1. This is a revision application to the Government of India which, under Section 35P(2) of the Central Excises and Salt Act, 1944, is to be proceeded with as if it were an appeal filed before the Tribunal.
2. The facts of the case, briefly stated, are that the Appellants are manufacturers of copper in crude form (falling under Item 26-A(1) of the Central Excise Tariff Schedule) starting from copper ore as also brass sheets falling under Item 26-A(2) of the said Schedule (hereinafter referred to as the CET). At the material time, Central Excise Notification No. 74/65 dated 1.5.1965, as amended by notification No. 187/73, dated 29.9.1973 prescribed a concessional rate of basic excise duty of Rs. 500/- per M.T. on copper manufactures including copper sheets (Item 26A(2) of the CET) provided that such products were manufactured out of copper or copper alloys in any form and on the virgin copper or the copper content of the alloy appropriate excise duty or additional (countervailing) duty of Customs "is paid or is deemed to have been paid". The Central Excise authorities, in whose jursdiction the appellant firm was situated, ascertained, in the course of an inspection, that a (calculated) quantity of 231.9381 M.T. of brass sheets had been manufactured out of crude copper which had not discharged duty liable at the appropriate rate. It was, therefore, alleged that the benefit of the concessional rate of duty fixed in the above referred to Notification was not available with respect to the said brass manufactures. On this basis a Show Cause Notice was issued asking the appellants to pay a sum of Rs. 1,28,725.65 by way of basic excise duty and Rs. 96,544.23 by way of auxiliary excise duty making for a total of Rs. 2,25,269.88. The Show Cause Notice gave details of the computation of these amounts. After considering the appellant's reply to Show Cause Notice and their oral submissions in the course of a personal hearing, the Assistant Collector confirmed the demand raised in the Show Cause Notice. Aggrieved with this order, the appellants preferred an appeal to the Appellate Collector of Central Excise, Calcutta who upheld the Assistant Collector's order. It is against this order that the appellants filed a revision application before the Central Government which, as stated above, is to be disposed of by the Tribunal as if it were an appeal filed before it.
3. In the Revision Application, it was urged that, during the material period, the appellants were carrying on discussions with the Superintendent of Central Excise, Jamshedpur with a view to resolving the problem of payment of excise duty on brass and other rolled products arising out of the amendment of the aforesaid Notification No.74/65 by Notification No. 183/73 dated 29.9.1973 without, however, clearing any finished stock of brass manufactures. A note was recorded of the discussions setting out the manner of payment of duty on the said stocks. It was in pursuance of the said discussions and in response to the Superintendent's demand dated 26.6.19 that the appellants paid on the 15th November, 1973 excise duty of Rs. 2,19,181.50 (Basic excise duty) and Rs. 1,64,386.13 (auxiliary duty).
The appellants urged that no further duty was liable to be paid.
4. Another submission was that the Appellate Collector had disposed of the appeal without hearing the appellants although they had asked for a personal hearing by means of a letter.
5. A third submission was that the demand, which is the subject matter of the present proceedings, was hit by Rule 10 of the Central Excise Rules. Only the duty which was short-levied through error or inadvertence could be demanded within a period of one year from the date of payment of duty or date of adjustment of duty in the current account; this time-limitation is not saved merely because a Show Cause Notice was issued.
6. The appellants had made a plea that, in any event, they should be entitled to remission of duty on the melting or burning loss involved in the production of brass sheets from copper. This plea had not been accepted by the lower authorities.
7. At the outset, Shri Mittal, appearing for the appellants, submitted that though the appeal memo, filed on 12.2.1976 before the Appellate Collector of Customs did not contain a request for personal hearing, the appellants had requested for personal hearing by a letter dated 11th June, 1976. This had not been taken into consideration by the Appellate Collector before passing his orders on the appeal. When it was pointed out to the Counsel by the Bench that the Appellate Collector had passed his order on 10.6.1976 though it may have been communicated to the appellants on the 5th July, 1976, Shri Mittal did not press the point. The Bench finds no substance in the plea that the Appellate Collector disposed of the appeal without hearing the appellants in violation of the principles of natural justice.
8. The Counsel for the appellants drew the attention of the Bench to the language of the Central Excise Notification No. 74/65 dated the 1st May, 1965 as it stood on 29th September, 1973 (the material date). He then referred to the language employed (and the difference in the terminology) in some other Notifications like 119/ 66 (Sub-clause V).
