of Central Excise, Vadodra Vs. M/S. Dhiren Chemical Industries  Insc 650
(12 December 2001)
Syed Shah Mohammed Quadri, U.C. Banerjee, S.N. Variava & Shivaraj V. Patil.
APPEAL NOS. 2496-2497 OF 1992
question that we are concerned with relates to the correct interpretation to be
placed upon the phrase "on which the appropriate amount of duty of excise
has already been paid".
case of Usha Martin, the relevant Exemption Notification read, so far as is
in goods falling under Item 26-AA(i-a) made from duty-paid material:
exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central
Excise Rules, 1944 and in supersession of the notification of the Government of
India in the M.F. (D.R.) No. 131/62-CE, dated 13-6-1962, the Central Government
hereby exempts iron or steel products falling under sub-item (i-a) of Item No.
26-AA made from any of the following materials or a combination thereof namely:
fresh unused re-rollable scrap 'on which the appropriate amount of duty of
excise has already been paid'...".
supplied) The other clauses used the same phrase.
Court said that there was "no doubt that as per the above notification if
any amount of duty has been paid on the raw material, the output product would
escape from excise duty. The doubt which arose was regarding the expression in
the notification i.e., 'on which the appropriate amount of duty of excise has
already been paid' as to whether it is capable of two interpretations, one as
claimed by the assessee and the other as put forth by the Revenue." The
Court then said:
we take the words 'already paid' in the notification delinked from other words
employed therein, they would, perhaps, lend support to the contention of the
Revenue as the said combination relates to an antecedent act of payment. But
the word 'already' is not the decisive term in the context because the
preceding word 'appropriate', cannot be sidelined to piffle. The word 'appropriate'
is defined in Websters' New Dictionary and Thesaurus (Concise Edn.) as
'applicable, apposite, appurtenant, apropos, apt...'. In the World Book
Dictionary it is defined as 'right for the occasion, suitable, proper,
is the idea behind granting exemption to the commodities indicated in the
notification? One reason is that the Central Government wanted to save certain
raw materials and the end products made with them from double duty. Another
idea, as could be discerned from it, is that the reason which prompted the
Central Government to absolve one commodity from duty must as well be
applicable to the other commodity which is made out of the former. Therefore,
we are not disposed to afford a narrow interpretation to the expression (i.e.
on which the appropriate amount of duty of excise has already been paid) as
excluding all cases where nil duty was paid for the input materials." The
Court, thus, upheld the contention on behalf of the assessee.
case of Motiram Tolaram, reliance was placed upon the case of Usha Martin to
contend that the appropriate duty being nil, because the raw material was not
manufactured in India, it must be taken that appropriate duty had been paid and
the appellants would be entitled to the benefit of the Exemption Notification
in question, which used the said phrase. The Court was unable to agree. It said
that the raw material being an item which was manufactured in India, a rate of excise duty was leviable
thereon. On the raw material which had been imported, the appropriate amount of
duty had not been paid. It was only if this payment had been made that the
exemption notification would be applicable.
view, the correct interpretation of the said phrase has not been placed in the
judgment in the case of Usha Martin. The stress on the word
"appropriate" has been mislaid. All that the word
"appropriate" in the context means is the correct or the specified
rate of excise duty.
exemption notification that uses the said phrase applies to goods which have
been made from duty paid material. In the said phrase, due emphasis must be
given to the words "has already been paid". For the purposes of
getting the benefit of the exemption under the notification, the goods must be
made from raw material on which excise duty has, as a matter of fact, been
paid, and has been paid at the "appropriate" or correct rate. Unless
the manufacturer has paid, the correct amount of excise duty, he is not
entitled to the benefit of the exemption notification.
the raw material is not liable to excise duty or such duty is nil, no excise
duty is, as a matter of fact, paid upon it. To goods made out of such material
the notification will not apply.
notification is intended to give relief against the cascading of excise duty -
on the raw material and again on the goods made therefrom. There is no
cascading effect when no excise duty is payable upon the raw material and the
hardship that the notification seeks to alleviate does not arise.
need to make it clear that, regardless of the interpretation that we have
placed on the said phrase, if there are circulars which have been issued by the
Central Board of Excise and Customs which place a different interpretation upon
the said phrase, that interpretation will be binding upon the Revenue.
appeals shall now be placed before a Bench of two learned Judges, who will
decide the same on their merits. This is done having regard to the fact that
other issues may be involved.
Shah Mohammed Quadri) ..........................................J.
V. Patil) December 12,