1. The captioned appeal was initially filed as a Revision Application before the Central Government, which under Section 35-P of the Central Excises & Salt Act, 1944, has come as transferred proceedings to this Tribunal for disposal as if it were an appeal filed before it.
2. The facts of the case have been succinctly stated in the Appellate Collector's order, the relevant portion of which we reproduce hereunder :- "Among other things, appellants manufacture Artificial and Synthetic Resins falling under Tariff Item No. 15A (i). As they wanted to avail of the benefit of 25% reduction in the rate of duty as contemplated in Notification No. 198/76, dated 16-6-1976, their clearances during the years 1973-74, 1974-75 and 1975-76, were considered for arriving at the base clearance quota. The clearances during 1973-74, being the highest, were considered as the " base clearance quantity for availing of the above benefit and was approved accordingly. The base clearance quantity was comprised of the PVC Resins and PVA Emulsion only as they were excisable under Tariff Item 15A (1). The clearance of PVA compound grade and calibonds (modified resins) being non-excisable were naturally not included in the above base clearance quantity. The appellants aecordingly availed of the concession. On 18-6-1977, Budget was presented as a result of which modified resinswere covered by Tariff Item No. 15A (1) with effect from 18-6-1977 and the appellants' products PVA compound grade and calibonds became excisable under Tariff Item 15A(1). During the years 1977-78 and 1978-79, the appellants included the clearances of modified resins i. e. PVA compound grade and calibonds to find out the excess clearances over the base clearances quantity already fixed and availed of the benefit of 25% concession in duty envisaged by Notification No. 198/76-CE., on the excess clearances. Thus, the appellants paid duty on PVA compound grades and calibonds at 75% rate of duty instead of full rate of duty on the excess quantity during the years 1977-78 and 1978-79. The Range Superintendent, therefore, issued two show cause notices dated 26-4-1979 and 4-5-1979 relating to the period 1977-78 and 1978-79 respectively asking the appellants as to why duty amounting to Rs. 10,32,607.39 and Rs. 11,80,969.89 should not be recovered from them as their products PVA Compound grade and Calibond were not eligible to the concession. Asstt. Collector of Central Excise, Division *M', Bombay, who adjudicated the case held that the base clearance quota for the purpose of Notification No. 198/76 was fixed only for the quantities in respect of PVC Resins and PVA emulsion and not for Tariff Item 15A as a whole. As such the appellants were entitled to the concessional rate of duty for the appellants' products PVC Resins and PVA Emulsions only and not for modified grades (compounded grades and calibonds). The compounded grades and calibonds of PVA modified compounded grades were treated as non-excisable and not as exempted under Tariff Item 15A, at the time of fixing base clearance and base year and hence explanation (i) to the Clause 1(B) of the Notification No. 198/76 is applicable.
The incentive scheme is not operative to the clearances of PVA Compounded grades and calibonds (modified forms), in view of their non-inclusion in the base quantity clearances. He further held that the provisions of Rule 10(1) are applicable according to which the demands were not time-barred and confirmed the demands, vide the impugned order." 3. The crucial issue arising for determination in the case is "whether the appellants' products P.V.A. compounded grades and calibonds (modified resins) which were non-excisable during the base year 1973-74 and which were not included in the base clearance are eligible to the benefit of Notification No. 198/76 when these products became excisable under Tariff Item 15A (1) subsequently during the years 1977-78 and 1978-79".
4. The Appellate Collector took the view that though there is no specific provision on the above point in the said Notification, the principle contained in explanation (i) to Clause (b) of the Notification relating to exempted goods was applicable to non-excisable goods as well. On this basis, he held that during 1977-78 and 1978-79, all the goods covered by Central Excise Tariff Item No. 15A (1) were eligible to the concession contained in Notification No. 198/76 provided the base clearance in respect of all these goods had already been determined. The base clearance did not contain the clearance of PVA compounded goods and calibonds and so the excess clearance inclusive of these modified resins were not ascertainable. The concession was, therefore, not available to the products.
On the appellants' contention that the concession should be extended (during 1977-78 and 1978-79) to the modified resins at least to the extent of the basic resin content therein, he held that in the absence of test report, there was no way to ascertain the resin content of the products.
However, he held that the first demand dated 26-4-1979 relating to 1977-78 was time-barred, as also part of the second demand dated 4-5-1979 relating to the period prior to 4-11-1978.
