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Shetkari Sahakari Sakhar Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1983)LC350DTri(Delhi)
AppellantShetkari Sahakari Sakhar
RespondentCollector of Central Excise
Excerpt:
.....time to time, under sub-section 3 (c) of section 3 of the essential commodities act, 1955 for "levy sugar." this concession was applicable to sugar which exceeded 35% of the production which was in excess of the "average production". the expression "levy sugar" for the purposes of the notification was defined to mean "sugar required by the central government to be sold under an order made under clause (f) of sub-section (2) of section 3 of the essential commodities act, 1955". the appellant was clearing sugar in accordance with the provisions of the said notification with effect from 5-11-1977. on 16-11-1977, the central government issued another notification no.317/77 which fixed a concessional rate of basic excise duty of 7.5% ad valorem and additional excise duty of 5% ad valorem,.....
Judgment:
1. This is a Revision Application filed before the Central Government (hereinafter called Appeal) which, under Section 35-P of the Central Excises & Salt Act, 1944, stands transferred to this Tribunal and is to be disposed of as if it were an appeal presented before it.

2. The facts giving rise to the present dispute are that the Central Government issued Central Excise Notification No. 36/76 dated 25-2-1976 in pursuance of the recommendations of the Sampath Committee for giving incentive by way of excise duty concession on sugar to sugar factories which had undertaken a programme of expansion of the factory. The said Notification extended a concessional rate of basic excise duty of 15% ad valorem and an additional excise duty (leviable under the Additional Duties of Excise (Goods of Special Importance Act 1959) of 5% ad valorem, on the basis of the price determined by the Central Government, from time to time, under Sub-section 3 (c) of Section 3 of the Essential Commodities Act, 1955 for "levy sugar." This concession was applicable to sugar which exceeded 35% of the production which was in excess of the "average production". The expression "levy sugar" for the purposes of the Notification was defined to mean "sugar required by the Central Government to be sold under an order made under Clause (f) of Sub-section (2) of Section 3 of the Essential Commodities Act, 1955". The appellant was clearing sugar in accordance with the provisions of the said Notification with effect from 5-11-1977. On 16-11-1977, the Central Government issued another Notification No.317/77 which fixed a concessional rate of basic excise duty of 7.5% ad valorem and additional excise duty of 5% ad valorem, on the basis of the price determined by the Government from time to time under the Essential Commodities Act. These concessional rates were applied to sugar required by the Central Government to be sold under Clause (f) of Sub-section (2) of Section 3 of the Essential Commodities Act, 1955. As these concessional rates were lower than the rates fixed under Notification No. 36/76, of 25-2-1976 the appellants contended by a letter dated 17-12-1977 to the Superintendent of Central Excise, Sangli, that they were entitled to clear sugar at the lower concessional rates in terms of Notification No. 317/77. They also claimed that during the period 5-11-1977 to 15-11-1977, they were entitled to clear sugar at the lower concessional rate of 10% ad valorem, (basic excise duty) and 5% ad valorem (additional excise duty). They claimed refund of duties paid in excess of these lower concessional rates. The Superintendent of Central Excise, Sangli, by his letter of 2-1-1978, rejected the contentions of the appellants holding that the benefits of Notification No. 317/77 of 16-11-1977 and its predecessor Notification No. 210/73 of 15-12-1973 were not available to the appellants in respect of sugar cleared in terms of Notification No. 36/76. Aggrieved with this order, the appellants filed an appeal before the Appellate Collector of Central Excise, Bombay who upheld the order of the lower authority. It is against this order of the Appellate Collector that the appellants filed a Revision Application before the Central Government which, as we have stated earlier, stands transferred to this Tribunal for disposal.

3. In the Revision Application, apart from the grounds taken up before the lower authorities, the appellants have stressed on the point that the scheme to provide incentives to newly set-up factories as also existing units which had undertaken expansion projects was based in part on excise duty reduction and in part on the grant of higher percentage of levy-free sugar quota. While the Agriculture Ministry permitted a higher levy-free quota of sugar in respect of such factories, the Finance Ministry announced concessional rates of excise duty in respect of such additional levy-free quota of sugar. The Agriculture Ministry's Circular letter of 6-12-1975 laid down that in spite of the higher free sale quotas allowed, the expanded units would be required to pay excise duty in accordance with the normal rates applicable to the existing units on the basis of 65 to 35 ratio of levy and free sale sugar. The appellants thus contended that, in accordance with the said scheme, the extra levy-free quota of sugar was to be considered as levy sugar only for the purpose of levy of excise duty and not as free sale sugar or, in other words, such sugar free from levy quota attracted excise duty only at the rates applicable to levy sugar. Though Notification No. 36/76 which governed the appellants' clearances of additional free sale sugar prohibited sugar factories covered by it from availing themselves of the benefits of Notification No. 210/73 in respect of sugar cleared in terms of the former Notification, it really did not matter so long as the effective rates prescribed by the two Notifications were the same, viz., 15% ad valorem (basic) and 5% ad valorem (additional excise). However, by Notification No. 317/77 of 17-11-1977, Government fixed the concessional rates of 7.5% ad valorem (basic excise) and 5% ad valorem (additional excise) in respect of levy sugar. These were the rates at the material time. The appellants have contended that it is these latter lower concessional rates of 7.5% ad valorem and 5% ad valorem that were applicable in their case and not the higher rates of 15% ad valorem and 5% ad valorem in terms of Notification 36/76. Otherwise, theso called concessional rates of duty in the case of expanded units applicable to their additional free-sale sugar quota would be higher than the duty rates applicable to levy sugar and the incentive for such sugar in terms of the Incentive Scheme would become illusory. The higher rates prescribed in Notification No. 36/76 became inoperative on issue of Notification No. 317/77.

