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Indian Plywood Manufacturing Co. Vs. Collector of Cental Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1983)LC1083DTri(Delhi)
AppellantIndian Plywood Manufacturing Co.
RespondentCollector of Cental Excise
Excerpt:
.....veneers, which fall under item no. 68 of the central excise tariff schedule (cet, for short), are duty paid. on 18-6-77, the central government issued notification no. 178/77 under rule 8(1) of the central excise rules, 1944, exempting all excisable goods on which duty of excise is leviable and in the manufacture of which any goods falling under item no. 68 cet ("inputs") have been used, from so much of duty of excise leviable thereon as is equivalent to the duty of excise already paid on the "inputs". by virtue of clause 37(1) of the finance bill 1978, special excise duty became leviable on all excisable goods at the rate of 5% of the amount of excise duty chargeable on such goods. the appellants contended that the basic excise duty leviable on other goods should first be reduced by.....
Judgment:
1. The brief facts of the case are that the appellants are manufacturers of plywood. For this purpose, they are using commercial and decorative veneers which they manufacture in their factory as well as get from outside. In the case of outside purchases, the veneers, which fall under Item No. 68 of the Central Excise Tariff Schedule (CET, for short), are duty paid. On 18-6-77, the Central Government issued Notification No. 178/77 under Rule 8(1) of the Central Excise Rules, 1944, exempting all excisable goods on which duty of excise is leviable and in the manufacture of which any goods falling under Item No. 68 CET ("Inputs") have been used, from so much of duty of excise leviable thereon as is equivalent to the duty of excise already paid on the "Inputs". By virtue of Clause 37(1) of the Finance Bill 1978, special excise duty became leviable on all excisable goods at the rate of 5% of the amount of excise duty chargeable on such goods. The appellants contended that the basic excise duty leviable on other goods should first be reduced by the amount of exemption contained in Notification No. 178/77 and on the net amount of basic excise duty so payable, special excise duty should be computed. However, the lower authorities did not accept this contention and insisted that special excise duty should be charged with reference to the basic excise duty leviable and from the gross amount so arrived at, the amount of duty exempt by virtue of Notification No. 178/77 should be reduced to arrive at the net amount of duty payable. In pursuance of the decision of the lower authorities, the appellants paid a sum of Rs. 1,272.82 towards the amount allegedly short-levied during the period from 1-6-1978 to 31-12-78. The appeal against the Assistant Collector's orders was rejected by the Appellate Collector and against the Appellate Collector's orders, the appellants filed a Revision Application before the Central Government which, by virtue of the provisions of Section 35P (2) of the Central Excises and Salt Act, has been transferred to this Tribunal for disposal as if it were an appeal presented before it.

2. In the Revision Application (hereinafter referred to as Appeal), the contention taken up by the appellants are substatially the same as those advanced before the lower authorities. The appeal was fixed for hearing on 3-3-1983 on which day Shri S.K. Kapoor, an employee of the appellants appeared before us and submitted that the appellants did not want to put in personal appearance and that the matter might be decided according to their written submissions. However, at the request of the SDR, the appeal was adjourned to 22-4-1983. Since the appellants had already submitted that they did not wish to make a personal appearance, we decided to dispose of the appeal on merits with the assistance of Shri Tayal, SDR. In the meanwhile, the appellants had, by a communication, brought to our notice certain provisions in the Finance Bill 1983 which, in their view, would go to establish the correctness of their contention.

3. In order to appreciate the issue involved and the rival contentions, it is necessary to consider the provisions of Clause 37 of the Finance Bill, 1978 which are reproduced below : - 37. "Special duties of Excise 1 of 1974.-(1) In the case of goods chargeable with a duty of excise under the Central Excises Act as amended from time to time, read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable, there shall be levied and collected a special duty of excise equal to five per cent of the amount so chargeable on such goods.

(2) Sub-section (1) shall cease to have effect after the 31st day of March 1979 (10 of 1897), except as respect things done or omitted to be done before such cesser and section 6 of the General Clauses Act, 1897, shall apply upon cesser as if the said sub-section had then been repealed by a Central Act.

(3) The special duties of excise referred to in sub-section (1) shall be in addition to any duties of excise chargeable on such goods under the Central Excises Act or any other law for the time being in force.

(4) The provisions of the Central Excises Act and the Rules made thereunder, including those relating to refunds and exemptions from duties, shall, as far as may be, apply in relation to the levy and collection of the special duties of excise leviable under this section in respect of any goods as they apply in relation to the levy and collection of the duties of excise on such goods under that or those rules, as the case may be." It is also necessary to consider the provisions of Notification No.178/77, 18-6-1977.

