1. The appellants had filed this Revision application against the Order-in-Original dt. 9-6-1982, passed by Sh. K.S. Dilipsinhji, Collector of Central Excise, Bombay, before the Central Board of Excise & Customs, which stands transferred to the Tribunal to be disposed of as an appeal filed before it. By the said order, the learned Collector of Central Excise, Bombay-1 (hereinafter called Collector) confirmed the demand of Rs. 18,53,063.20 paise on 'Aluminium Circles' falling under T.I. 27(b) of the Central Excise Tariff on the appellants.
2. Facts material for decision of this appeal are : that appellants are engaged in the manufacture of Aluminium Utensils/Containers. For the purpose of manufacturing such products, they cut out Aluminium Circles falling under T.I. 27(b) from Aluminium Sheets also falling under the same sub-tariff item i.e. 27(b). It appears that before 1970, in such a situation no excise duty was collected at the stage of manufacture of Circles and at that time duty was not ad valorem but was specific i.e.
on weight basis. Central Excise duty on this item was partly advaloremised in 1970. The appellants were not paying duty at the stage of Circles but were paying duty at the final product stage that is aluminium utensils. They were also not following the procedure laid down under Rule 56A of the Central Excise Rules, 1944 (hereinafter called Rules). The appellants claim that for doing so they were relying on a clarification given by the Collector of Central Excise, Bombay vide his communication dated 5-4-1961, addressed to the appellants' subsidiary concern M/s. Metal Rolling Works Private Ltd. The said communication related to Copper Sheets and Circles. It was clarified 'that manufacturers, who are only making Circles out of duty paid sheets would not be required to pay duty again on Circles cut out from such duty paid sheets. Sometimes in 1976, the Excise authorities on verification found that the appellants had manufactured and cleared Hindalium and Aluminium Circles weighing 403533 kgs. valued at Rs. 50,64,339.15 and 3,12,791.800 kgs. valued at Rs. 37,84,780.78 respectively. The Assistant Collector of Central Excise, Bombay Division-II issued a show cause notice dated 24-11-1976 to the appellants alleging contravention of Rules and called upon them to show cause why duty on Circles be not recovered and penalty imposed. The appellants filed reply denying the allegations. The Collector after complying with usual procedure by his Order No. V-Adj. (27) 15-3/76, dt. 7-10-1980, confirmed the demand of Rs. 41,12,707.80 paise and also imposed penaly of Rs. 40,000 on the appellants. The appellants challenged this order before the Central Board of Excise & Customs, New Delhi. The Board by its order dated 25-3-1981, with certain observations set aside the order of the Collector and remanded the matter to him for fresh adjudication. The Collector then allowed the appellants to make further submissions and also granted them personal hearing. The Collector by the impugned order 9-6-1982 demanded duty of Rs. 18,53,063.20 paise from the appellants, which he said was worked out by the appellants themselves. He, however, refrained from imposing any penalty. Aggrieved with the order, the appellants have filed the present appeal to the Central Board of Excise & Customs, which is before us.
3. First contention urged by Sh. E.R. Srikantia, learned Consultant for the appellants is that cutting out 'Circles' out of duty paid 'Sheets' does not constitute manufacture in the Excise sense and no liability for duty arises. He submitted that the relevant Tariff Item 27(b) of the Central Excise Tariff at the material time read "Manufactures, the following, namely, plates, sheets, circles, strips, shapes and sections, in any form or size, not otherwise specified". He submitted so long as goods remained within the same sub-item, it cannot be said that 'manufacture' has taken place from the Excise point of view. The intention of the Legislature, he argued, by placing a number of goods in a group under one sub-item was that the specified goods mentioned therein would be cleared on one point duty when they are cleared for the purpose of excise either as plates, sheets, circles, strips etc.
