVENTIVE) AMRITSAR V. 131
M/S. MALWA INDUSTRIES LTD [S.B. SINHA, J.]
Petition Nos ............ CC Nos. 9727-9731 of 2003 had been A
1 filed. Those Special Leave Petitions were withdrawn by
learned Attorney General on 19th January, 2004.
In view of the fact that one Special Leave Petition has
been dismissed and another has been withdrawn,we see
B
no reason to interfere.
The Civil Appeals stand dismissed. There will be no
order as to costs."
17. Yet again in Lohia Sheet Products v. Commr. Of Cus-
toms. New Delhi [2008 (224) ELT 349 (SC)], this Court cat- C
egorically held:
"16. This Court in the case of Thermax Pvt. Ltd. v.
Commissioner of Customs has held that since the
concession under Rule 192 turns only on the nature and D
use to which the .goods are put by the user or purchaser
thereof and whether he has gone through the procedure
outlined in Chapter X, it would not be corre~t to deny it to
a supplier of such goods on the ground that he was an
• importer and not a manufacturer. In other words, this Court E
stated in specific terms that one has to forget that the
goods are imported, imagine that the importer had
manufactured the goods in India, determine the amount of
excise duty that he would have been called upon to pay in
that event. The decision of the Tribunal that the assessee F
could not get a refund because the procedure of Chapter
X of the Rules is inapplicable to importers as such was
held to be wrong. It was further held that the benefit of the
exemption or concession should be granted wherever
Page 1127 the intended use of the material can be G
established by the imp_orter or by other evidence. In the
present case, it is a matter of fact that duty was paid by
the appellant at the time of import of waste or scrap. Mere
fact that the goods were imported would not make any
difference. The intention behind the grant of exemption H
132 SUPREME COURT REPORTS [2009] 2 S.C.R.
A under the notification was to preventthe duty being paid
at two stages."
We may notice the relevant extract of the notification dated
23.07.1996 in Lohia Sheet Products (supra), which reads as
under: ·
B
"Reference. Chapter Description of goods Rate
No. Heading
No. or
Sub-heading
c No.
(1) (2) (3) (4)
74.04 Copper waste and scrap used Nil"
within the factory of production
for the manufacture of
D . unrefined or unwrought copper,
copper sh~ets or-circles and
handicrafts.
18. A laige number of decisions have been cited by Mr.
Harish Chandra to show that the exemption notification must
E be strictly construed. We-may, however, notice only a few of
them.
19. In Commissioner of Central Excise. Trichy v. Rukmani
Pakkwell Traders [2004 (165) ELT 481 : (2004) 11 SCC 801], I
F it was held:
"6. The Tribunal had also held that under the notification
the use must be of "such brand name". The Tribunal has
held that the words "such brand name" show tbat the very
same brand name or trade name must be used. The
Tribunal has held that if there are any differences then the
exemption would not be lost. We are afraid that in coming
to this conclusion the Tribunal has ignored Explanation IX.
Explanation IX-makes it clear that the brand name or trade
a
name shall mean brand name or trade name (whether
H registered or not), that is to say, 'a name or a mark, code
CC (PREVENTIVE) AMRITSAR V. 133
MIS. MALWA INDUSTRIES LTD [S.B. SINHA, J.]
number, design number, drawing number, symbol, A
;
monogram, label, signature or invented word or writing.
This makes it very clear that even a use of part of a brand
name or trade name, so long as it indicates a connection
in the course of trade would be sufficient to disentitle the
person from getting exemption under the notification." B
However, we may notice that this Court in Sarabhai M.
