1. The case was argued before us on 17-2-1983. The appellants manufacture scooters for which they obtain duty-paid power pack (engine) from M/s Scooters India Ltd., Lucknow. Exemption Notification No. 21/77-CE permitted them set off of duty of excise already paid on the engines fitted to their scooters. By virtue of another exemption Notification No. 198/76-CE, they were entitled to a further exemption which was in the nature of an incentive for their excess production of scooters calculated in the specified manner. The relevant portion of this notification exempted their excess production of scooters "from so much of the duty of excise leviable thereon under the said item [read with any notification issued under Sub-rule (1) of Rule 8 of Central Excise Rules, 1944 and in force for the time being] as is in excess of 75 per cent of such duty, ." The dispute involved in the present appeal is whether while assessing duty on the scooter, the exemption (or incentive) under Notification No. 198/76-CE is to be calculated before or after deducting the duty set off on the engine under Notification No. 21/77-CE. During the arguments, the appellants presented an illustration of the two calculation methods which we reproduce below to facilitate easier understanding of the problem :-________________________________________________________________________________ I II Urged by the Appellants Followed by the Department________________________________________________________________________________Duty rate 12-1/2% Duty rate 12-1/2%Incentive 25% Duty on value ofRate leviable 9.375% Rs. 4,000 per scooter Rs. 500.00 Less set off for proformaGross duty payable for Gross duty payable Rs. 302.67value of Rs. 4,000Less set off or Less incentive @ 25% 75.67proforma credit (-) 197.33Net duty payable 177.67 Net duty payable Rs. 227.00________________________________________________________________________________ 2. The appellants argued that the method followed by the Department would result in discrimination against manufacturers following the set off procedure under Notification No. 21/77-CE vis-a-vis those following proforma credit procedure under Rule 56A of the Central Excise Rules, 1944 to avail of the benefit of the same notification. They argued that Notification No. 198/76-CE was also an exemption notification just as Notification No. 21/77-CE and there was no justification to apply the latter notification first before applying the former notification.
3. On behalf of the Department, Shri Raghavan Iyer laid stress on the wording of Notification No. 198/76-CE the relevant portion from which has already been extracted in para 1 above. He stated that the language used in this notification made it incumbent that the incentive should bs calculated on the effective rate of duty payable under the tariff item read with any exemption notification in force which in this case was Notification No. 21/77-CE. Notification No. 198/76-CE was an exemption piled upon exemption and because of the specific wording of the material portion of this notification, the duty 'leviable' on the scooter really meant the duty 'actually payable'. As regards the appellant's argument of discrimination, he stated that proforma credit procedure and set off procedure were two different patterns of working with their own conditions and limitations. Choice of the pattern was left to the manufacturer. Once he chose one particular pattern; he cannot legitimately claim parity with those following the other pattern. In the instant case, no doubt a manufacturer of scooters following proforma credit procedure got a higher amount of incentive under Notification No. 198/76-CE but as between two manufacturers working under the same pattern, whether set off or proforma credit, there was no discrimination. The appellants too could have chosen to follow the proforma credit procedure but they did not do so. There was no discrimination against them vis-a-vis another manufacturer following the set off procedure.
4. We have carefully considered the matter. It is clear from the language of Notification No. 198/76-CE that the exemption granted therein is from so much of the duty of excise leviable on scooters under Item 34 of the Central Excise Tariff read with any exemption notification in force for the time being as is in excess of 75 per cent of such duty. In other words. Notification No. 198/76-CE itself requires that the incentive provided therein should be calculated with reference to the net effective duty actually payable on scooters. If one were to follow the method of calculation urged by the appellants, one would have to omit the words, figures and brackets "[read with any notification issued under Sub-rule (1) of Rule 8 of Central Excise Rules, 1944 as in force for the time being]" from Notification No.198/76-CE for which there is no warrant. We, therefore, agree that the method of calculation followed by the Department is the correct one. We also agree with the argument of the Department that there is no discrimination against the appellants vis-a-vis another manufacturer similarly placed, that is, working under the set off procedure.