ELSON MACHINES (P) LTD.versusCOLLECTOR OF CENTRAL EXCISE

                       ELSON MACHINES (P) LTD.
A
                                        v.
                  COLLECTOR OF CENTRAL EXCISE

                            NOVEMBER 15, 1988

B         [R.S. PATHAK, CJ AND RANGANATH MISRA, J.]

          Central Excise Rules, 1944-R. 8( 1) -Exemption from duty
    granted under Notification No. 80/80/+C.E. dated 19-6-1980-Whether
    captive consumption of specified goods within the factory for manufac-
    ture of specified goods falling under a different item can be excluded
    while determining the clearance value.
c
          As a measure of concession to small-scale manufacturers, Notifi-
    cation No. 80/80-C.E. dated 19-6-1980 issued under r. 8(1) of the
    Central Excise Rules, 1944 exempted from duty certain excisable goods
    and, paragraph 2 thereof stipulated inter a/ia that the concession would
D   not be available to a manufacturer if the aggregate value of clearances
    of the specified goods by him for home consumption during the preced-
    ing financial year had exceeded Rs.IS lakhs. Explanation V thereto
    provided t.hat where any specified goods were used within the factory of
    p!'oduction for further manufacture of any other specified goods and,
    where both the former and the latter categories of specified goods fell
E   under the same item of the First Schedule to the Central Excises and Salt
    Act, 1944, the clearances of the former category of specified goods shall
    not be taken into account for calculating the aggregate value of clea-
    rance under the notification.

        The appellant which was engaged in the business of manufactur-
F Ing and selling electric motors, availed of the aforesaid exemption for
  the periods 1-4-1980 to 30-11-1980 and 1-4-1981 to 30-9-1981. The
  Excise Authority issued a demand for payment of duty on the ground
  that its clearance exceeded the limit of Rs. IS lakhs. On appeal, the
  demand for the period 1-4-1980 to 30-II-1980 was set aside .but the
  demand for the period 1-4-1981 to 30-9-1981 was sustained. On further
G appeal, the Appellate Tribunal observed that !'or the year 1980-81 the
  appellant had disclosed a clearance of Rs.13,43,443.SS on account of
  electric motors for home consumption and Rs.6,51,138.50 on account of
  electric motors "for captive consumption" in the manufacture ofmono-
  block pumps. The Tribunal held that while electric motors were
  mentioned under Tariff Item 30, power driven pumps were ,specified
H u.ndcr Tariff Item 30-A; and therefore, the electric motors captively
                                      878
       ELSON MACHINES v. COLLECTOR OF C.E. !PATHAK, CJ.]         879

consumed as inputs in the manufacture of power driven pumps could A
not be excluded, The further co.ntention that the appellant had mista-
kenly stated that electric motors had been used for monoblock pumps
whereas only rotors and stators which were integral components of
monoblock pumps had been used and therefore the same Tariff Item
was attracted entitling it to the concession was also rejected by the
Tribunal,                                                              B

     Dismissing the appeal,

      HELD: The contention that the goods in question could not be
said to have been cleared from the factory since they were employed in
the manufacture of monoblock pumps within the factory itself has no C
force, As soon as the manufacture of the goods was completed they must
be regarded as goods available for clearance from the factory, and there
is nothing to show that when fitted into monoblock pumps they were not
removed to another part of the factory for that purpose. The process of
manufacture of those goods is distinct, separate and complete in itself
and at the end of the manufacturing process, the goods in question D
represent a completed product, l882E-F J

      Whether the goods in question were rotors and stators and
whether they formed integral components of monoblock motors is a
question of fact considered and concluded by the Tribunal and it cannot
be entertained at this stage. [882B]                                    E

      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 603
of 1985.

     From the Judgment and Order dated 27 .8.1984 of the Customs
Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal F
No. 1711/83-B in Order No. 643/84-B.

      Dushyant Dave, R. Karanjawala and Mrs. Manik Karanjawala
for the Appellant.

