EAGLE FLASK INDUSTRIES LTD.versusTHE COMMISSIONER OF CENTRAL EXCISE, PUNE

               EAGLE FLASK INDUSTRIES LTD.                                         A
                            v.
         THE COMMISSIONER OF CENTRAL EXCISE, PUNE

                           SEPTEMBER 2, 2004

             [ARIJIT PASAYAT AND P.P. NAOLEKAR, JJ.]                               B

     Central Excise Rules, 1944 :

       Rules 174 and 174-A-Plastic items falling under Chapter Headings
 3924.90 and 2909.6-Exemption Notifications Nos. 53188 dated 1.3.1988              C
-and 11188 (NT)-CE dated 15.4.1988-Assessee not filing classification/
 declaration required under the Notifications-Claim for exemption-Held,
for availing benefits under an exemption notification, the conditions have to
 be strictly complied with-The relevant provision makes it clear that where
 goods are chargeable to nil rate of duty or where exemption from whole of
 excise duty leviable is granted, manufacturer is required to make a declaration   D
 and give the undertaking as specified-Since declaration and undertaking
 were not submitted by assessee, the Tribunal was right in holding that
 exemption from operation of r.174 was not available to it-Central Excise
 Act, 1944.

      CIVIL AP PELLATE JURISDICTION : Civil Appeal No. 4647of1998.
                                                                                   E

     From the Judgment and Order dated 8.5.98 of the Central Excise and
Gold (Control) Appellate Tribunal, New Delhi in A. No. E/1009/1991-C in
F.O. No. 364 of 1998-C.
                                                                                   F
     U.A. Rana, Arvind Kumar, Madhup Singhal and Sandeep Khare! for
M/s. Gagrat & Co. for the Appellant.

     Anoop Chowdhury, Rupesh Kumar, P. Parmeshwaran and B. Krishna
Prasad for the Respondent.
                                                                                   G
      The following Order of the Court was delivered :

     ARIJIT PASAYAT, J. : The appellants assail correctness of the order
passed by the Customs, Excise & Gold (Control) Appellate Tribunal, New
Delhi (in short 'CEGAT'). In the appeal before the CEGAT, the appellants
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    36                    SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R.

A   had challenged a duty demand of Rs. 14,95,893 and penalty of Rs. 5,000,
    as imposed by the Adjudicating Authority and confirmed by the Collector,
    Central Excise and Customs (Appeals). CEGAT dismissed the appeal.

            Background facts are : according to the appellants, they are engaged in
     the manufacture of articles of plastic i.e. Plastic insulated wares and vacuum
B    flasks. They had two factories, one at Talegaon and the other at Chinchwad.
     The former one was considered to be the main factory. It was claimed that
     during the period of dispute, i.e. from 01.03.1990 to 21.08.1990, major
     portion of the articles manufactured by them in terms of value were exempt
     from Central Excise Licensing Control' under Rule 174-A of the Central
c    .Exic.se Rules, 1944 (in sho·rt 'the Rules'). Since all the goods manufactured
      in their main factory were fully exempt from duty during the relevant period,
     only a minor portion of production was carried o~t in the Chinchwad factory.
     A show cause dated 28.08.1990 was served by the Central Excise authorities
     requiring them to' show cause as to why duty shall not be levied and penalty
      imposed for failure to take out L-4 licence required for the manufacture of
D     excisable goods falling under Chapter headings No. 3924.90 (Casserole) and
     3909.60 (Rigid Polyurethene Foam) falling during the relevant period and
     for the failure to file the list of excisable goods. It was alleged that there was
     failure to determine the duty liability and also that they had not maintained
      accounts of the excisable goods. They were called up to show cause why duty.
E   ,sh.ould not be demanded and penalty should not be imposed for contravention
      of various provisions of the Central Exicise Act, i 944 (in short 'the Act'.).
      The appellants took the stand that since the products manufactured were
      chargeable to nil rate of duty and si~ce they were also exempted from
      Licensing Control under Notification 11/88 (NT)"CE dated 15;04.1988, there
      was no liability or requirement on their. part to obtain ·L-4 licence. It was · ·
      further submitted that the Superintend~nt of Central Excise had· been
      informed about the aforesaid aspects by letter dated 04.04.1.990. As regards
     the Rigid Polyurethene Foam is concerned, the appellants claimed that the
      said item was non-excisable, as held in the assessee's own case for an earlier
     period. As regards the manufacture of goods at Chinchwad factory, the
G     appellants took the stand that the said factory was a subsidiary unit of their
     main factory and all the materials required for the manufacture of goods were
     supplied by the main factory and the sales were also effected from the main
     factory. The Adjudicating Officer held that merely because exemption was
     granted under certain Notification, that does. not make the product a non··
     excisable item even when the item ~as fully exempt. It was, therefore,
H
      EAGLE FLASK INDUSTRIES LTD. v. C.C.E. [PASAYAT, J.]                    37