Where duty paid sheets had been converted into Circles no new class of goods of a different taxable description had emerged and no duty is attracted. He submitted that to subject such goods to duty under T.I.27(b) again would tantamount to 'double taxation', which is not at all warranted. In support of his argument, Sh. Srikantia, learned Consultant relied on the following decisions :Maharashtra Safety Glass Works Pvt. Ltd. v. Union of India-l9S2 E.L.T.Hindustan Steel Ltd. Bhilai Steel Plant v. Union of India-Compilation of JudgmentsUnion of India and Ors. v. Tata Iron & Steel Co. Ltd., Jamshedpur-Aluminium Corporation of India Ltd. v. Union of India and Ors. - E.C.R.C. 466 (S.C.)-1978 E.L.T. (J452).
(vi) Shakti Insulated Wires Private Ltd. v. Union of India-1982 E.L.T. 10 (Bombay).
(vii) Government of India v. Eastern Dyeing Co., Ludhiana-1982 E.L.T 764 (G.O.I.).Golden Paper Udyog (P) Ltd. Faridabad v. Collector of Central Excise Delhi-CEGAT O. No. 109/1983-C, dt. 25-5-1983, [1983 E.L.T. 1123 (CEGAT)],Golden Paper Udyog (P) Ltd. v. Collector of Central Excise, Delhi- 1983 (2) E.T.R. 355 (CEGAT) O. No. 163 & 164/83-C, dt.
17-6-1983, (xi) Quality Coated Products v. Government of India-1980 E.L.T. 579 (Madras).
(xii) Sandoz India Ltd. v. Union of India-1980 E.L.T. 696 (Bombay) and (xiii) Vijaya Textile v. Union of India-1979 E.L.T. J181.
4. On behalf of the respondent, Sh. V. Lakshmi Kumaran, learned Senior Departmental Representative submitted that if the appellants had a case that he would have frankly conceded the same but this was a hard case.
For the failure of the appellants to have followed the Rule 56A procedure, the appellants had no case at all. He, however, admitted that at the material time, the procedure under Rule 56A was not being followed by other manufacturers of Circles from duty paid sheets.
He submitted that cutting out the circles from sheets would constitute manufacture and the intention of the legislature was to collect duty at circles stage also unless there was intention to that effect. He argued that the appellants could have obtained the benefit of set-off of duty had they followed Rule 56A procedure, which they did not do.
Sh. Lakshmi Kumaran, learned S.D.R. further argued that if the Parliament has specifically included a particular product in the 1st Schedule to the Central Excises and Salt Act, 1944, its validity cannot be questioned on the ground that it did not involve any process amounting to manufacture. Sh, Lakshmi Kumaran in support of his this argument relied on : (i) Union of India v. Hindu undivided family business known as Ramlal Mansukh Rai, Rewari and Anr.-1978 E.L.T. 389-AIR 1971 S.C. 2335 (SC)].
(ii) Hyderabad Asbestos Cement Products Ltd. and Anr. v. Union of India- 1980 E.L.T. 735.
(iii) New Shakti Dye Works Private Ltd. and Ors. v. Union of India and Ors.- 1983 E.L.T. 1736 (Bom.); and 5. This point need not detain us long in view of the Supreme Court decision in Union of India v. Hindu Un-divided family Business known as Ramlal Mansukrai, Rewari and Anr.-1978 E.L.T. (J389) Supreme Court dealing on item which inter alia described "Circles" as manufacture.
The Supreme Court in the decision held as under : "When the legislature used the word "manufacture" in connection with Circles, after having taken account of the fact that billets were already subjected to excise duty, it is obvious that the process, by which the billets were converted into Circles, was held by the legislature to amount to manufacture." It is true that the decision on facts is slightly different from the present case; whereas, in the above case circles were made from the duty paid 'billets' and duty on billets was lesser compared to duty on circles but that would not affect the ratio of the decision. It is not disputed that the sheets were liable to duty and from these sheets circles were made in respect of which the word 'manufacture' is used.
Applying the ratio of the decision, there can be no doubt that conversion of duty paid sheets into circles would constitute manufacture and such circles would be dutiable unless there was any exemption or set-off of duty to that effect.
