M/S Hyderabad Asbestos Cement Products & ANR Vs.
Union of India & Ors  INSC 417 (7 December 1999)
R.C.Lahoti, N.S Hegde R.C. Lahoti, J.
C.A. No........../99 (Arising out of
S.L.P.(C) No.12722/87) -------------------------------------- Leave granted.
appellants manufacture and sell asbestos cement products such as sheets
(corrugated or plain), pressure pipes, couplings etc. These products require
cement and asbestos fibre as raw materials. Both the items consumed as raw
materials as also the finished products manufactured by the appellants are all
excisable commodities under different tariff items. Asbestos fibre is covered
by Tariff item 22- F. Cement is covered by Tariff item 23. The finished
products manufactured by the appellants are excisable under Tariff item 23-C.
In respect of cement and asbestos fibre obtained from outside excise duties
were duly paid under the relevant tariff items 23 and 22F. In respect of
imported asbestos additional duty, i.e., countervailing duty equivalent to
excise duty was paid. The finished products of the appellants were not exempt
from payment of excise duty leviable thereon nor were they chargeable to nil
rate of duty. The appellants claimed the benefit of proforma credit procedure
by seeking credit for the payment of duty paid on the inputs as against the
duty payable on the finished products and sought for permission of the
Assistant Collector of Central Excise, Hyderabad under Rule 56A of the Central
Excise Rules, 1944 (hereinafter referred to as `the Rules') framed under the
provisions of the Central Excise and Salt Act, 1944. The Assistant Collector
refused to grant such permission. An appeal preferred before the Collector of
Central Excise, Hyderabad failed. The appellants challenged
both the orders before the High Court of Andhra Pradesh by filing writ petition
under Article 226 of the Constitution which also has been dismissed. The
decision of the High Court under appeal is reported as 1987 (32) ELT 28 A.P.
The High Court has for itself analysed and examined the provisions of Rule 56A.
The High Court has also cited in its support a division bench decision of the
Union of India - 1986 (25) E.L.T. 879. The aggrieved appellants have filed this
special leave petition.
sole question arising for decision is whether the benefit of proforma credit
procedure specified in Rule 56A (1) is available to the appellants though the
raw materials consumed by the appellants in their manufacture of the final
products are excisable under tariff items different from the one under which
their final products are excisable.
56A was introduced on 8.12.1962. It has undergone several changes from time to
time which have been extensively noticed by the High Court of Gujarat in the
case of Digvijay Cement Company Ltd. (supra). The rule as it stood at the
relevant time reads as under:- "56.A. Special procedure for movement of
duty-paid materials or component parts for use in the manufacture of finished
excisable goods--- (1) Notwithstanding anything contained in these rules the
Central Government may, by notification in the Official Gazette, specify the
excisable goods in respect of which the procedure laid down in sub-rule (2)
The Collector may, on application made in this behalf and subject to the conditions
mentioned in sub-rule (3) and such other conditions as may from time to time be
prescribed by the Central Government, permit a manufacturer of any excisable
goods specified under sub-rule (1) to receive, material or component parts or
finished product (like asbestos cement), on which the duty of excise or the
additional duty under Section 2A of the Indian Tariff Act, 1934 (32 of 1934),
(hereinafter referred to as `the countervailing duty), has been paid, in his
factory for the manufacture of these goods or for the more convenient
distribution of finished product and allow a credit of the duty already paid on
such material or component parts or finished product, as the case may be;
that no credit of duty shall be allowed in respect of any material or component
parts used in the manufacture of finished excisable goods- (i) if such finished
excisable goods produced by the manufacturer are exempted from the whole of the
duty of excise leviable thereon or are chargeable to nil rate of duty, and (ii)
unless--- (a) duty has been paid for such material or component parts under the
same item or sub-item as the finished excisable goods; or (b) remission or
adjustment of duty paid for such material or component parts has been
specifically sanctioned by the Central Government;
further that if the duty paid on such material or component parts (of which
credit has been allowed under this sub-rule) be varied subsequently due to any
reason, resulting in payment of refund to, or recovery of more duty from, the
manufacturer or importer, as the case may be, of such material or component
parts, the credit allowed shall be varied accordingly by adjustment in the
credit account maintained under sub-rule (3) or in the account-current
maintained under sub-rule (3) or Rule 9 or Rule 178(1) or, if such adjustment
be not possible for any reason, by cash recovery from or, as the case may be,
refund to the manufacturer availing of the procedure contained in this
rule." Subsequently with effect from 1.8.1983 the rule has undergone
further changes which are not relevant for our purpose.
