1. This is a revision application (hereinafter called "appeal") filed before the Central Government which under Section 35P of the Central Excises and Salt Act, 1944, stands transferred to this Tribunal to be disposed of as if it were an appeal presented before the Tribunal.
2. This appeal raises an interesting question a" to the combined effect of two exemption notifications under Rule 8(1) of the Central Excise Rules, in relation to the same commodity. In order to appreciate the point at issue, it would be useful to set out the relevant facts and background.
3. The appellants are a small unit manufacturing metal continers classing able under Item 46 of the Central Excise Tariff. Under Notification No. 97/70-C.E. dated 1-5-1970, manufacturers of such metal containers, whose clearances did not exceed Rupees two lakhs in a financial year, were entitled to exemption on their first clearance of metal containers during the financial year upto the value of Rupees one lakh.
4. With effect from 1-3-1976, the Government of India introduced a procedure known as the "Simplified Procedure" for assessment of the excise duty on goods falling under certain specified items of the Central Excise Tariff and manufactured by small units whose production during a financial year did not exceed Rupees five lakhs. This was done by inserting a new Chapter VIIB in the Central Excise Rules comprising new Rules 173R to 173RM, and also issuing Notification No. 14/76 dated 23-1-76 under Rule 8(1) of the Central Excise Rules. The effect of these changes was that in respect of goods covered by the Simplified Procedure, the "average annual quantity or value" of goods removed by the assessee was to be determined on the basis of his clearances during the relevant preceding period. The duty liability was to be discharged by the assessee in the manner prescribed in Rule 173RD by paying, on a monthly basis, the duty based on the average annual quantity or value as determined in his case under Rule 173RB. However, he was given two concessions in regard to the amount of duty payable. Without going into the minute details, the broad scheme was that the duty payable was limited to nine-tenths of that normally payable on the basis of the average annual quantity or value. In regard to commodities for which there was an exemption upto certain value or quantity limits for small units (as for example, for metal containers under Notification No.97/70), a further duty concession related to the benefit the assessee would have got under such notification was also incorporated.
5. Where an assessee who was entitled to avail himself of the scheme did not apply for permission to do so, and to pay duty under Rule 173RD, or where he applied, but was refused permission to do so by the proper officer, Rule 173RJ provided that he should pay duty in accordance with the provisions of Chapter V. (This Chapter, which is headed "manufactured goods other than salt" perscribes the general procedure for clearance of goods on payment of duty. It is essentially what is known as a system of Physical Control, as contrasted in the provisions of Chapter VIIA, which lays down the "Self Removal Procedure" for the clearances of goods).
6. The facts in the present case, which are not in dispute, are that the assessees had been manufacturing metal containers falling under Item 46 GET from 1970 onwards. They were availing themselves of the benefit of exemption under Notification No. 97/70 referred to above.
When the Simplified Prodecure was introduced, although they were eligible to apply for it, they did not do so. Therefore, in accordance with Rule 173RJ, they were required to pay duty under the provisions of Chapter V of the Central Excise Rules, i.e. under the procedure of Physical Control. The appellants cleared their goods on payment of duty at 15 per cent ad valorem on each clearance. They subsequently claimed refund of Rs. 15,000, being the amount of duty paid against initial clearances upto the value of Rupees one lakh, which it was claimed had been wrongly collected, since according to them they continued to be eligible for the exemption under Notification No. 97/70, which had not been cancelled. Their refund claim was rejected by the Assistant Collector on the ground that under Notification No. 14/76, the appellants were ineligible for exemption from duty under any other notification. Their appeal to the Appellate Collector was also rejected, on the grounds that (a) under Sub-rule (5) of Rule 173RA the appellants should have come under the Simplified Procedure; and that (b) under proviso (iii) of Sub-rule (5) of Rule 173RA, such of those licensees who came under the Simplified Procedure would not be eligible for the benefit of any other exemption notifications issued under Rule 8(1). It is against this decision that the appellants have come to the Tribunal.