6. As for Sh. Srikantia, learned Consultant's strong reliance on Bombay High Court decision in Empire Dyeing & Mfg. Co. Ltd. v. Bhide and Ors.
1977 E.L.T. (J34)-(Bombay) Vijay Textile v. Union of India-1979 E.L.T.(J181) and Golden Paper Udyog (decision of CEGAT) Supra and the argument that duty could be collected only at one stage, we note that these two decisions do not relate to items wherein the items were described as "manufacture" in the tariff item. Besides, it also appears that the precedental force of these two decisions is considerably weakened by the Division Bench judgment of Bombay High Court in New Shakti Dyeing Works Private Ltd. and Ors. v. Union of India and Ors.- 1983 E.L.T. 1736 (Bom.) [judgment specifically refers to decision in Vijay Textiles v. Union of India-(1979 E.L.T. J181 though not to Empire Dyeing's case].Sidi Vinayaka Coconut & Co. and Ors. v. State of Andhra Pradesh and Ors. AIR 1974 page 1 111, it would appear that there can be no legal objection to the legislature itself expressly treating and taking the same commodity at different stages as commercially different articles. Now it is nobody's case that aluminium sheets and aluminium circles are commercially the same articles. The sub-item describes them as manufacture. The Supreme Court in para-10 of its decision referred to a number of decisions where the same commodity at different stages was treated and taxed as commercially different article. In view of this, we do not accept the appellants' contention that circles would not be treated as manufacture or that they were not liable to duty, if they were made out from duty paid sheets. We might emphasise that liability would be there though it would also depend on exemption Notification or set-off allowed under some provision of law.
Apart from the above, there is also a contradiction in the appellants arguments when they claim that duty liability did not arise at circle stage.
From the Order of the Collector, it appears that Rule 56A procedure for claiming proforma credit/set-off was applicable to Aluminium products.
We also observe that insistence on Rule 56A procedure was dispensed with and duty was being collected on later the better principle i.e.
finished product and not on every stage. This would, however, not be against the legal position that duty was collectable at every stage though by recourse to Rule 56A procedure set-off of duty could be claimed. In fact even in the present appeal for the period 1970 to 1976, the appellants are relying on Rule 56A procedure claiming set-off of duty paid on sheets from the demand of duty made on Circles. The appellants have also been from 1977 onwards following Rule 56A procedure and claiming credit of duty paid on sheets. For all these reasons, we hold that circles made from duty paid sheets constituted manufacture and were liable to payment of duty unless there was an exemption to that effect or procedure for claiming proforma credit of duty paid and followed.
7. Sh. Srikantia, learned Consultant forcefully invited our attention to orders passed by the Central Board of Excise & Customs and argued that the Board had observed that exercise of charging duty on Circles cut out from duty paid sheets, the circles having less weight then sheets would be administratively wasteful and even of doubtful legal validity. The legal validity of demand of duty on Circles has been dealt with by us above. This ground therefore, does not help the appellants.
8. Sh. Srikantia also argued that weight of sheets would be more than the weight of the circles made out of it. Duty thus oa sheets would be more than duty on circles. Therefore, there was no intention to collect duty at every stage because in these circumstances, there could not be set-off. We are afraid this argument leads us nowhere. Besides, it appears to us that since this duty is ad valorem and value of circles would be more than value of sheets this argument is fallacious.
9. Sh. Srikantia, learned Consultant also argued that the Board has observed that benefit of Rule 56A could be given retrospectively in view of amendment in Rule 56A by Notification No. 15/81-C.E., dated 21-2-1981 in cases where application for such procedure and credit is not submitted timely for some bona fide reason. This argument will be dealt with at proper place.
10. Sh. Srikantia, next argued that the appellants in any event are entitled to abatement to the extent of duty already paid by them under Item 27 (b) for sheets amounting to Rs. 24,61,865.39 irrespective of the existence of the Rule 56A. This argument is also taken adequate care of in our finding in ground No. 1, where we have said that duty was realisable at Circles stage unless the appellants could show that they were entitled to benefit of any exemption notification or set-off of duty.