In exercises of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts all excisable goods (hereinafter referred to as the "said goods") on which the duty of excise is leviable and in the manufacture of which any goods falling under Item No. 68 of the First Schedule to the Centrel Excises and Salt Act, 1944 (1 of 1944) (hereinafter referred to as the inputs) have been used, from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs : Provided that where the duty of excise leviable on the said goods is less than amount of duty of excise paid on the inputs, the extent of exemption shall be restricted to the duty of excise leviable on the said goods.

4. The appellants contention is that the above notification is a notification which has a direct relevance to Central Excise duty for the time being leviable under the Central Excises and Salt Act on plywood in as much as the notification exempted all excisable goods, which would include plywood, from so much of the duty of excise leviable thereon as is equivalent to duty of excise already paid on "Inputs" (Veneers in this case). The contention of the revenue, on the other hand, is that the said notification does not reduce the rate of effective basic excise duty payable on goods falling under Tariff Item No. 16B CET (under which item plywood falls) but it only extends a set-off of the duty paid on Veneers under Item 68-CET against the amount of duty payable on plywood under Item No. 16-B-CET. On the other hand, the appellants seeks to derive support for their contention from the provisions of Clause 55 of the Finance Bill 1983, which, while providing for levy of special excise duty as in the case of the 1978 Finance Bill, has effected a substantial change. The said Clause 55 of 1983 Finance Bill is reproduced below :- 55.-"Special duties of Excise.--(1) In the case of goods chargeable with a duty of excise under the Central Excises Act, as amended from time to time, read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable (not being a notification providing far any exemption for giving credit with respect to, or reduction of duty of excise under the said Act on such goods equal to, any duty of excise under the said Act, or the additional duty under section 3 of the Customs Tariff Act, already paid on the raw material or component parts used in the production or manufacture of such goods), there shall be levied and collected a special duty of excise equal to ten per cent of the amount so chargeable on such goods.

Sub-sections (2), (3) and (4) are substantially on the same lines as in the 1978 Finance Bill," 5. We have carefully considered the submissions of both sides.

Sub-clause (1) of Clause 37 of the 1978 Bill provides that in the case of goods chargeable with a duty,of excise under the Central Excises Act, read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable, there shall be levied and collected a special duty of excise equal to 5 per cent of the amount so chargeable on such goods. Plywood falls under Item No. 16B of the First Schedule to the Central Excises and Salt Act.

In terms of section 3 of the said Act read with the said First Schedule, the duty of excise leviable on plywood during the relevant period was 27 1/2 per cent ad valorem. The effective rate of basic excise duty on plywood of the type under consideration was 27 1/2 per cent ad valorem. With effect from 1-3-1978, the levy of special excise duty came into force by virtue of Clause 37 of the Finance Bill 1978.

The question is what is the duty of excise with reference to which special excise duty at 5 per cent should be computed. Should it be with reference to 27.5 per cent or should it be with reference to the amount computed at 27.5 per cent as reduced by the amount of the duty of excise paid on the "Inputs" (Veneers) under Item 68-CET by virtue of Notification No. 178/77 There is little doubt that Notification No.178/77 is a notification of the nature referred to in Clause 37(1) of the Finance Bill, 1978 inasmuch as it reduces the duty of excise leviable on all excisable goods (which would naturally include plywood falling under Item 16B-CET by an amount of duty equal to the duty paid on the "Inputs" falling under Item 68-CET. It is, therefore, clear that the amount of basic excise duty leviable on playwood computed at 27.5 per cent ad valorem should be reduced by the amount of the "Inputs" duty and, special excise duty should be computed at 5 per cent of the resultant amount. That this is the correct mode of computation of special excise duty gains support from the provisions of Sub- clause (1) of Clause 55 of the 1983 Finance Bill which, in specific terms, provides that the notification referred to therein would not cover a notification providing for any exemption for giving credit with respect to, or reduction of duty of excise under the Central Excises Act on such goods, equal to, any duty of excise under the said Act or the additional (countervailing) duty of Customs under Section 3 of the Customs Tariff Act, already paid on the raw material or component parts used in the manufacture of such goods. In other words, it has been made clear that for the purpose of computing special excise duty, the duty of excise chargeable on any excisable goods should be computed with reference to any exemption notification issued by the Central Government in relation to such goods but not any notification which provides for giving credit or reduction of duty of excise equivalent to the duty of excise or countervailing duty of customs already paid on the "Inputs". This provision obviously takes effect only from 1-3-1983 and would have no application to the past period. In the result, the appellants' contentions are tenable. The Orders of the lower authorities are set aside and the appeal is allowed. The Assistant Collector is directed to grant consequential relief to the appellants within two months from the date of communication of this order.


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