4. Shri Deshmukh, the learned Counsel for the appellants, besides stressing on the salient aspects of the matter, submitted that the concessional rates of duty under Notification No. 36/76 which was issued under Rule 8(1) of the Central Excise Rules could not be higher than the effective concessional duty rates, on levy sugar under Notification No. 317/77. It would be an intolerable position in law, if an assessee in the name of exemption was called upon to pay duty at rates higher than the effective rates to which they would be otherwise entitled. It would not be proper to interpret law in such a way that absurd results, as referred to above, ensued. In this connection, the learned Counsel cited several judicial pronouncements. The intention of Government was clearly spelt out in the letter of 6-12-1975 from the Chief Director (Sugar), Department of Food, Ministry of Agriculture, New Delhi, to all sugar factories. In fact, Government themselves amended Notification No. 36/76 by Notification No. 136/78 and rectified the anomaly pointed out earlier and equated the concessional rates of duty applicable to the additional free sale sugar quota and levy sugar.

Having regard to all this, the Counsel submitted that duties paid in excess of the rates laid down in Notification No. 317/77 should be refunded to the appellants.

5. Appearing on behalf of the Respondent (Collector), Shri K. D. Tayal, Senior Departmental Representative, submitted that the concession contained in Notification No. 36/76 was in respect of the assessable value of the additional free-sale sugar covered by the Notification.

The Notification provided that the concessional rates of 15% ad valorem (basic excise) and 5% ad valorem (additional excise) were to be charged on the basis of the price determined for levy sugar by the Central Government in terms of the Essential Commodities Act, against the normal assessable value which was applicable to free-sale sugar.

However, the concessional rate of duty prescribed in respect of levy-sugar did not apply to such sugar cleared in terms of Notification No. 36/76.

6. We have carefully considered the submissions of both the parties.

The short point arising for decision in the present case is as to whether the concessional duty rates prescribed in Notification No.36/76 of 25-2-1976 or those provided in Notification No. 317/77 of 16-11-1977 would apply in the case of the appellants on sugar cleared in terms of the former Notification. Now, it is an undisputed position that the appellants were entitled to avail themselves of the concession contained in Notification No. 36/76-CE. For the sake of proper understanding, it is better to reproduce the said Notification :- In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules 1944, read with Sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government hereby exempts sugar falling under sub-item (1) of Item No. 1 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), and which exceeds thirty-five per cent of the production which is in excess of the average production, from so much of the duty of excise and the additional duty of excise leviable thereon as is in excess of the duty and the additional duty calculated at fifteen per cent and five per cent, respectively, on the basis of the price determined by the Central Government, from time to time, under Sub-section 3(c) of Section 3 of the Essential Commodities Act, 1955 (10 of 1955), for levy sugar subject to the condition that a certificate is produced from the Chief Director, Directorate of Sugar and Vanaspati, regarding the expansion of the installed capacity of the sugar factory on or after the 1st day of November, 1975, and entitling it to avail of the exemption under this notification : Provided that nothing contained in the notification of the Government of India in the Ministry of Finance (Department of Revenue and Insurance) No 210/73-Central Excises, dated the 15th December, 1973 shall apply to such quantity of sugar as is produced in excess by a sugar factory covered by this notification.

(a) "Average production" in relation to a sugar factory, means the simple average production of the preceding three sugar years from the date of commencement of production in relation to the expansion of its installed capacity and if such factory has worked for a period less than three years, the average shall be calculated taking into account the actual year or years of production ; (b) "Levy sugar" means sugar required by the Central Government to be sold under an order made under Clause (f) of Sub-section (2) of Section 3 of the Essential Commodities Act, 1955 (10 of 1955) ; (c) "Sugar year" means the period of twelve months commencing on the 1st day of October and ending with the 30th day of September next following.