11. Another ground feebly urged by Sh. Srikantia, learned Consultant is that the show cause notice and the adjudication proceedings were time-barred under Section 40(2) of the Central Excises and Salt Act, 1944. Sh. Srikantia in support of this argument relied on Public Prosecutor, Madras v. R. Raju and Anr.-197% E.L.T. J 410 (S.C.) and Hyderabad Allwyn Meta 1 Works Ltd. v. Collector of Central Excise, Hyderabad-1978 E.L.T. (J -556) (A.P.).
12. As against this Sh. Lakshmi Kumaran, learned S.D.R. submitted that bar of limitation under Section 40 (2) of the Act would not help the appellants as the bar related to legal proceedings in a Court of law, and the provision of Section 40 (2) would not be applicable to the proceedings before the Departmental authorities. He relied on Universal Cables Ltd., Satna v. Union of India and Ors.-1977 E.L.T. J-92 (M.P.) wherein M.P. High Court relying on 'ejusdem generis rule' held that other legal proceedings bear restricted meaning conveying the idea of judicial proceedings or proceedings taken in court of law. The M.P.High Court also referred to the S.C. decision on which Sh. Srikantia has relied. After Sh. Lakshmi Kumaran had replied on this point, Sh.
Srikantia stated that he did not press this point.
13. Sh. Shrikantia, learned Consultant next urged that the Central Board of Excise & Customs in its order-in-revision had expressed that the appellants could be given the benefit of Rule 56A and allowed set-off of duty retrospectively in view of the amendment in Rule 56A in 1981. This should be taken to be a mandate from the Board to the Collector of Central Excise to give benefit of this provision.
14. We have gone through the orders of the Board, passed by Sh. J.Datta, Member as also of the Collector, Bombay. From a reading of order of the Board, we do not find any such mandate which Sh. Srikantia claimed in favour of the appellants. The learned Collector has discussed this aspect of the matter at page-7 of his order. He has held that none of the conditions under proviso to Rule 56A (2B) were satisfied in the appellants' case. The said proviso to Rule 56A (2B) consists of four conditions. Sh. Srikantia claimed that the appellants fulfilled conditions number (b), (c) and (d) but he admitted that the appellants did not fulfil condition (a) (i) & (ii) relating to late communication of such notification or (ii) change in assessment of raw material or component parts of finished goods from a particular Item No. in the First Schedule to the Central Excises and Salt Act, 1944 to another item number in the said Schedule.
15. While the Tribunal certainly has powers in appropriate cases to interfere with exercise of discretion vested in the Collector of Central Excise regarding grant of permission to avail procedure under Rule 56A to a manufacturer, the Tribunal would be slow to interfere with exercise of such discretion vested in the Collector unless it is shown by the appellants that discretion exercised by the Collector is manifestly wrong or perverse. In the circumstances of the case, we decline to interfere with the exercise of discretion made by the learned Collector.
16. Sh. Srikantia also urged that from no other manufacturer of aluminium circles from duty paid aluminium sheets during the relevant period duty had been realised by the Department and thus there was discrimination.
17. We are afraid, we can do nothing in the matter. After having found that duty was chargeable on Circles, we cannot order that duty be not realised because other similar manufacturers have escaped duty. The remedy to redress discrimination on the ground urged does not lie before the Tribunal. The appellants, if so advised could approach the Government for exercise of powers under Section 1IC(2) of the Act. In fact during arguments, Sh. Lakshmi Kumaran, learned S.D.R. urged that appellants' remedy lay in approaching the Government for exercise of its power under the provision.
18. Before the Collector and in the memo of appeal, a ground was urged that Hindalium is an alloy and not aluminium. This point has not been urged before us.
