1. This is a revision application (hereinafter called appeal) filed before the Central Government which under Section 35 of the Central Excises and Salt Act, 1944, stands referred to this Tribunal to be disposed of as if it were an appeal presented before the Tribunal.
2. This appeal raised an interesting question relating to the interpretation of Notification No. 23/75-Central Excises dated 1.3.1975. This notification granted a partial exemption from excise duty on vegetable product falling under Item 13 of the Central Excise Schedule in the manufacture of which indigenous cotton seed oil was used, at the rates and subject to the conditions set out in the notification. (One of the conditions was that "no such exemption...shall be admissible in respect of the said vegetable product where the indigenous cotton seed oil used in the manufacture thereof does not exceed 30 per cent of total weight of the said vegetable product"). The procedure for granting of the exemption was that the quantum of duty exempted would be calculated with reference to certain fixed period (starting with the four-monthly period March to June, 1975 and continuing with the subsequent six-monthly periods), and this amount would be credited in the assessee's account current, so that it could be utilised towards payment of duty in respect of subsequent clearances.
3. The appellants, who claimed that they had fulfilled the conditions of the exemption, claimed in respect of the six-monthly period January to June, 1976, exemption on 522.546 tonnes of indigenous cotton seed oil used by them in the manufacture of quantity of 644.932 tonnes of vegetable product. According to the appellants, since the quantum of indigenous cotton seed oil used was more than 30 per cent of the quantum of vegetable product manufactured by them in which the said cotton seed oil was used, they were entitled to the benefit of the exemption in respect of this quantity of indigenous cotton seed oil.
The Department, however, took the view that since during the six monthly period the appellants had cleared a total quantity of 1803.600 tonnes of vegetable product they were not entitled to any benefit under the notification. In other words, the Department took the view that if the assessee manufactured several batches of vegetable product, in some of which cottonseed oil was used and in some of which cotton seed oil was not used, the total quantity of vegetable product must be taken into account, whether or not in a particular batch of vegetable product cotton seed oil was used. While upholding the order of the Assistant Collector to this effect, the Appellate Collector of Central Excise, New Delhi pointed out that with the same quantity of cotton seed oil an assessee could adopt several different combinations of batches of vegetable product. If (as in the present case) the total quantity of cotton seed oil used by the assessee during the relevant period was less than 30 per cent of the total quantity of vegetable product manufactured by him during the same period, and if he used some cotton seed oil in the manufacture of every batch of vegetable product, he would not be eligible for any benefit under exemption. On the other hand, on the basis of the interpretation put forward by the appellants, if the assessee concentrated the use of the cotton seed oil in a smaller number of batches of vegetable product, so that the proportion of cotton seed oil used came to more than 30 per cent of the quantity of vegetable product in the batches in which cotton seed oil was used, he would get a benefit under the notification. Thus different results could be obtained by different methods of use of the same quantity of cotton seed oil. The Appellate Collector considered that this was an absurd result and that it could obviously not have been the intention of the exemption that such absurd results should follow from its operation. In this view he rejected the appeal.
4. Arguing the appellants' case before us, Shri R.P. Sethi submitted that the operative part of the exemption notification was very clear.
The exemption extended to "those vegetable products...in the manufacture of which indigenous cotton seed oil is used..." Therefore, only those batches of vegetable product in the manufacture of which cotton seed oil was used should be taken into consideration and those batches in which no cotton seed oil was used should be ignored. Shri Sethi pointed out that, in accordance with the procedure prescribed by the Delhi Central Excise Collectorate in connection with a similar previous notification, samples of cotton seed oil were being regularly drawn and tested. According to him this procedure would be meaningless if the interpretation of the Department was adopted. Shri Sethi also referred to the Order-in-Appeal No. V(13)2-1/73/5594 dated 15.4.74 passed by the Appellate Collector of Central Excise, Bombay, in which the interpretation favourable to the assessee had been accepted. In conclusion, he submited that if there was any ambiguity in the notification, an interpretation should be adopted which was in favour of the assessee.
5. For the Department, Shri A.K. Jain submitted that the procedure to which Shri Sethi referred has been prescribed with reference to the earlier notification. He was not however able to say why, if it had no relevance to the present notification, it was still being followed even after the earlier notification had been rescinded.
6. On the question of interpretation, Shri Jain stated that he was not supporting the view taken by the Appellate Collector according to which even batches of vegetable product in the manufacture of which no cotton seed oil had been used should be taken into account. In other words, he agreed that the quantity of vegetable product in those batches in the manufacture of which no cotton seed oil was used should be ignored.
However, he submitted that the appellants had not clearly fulfilled the condition that the proportion of cotton seed oil used was more than 30 per cent of total quantity of vegetable product manufactured (in the manufacture of which cotton seed oil was used) and had not furnished any clear calculations in this regard.
7. Replying to Shri Jain, Shri Sethi stated that the appellants' claim was full admissible in the light of what Shri Jain had stated and that they had given a very clear calculation as to the basis on which their claim was made.
8. We have carefully considered the matter. We find that the wording of the notification is very clear as regards the quantity of vegetable product manufactured during the relevant period which should he taken into account. It is the quantity of vegetable product "in the manufacture of which indigenous cotton seed oil is used". Therefore, any batches of vegetable product, in the manufacture of which no cotton seed oil is used, have to be ignored. It is quite true that on the basis of this interpretation, the benefit which a manufacturer may get by using a given quantity of cotton seed oil may vary greatly depending on the manner in which he distributes the cotton seed oil among batches of vegetable product. If he distributes the cotton seed oil uniformly, using it in every batch of vegetable product manufactured during the relevant period, he may get no benefit at all. If he concentrates the cotton seed oil in a few batches of vegetable product, he may get a substantial benefit, as is claimed in the present case. Thus, in the present case, the appellants during the relevant six months period manufactured a total quantity of 1803.600 tonnes of vegetable product, and used 522.546 tonnes of cotton seed oil. They, however, concentrated the use of this cotton seed oil in the manufacture of only 644.932 tonnes of vegetable product. Thus, in respect of about one-third of the total quantity of vegetable product manufactured by them, they used a quantity of cotton seed oil amounting to as much as 81 per cent of that quantity of vegetable product, and in respect of the manufacture of the other two-thirds of the total quantity product they used no cotton seed oil at all. In other words, they utilised the given quantity of cotton seed oil so as to get maximum advantage in terms of exemption from excise duty. This kind of utilisation of cotton seed oil may or may not have been of the kind Government had in mind when they issued the notification in question. We, however, have no doubt that as the notification is worded it bears the interpretation claimed by the appellants and that they are entitled to the advantage claimed by them.
It is a well-established principle that it is open to a tax-payer to take the maximum advantage of a provision of law, so long as he does not contravene that law. This is what the appellants have done in the present case. We cannot agree with Shri Jain's argument that it is not possible on the basis of the data furnished by the appellants to calculate the monetary benefit which would be admissible to them in terms of the interpretation which they have claimed and which we find to be correct. It appears to us that alt the necessary data are available. We accordingly allow the appeal and direct that consequential relief be given to the appellants.