For easy understanding, these Notifications are re-produced below: Notification No. 74/ 65 dated 1.5.1965 as amended by Notification No. 58/68 dated 233.1968: G.S.R. 673--In 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 Ministry of Finance (Department of Revenue) No. 52/62-Central Excises dated the 24th April, 1962, the Central Government hereby exempts the manufactures of Copper and Copper alloys, that is to say, plates, sheets, circles, strips and foils in any form or size (falling under Sub-item (2) of Item No. 26A of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), in the manufacture of which copper or copper alloys in any form is used and on the virgin copper or the copper content of the alloy, the prescribed amount of duty of excise, or as the case may be, the additional duty leviable under Section 2A of the Indian Tariff Act, 1934 (32 of 1934) is paid or is deemed to have been paid, from so much of the duty leviable thereon as is in excess of Rs. 500/-. per metric tonne.
2. This notification shall be deemed to have taken effect from the 26th day of February, 1965.
3. Nothing contained in this notification shall, with effect from the 23rd day of March, 1968, apply to plates, sheets, circles, strips and foils of the kind referred to above, manufactured by a manufacturer who also manufactures virgin copper from ore, whether in the same or in another factory in India.
G.S.R. 457(E)--In exercise of the powers conferred by Sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 74/65-Central Excises, dated the 1st May, 1965, namely: Copper in any crude form including ingots, bars, blocks, slabs, billets, shots and pellets, falling under Sub-item (1) of this Item and wire bars, wire rods, and castings of copper falling under Sub-item (1b) of the said Item are exempt from the whole of the duty of excise leviable thereon if made from any of the following materials or a combination thereof, namely: ii) waste or scrap obtained from copper or copper alloys where the prescribed amount of duty of excise, or, as the case may be, the additional duty leviable under Section 2A of the Indian Tariff Act, 1934 (32 of 1934), has been paid on the copper or the copper content of alloys; or iii) virgin copper in any crude form on which the prescribed amount of duty of excise, or as the case may be, the additional duty leviable under Section 2A of the Indian Tariff Act, 1934 (32 of 1934), has already been paid; or iv) copper in any crude form purchased from the market on or after the 20th day of August, 1966, or v) waste or scrap of copper and copper alloys, falling under Sub-item (1b) of the said Item No. 26A, in respect of which the appropriate amount of duty of excise, or, as the case may be, the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), has already been paid on the copper or the copper content of the alloys.
This notification shall be deemed to have taken effect from the 24th day of April, 1962.
9. The Counsel submitted that whereas the language employed in Notification No. 119/66 made the exemption contained therein subject to the condition that the raw material from which the products exempted under the notification were manufactured should have paid the appropriate amount of duty of excise or additional (counter-vailing) duty leviable under Section 3 of the Customs Tariff Act, Notification No. 74/65 (which was material to the present case) employed a different language and made the exemption contained therein subject to the condition that the prescribed amount of excise duty or, as the case may be, the additional (countervailing) duty of Customs is paid or is deemed to have been paid. In the instant case, though excise duty had not been paid on the crude copper before it was taken into use for manufacture of brass sheets, duty was eventually paid on the crude copper and on the brass sheets. The Department's contention was that the appellants were not entitled to clear the brass sheets by paying only differential basic duty of Rs. 500/-per M.T. in terms of Notification No. 74/65 since the crude copper from which the brass sheets were manufactured had not before such use in such manufacture, discharged duty liability at the appropriate rate. Notification No.74/65 did not require that, for application of the concessional rate of basic excise duty (Rs. 500/- per MT), duty on crude copper should already have been paid before the brass sheets were made from such copper. The appellants had in fact paid the crude stage duty on copper before the brass sheets made therefrom were cleared at the concessional rate of Rs. 500/- per MT. Thus, the Appellants had discharged their duty obligation in a proper manner. They had, in fact, paid the full amount of duty leviable taking crude copper and brass sheets together.
What the Show Cause Notice did was, in effect, to levy duty again on the crude copper on the ground that the Appellants had not initially paid the appropriate duty on the said crude copper before taking it into use in the manufacture of brass sheets.
10. Explaining the methodology followed in the matter of duty payment, Shri Mittal submitted that the Appellants were following what, in Central Excise parlance, was known as the "letter the better" principle. In terms of this principle the Appellants--an integrated manufacturer manufacturing both crude copper and brass sheets were paying duty only when the brass sheets were cleared and not at 2 stages, i.e. at the stage of crude copper and at the stage of brass sheets. However, the total amount of duty was being correctly paid. In this method, duty was not payable on the quantity of copper which was lost as melting or burning loss involved in the process of manufacture of brass sheets. However, in the method now required to be followed even such copper which was lost as melting and burning loss was liable to pay duty and this was not justified. After the 29th September, 1973, the appellants had been following the procedure evolved in the course of discussion with the Central Excise authorities and suffering duty even on copper lost as melting and burning loss.
