COLLECTOR OF CENTRAL EXCISE, NEW DELHIversusM/S. UNIVERSAL ELECTRICAL INDUSTRIES AND ANR.

A                COLLECTOR OF CENTRAL EXCISE, NEW DELHI
                                             v.
           MIS. UNIVERSAL ELECTRICAL INDUSTRIES AND ANR.

                                 MARCH 11, 2003

B       (SYED SHAH MOHAMMED QUADRI AND ASHOK BHAN, JJ.]


          Central Excise Tariff Act, l 985

          Centrgl Excise Rules, l 944
c
           Schedztle/r.8-Specified inputs and finished products-Computation of
     aggregate value-Notification No. l 75186 dated 1.3. 1986-Explanations II and
     III-Exemption to Small Scale !ndustries:_Assessee, an SS! unit Manufacturing
    final products as also inputs for use in such final products-Computation of
D    aggregate value for levy of excise duty-Assessee contending that for the
    purpose of computing aggregate value of clearances under the Notification,
     the clearances of excisable goods which are chargeable to 'nil' rate of i:futy
     or which are exempted from the whole of duty of excise leviab/e thereon by
     any notification issued under sub-rule(l) of r.8, not lo be taken into
    consideration-Held, fa:planation !I excludes value offinished goods exempted
E    under different Notifications, likewise value of inputs used for manufacture of
    finished goods are also excluded-Both being specified goods-Therefore,
     value ofsuch inputs cannot be addedfor purpose of aggregate value-Assessee
    entitledto   benefit of Explanation Ill while computing aggregate value for
    purposes of availing c:Xemplion under the Notification.

F        CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 11441-11442
    of 1995.

         From the Judgment and Order dated 6.12.1993 of the Central Excise
    and Gold (Control) Appellate Tribunal, New Delhi in A. No. E/2114/91-B
    and E/3349/91-B in F.O. No. E/416-417 of 1993-B.
G
         Anoop G. Chaudhary, Sanjiv Sen, Rajiv Shakdher and Ms. June
    Chaudhary for the Appellant.

       V. Lakshmikumaran, Alok Yadav and V. Balachandran for the
H Respondents.
                               920
C.C.E. v. UNIVERSAL ELECT~\:A!- INP\l~'fRl!lS [SYE!l SHAJ.l MOHAMMED QUADRI, J.] 921

      The following Order of the CQurt w11s delivered :                                A
      SYED SQA,Q MOftAMMJi;I> QlJADRI, J. The Revenue is in appeal,
against the common on:ler qf\lw Q11&toms, Excise &nd Gold (Control) Appellate
Tribqnal, New P~lhi ~f9r sh<!rt, 'the Tribunal'] in Appeal Nos. E/2114/91-B
and E/3349/9,H~, fil~g py th~ !l~~essees, dated 6th December, 1993.
                                                                                       B
        For appreciatil]g th~ qu.estion raised in these appeals, it will suffice to
refer to· the f\jcts in \h\l Q<\Sll Qf Mis. Universal Electrical Industries, the
assessee. The asse~Hll! manufactl,lre~ elec.tric toasters, room heaters, electric
fans etc. I\ i§ 11 s11111ll ~Qalll jnd11~try Q]!dming benefit of Notification No. 175/
1986-C.E. dljt~d. !~\ Jvl!\f<;h 1986 [for short, 'the notification']. The assessee C
has been clearing the ~wills qnckr the notification, both the inputs as well as
the finished gooqs . On AY~Ust 6, 1990, a show-cause notice was issued to the
assessee <;<1l!inl): ypon it \g el\philn as to why the benefit of the said notification
should not b~ clenied. tQ it, After considering the reply filed by the assessee,
t\w j\lriscliction\ll Collector t.Qok thll view that Explanation Ill to the notification
wg!!ld be attri\cMll only when the inputs as well as the finished goods are D
c\~arecl qnder the l]Q\ificl\tion !!lld. !IS the finished goods were granted exemption
under other notific<itions, he Qonfirmed the demand of duty of Rs.1.88, lakhs.
On appe&i by th~ (l~s~s~ee, the Tribunal allowed the appeal, by majority, by
the p,rcler impugned in thl'lst.l appeals,

       Mr. Anoop 0, Ch&11dhary, learned senior counsel appearing for the E
Revenue, vehemently contends that Explanation Ill can be invoked only if
the finis.hect goo<fs 11re ckared under the notification and inasmuch as the
fini~he!! gll\ld.s imi exem.pted under a different notification and would be
cteern~d. tp be cleari'd. 11nd.er that notification, the assessee cannot get the
benefit of J3xpl11nation jll t9 the notification.
                                                                                       F
         Mr, V, Lakshmikumaran, learned counsel appearing for the assessee,
Ill\ th~ other hand, with equ11l vehemence, submits that when there is a general
lll\emptign for cle<irance of the finished goods, that factor cannot be taken
!lg!linst the sm11ll ~ct1le industry, like the respondent; in computing the aggregate
v1:11\1e for availing the benefit of the notification, submits the learned counsel. G
E11pl!mation II imct ExplHnation III have to be read together to ascertain the
(rye intel\tiQn, It would be clear from Explanation II that the clearance under
4iff@rent notifiP<itions granting exemption has to be excluded; so also from
f\pli!I1!l!ill{I Ill, it is evident that cle<mmce under the notifications in regard
tll the inp11ts has also to be excluded.
                                                                                       H
    922                     SUPREME COURT REPORTS                   [2003] 2 S.C.R.