5. In the hearing of the appeal before us, Shri Kampani, the learned Consultant for the appellants, reiterated the submissions contained in the Memorandum of Appeal and stressed, in particular, that non-excisable goods could not be termed exempted goods and brought within the scope of explanation l(i) to para 1 of the subject Notification. He also submitted that despite the changes made in the 1977 Budget, modified resins of the type manufactured by the appellants, continued to be non-excisable, though Shri Kampani further submitted that the appellants were not pressing for refund of the duty so erroneously paid. As an alternative submission, it was stated that the "base clearance" of the subject goods should be taken as 'nil' and the entire "excess clearance" declared eligible to the benefit of the Notification.
6. Smt. Vijay Zutshi, the learned Sr. DR, submitted that the claim that the subject modified resins were non-excisable even after the 1977 budget changes was being made for the first time now. Duty was paid on these goods since the 1977 budget, but not under protest. The issue should thus be deemed to be closed. We are inclined to accept this contention since admittedly, this is a new issue, not taken up before the lower authorities and, in any case, the appellants are not pressing for refund on this score.
7. Smt. Zutshi strenuously defended the Appellate Collector's order by urging that the reasoning adopted by that authority leading to his conclusion was well-founded.
8. We have considered the submissions of both sides. It is an admitted position that the subject goods (PVA compound grade and calibonds) were not excisable under Item 15A (1) of the CET till the 1977 budget. These goods were brought under the said Item as a result of the 1977 budget changes. Now, Sr. No. 14 of the Table attached to Notification No.198/76 specifies the goods eligible for the benefits of the Notification thus--------------------------------------------------------------------------------Item No. of the CET. Description of goods.--------------------------------------------------------------------------------15A (1).
Artificial or synthetic resins and plastic materials.
Since the subject goods were not excisable in the base year (i.e. prior to the 1977 budget), they were correctly not included in the base clearances. During 1977-78 and 1978-79, the goods were excisable under item 15A (1) CET and the appellants were paying duty thereon on that footing. Now, the contention is that during these 2 years, the clearances of these goods should also be taken into account for calculating the excess clearances of goods falling under item 15A (1) CET during these 2 years. The lower authorities negatived this contention relying on the following explanation in the Notification :- (b) the clearances of any specified goods, exempted from the whole of the duty leviable thereon in any financial year shall not be taken into account; but clearances of any specified goods under bond for exports or clearance of any specified goods entitled for exemption, when used in the production or manufacture of any other goods shall be taken into account.
(i) any goods which were exempted from the whole of the duty leviable thereon in the base period but not so exempted in any financial year subsequent to the base period, shall not be entitled to any exemption from duty or be taken into account for calculating the excess clearances.
It is not the case of the Department that the subject goods were excisable under iteme 15A(1) CET in the base period but exempted from the whole of the duty leviable thereon by virtue of a Notification issued by the Central Government under Rule 8 (1) of the Central Excise Rules. The admitted position is that the goods were not excisable under the said item during the base period. In the event, we fail to see how the aforesaid explanation pertaining, in terms, to exempted goods is sought by the lower authorities to be applied to the subject goods which were non-excisable under item 15A (1) CET during the base period.
The application of the principle laid down in the explanation to the subject goods was clearly unjustified. The Notification does not specifically set out any condition or principle to be applied in respect of goods which were non-excisable during the base period but were excisable during the incentive years, (the years when the benefit of the notification is sought for in terms of the notification). It is, therefore, only reasonable to hold that the fact that the subject goods were not excisable during the base period would not disentitle the products from the benefits of the notification in the incentive years.
Nor do we accept as correct the stand that the excess clearances of only those particular goods would be eligible to the duty concession which were included in the base clearances. If the clearances of any goods were not included in the base clearances because they were not excisable during the base period, that is no reason to deny the benefit of the concession to those goods in the incentive period so long as they answered to the description of the goods specified in the notification. In the result, we accept the appellants contention in this behalf and direct that the clearances of PVA compound grade and calibonds during the incentive period be extended the benefit of notification 198/76. The consequential relief should be granted to the appellants by the concerned excise authorities within 4 months from the date of communication of this order.
9. In the above view of the matter, it is not necessary for us to pronounce on the other contentions of the appellants.