19. The next question for determination is whether it is Rule 10 read with Rule 173-J with one year limitation should be applicable or Rule 10A under which there is no limitation. It is common ground that though at the material time Rule 56A was applicable to this case, the insistence on following the procedure stipulated under Rule 56A was dispensed with by the authorities.
20. It is not disputed that the entire activity of the appellants were done with full knowledge of the Department. Though circles were not assessed, there was assessment of duty on sheets. We also note that no penalty has been imposed against the appellants. It appears to us that the failure of the appellants to pay duty on Circles and claim set off of duty paid on sheets was due to mistaken interpretation on both sides i.e. the appellants and the department. The Department itself was not insisting on manufacturers of circles from duty paid she ets to pay duty again at circle stage. This could be a mistaken interpretation of a provision. In such a situation, the provision and limitation applicable should be Rule 10 read with Rule 173-J, as then existing as the appellants were following Self Removal Procedure. The limitation under the two Rules read together at the material time was one year.
The demand raised against the appellants should, therefore, be limited to this period from the date of show cause notice dated 24-11-1976 i e.
it would be limited to the period 25-11-1975. In taking this view, we find support from a decision of Madras High Court in Modern Theatre Ltd., Salem v. Collector of Central Excise, Madras published at page-234 'Compilation of judgment in Central Excise cases (1962-66) Volume-I compiled by the Directorate of Inspection, Customs & Central Excise, New Delhi, 21. Sh. Srikantia, learned Consultant also urged that duty had not been worked out by the Department and Collector had mechanically accepted the hypothetical figures given by the appellants during the hearing before him. He also argued that duty demanded from the appellants was that applicable to primary manufacturers from Ore and would not be applicable in the appellants' case. It is sufficient to say that as a result of the order, appropriate duty realisable from the appellants for one year would have to be worked out. The appellants could satisfy the Collector as to what would be appropriate duty in the case of the appellants for the period.
22. As a result of aforesaid discussion, the demand of duty from the appellants is restricted to a period of one year preceding the date of show cause notice i.e. the period 20-11-1975 to 24-11-1976. Rest of the demand is set aside. The demand shall be re-worked out in accordance with this order. The appeal is thus partly allowed.
23. Order in Dissent in respectful disagreement after the benefit of mutual discussion.
1. The Board, in its Order-in-Appeal remitting the case for de novo adjudication, has, inter alia mentioned that if there was a decision to charge duty afresh on circles, then by application of Rule 56A, proforma credit would be available and the question of charging any duty would not arise, as duty is on weight and value and the circles will have less weight than the duty paid sheets out of which they are cut. Such an exercise, it observed, would be administratively wasteful and "of doubtful legal validity".
24. Since the liability to duty of the subject circles falling under Tariff Item 27 (b), cut from alumiuium sheets on which duty of Rs. 24 lacs also under sub-item (b) of Item 27, had been paid, is the fundamental point of this otherwise weighty appeal, involving as it does a demand for duty of over Rs. 18 lacs, and other issues of law and fact, it would seem right and proper to me to examine and address this legal issue at the very outset, passing over for the moment the preliminary point of limitation. The arguments and citations by both sides, as also various aspects of the matter touched upon by the Collector have been kept in view.
25. It may be added that despite the "doubtful legal validity" apprehended in the order of the Board, the impugned order merely relies on Rules 9 and 49 being amplified by Notification No. 20/82 dated 20-2-82 and given retrospective effect,' 'to put beyond any pale of doubt that when one category of goods are manufactured in an L. 4 licensed premises and utilised therein for manufacture of another category of goods, duty is leviable on such clearances". The obvious implication is that circles were manufactured for moulding into utensils and derive duty liability from this fact, irrespective of duty having been first paid on the aluminium sheets used.
(a) (i) Aluminium in any crude form (including ingots, bars, blocks, slabs, billets, shots and pellets) ; (ii) wire bars, wire rods and castings not otherwise specified ; (aa) waste and scraps.