reading of the rule shows that the Central Government has been empowered by
sub-rule (1) to specify by notification in the official gazette such excisable
goods in respect of which the benefit of proforma credit as provided by
sub-rule (2) can be taken. The excisable goods referred to in sub-rule (1) are
finished products. In order to claim the benefit of the rule the conditions to
be satisfied are:
the finished product should be specified by the Central Government by
notification in the official gazette as the excisable goods in respect of which
the procedure laid down in sub-rule (2) shall apply; (ii) an application must
be made by the assessee to the Collector in this behalf; (iii) the material,
component parts or finished products, the duty or additional duty paid whereon
may be availed for the purpose of taking proforma credit, must not be used in
the manufacture of such finished excisable goods as are exempt from the whole
of the duty of excise leviable thereon or are chargeable to nil rate of duty;
and (iv) (a) the duty as has been paid for such material or component parts
must have been so paid under the same item or sub item as the finished
excisable goods, or (b) if the raw material or component parts are not
excisable under the same item or sub-item as the finished excisable goods, or
in other words if such material or component parts are excisable under an item
or sub-item other than the one under which the finished goods are excisable
then the Central Government should have specifically sanctioned remission or
adjustment of duty paid for such material or component parts.
controversy centres around the interpretation and scope of proviso (ii) (b) of
Rule 56A. The appellants' plea is that once the Central Government has notified
the excisable goods under sub-rule (1) the benefit of proforma credit shall be
available to the appellants without regard to the fact whether or not the raw
material or the component parts are excisable under the same item or sub-item
of Tariff. The effect of benefit extended by the main part of the Rule cannot
be nullified or taken away by a proviso, submitted the learned counsel for the
appellants. The plea so raised has not appealed to the High Court. We also find
no merit in the plea though it has been forcefully reiterated before us.
language of the rule is plain and simple. It does not admit of any doubt in
interpretation. Proviso (i) and (ii) are separated by the use of conjunction `and'.
They have to be read conjointly. The requirement of both the provisos has to be
satisfied to avail the benefit. Clauses (a) and (b) of proviso (ii) are
separated by the use of an `or'and there the availability of one of the two
alternatives would suffice. Inasmuch as cement and asbestos fibre used by the
appellants in the manufacture of their finished excisable goods are liable to
duty under different tariff items, the benefit of proforma credit extended by
Rule 56A cannot be availed of by the appellants and has been rightly denied by
the authorities of the Department.
in no doubt that to avail the benefit of proforma credit under Rule 56A the
inputs which go to manufacture the specified finished excisable goods must be exigible
to payment of duty under the same tariff item or sub item; or else, if such
inputs are exigible to tax under different tariff items or sub-items then they
must be covered by the specific sanction of the Central Government granting
remission or adjustment of duty on those inputs as provided by proviso (ii)
(b). Admittedly there is no such specific sanction. The raw materials consumed
being excisable under Tariff items different from the one under which the
finished products are excisable the appellants have been rightly denied benefit
of proforma credit.
find ourselves in agreement with the view taken by the High Court. The appeal
is devoid of any merit. It is dismissed though without any order as to the
costs. C.A. No.9159/96, C.A. Nos.2779-80/97 and SLP(C) No.13520/87.
the same reasons these appeals and special leave petition are also dismissed
though without any order as to the costs.