11. The Counsel for the appellants then referred to the amendments to the Central Excise Rules, 9 and 49 effected by the Government of India, Ministry of Finance (Deptt. of Revenue) Notification No. GSR 74(E) dated 20th February 1982 by which amendments were given retrospective effect from the 28th February, 1944 vide Section 51 of the Finance Act, 1982. Now, the position was made legally clear, namely, excisable goods manufactured in a premises and removed to another part of his same premises for further manufacture would have to discharge the duty liability, if any, thereon before such removal.
12. Appearing on behalf of the Respondent, Shri Iyer submitted that Notification No. 74/65, as it stood before the 29th September, 1973, did not apply to Hindustan Copper Ltd., the appellant firm, which was an ore-based manufacturer of copper and copper products. In this connection, he drew the attention of the Bench to the amending Notification No. 58/68 dated 23rd March, 1968 which inserted a new para 3 therein as follows: 3. Nothing contained in this notification shall, with effect from the 23rd day of March, 1968 apply to plates, sheets, circles, strips, and foils of the kind referred to above, manufactured by a manufacturer who also manufactures virgin copper from ore, whether in the same or in another factory in India.
Notification No. 183/73 dated 29th September, 1973 omitted the said paragraph 3. The question, therefore, would be whether the appellant firm was entitled to avail itself of the concession contained in Notification No. 74/65 during the period prior to 29th September, 1973.
Since Hindustan Copper were ore based manufactures, they were not entitled to avail themselves of the benefits of Notification No. 74/65.
In other words, they should have paid the appropriate amount of duty on the crude copper before it was removed to the foundry for further manufacture into copper or brass sheets.
13. With regard to the expression duty "is paid "occurring in Notification No. 74/ 65, Shri Iyer submitted that it meant that duty was paid in accordance with law i.e. crude copper should have paid duty at the stage of its removal to the foundry. The Notification applied only if this duty was paid before the said copper was taken for manufacture of brass sheets. The argument of the Counsel for the Appellants that the expression meant that the appellants had the option of paying duty before the removal of crude copper to the foundry for manufacture f brass sheets or after the manufacture of brass sheets was not tenable since crude copper was liable to duty and this liability had to be discharged before it was removed within the factory for the purpose of manufacture of another product. It wouid not be correct to say that an ore-based manufacturer, as in the present case, had an option to pay duty on crude copper either before its removal for the purpose of further manufacture or after the stage of further manufacture.
14. In reply to a question from the Bench, Shri Mittal, the Counsel for the Appellants, submitted that this was not a case of the Department seeking to levy duty twice over, i.e. it was not the case of double levy of duty.
15. We have carefully considered the submissions of both the parties.
M/s. Hindustan Copper Ltd., (HCL for short) are ore-based manufacturers of copper, that is to say, they start wth copper ore and produce copper out of it. Notification No. 74/65 makes it clear (reference para 3 of the Notification) that nothing contained in the said Notification shall, with effect from 23rd March, 1968 apply to "plates, sheets, circles, strips and foils of the kind referred to above, manufactured by a manufacturer who also manufactures virgin copper from ore, whether in the same or in another factory in India". It is clear from this provision that HCL was not eligible to the benefits of Notification No.74/65 with effect from 23.3.68. On 29.9.73, paragraph 3 of the Notification (referred to above) was omitted from Notification No.74/65 by amending Notification No. 183/73. We are, in this case, concerned with the period prior to 29.9.73 as well as subsequent to it.
In the period prior to 29.9.73, HCL was clearly not entitled to avail itself of Notification No. 74/65. In other words, it should have paid duty at the stage of its removal from the place where it was produced or stocked to the foundry for further manufacture of brass sheets and other rolled products. This position is clear from Rule 9 of the Central Excise Rules, 1944 which stipulates that "no excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf whether for consumption, export or manufacture of any other commodity in or outside such place, until excise duty leviable thereon has been paid..." As Shri Mittal has submitted. Section 51 of the Finance Act, 1982 has made this position crystal clear by giving restrospective effect to Notification No.GSR-74(E) dated 20.2.82 from 28.2.44. The position after the amendment of Notification No. 183/73 is that HCL could, from 29.9.73, avail itself of the benefits of the said Notification 74/65. In either event, the basic position remains that copper in crude form (which is an excisable item in the Central Excise Tariff) should discharge its duty liability at the appropriate rate before it could be removed to the foundry for subsequent manufacture and rolling operations resulting to brass sheets and other rolled products.