(3) The second proviso to Notification No. 14/76 no doubt states that no exemption granted under any other notification under Rule 8(1) shall apply to such cases. However, it refers to goods the duty on which is payable by the manufacturer in the manner provided for in Rule 173RD or in accordance with Chapter V. This proviso did not apply to goods removed under Rules 49 and 52. (They have not commented on the fact that Rules 49 and 52 are a part of Chapter V of the Central Excise Rules); (4) The appellants have also relied upon a decision by the Government of India on a like issue, namely, Order-in-Review No. 1261 of 1978 dated 8-11-78, reported in 1979 E.L.T. J 51. In that case, which related to an assessee manufacturing nuts and bolts, the benefit of exemption under Notification 14/76 was similarly denied by the Assistant Collector on the ground that Notification No. 14/76 was restricted to licensees (1) who held a licence for less than 12 months immediately preceding the months in which they made the appeal (sic) for Simplified Procedure (2) who applied for licence for the first time on or after 1-1-76 and (3) those specified in Sub-rule 3A of Rule 173RA of Central Excise Rules, 1944. Since according to him the assessees in that case did not fall under any of those categories, he held that the notification was not attracted in their case. The Government of India issued a show cause notice under Section 36 of the Central Excises and Salt Act. The assessees urged that Notification No. 14/76 applied to new assessees and to those who held a licence for less than 12 months, and had no application in their case, and the proviso thereof could not also apply their case. The Government of India accepted the above pleas.
They observed that a party required to work under Physical Control during the specified period, in terms of Sub-clause (1) of Rule 173 RJ, could not be debarred from availing of the benefit of the exemption notification conferred by Notification No. 158/71 (relating to nuts and bolts). They therefore upheld the Order-in-Appeal and dropped the review proceedings. It was submitted that the above decision of the Government of India would equally apply to the present case.
8. For the Department, Shri Tayal submitted that it was not legally obligatory for an assessee to opt for the Simplified Procedure. If he did not do so he was obliged to work under Physical Control as provided in Chapter V. He had not been able to find proviso (iii) under Sub-rule 173RA(5) referred to in the learned Appellate Collector's order, and felt that the reference was probably to the second proviso to Notification No. 14/76. (This appears to be correct: the Appellant Collector was apparently misled by the fact that in the Department's Central Excise Manual, the notification was printed immediately after Rule 173RA). According to him, the second proviso to Notification No.14/76 was applicable in respect of all assessees, whether working under the Simplified Procedure or under Physical Control, and it was also applicable to all exemption notification issued in respect of goods covered by the Simplified Procedure. His submission was that since the appellants did not opt for the Simplified Procedure, they had necessarily to conform to the Physical Control Procedure under Chapter V, which they in fact did. The second proviso to Notification No. 14/76 therefore applied to them, and it had the effect of nullifying the concession contained in Notification No. 97/70 so far as they were concerned. In this view he submitted that the appeal should be rejected.
9. This case involves a reference to the very datailed rules in the new Chapter VIIB of the Central Excise Rules and to the fairly complex Notification No. 14/76. It has been remarked that the expression "Simplified Procedure" was somewhat of a misnomer. This remark is not without some truth, It is a matter of common knowledge, of which we can take note, that this procedure was introduced on the recommendations of a high-level committee known as the Central Excise (Self Removal Procedure) Review Committee, or the S.R.P. Committee. The intention was to free a large number of small units with a low revenue potential from procedural and other formalities, to provide an incentive for growth, to reduce the area of friction between the Department and the assessees, and to bring about a diminution of the administrative burden. However, the legal instruments, that is, the Rules and the notification issued in order to bring about these very laudable objects, were of rather daunting complexity. The orders which we have had to take into account in dealing with this case, whether of the Assistant Collector, the Appellate Collector, or the Government of India, highlight the complexity of these legal instruments. Ultimately, however, the point for decision falls within a very narrow compass, and we have in our further discussion concentrated on this basic point.
10. The issue turns on the point that during the material period there were in force two notifications, both issued by the Government of India under Rule 8(1) of the Central Excise Rules, and both applicable to the appellants' product (metal containers), though the first was in specific terms and the second in general terms. The operative part of the first notification No. 97/70 dated 1-5-1970, relating to the goods exempted, was as under:- "...metal containers falling under this Item, upto a value not exceeding rupees one lakh, cleared on or after the first day of April in any financial year by or on behalf of a manufacturer from one or more factories for home consumption from the whole of the duty of excise leviable thereon".