(b) Manufactures, the following namely, plates, sheets, circles, strips, shapes and sections, in any form or size, not otherwise specified.
(c) Foils, etc. This appeal concerns sub-item (b), to wit, manufactures.
27. Notification 43/75 dated 1-3-1975 Sl. No. 8, shows that circles can be manufactured from duty paid circles, plates, sheets or strips of aluminium and are exempted. There can also be no doubt that all the manufactures specified in sub-Item (b) of item 27 are, individually, "manufactured products" and are liable to central excise duty, by whichever process they are made and such process (or processes) must come within the definition of "manufacture" in Section 2 (f), since, in terms of Section 3, the Legislature would include only such products as are in fact "manufactured". But this does not automatically decide the question of their durability or taxability, as, and at the rates, set-forth in the First Schedule in terms of the said section.
28. The question arising in this appeal is whether duty is leviable or recoverable on the specified manufactures individually and severally, ignoring or notwithstanding the fact that, (as in Notification 43/75 for example) each of them can or may be produced out of one or more of the others; i.e. a plate may be rolled into a sheet; a sheet may be cut into a circle or strip; a large size circle may be cut into several smaller circles, and so on. Not only this, a thicker plate may be reduced in thickness to a thinner gauge; and likewise, a thicker sheet into a thinner one; and so on, by the process of re-rolling, giving rise, in each case, to a new and different manufacture (product) having a distinct name, character and use, to distinguish it from its progenitor and even having a greater value.
29. It is well known that the department has not applied the tariff at each stage in such cases. In fact, it has consistently followed the later the better principle in assessment of metals and their manufactures in integrated units-both ferrous and non-ferrous, (in some cases even postponing the primary stage duty till payment of the product stage duty). Thus, if a strip or a circle was the end product of rolling a billet, no duty was recovered on the intermediary stage products, such as plate, sheet or strip, though specified in the Tariff, but only on the final circle or strip cleared. Had not the Legislature intended this, it would not be within the power of the excise administration to have adopted this practice in the case of metal manufactures.
30. It is facile to argue, as the learned SDR does, that since duty was earlier on weight basis i.e. per kilogram, it would have been futile to recover duty at each stage and grant a set-off. This not only ignores the observation of the Board but on the contrary, the very concept of granting any set-off is an explicit admission that there was no legislative intention to tax the manufactures specified in sub-item (b) again and again, since they belonged to the same genus and were intentionally grouped under a common sub-item. The practice is in fact in keeping with the intention of the legislature not to tax sheets, circles etc. "in every form or size" but "in any form or size". If the departmental interpretation (about which the Board has doubts regarding legal validity) is to be accepted, it is tantamount to substituting the word '"every" for "any" appearing in Item 27(b) and for this there is no warrant, as it makes a word of difference to the meaning. It could be argued, to meet this point, that "in any form or size" qualifies only "shapes and sections" and not the other articles mentioned, but this would not be to correctly construe sub-item (b) on a comparison with Items 26A(2) and 26B(2). Besides, the Hon'ble Supreme Court (1978 E.L.T. J 38 Ramlal Mansukhrai) held that "in any form or size" in the case of copper circles covered ultrimmed circles and the matter rests with this decision.
31. Further, it is seen that there are exemptions, like Notification No. 292/77, which applies to shapes and sections, falling under sub-item (b), if manufactured from circles, plates, sheets or strips falling under the same sub- item of Item 27. This is to be seen in the nature of a protective exemption, to ensure that such manufactures do not escape duty; and are made only from other duty-paid manufactures; or, if otherwise, bear the appropriate duty. It clearly supports the view that double taxation was never intended, when a class of manufactures, having a relationship with each other, was brought under a single sub-item.
32. One has only to look at the structure of the items in the tariff, say Tobacco falling under Item 4, Fabrics under Item 19, Tea under Item 3 and Tin plates under Item 28, to show that where the intention was to leavy multistage duty, this was clearly and unambiguously laid down.
