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Collector of Central Excise Vs. Indian Organic Chemicals Ltd. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu
Decided On
Reported in(1985)(5)LC1741Tri(Chennai)
AppellantCollector of Central Excise
RespondentIndian Organic Chemicals Ltd.
Excerpt:
.....which is in excess of the average production of the corresponding period of the preceding three sugar years; a feature of the notification relating to sugar is that irrespective of the time of clearance of the sugar, or even the quanta of duty that may be collectible on the sugar at the time of clearances (depending on the tariff value, if any, fixed, the rate of excess duty prevailing at that time etc.) once the higher quantum of sugar is produced, it gets the benefit of the scheme, though it could well be that because of the factors referred to, the quantum of duty paid on clearances of excess production may not be larger than the duty paid on sugar produced and cleared during the incentive period. we therefore, consider that the reference to clearances in notification no. 283/82 is.....
Judgment:
1. M/s. Indian Organic Chemicals Ltd., Madras, the respondent herein, submitted an application requesting to take credit for an amount of Rs. 15,42,348/- (amount since corrected to Rs. 17,63,494.67) under the provisions of Rule 56AA(2) of the Central Excise Rules, 1944 read with Notification No. 283/82-CE, dated 27-11-1982 urging that they had produced more goods during the financial year 1982-83 as compared to the clearances during the base year 1981-82. The Assistant Collector of Central Excise, Madras III Division noted that the Company remained closed during the period 29-7-1981 to 4-10-1981 resulting in stoppage of production of polyester staple fibre for 67 days in toto during the same period ; hence applying the formula in Notification No. 283/82 which has been indicated therein to cover such a contingency, the Assistant Collector held that the production during the incentive period was not higher than that during the base year. Accordingly, he rejected the claim. The respondent-company appealed to the Collector of Central Excise (Appeals), Madras. On a plain reading of Notification No. 283/82, the Collector held that what was to be compared was the quantity cleared during the base period with the quantity cleared during the incentive period ; that there was no production for a period of 67 days during the incentive period due to a lockout of the production staff of the respondent-company would not make any difference to their position in law ; he thus allowed the appeal and ed the Assistant Collector to examine the application of the respondent-company for grant of duty in the light of the observations contained in his No. 74/84-(M) dated 31-5-1984. The Collector of Central Excise, Madras has come up in appeal against this of the Collector (Appeals).

2. The main point canvassed in the appeal in that Notification No.283/82, dated 27-11-1982 provides an incentive to higher production; and admittedly during the period in question there was no production ; the factory remained 'closed' and therefore, the of the Collector (Appeals) was not maintainable. Reference has also been made to the decision of the Supreme Court in the case of Hansraj Gordhandas v. H.H.Dave-AIR 1970 SC 755- wherein Their Lordships of the Supreme Court said that the tax payer cannot be denied the benefit of an exemption notification by calling in aid the supposed intentions of the exempting authority. But "if such intention can be gathered from the construction of the words of the notification or by necessary implications therefrom, the matter is different". Reference has also been made to the Explanatory Memorandum to Notification No. 283/82 which refers to concession being given for increased production of goods during the 'productivity year'.

3. At the time of hearing before us the learned Senior Departmental Representative relied on these grounds of appeal and also referred to the speech of the Finance Minister while introducing the Budget of 1982. In the budget speech, the Hon'ble Minister has stated that "the fiscal mechanism could be judiciously deployed in furthering this objective. With this view, I propose to formulate a scheme of excise duty concession for increased production of goods during the period of 12 months commencing on the 1st March, 1982 and ending on the 28th February, 1983". In spelling out the very features of the concession he referred to the benefits of the scheme accruing only in cases where the production in the 12 months period referred to exceeds 110% of the production during the base period. This was followed by issue of Notification No. 283/82. The Central Excises and Salt Act, 1944, is one relating to production of goods and levy of duty thereon. He therefore, urged that the intention to be gathered from the speech of the Finance Minister as well as the notification is that the concession is relatable to production and not clearances. In holding otherwise the Collector (Appeals) misdirected himself. He then referred to the Explanation (1)(b) to Condition (vii) as set out in the notification and observed that the words used are "in the case of a factory which had remained closed for a period of more than 15 days at one time during the base period due to...". The term 'closed' has not been defined in the notification but it must be given the natural meaning that it remained without production. That during the period there was no production on the other part of staff of the factory continued to work, there was receipt of raw material for which D.3 intimations have been given and necessary checks carried out and there were actual clearances during the period, would not make any difference to this position.

4. We drew the attention of the learned Senior Departmental Representative to another notification relating to incentive for higher production of sugar namely No. 132/82, dated 21-4-1982, as amended by Notification No. 193/ 82, dated 11-6-1982 issued for about the same year and sought his reaction to the difference in the wording between the notification issued for sugar and the one under consideration in the present appeal. The learned SDR replied that commodities being different, Government could have thought of different methods of giving incentive to different classes of goods.

5. We note that in his budget speech the Finance Minister referred to his formulating a scheme of concession for increased production. He also referred to production in the incentive period exceeding that of the base period. However, the notification itself related to the concession being given when clearances during the incentive year exceeded the clearances of the base year. Right through the notification deals with clearances and not with production as such. In the explanatory memorandum to Notification No. 283/82 reference has been made to clearances in paragraphs 2 and 3. Here again, the stress is on clearance and not on production. There are various means of stimulating production in achieving the object of increased production.

It is quite possible that the Finance Minister thought that if there are to be increased clearances that should be as a result of various factors that could well be the result of increased production during the incentive period as a whole. Support is lent to this view when we read Explanation l(a) to Condition (vii) of the notification when a factory remained closed for not more than 15 days being allowed concession ignoring the period of closure completely. When we turn to the notification for production incentive issued round about the same period for sugar, we find that the schedule to the notification specifically sets out that the description of sugar which is entitled to the concession is that produced during the period commencing on the 1st day of May, 1982 and ending with the 30th day of September, 1982 which is in excess of the average production of the corresponding period of the preceding three sugar years; a feature of the notification relating to sugar is that irrespective of the time of clearance of the sugar, or even the quanta of duty that may be collectible on the sugar at the time of clearances (depending on the tariff value, if any, fixed, the rate of excess duty prevailing at that time etc.) once the higher quantum of sugar is produced, it gets the benefit of the scheme, though it could well be that because of the factors referred to, the quantum of duty paid on clearances of excess production may not be larger than the duty paid on sugar produced and cleared during the incentive period. We therefore, consider that the reference to clearances in Notification No. 283/82 is a deliberate one.

As rightly observed by the Collector (Appeals), the words in the notification have to be given their direct meaning unless an intention appears to the contrary from the wording of the notification itself. In the present case, no such other intention is apparent. Even in a case of ambiguity, one is permitted to look at the meaning given to the disputed term in cognate legislation. As pointed out by the respondent in their memorandum of cross objection, the Factories Act distinguishes between a 'layoff' and a 'closure'. In the circumstances of the present case, we find that there was both receipt of raw materials under D.3 intimation to the department, as well as clearances during that period.

It is not in dispute that only the labour force was laid off but the factory otherwise functioned.

6. In the light of the above, we hold that the of the Collector of Central Excise (Appeals) is maintainable in law and is based on facts.

Acoordingly, we dismiss the appeal of the Collector.

7. As the matter relates to a claim for the year ended 1982-83 and much water has flown under the bridge since then, we also direct that the order of the Collector (Appeals) be given effect within three months from the date of this order.


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