11. The material part of the second notification, No. 14/76 dated 23-1-76, so far as the present case is concerned, was contained in the second proviso thereto, which is reproduced below:- "Provided further that no exemption, granted under any other notification issued under Sub-rule (1) of Rule 8 of the said rules, from the whole of the duty leviable on any of the excisable goods (specified under Sub-rule (1) of the said Rule 173RA and the duty on which is payable by the manufacturer thereof in the manner provided for in Rule 173RD or in accordance with the provisions of Chapter V of the said rules) if removed in (a financial year, shall apply to such goods during the three year bloc period." 12. There is no dispute on the facts that the goods in question, viz., metal containers, were specified under Sub-rule (1) of the said Rule 173RA. It is also an established fact that the goods were cleared under the basic procedure as prescribed in Chapter V, viz., the Physical Control Procedure. (The appellants have sought to argue that their clearance was under Rules 49 and 52. As pointed out in para 7(3), this argument leads them nowhere, since these two rules are very much a part of Chapter V). Without getting lost in the details of, Chapter VIIB and Rules 173R et seq it may be stated that under the provisions contained in Chapter VIIB, all manufacturers who were eligible to work under the Simplified Procedure had to do so, paying duty as provided in Rule 173RD. It they did not, they had to pay duty in the manner provided in Chapter V, working under the Physical Control Procedure. There was no third option open to them, such as that of working under the system of Production Based Control (corresponding broadly to the general Self Removal Procedure as in force before the recommendations of the S.R.P.Review Committee were implemented), covered by Chapter VIIA of the Central Excise Rules. It is not necessary to dwell further on this aspect, in view of the established fact that the appellants were admittedly paying duty in accordance with the provisions of Chapter V.13. The question therefore is the combined effect of the two provisions referred to in paras 10 and 11 above on the duty liability of the appellants. Basically, it is their case that they had been, and continued to be eligible for the exemption contained in Notification No. 97/70, and that they could not be deprived of the benefit of this notification unless it was specifically rescinded or amended. As against this, the contention of the Department basically is that the proviso to notification No. 14/76 had the effect of nullifying the exemption conferred by notification 97/70, so far as the present appellants were concerned.
14. Putting the case for the appellants at its strongest, it may be said that they derived no benefit from the main part of notification No. 14/76. They could not be deprived of the benefit clearly due to them under another notification (Viz. No. 97/70) by virtue of a proviso to notification No. 14/76, particularly as that proviso did not make a specific reference to notification No. 97/70, or effect a specific amendment thereto.
15. There is something to be said for the above view. But there is more to be said against it. It cannot be disputed that a notification under Rule 8(1) can be amended or rescinded by a subsequent notification under the same rule. It cannot be doubted that Government could, if they had so desired, have made specific amendments to the earlier notifications which were relevant to the context: as for instance by adding a proviso on the following lines to notification No. 97/70:-- "Provided further that this exemption shall not apply to goods specified under Sub-rule (1) of Rule 173RA, on which duty is payable by the manufacturer thereof in the manner provided for in Rule 173RD or in accordance with the provisions of the said rules, during the three year bloc period as defined in Rule 173R." 16. What was done instead in Notification 14/76, which was issued under Rule 8(1), was to insert a general proviso which purported to make all exemptions (of the nature of the exemption under notification 97/70), inapplicable in respect of goods on which duty was payable either under the Simplified Procedure (under Rule 173RD) or under the Physical Control Procedure (under Chapter V). It may be said that this was not the best way to make such a comprehensive provision, affecting a large number of earlier notifications. It may also be said that a better way would have been to make a specific amendment to each such notification, on the lines of the one indicated in the preceding paragraph. But can it be said that the provision was an ineffective one, and should be deemed not to have any effect on earlier notifications such as notification No. 97/70 We have given our careful consideration to this issue, and we think the answer must be in the negative. As already observed, Government did have the power to make a provision having the effect of modifying or rescinding earlier notifications. Every notification has to be read along with any later notifications which relate to the same goods, and subject to any amendments effected through such later notifications. If Notification No. 97/70 is read along with the subsequent Notification No. 14/76, the combined effect clearly is that the benefit of Notification No. 97/70 was not available to manufacturers in the position of the present appellants. No doubt Government could have made the provision in a different way, by specifically amending Notification No. 97/70, but Government chose to make it in this particular way, in the form of the proviso to Notification No. 14/76, and we do not think we can go so far as to say that the amendment so effected was ineffective or inoperative.
17. In the result, we hold that the appellants were eligible to work under the Simplified Procedure and pay duty under Rule 173RD, but did not do so. Consequently, they were required to pay duty under Chapter V. As a further consequence, they came within the mischief of the second proviso to Notification No. 14/76 which made the exemption under Notification No. 97/70 inapplicable to the goods manufactured by them.
Therefore, they were rightly denied the benefit of that exemption by the lower authorities. We accordingly reject the appeal.