     G. Ramaswami, Additional Solicitor General, N.S. Das Bahl G
and Ms. S. Relan for the Respondent.

     The Judgment of the Court was delivered by

    PATHAK, CJ. This appeal is directed against the judgment
and order of the Customs, Excise and Gold Control Appellate            H
    880         SUPREME COURT REPORTS                [1988] S\lpp. 3 S.C.R.

    Tribunal on the question whether the appellant is djsentitled to the
    concession granted by Notification No. 80/80-C.E. dated 19 June 1980
    to small scale manufacturers in the matter of Central Excise duty.

          The appellant is a private limited company. It has its registered
    office and factory in the State of GujRrat. It is engaged in the business
    of manufacturing and selling electnc motors.

          In exercise of the powers conferred by sub-rule (1) of rule 8 of
    the Central Excise Rules, 1944, the Central Government issued Notifi-
    cation No. 80/80-C.E. dated 19 June 1980, which, as it stood during
    (he relevant period, exempted from duty excisable goods falling under
    certain Item Numbers of the First Schedule to the Central Excises and
c   Salt Act, 1944 as specified in the Table annexed to the Notification and
    of the particular description set forth in that Table. But paragraph 2 of
    the Notification declared:

                "Nothing contained in this notification shall apply to a
D               manufacturer,-

                (i) if the aggregate value of clearances of all excisable
                goods by him or on his behalf, for home consumption, from
                one or more factories, during ~he preceding financial year,
                had exceeded rupees twenty lakhs,

                (ii) if the aggregate value of clearances of the specified
                goods by him or on his behalf, for home consumption, from
                one or more factories, during the preceding financial year,
                had exceeded rupees fifteen lakhs."

F         The appellant availed of exemption under the Notification for
    the periods 1 April 1980 to 30 November 1980 and 1 April 1981 to 30
    September 1981 claiming that the clearances during the preceding
    years were confined to the stipulated limit. The Excise Authority, in
    the belief that the appellant had wrongly availed of exemption as its
    clearances exceeded the limit of 15 lakhs, issued notice to the appel-
G   !ant to show cause against an assessment of the differential duty for
    those periods. The appellant attempted to show cause, but the
    Assistant Collector of Excise did not accept the case set up by the
    appellant and imposed the demand. On appeal the Collector of
    Contra! Excise (Appeals) set aside the demand for the period 1 April
    1980 to 30 November 1980, but he upheld the demand for the period 1
H   April 1981 to 30 September 1981. In the further appeal before the
           ELSON MACHINES v. COLLECTOR OF C.E. [PATHAK, CJ.]        881

    Customs, Excise and Gold Control Appellate Tribunal the entire ques-
    tion was whether the appellant had exceeded the limit of Rs.15 lakhs · A
    when effecting clearances during the financial year 1980-1981 and was,
    therefore, not entitled to exemption for the period 1 April 1981 to 30
    September 1981.

          For the financial year l April 1980 to 31 March 1981 the appel- B
    !ant had disclosed a clearance value of Rs.13,43,443.55 on account of
    electric motors for home consumption and a clearance valu.e of
    Rs.6,51,138.50 on account of electric motors "for captive consump-
    tion" in the manufacture of monoblock pumps. It was contended by
    the appellant that the electric motors used for making monoblock
    pumps could not be taken into consideration when calculating the
    clearances eligible under the Notification. According to the appellant C
    the captive consumption did not amount to clearance. The claim was
    disputed by the Department, which relied on Explanation V to the
    aforesaid Notification dated 19 June 1980. The Explanation declared:

               "Explanation V-Where any specified goods (hereinafter D
               referred to as inputs) are used for further manufacture of
               specified goods (hereinafter referred to as finished goods)
               within the factory of production of inputs and where such
               inputs and finished goods fall under the same item of the
               said First Schedule to the said Act, the clearances of such
               inputs for such use shall not be taken into account for the E
               purposes of calculating the aggregate value of clearances
               under this notification."