obligatory on the part of the appellants to follow the requisite procedures        A
before manufacturing goods at the Chinchwad factory. As regards the claim
that the appellants were covered by notification No. 11/88 (NT)-CE dated
15.4.1988, the adjudicating officer, found that the appellants ha4 not
complied with the requirements, as contained in the Notification. He also
found that the appellants had started the manufacturing in the premises of
M/s. Top Plastics Pvt. Ltd. right March, 1990 at Chinchwad even before the
                                                                                   B
aforesaid M/s. Top Plastics Pvt. Ltd. had applied for cancellation of their
licence on 21.08.1990. He also noted that the appellants had obtained the L-
4 licence only on 28.03 .1990. Since they have not filed the prescribed
declaration under Notification No. 11/88, they were not exempt from the
operation of Rule 174 of the Rules. It was also held that appellants had carried   c
out manufacturing activities without following the requisite procedures and
therefore were not entitled to exemption under Notification 53/88 dated
Ol.03.1988. The demand of duty was confirmed and penalty was imposed.
In appeal, the Collector (Appeals) confirmed the order. He found that both
types of products manufactured by the appellants were excisable. Before the
CEGA T, it was contended that so far as the casseroles are concerned,
exemption notification 53/88 dated 01.03 .1988 clearly allowed exemption of
the said item. No classification/declaration by the present appellants Mis.
Eagle Flask Industries was required to be filed, since the management of the
Chinchwad factory where casseroles were being manufactured was under Ml
s. Top Plastics Pvt. Ltd. It was highlighted that though initially L-4 licence     E
was taken, cancellation was requested subsequently. It was submitted that the
non-filing of declaration under Notification 11/88 was only, at the most, a
procedural lapse and should not have resulted in levy of substantial tax
liability.

     The respondent before the CEGA T supported the orders of the
Adjudicating Officer, as confirmed by the appellate authority. The CEGAT,
on analysis of the factual position, came to a definite finding which was not
disputed by the appellants that they had failed to comply with the requirement
of submitting declaration under Notification 11/88. That being so, the orders
passed by the departmental authorities were confirmed.
                                                                                   G
     In support of the appeal, learned cotmsel for the appellant submitted that
when the items were exempt from duty, there was consequential exemption
from licensing control. In any event, mere lapse of non-submitting a
declaration in tenns of Notification 11/88 does not dis-entitle the assessee
from the benefits otherwise available under the Notification.                      H
    38                    SUPREME COURT REPORTS (2004] SUPP. 4 S.C.R.

A      Learned counsel for the respondent supported the judgment of the
    CEGAT.

          We find that Notification l l/88 deals with exemption from operation
    of Rule 174 to·exempted goods. The Notification has been issued in exercise
    of powers conferred by Rule 174-A of the Rules. /nter-alia it is stated therein
B   that, where the goods are chargeable to nil rate of duty or exempted fro~
    the whole of duty of excise leviable ther~on, the goods are exempted from
    the operation /"of Rule 174 of the Rules. The goods are specified in the
    Schedule to ,ffi~ Central Excise Tariff Act, 1985 (in short 'the Tariff Act').
    The Proviso makes it clear that where goods are chargeable to nil rate of duty
c   or where the 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 From
    annexed while claiming exemption for the first time under this Notification
    and thereafter before the 15th day of April of each financial,ye~r. As found
    by the forums below, including CEGAT, factually, the declaration and the
D   undertaking were not submitted by the appellants. This is not an empty
    formality. It is the foundation for availing the benefits under the Notification.
    It cannot be said that they are mere procedural requirements, with no
    consequences attached for p.on-obsl!rvance. The consequences are denial of
    benefits under the Notification. For availing benefits under an exemption
E   Notification, the conditions have to be strictly complied with. Therefore,
     CEGA T 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
    jirma. We find no merit in this appeal, which is, accordingly, dismissed.

    R.P.                                                         Appeal dismissed.