16. Against the above background, we may now examine the factual position in respect of the duty liability of HCL as worked out by the Central Excise authorities. This is best appreciated by setting out the relevant events and transactions in a tabular form:1.
Crude copper in stock at the 23.996 M.T. foundry on 184.108.40.206.
Receipts of Crude copper in the 122.125 " foundry between 29.9.73 and _______ 22.10.73 146.121 " _______4.
Amount of Central Excise duty asses- Rs. 2,19,181.50 (Basic sed by the Central Excise authorities excise) on the aforesaid quantity of crude + Rs. 1,64,386.13 (Auxilia- copper for which a notice in form ry/excise) DD-2 bearing date 26.10.73 was issued ____________________ Rs. 3,83,567.63 manufactured out of 146.121 M.T. of 231.9381 MT copper taking the proportion of copper9.
Duty payable on 231.9381 M.T. of Rs. 4,63,876.20 + 3,46,907.15 brass at Rs. 2000/- per MT (Basic (BED) (AED) excise)plus Rs. 1500/-(Auxiliary excise)10.
Duty paid on 15.11.73 on 146.121 Rs. 2,19,181.50 + 1,64,386.13 MT of crude copper against (BED) (AED) DD-2 dt. 220.127.116.11.
Duty paid on the calculated quantity Rs. 1,15,969.05 + 86,976.79 of 231.9381 MT of brass at Rs. 500/- (BED) (AED) per M.T. (Basic excise) plus 75%12.
Therefore, total duty paid by HCL _______________________________ (Step 10 plus step 11) Rs. 3,35,150.55 + 2,51,362.92 _______________________________13.
Differential duty to be paid by HCL Rs. 1,28,725.65 + 96,544.23 (Step 9 minus Step 12) 17. As the Appellants have themselves admitted, this is not a case of double levy in the sense that duty is sought to be charged twice over on the same product. In the scheme of the Notification No. 74/65, it is clear that only such rolled products including brass sheets (falling under Item 26A(2) of the Central Excise Tariff) as were manufactured out of duty paid copper (or other specified duty paid material with which we are not concerned in the present case) could pay duty at the reduced rate of basic excise duty of Rs. 500/- per MT; in such an event Auxiliary Duty would be 75% of Rs. 500/- i.e. Rs. 375/-per M.T. If the crude copper from which the rolled products, including brass sheets, were manufactured had not discharged duty liability at the appropriate rate, then the said rolled products would not be eligible to be assessed at the concessional rate provided in the said Notification 74/65, but would attract duty at the tariff rate of Rs. 2000/- per MT( Basic excise duty) applicable to goods falling under Item 26A(2) of the Central Excise Tariff; in that event the Auxiliary duty applicable would be 75% of Rs. 2000/-, i.e. Rs. 1500, -per M.T. In the present case, what seems to have happened is that crude copper out of which the brass sheets were manufactured had not discharged its duty liability prior to its being taken into use for such manufacture. The Central Excise authorities had assessed the duly leviable thereon and issued a notice inform DD-2 on 26.10.73. However, HCL paid this amount only on 15.11.73. In the meantime, the said copper had been taken into use for rolling which was done by 10.11.73. Since duty had not been paid on the crude copper, the rolled products were not eligible to he cleared at the concessional rate in terms of Notification No. 74/65. It is this that led the Central Excise authorities to issue a Show Cause Notice for the differential amount of duty which matter has now come to the Tribunal as a transferred Revision Application for disposal. From the above narration of sequence of events, it is clear that the demand made by the Central Excise authorities is correct in law and the Appellants 'contentions to the contrary have no substance. The Appellants' contention that the words used in Notification No. 74165 viz. "duty is paid " in distinction to the words used in some other Notification like 119/66 ("duty of excise...has already been paid") implied that duty had not to be paid before the crude copper is taken into account for manufacture of rolled products, is, in our view, of no consequence. The plain meaning of the words "duty is paid" is that at the time the goods are taken into use the duty should have been paid. The other contention regarding "burning or melt loss" is also not acceptable at this stage, since it had not been agitated before the lower authorities nor has any supporting evidence been produced even at this stage.
Having regard to the foregoing discussions, we confirm the orders passed by the lower authorities and reject the appeal.