1. M/s. Tamilnadu Steels, Arakkonam has filed a Revision Application dt. 30.5.1981 which is directed against the Order No. 4/81 of 1981 dated 21st February, 1981 passed by the Central Board of Excise & Customs under Section 35A of the Central Excises and Salt Act, 1944.
This Revision Application has now been transferred to the Tribunal and is being considered as an appeal. The appellants are manufacturers of steel billets and castings falling under item 26AA(i) and item 26AA(v) of the Central Excise Tariff. An Incentive Scheme to encourage higher production was introduced by the Government and this was promulgated in Notification No. 198/76-CE, dated 16.6.1976. These iron and steel products manufactured by the appellants were specified as eligible for the incentive scheme. The Assistant Collector of Central Excise, Vellore granted the refund due to the appellants in respect of basic excise duty but denied any benefit in respect of auxiliary duty paid by the appellants. The appellants, however, submitted that 25% reduction of duty should be available both for the basic excise duty as well as auxiliary duty after they cross the base clearance figure. The Collector of Central Excise, however, informed the appellants that the excise duty relief having been given under Rule 8(1) of the Central Excise Rules is applicable only in respect of basic excise duty and not in respect of auxiliary duty. The Central Board of Excise and Customs also rejected the application made by the appellants on the ground that 25% concession envisaged under the said Notification No. 198/76-CE dated 16.6.1976 applied to basic excise duty only. The main ground for this decision was that the Notification had been issued under Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944. Since the auxiliary duty had been levied under Section 36 of the Finance Act, 1976, any exemption in respect of auxiliary duty had to be granted under a Notification issued under Rule 8(1) of the Central Excise Rules, 1944 read with Section 36(5) of the Finance Act, 1976 which had not been done in the present case. He rejected the appellants' plea that auxiliary duty is computed as a percentage of basic excise duty and that the concession which is extended to the basic duty should automatically be given in respect of auxiliary duty as well.
2. Shri P. Chidambaram, Advocate appearing on behalf of the Appellants, stated that the auxiliary excise duty levied under Section 34(5) of the Finance Act, 1975 read with Notification No. 128/75 dated 12.5.1975 or Notification No. 176/76 dated 27.5.1976, as the case may be, is levied as a percentage of the basic excise duty. The auxiliary excise duty, therefore, can only be a percentage of the effective basic excise duty.
If the basic excise duty payable by the appellants was reduced under the Incentive Scheme as embodied in the Notification No. 198/76 dated 16.61976, the appellants should be automatically eligible for these concessions in respect of auxiliary duty. In accordance with the provisions of this Notification, the appellants were liable to pay only 67.50 per metric tonne in respect of excess clearances of goods falling under item 26AA(i) and Rs. 18.75 per metric tonne in respect of excess clearances of goods falling under item 26AA(v). Since the auxiliary excise duty is reckoned as a percentage of the effective basic excise duty, the appellants were liable to pay only 100% of the effective basic excise duty. That is to say, in respect of goods falling under item 26AA(i), the appellants were liable to pay only 67.50 per metric tonne as auxiliary excise duty and in respect of goods falling under item 26AA(v), the appellants were liable to pay only 18.75 per metric tonne as auxiliary excise duty. While the appellants were given the concessions under Notification No. 67/73 dated 1.3.1973 and No. 238/75 dt. 19.12.1975, they were denied the concessions under Notification No.198/76 dated 16.6.1976. The lower authorities have ignored the basis on which the auxiliary excise duty is levied, namely, that these duties are levied only as "percentage of duty leviable under the Act read with any Notification for the time being in force". The percentage of 100% as stated in Notifications should be applied only on the effective basic excise duty taking into account all the relevant Notifications issued under Rule 8. The Assistant Collector as well as the C.B.E.C.have wrongly denied the benefit of Notification No. 198/76 dated 16.6.1976 although this Notification has been issued under Rule 8 and accordingly it is required to be taken into account by levying the auxiliary excise duty.Indian Aluminium Co.
v. Union of India as reported in 1983 ELT P. 349 wherein the Delhi High Court had ruled that the Incentive Scheme exemption should cover both the basic excise duty and auxiliary duty under Notification No. 198/76.
4. Shri Lakshmi Kumaran Sr. Departmental Representative referred to the Central Excise Law Amendment and Validation (Ordinance), 1982 which was replaced by Act 58 of 1982 1982 ELT Vol. IX Page B--53. This Act provided that exemption of auxiliary duty has to be given specifically under the relevant provisions of Finance Act and not merely under Rule 8 of the Central Excise Rules. The Delhi High Court judgment, therefore, cited by the learned Advocate for the Appellants would be of no avail to the appellants. He, however, was inclined to agree with the contentions of the appellants that the rate of auxiliary duty as prescribed in the Notification No. 128/75 dated 12.5.1975 or Notification No. 176/76 dated 27.5.1976 was to be calculated as percentage of duty leviable under the Central Excise Act read with any Notification for the time being enforced under the said Act or the rules made thereunder, provided, of course, that the duty so calculated as specified by the percentage did not in any case exceed 20% of the value of such goods as determined in accordance with the provisions of Section 4 of the Central Excises Act.
5. The Bench has carefully considered the submissions made by both the parties. The provisions of the relevant Notifications levying the auxiliary duties are in-built in the Notifications themselves and provide that iron and steel products falling under item 26AA of the Central Excise Tariff are exempt from so much of the auxiliary duty of excise leviable thereon under Section 36(1) of the Finance Act, 1976 as is in excess of the duties specified in the corresponding entry of the said Table. The relevant portion of the Table is produced below: TABLE Description Duty as percentage of duty leviable under the Central Excise Act read with any notification_____________________________________________________________Iron or Steel products In view of these provisions in the relevant notification, it is clear that auxiliary duty has to be calculated in the prescribed manner. The appeal is, therefore, allowed with consequential relief. The lower authorities will be entitled to correctly determine the relief due to the appellants under the rules.