2. In computing the average production of sugar during the preceding three years in respect of a sugar factory, the data as furnished in Form R.G.I, prescribed in appendix 1 to the Central Excises and Salt Act, 1944, or in such other records as the Collector may specify under Rule 53 or Rule 173G of the said rules shall be adopted".

It may be noted that the notification extends the concessional duty rate of 15% ad valorem (basic duty) and 5% ad valorem (additional duty) to sugar exceeding 35% of the production which is in excess of the "average production" (defined in the Notification). It further provides that the price to be adopted for the determination of the duty by application of the said concessional duty rates shall be the price determined by the Central Government, from time to time, under Section 3(3c) of the Essential Commodities Act, 1955 for "levy sugar". "Levy sugar" has been defined for the purposes of the Notification as "sugar required by the Central Government to be sold (emphasis supplied by us) under an order made under Clause (f) of Sub-section (2) of Section 3 of the Essential Commodities Act, 1955". Now, the sugar cleared in terms of Notification No. 36/76 is not "levy sugar" but extra quotas of free-sale sugar. The concession in Notification No. 36/76, therefore, contains two components : one, the lower rates of duty prescribed therein and second, the assessable value is equated to the Government-determined price of "levy sugar". Since, however, such extra quotas of free-sale sugar were not actually "levy sugar" required to be sold in terms of the orders of the Central Government under the Essential Commodities Act, the concessional duty rates notified for "levy sugar" would not be applicable in the absence of any express provision to that effect. Notification No. 36/76, on the other hand, contains an express provision to the effect that nothing contained in the Notification No. 210/73 dated 15-12-1973 shall apply to such quantity of sugar as is produced in excess by a sugar factory covered by this Notification No. 36/76. Now, Notification No. 210/73 was subsequently superseded. The Notification in force at the material time was 317/77 of 16-11-1977 which is extracted below :- In supersession of Notification Nos. 251/76-CE., dated 14-9-1976, 254/76-CE, dated 21-9-1976 and 279/76 CE, dated 22-11-1976, sugar falling under sub-item (1) of Item No. 1, cleared on or after the date of publication of this notification in the Official Gazette, being sugar required by the Central Government to be sold under Clause (f) of Sub-section (2) of Section 3 of the Essential Commodities Act, 1955 (10 of 1955), is exempt from so much of the duty of excise and the additional duty of excise leviable thereon as is in excess of the duty and the additional duty calculated at seven and a half per cent and five per cent respectively, on the basis of price determined by the Central Government from time to time, under Sub-section 3(c) of Section 3 of the said Essential Commodities Act, as the price payable for such sugar to the producer thereof.

Explanation : For the purposes of this notification, the element of the duty and the additional duly, if any, added to the price aforesaid shall be deducted before calculating the duty and the additional duty on the basis of such price.

2. This notification shall be in force upto and inclusive of the 30th day of Sept. 1978".

It is ex facie clear that this Notification applied only to sugar required by Central Government to be held in terms of orders issued under the Essential Commodities Act, in other words, "levy sugar".

Reading the two Notifications No. 36/76 was not in force at the material time, the extra quantity of free-sale sugar would have attracted the higher duty rates applicable to free-sale sugar cleared in the normal course and on the basis of higher assessable values applicable to such free-sale sugar. Hence, the appellants' contention that denial of the concessional duty rates applicable to "levy sugar" with respect to extra quantity of free-sale sugar cleared in terms of Notification No. 36/76 would render the incentive scheme illusory is without substance. This is not a case where a plain reading of the relevant Notification leads to absurd results. On the other hand, as we have shown, the reading of the two Notification Nos. 37/76 and 317/77 directly negatives the appellants' contention. It is not, therefore, necessary for us to discuss the judgments referred to by the learned Counsel for the Appellants in support of his contention that it would not be proper to interpret the law in such a way that absurd results ensued. The ratio of the judgments cited by the learned Counsel for the appellants does not apply to the facts of the instant case. On the other hand, we are fortified in our stand by the observations contained in the judgment of the Hon'ble Supreme Court in the case of M/s Hansraj Gordhandas v. Assistant Collector of Central Excise & Customs, Surat and Ors. delivered on 27th September, 1968 in Civil Appeal No. 1059 of 1965-1978 E.L.T. (J 350) (S.C.). The relevant portion is extracted below :- "It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the tax payer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting autho-riry. If such intention can be gathered from the construction of the words of the Notification or by necessary implication therefrom, the matter is different, but that is not the case here".

There is no room, in our opinion, for any doubt as to the intent or meaning of the Notification No. 36/76.

7. Having regard to the aforesaid discussions, we uphold the order of the Appellate Collector and reject the appeal.


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