Chemicals v. Commissioner of Central Excise, Vadodara
-~
[(2005) 2 SCC 168 : (2005) 179 ELT 3], this Court held :
"22. Our interpretation is supported by the language of the
c
notification. Under the proviso read with the Explanation
to the said notification, there were three conditions
required to be satisfied by way of certification by the Drugs
Controller. Firstly, that the bulk drugs should have the same
meaning as mentioned in the Explanation to the
D
notification. Secondly, that such bulk drugs should be
normally used for the specified purposes; and, thirdly, that
the "bulk drugs" are used as such or as an ingredient in
any formulation. Plainly read, the third condition has to
mean that the goods, for which exemption was sought,
were actually used as such or as an ingredient in any E
formulation. If the arguments advanced on behalf of the
appellant are accepted then the second and third
~.
conditions would have the same meaning and there would
be no point in specifying them as separate conditions. !n
the Ex12lanation to the notification, we have two F
ex12ressions 1 namelYi "normal/'{_ used' and "used as such".
We have to read both these ex12ressions in juxtaQ.osition.
If so read, it becomes clear that the ex12ression "used as
~uch" in the 12roviso gualifies the actual use and not the
ca12ability: of use. These words are by: way: of emQhasis. G
They are a condition to be actually satisfied before the
exemption can be availed and granted. Consequently,
every manufacturer of a bulk drug cannot seek the benefit
of exemption under the said notification merely by reason
-of "normal use" of the drug. The words "normal use" indicate H
134 SUPREME COURT REPORTS [2009] 2 S.C.R.
A the possible use whereas the expression "used as such"
indicates the actual use."
(Emphasis added)
Thus, these decisions militate against the submission that
8 the goods must be manufactured in the factory.
20. We, as noticed hereinbefore, have no quarrel.with the
proposition that exemption notification should be construed
strictly which means that benefit thereof should not be granted
to one, who is not entitled therefor. But it is also true that those
C who are entitled to the benefit cannot be deprived therefrom by
taking recourse to the doctrine of narrow interpretation
simplicitor, although the purpose and object thereof would be
defeated thereby.
In Kartar Rolling Mills v. Commissioner of Central Excise,
0 New Delhi [(2006) 4 SCC 772: 2006 (197) ELT 151], this Court
held:
" ... It is trite to say that exemption notification has to be
construed strictly. Since the notification came into effect
E from 11-4-1994, the benefit of the notification cannot be
extended to the appellants retrospectively w.e. f. 1-3-1994."
In Eagle Flask Industries Ltd. v. Commissioner of Central
Excise, Pune [(2004) 7 SCC 377: 2004 (171) ELT 296], this
Court held:
F
"6. We find that Notification No. 11 /88 deals with exemption
from operation of Ru le 174 to exempted goods. The
notification has been issued in exercise of powers
conferred by Rule 174-A of the Rules. Inter alia, it is stated
· therein that, where the goods are chargeable to nil irate of
G
duty or exempted from the whole of duty of excise leviable .
thereon, the goods are exempted from the operation of
Rule 174 of the Rules. The goods are specified in the
Sch~dule to the Central Excise Tariff Act, 1985 (in short
"the Tariff Act"). The proviso makes it clear that where
H
CC (PREVENTIVE) AMRITSAR V. 135
M/S. MALWA INDUSTRIES LTD [S.B. SINHA, J.]
goods are chargeable to nil rate of duty or where the A
' exemption from the whole of the duty of excise leviable is
granted on any of the six categories enumerated, the
manufacturer is required to make a declaration and give
an undertaking, as specified in the form annexed while
claiming exemption for the first time under this notification B
and thereafter before the 15th day of April of each financial
year. As found by the forums below, including CEGAT,
factually, the declaration and the undertc:1king were not
-~ submitted by the appellants. This is not an empty formality.