A          To appreciate the contention of the learned counsel, it will be apt to
    refer to the relevant part of Notification no. 175/1986-C.E. dated I st March,
    1986:

            "Exemption to first clearances of specified goods upto the value of
            rupees fifteen lakhs and concessional duty on subsequent clearances
B           in the case of manufacturer. having clearances not exceeding rupees
            one and a half crores in the preceding year.-In exercise of the powers
            conferred by sub-rule (I) of Rule 8 of the Central Excise Rules, 1944,
            and in supersession of the notification of the Government of India in
            the Ministry of Finance (Department of Revenue) No. 85/85-Central
            Excises, dated the 17th March, 1985, the Central Government hereby
c           exempts the excisable goods of the description specified in the
            Annexure below and falling under the Schedule to the Central Excise
            Tariff Act, 1985 (5of1986), (hereinafter referred to as the 'specified
            goods, and cleared for home consumption on or after the I st day of
            April in any financial year, by a manufacturer from one or more
D           factories,-

            xxx                                xxx                          xxx

            Explanation II. - For the purposes of computing the aggregate value
            of clearances under this notification, the clearances of any excisable
            goods which are chargeable to nil rate of duty or, which are exempted
E
            from the whole of the duty of excise leviable thereon by any other
            notification (not being a notification where exemption from the whole
            of the duty of excise leviable thereon is granted based upon the value
            or quantity of clearances made in a financial year) issued under sub-
            rule (I) of Rule 8 of the said Rues, 1944, or sub-section (I) of section
F           SA of the Central Excise and Salt Act, 1944 (I of 1944) shall not be
            taken into account.

            Explanation III.- Where any specified goods (hereinafter referred to
            as inputs) are used for further manufacture of specified goods within
            the factory of production of inputs, the clearances of such inputs for
G           such use shall not be taken into account for the purposes of calculating
            the aggregate value of clearances under this notification."

         A plain reading of the notification shows that the Government of India,
    in exercise of the powers conferred under sub-rule (I) of Rule 8 of the
    Central Excise Rules, 1944 (for short, 'the Rules'), has exempted excisable
H
    C.C.E. v. UNIVERSAL ELECTRICAL INDUSTRIES [SYED SHAH MOHAMMED QUADRI, J.] 923

    goods of the description specified in the annexure thereto and falling under       A
    the Schedule to the Central Excise Tariff Act, 1985 [hereinafter referred to
    as 'the specified goods'].

           It is not in dispute that the inputs as well as the finished goods
    manufactured by the assessee answer the description of the 'specified goods'.
    The short question that remains to be resolved is, for the purposes of claiming    B
    exemption under the notification, how should the aggregate value be arrived
    at? It is in that context that a reference to Explanation II would be relevant.
    It says that for the purposes of computing the aggregate value of clearances
    under the notification, the clearances of excisable goods which are chargeable
    to 'nil' rate of duty or which are exempted from the whole of duty of excise       C
    leviable thereon by any notification issued under sub-rule (I) of Rule 8 of the
    Rules shall not be taken into consideration. In this case, as the finished goods
    are, admittedly, exempted under Notification Nos.155/1986, 160/1986 and
    124/1988, the value of the exempted finished goods will have to be excluded
    in arriving at the aggregate value for the purposes of the notification.
                                                                                       D
          Now, coming to Explanation III, it provides that where inputs which
•   are specified goods, are used within the factory of production for further
    manufacture of finished goods which are also specified goods, the clearance
    of such inputs for such use shall not be taken into account for the purposes
    of calculating the aggregate value of clearances under this notification. There    E
    appears to be a rationale behind this Explanation; firstly, when the value of
    the finished goods, which are exempted under different notifications, is to be
    excluded, having regard to the wording of Explanation II, on the same analogy,
    the value of inputs which are being used for manufacture of finished goods
    are also excluded as both are specified goods, subject, of course, to the limit
    of the notification. Secondly, the notification provides relief to small scale     F
    industries; when the inputs which enjoys the exemption under the notification
    have already been dealt with, there is no reason why the value of the same
    inputs again be added for the purposes of aggregate value. It follows that the
    assessee would be entitled to the benefit of Explanation III while computing
    the aggregate value for the purposes of availing exemption under the               G
    notification.

         In this view of the matter, we find no illegality in the order of the
    Tribunal. The appeals are, therefore, dismissed with costs.

    R.P.                                                       Appeals dismissed.