S.P. Bharucha, J.
1. The petitioners manufacture phthalic anhydride (now called 'the finished product'). They manufacture it by using orthoxyelene (now called 'the raw material'). The raw material is manufactured in India only by the Indian Petro Chemicals Corporation Ltd. (I.P.C.L.) and is supplied only to the petitioners, Shri Ambuja Petrochemicals Ltd., S.G. Chemicals and Pharmaceuticals, Thirumalai Chemicals Ltd. and Mysore Petrochemicals Ltd. The supply of the raw materials by IPCL is limited. Therefore, the petitioners had to import the raw material.
2. There is an exemption notification dated 21st December, 1967 issued under Rule 8 of the Central Excise Rules, 1944, governing the levy of excise on the raw material. The relevant portions of the notification read thus:
In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts the excisable goods falling under Items 6 to 11A of the First Schedule to the Central Excises and Salt Act 1944 (1 of 1944) produced in any premises (other than the premises wherein refining of crude petroleum or shale or blending of non-duty paid petroleum products is carried on) declared under Sub-rule (2) of Rule 110 of the Central Excise Rules, 1944 to be a refinery, and-
(a) Utilised in the refinery in which the said excisable goods are produced, for the manufacture of other goods or as fuel for such manufacture (excluding fuel used for any internal combustion engine) or both;
(b) allowed to escape in the atmosphere by flare system or otherwise ; or
(c) cleared to another factory outside the refinery in accordance with the procedure set out in Chapter-X of the Central Excise Rules, 1944 for use in the manufacture of any of the commodities specified in the Schedule hereto annexed otherwise than as fuel from the whole of the duty of excise leviable thereon under Section 3 of the Central Excises and Salt Act, 1944 (1 of 1944):
Provided that any of the excisable goods having its flashing point below seventy-six degrees of Fahrenheit's thermometer and not less than 7% by volume of which distils above 2150C, and cleared under this clause for use as industrial fuel (but not as fuel for internal combustion engine) shall be exempt from so much of the duty leviable thereon as is in excess of
(a) Rs. 103.43 per kilo litre at fifteen degrees of centigrade thermometer, in the case of goods falling under Item Nos. 6, 7, 8 and 9 of the First Schedule to the Central Excises and Salt Act 1944 (1 of 1944); and
(b) Rs. 98.50 per Kilo litre at 15C in the case of goods falling under Item Nos. 10 to 11A of the aforesaid First Schedule:
Provided further that nothing contained in this notification shall apply to excisable goods, falling under Item No. 9 of the aforesaid First Schedule, having its flashing point below seventy-six degrees of Fahrenheit's thermometer and not less than 7% by volume of which distils above 215C. SCHEDULE... ... ...3. Chemicals.
3. It is not in dispute that IPCL is declared a refinery under Rule 140(2) of the Central Excise Rules and that the finished product is a chemical falling within the Schedule of the notification.
4. The petitioners hold a licence from the Central Excise authorities which authorizes them to obtain without payment of excise duty the raw material to be used in the finished product.
5. The petitioners were required by the Customs authorities to pay additional duty under Section 3 of the Customs Tariff Act upon the imported raw material. It is their case in this petition that inasmuch as the raw material is exempt from the payment of excise duty, no additional duty is leviable upon the imported raw material. Emphasis was laid by their counsel upon the fact that the raw material was produced in India only by IPCL, which is declared a refinery ; that the Indian raw material was used only by the five manufacturers, including the petitioners, for the production of items mentioned in the Schedule of the notification ; and that there was no case in the affidavit in reply that it was used for anything else. It was submitted that, therefore, no additional duty was leviable on the imported raw material.
6. Mr. Bulchandani, learned Counsel for the respondents, submitted that the exemption given by the notification was conditional not only upon the raw material being manufactured in a refinery declared to be such under the Central Excise Rules but also upon the raw material being utilised in one of the three ways specified in the notification. In his submission, excise duty was leviable on the like articles manufactured in India, and was exempted only if the raw material satisfied the conditions mentioned in the notification. Excise duty being leviable upon the like product manufactured in India, additional duty was leviable upon the imported raw material.
7. The raw material is manufactured in India only by IPCL. IPCL is declared to be a refinery under the Central Excise Rules. If there is no other condition specified in the notification, no excise duty is leviable on the raw material that is manufactured in India and, consequently, no additional duty as leviable on the imported raw material. The notification dots, however, provide that only if the raw material is utilised in the refinery in which it is produced, or is allowed to escape into the atmosphere, or ii is cleared to a factory outside the refinery for use in the manufacture of one of the commodities specified in the Schedule thereto, it is exempt from excise duty.
8. My attention has been drawn to the judgment of a Division Bench of this Court in Century Enka Limited v. Union of India 1982 E.L.T. 64 (Bom.) : 1982 ECR 177D (Bom). It was held there that the plain reading of Section 3 of the Customs Tariff Act, made it clear that additional duty cannot be levied on an article imported into India, if such article, when manufactured in India, is exempt from the payment of excise duty. It was futile to urge, as the Customs authorities had there done, that an exemption notification issued under the Central Excise Act would have no bearing to determine the liability to pay additional duty under the Customs Tariff Act. The judgment proceeds to consider the submissions which had been made by the Customs authorities that the exemption notification there concerned provided for the exemption only on a certain condition. The Division Bench observed that it was true that the raw material was exempt from the payment of excise duty provided it was used in the manufacture of the stated finished product. The petitioners had averred that the material imported was to be used in their factory for such manufacture. The Customs authorities had not filed any affidavit in reply. The correspondence between the parties left no doubt that the Customs authorities did not dispute the accuracy of the statement. In the circumstances, the Division Bench was satisfied that the conditions mentioned in the exemption notification were satisfied.
9. I am bound by and follow the decision of the Division Bench, but I must very respectfully place on record by disagreement with the latter part thereof. Where a notification grants exemption from levy of excise duty subject to the fulfilment of one or more conditions, the 'like article...manufactured in India' is given exemption from excise duty only provided it fulfils the conditions mentioned in the notification. Even under a notification excise duty is, ordinarily, leviable upon that like article manufactured in India. Under Section 3 of the Customs Tariff Act, therefore, the imported article must attract additional duty.
10. The petition succeeds and is made absolute in terms of prayer (a)(i), (ii) and(iv).
There shall be no order as to costs.
11. The petitioners have, under the terms of the interim order in the petition, furnished bank guarantees and customs bonds. These shall stand discharged after the expiry of four weeks from today.