Here, mere cutting of a sheet or a strip into a circle need not, in my opinion, ipso facto constitute "manufacture". Other circumstances would also have a bearing.
33. This being so, neither a change to partly specific and partly ad valorem rate of duty; nor to a wholly ad valorem rate of duty, could have the slightest impact on interpretation of the sub-item as enunciated above. To reinterpret the substantaive part of the tariff item, consequent on a mere change in the rate or type of duty, when there has been no restructuring of the entry, would, in my opinion, be unreasonable. It would ignore the stipulation in Section 3 regarding levy as (not only at the rate) set forth in the First Schedule to the Act.
34. Furthermore, once it be held that each of the products mentioned in sub item (b) is liable to duty, irrespective of whether it is made from one of such products on which duty was paid, then this would apply with equal force to the products in an integrated factory, and in terms of amended Rules 9 and 49, the recovery of duty on sheets used to make circles/strips and recovery again of duty under Item 27(b) on the circles/strips, would have to necessarily and statutorily be made.
Since this is not being done, to the best of our knowledge, it is one more reason to agree with the clarification given in the case of copper circles made from duty paid sheets.
35. Consequently, it would also then not be logical to interpret the identical sub-items pertaining to manufactures of copper and copper-alloys under Item 26A on the one hand and aluminium under Item 27 on the other hand, differently. What the Collector had clarified regarding the non-dutiability of plates, sheets circles etc. into thinner forms or made into circles converted from duty paid plates, sheets, circles etc. of copper, must also be applied to circles of aluminium cut from duty paid sheets, if arbitrariness is to be avoided; and the department has not shown how the two are different, except for the ad valorem argument, which has been dealt with earlier.
36. Incidentally, the appellant has also challenged the factual accuracy of the statement in the impugned order that the said clarification was only for conversion of duty paid plates etc. into thinner forms. Apart from this, it would make no difference if it was cutting into a circle or rolling into a thinner gauge, for both processes would or would not constitute 'manufacture', as discussed in para 4.5.
37. The appellants are fortified in this regard by their assertion that it is only they who have been singled out by the department for this recovery of duty, which remains uncontroverted by the department. If taxing authorities ignore their precedents (in this case a practice not to recover duty on such circles) it will not only lead to utter confusion but will result in the most unfair discrimination of taxes in respect of the same goods with regard to different assessees, as observed by the Hon'ble Gujarat High Court (1980 ELT 752).
38. In this context, a caveat would, however, be necessary. Where a circle is cut or converted from a duty paid sheet etc., there is no "manufacture" within the meaning of Section 2(f); but where the sheet etc. is non-duty paid, the cutting or conversion does constitute "manufacture", since it is an incidental or ancillary process, together with the earlier processes of rolling etc., which culminates in production of the circle. It is from this difference that flows the right of the department to protect the revenue, by way of licensing/exemption. Unless this is done, it would not be feasible to distinguish between the two types of manufacture and ensure that the circles of the subject type have in fact discharged the duty liability.
At the same time, to argue backward, from the mere existence and wording of such notifications (subordinate legislation) to an interpretation of the Tariff to inter a levy and conclude that the specified manufactures are exigible to duty, in every form and with every change in form, irrespective of whether or not they have once borne the duty payable under this sub-item, would be against both the expressed intendment and the time-honoured later-the-better practice, as elucidated above. The same can be said regarding existence of Rule 56A and its being used backwards to interpret Item 27(b).
39. Moreover, the demand on circles in this case originally was Rs. 41,12,707.80P. In de now adjudication it was reduced to Rs. 18,53,O63.2OP. The duty paid on the sheets used is stated to be Rs. 24,61,865.39P. Applying Rule 56A will, therefore, result in "proforma debit" instead of "proforma credit" and Rule 56A is hardly intended for such a situation. Since 25% wastage in cutting is admitted, at best, applying Rule 56A, assuming duty on such circles is recoverable, it could be to the extent leviable on the cost of cutting. Since the duty is on value cum weight, this will not be determinable.