It is the foundation for availing the benefits under the C
notification. It cannot be said that they are mere procedural
requirements, with no consequences attached for non-
observance. The consequences are denial of benefits
under the notification. For availing benefits under an
exemption notification, the conditions have to be strictly
0
complied with. Therefore, CEGAT endorsed the view that
the exemption from operation of Rule 174, was not available
to the appellants. On the facts found, the view is on terra
firma ... "
In Tata Oil Mills Co. Ltd. v. Collector of Central Excise E
[(1989) 4 SCC 541], Ranganathan, J., despite accepting the
proposition that the exemption notification should be construed
strictly, opined:
"These words may be construed literally but should be
given their fullest amplitude and interpreted in the context F
of the process of soap manufacture. There are no wo_rds
in the notification to restrict it only to cases where rice
bran oil is directly used in the factory claiming exemption
and to exclude cases where soap is made by using rice
bran fatty acid derived from rice bran oil. The whole purpose G
and object of the notific~tion is to encourage the utilisation
of rice bran oil in the proces$ of manufacture of soap in
preference to various other kinds of oil (mainly edible oils)
used in such manufacture and thi$ should not be defeated
by an unduly narrow interpretation of the language of the H
136 SUPREME COURT REPORTS (2009] 2 S.C.R.
A notification even when it is clear that rice bran oil can be
),
used for manufacture of soap only after its conversion into
fatty acid, or hydrogenated oil."
21. Contention of Mr. Harish Chandra that the decision of
Thermax Private Ltd. (supra) on the point urged before us has
8 been doubted is not correct. In Commissioner of Central Ex-
cise, New Delhi v. Hari Chand Shri Gopal [2005 (188) ELT 353),
upon taking into consideration various rules and in particular
Rule 192 of the Central Excise Rules, 1944, this Court pointed ,/-
out that conceptually there is a difference between short pay-
c ment that arises from non-levy or any mistake on the levy, on the
one hand, and the short payment arising out of the failure of the
buyer/ user of the goods to account for them, on the other. The
court opined that the responsibility for the payment of duty on
the goods cleared under concession/ exemption having been
D transferred, it was obligatory on the person wishing to obtain
the remission of duty to apply through the proper officer in the 1'
form prescribed therein. The court noticed that there is~ diver-
gence of view in regard to the mode and manner of filing such
an application. It was noticed that Chapter X of the Act incorpo-
E rates the procedure required to be followed for the said pur-
pose. It was opined that that aspect of the matter had not been
considered in Thermax Private Ltd. (supra) or Collector of Cen-
tral Excise. Jaipur v. J.K. Synthetics [2000 (120) ELT 54]. This
·~
Court noticed that there was a divergence of view in the judg-
F ments of the Tribunal in that behalf also, as for example, in Na-
tional Aluminium Co. Ltd. v. Commissioner of Central Excise.
Bhubaneswar [2000 '(125) ELT 519 (Tribunal)], it was held that
"even if Chapter X procedure is not followed, calcined alumina
manufactured in assesses' unit and transferred to another unit
for manufacture of aluminium was entitled to exemptio.n under
G
Notification No. 217/86-C.E. as the.assessee had established
intenaed use of material by Q~her evidence".
It was pointed out that a diametrically opposite view has
been taken in Kirloskar Brothers Ltd. v. Collector of Central
H Excise. Pune [1997 (94) ELT 176 (Tribunal)] wherein it was held
CC (PREVENTIVE) AMRITSAR V. 137
MIS. MALWA INDUSTRIES LTD [S.B. SINHA, J.]
that the procedure required under Chapter X of the Act was A
required to be strictly followed in cases of additional exemption
as the procedural requirements were essentially pre-requisite
and no exemption can be sanctioned in absence of the required
compliance of the exemption notification.
It was furthermore noticed that the input relief was claimed B
in that case on the basis of the captive consumption whereas
Thermax Private Ltd. (supra) and J.K. Synthetics (supra) were
cases of the supplier being an importer and, thus, this Court
- 1 therein had no occasion to deal with cases of the nature in-
volved therein. c
21. We, therefore, are satisfied that this case is covered
by Thermax Private Ltd. (supra) and the point on which the mat-
ter has been referred to a larger Bench does not arise for con-
sideration herein.
D
22. For the reasons aforementioned, there is no merit in
these appeals which are dismissed accordingly with costs.
Counsel's fee assessed at Rs. 50,000/-
R.P. Appeal dismissed.
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