          The Appellate Tribunal observed that in terms of the Explana-
    tion the clearances of inputs could not be taken into account for
    calculating the aggregate value of clearances only when the inputs and f
    finished products fall under the same item of the First Schedule to the
    Act. It pointed out that while electric motors were mentioned under
    Tariff Item 30, power driven pumps were specified under Tarrif Item
    30-A. It Sl!id that consequently the electric motors captively consumed
    as inputs in the manufacture of power driven pumps could not be
    excluded when determining the appellant's clearances. The appellant G
    urged that the appellant had mistakenly stated that electric motors had
    been used for monoblock pumps whereas only rotors and stators which
    were integral components of monoblock pumps had been used, and
u   that, therefore, the same Tariff Item was attracted, thus entitling the
    appellants to the concession. The submission was rejected by the
    Appellate Tribunal. Accordingly, it found that the appellant had fl
    882          SUPREME COURT REPORTS                [1988] Supp. 3 S.C.R.

    exceeded the limit stipulated by Notification No. 80/80-C.E. dated 19
A
    June, 1980, and was, therefore, disentitled to the concession.

          It is contended before us that the Appellate Tribunal· erred in
    rejecting the submission of the appellant that the goods manufactured
  · by the appellant did not en!Itle 11 to the benefit of Explanation V of the
B Notification. It 1s urged that the goods in question were rotors and
    stators, that they were integral componc:mts of monoblock motors and
    could not be considered as components of general purpose Motors and
    therefore fell within the same Tariff Item as monoblock pumps. The
    question has been considered by the Appellate Tribunal. It is a ques-
    tion of fact and we do not propose to entertain "it at this stage.
c        It is then urged that stators and rotors should be considered
    under Tariff Item 68, which is a residuary item. The Appellate Tri-


                                                                                 -
    bunal has proceeded on the basis that what was manufactured by the
    appellant were electric motors. It is only in the alternative that it
    considered the submission of the appellant that the goods should be
D · regarded as rotors and stators. In the circumstances recourse cannot
    be had to Tariff Item 68 by the appellant.

           The next contention is that the goods in question cannot be said
    to have been cleared from the factory and therefore could not be
    included within the value of the clearances from the factory. The sub-
E   mission is that the goods were employed in the manufacture of mono-
    block pumps within the factory itself. We are not impressed by this
    contention. As soon as the manufacture of the goods was completed
    they must be regarded as goods available for clearance from the
    factory, and there is nothing to show that when fitted into monoblock
    pumps they were not removed to another part of the factory for that
F   purpose. The process of manufacture of those goods is distinct, sepa-
    rate and complete in itself and at the end of the manufacturing pro-
    cess, the goods in question represent a completed product.

           The next submission on behalf of the appellant is that the Clas-
    sification Lists had been approved earller and the Excise Authority was
G   es topped from taking a different view. Plainly there can be no estoppel
    against the law. The claim raised before us is a claim based on the legal
    effect of a provision of law and, therefore, this contention must be
    rejected.


H
         Finally it is pointed out by c<fonsel for the appellant that no
    recovery has bee~ made by _t_lle appeUant from its constituents and          -
                                                                                 ,·
       ELSON MACHINES v .. COLLECTOR OF C.E. IPATIIAK, CJ.)            883

therefore, it is said, the. demand should b_e set aside. Reference is        A
made to Collector of Customs and Centi-al Excise and Anr. v. Oriental
Timber Industries., [1985] 20 E.L.T. 202 {SC). We have perused the facts
of that case and we find that the order made by the court there, so far
as this aspect is concerned, was made on a concession of counsel for
the Union of India and on the footing that the Union of India was not
                                                                             B
concerned with the collection of additional duty for earlier years but
was merely concerned with the question of law involved in the case.
We are also not satisfied that the facts upon which relief was granted in
that case arise before us in this case.

      In'the result the appeal is dismissed with costs.
                                                                             c
H.L.C.                                                    Appeal dismissed