40. Learned Counsel has cited many precedents to support his arguments against double taxation 1979 E.L.T. J 380 : E.L.T. 10; 1984 E.L.T. 764; 1982 E.L.T. 480; 1983 E.L.T. 1123 ; and 1983 (2) ETR 355, to mention a few. It will suffice, if the last two, which are decisions by different Benches of the Tribunal, are adverted to. They deal with Item 17, Paper and Board, all sorts, and lay down the ratio that double taxation under the same sub-item (2) is not permissible; and that a second levy was not warranted on conversion of duty-paid Kraft paper into water-proofed paper by bonding with bitumen. This, in essence, is the conclusion arrived at by me with regard to Item 27(b), even though it is similar but not fully analogous to Item 17(2). In 1983 E.L.T. 1123, para 9(x), it has been held that where it is clear that it was not the legislative intent to levy duty twice, the mere fact (c)fan exemption specifying a product "cannot be constructed to imply a levy in teams of Item 17(2)".
It adds that where, in fact there is no levy, an exemption from a levy is meaningless and, further, "nor can a levy be inferred from an exemption from such levy when in fact there was none". The caveat entered in para 4.13 justifies the issue of an exemption to enable the department to protect the revenue, as also brought out in para 4.6.
41. The learned SDR relied on (i) Order No. C.95/84 of February 1984 by Special Bench 'C (Uma Laminated Products); (ii) 1978 E.L.T. 389 (Ramlal Mansukhrai); (iii) 1980 E.L.T. 735 (Hyderabed Asbestos) ; and (iv) 1983 ECR 1142 (New Shakti Dyeing Works). In respect of (i) it needs to be stated that "polyethene coated paper" was specifically mentioned under Item 17(2) (as a speciality paper) prior to 1976 and after amendment it got included generically in item 17(2) (as paper subjected to various treatments). There was reason, therefore, to treat it as dutiable. In the subject case, not only was there no change in the body of Item 27(2), but circles cut from duty paid sheets have been consistently treated as non-dutiable for over two decades. With regard to (ii), reference has been made to this decision in para 4.5.,Moreover, in that case the Supreme Court observed that in Item 26A itself the legislature laid down that duty shall be leviable on billets at a lower rate and on manufactured circles at a higher rate. In the present case, we are concerned not with two products, two sub-items and two rates of duty but with only one sub-item and one rate of duty albeit with two products viz. sheets and circles. The remaining two citations concern cotton fabrics and asbestos and there is nothing in them which would militate against the analysis and conclusion arrived at by me.
42. Rules under Section 37 are meant to carry out the purposes of the Act. They are no longer treated as part of the Act or of the same effect, after amendment of Section 38. So mere rules or notifications, cannot, in themselves, seek to impart any character to any part of the Act, which includes the First Schedule, other than what is plainly meant therein or can be logically construed therefrom. They have, of necessity, to be intra vires of the Act, and, in coming to my conclusion, this consideration has also informed my deliberations.
43. Thus, there would be no warrant for demanding duty on the subject aluminium circles, in the facts and circumstances of this case, in the view taken by me of the matter.
44. Having reached this conclusion, it would not be necessary for me to go into the other issues, such as whether Section 40(2) applies and whether the demand is even otherwise time-barred ; granting 25% wastage allowance for cutting sheets into circles ; correct valuation and rates of duty on the bases prevailing from time to time ; and whether set-off or proforma credit to the extent of the duty already suffered under item 27(b) in terms of Rule 56A would be admissible to the appellants.
These become academic in view of my rinding that, if it can be proved to the satisfaction of the department, and there is admittedly no dispute on this score, that aluminium sheets, on which appropriate duty under item 27(b) has been discharged, were used for cutting into circles, no duty under this item would be leviable again on the said circles. In the result, I would allow the appeal and set aside the impugned order.
In accordance with the decision of the majority, I agree that the appeal is allowed to that extent.