1. This appeal CCCB/SICGIL/CE/77/2646 dated 5-11-1980 has been filed on behalf of the South India Carbonic Gas Industries Ltd., Madras against the Appellate Collector of Central Excise, Madras's order No. 1386/80 dated 19-5-1980.
2. The appellants have 4 factories which produce carbon dioxide ; three factories started production and clearance before 1-4-1973, the fourth after 1-4-1973. Under notification 198/76-CE the Assistant Collector fixed the base clearance for all the 4 factories at 2,169,606,076 kg., with reference to clauses (b) and (c) of sub-paragraph 2(2) of the notification. Of the 2,169,606.076 kg., 584,980.766 kg. are accounted for by the fourth factory (which started clearances after 1-4-1973. We shall here refer to this factory as the fourth factory) South India Carbonic Gas claimed concessional duty for the fourth factory on carbon dioxide cleared from it over the 548,980.766 kg. which was reached on 20-11-1977. The Assistant Collector held that notification 198/76-CE had no provision for this and that the base clearance of the manufacturer as a whole should be taken into account. He held that it was not correct for the assessee to say that the 584,980.766 kg. which represented l/3rd of the aggregate of the clearances of the three financial years 73-74, 74-75 and 75-76 for the fourth factory should not have been added to the base clearances of the three factories (which started clearance of 2,169,606.076 kgs. before 1-4-1973) in order to arrive at the base clearance for the manufacturer. By reference to Sub-Clause (b) and (c) of sub-paragraph (2) of paragraph 2, the Assistant Collector held that the base clearances for all the factories, whether they started clearances before or after 1-4-1973, should be taken together to arrive at the single base clearance for that manufacturer. Their appeal to the Appellate Collector was rejected.
3. The appellants have now filed this appeal against the Appellate Collector's order. Their main argument in the appeal is that by doing what he did the Assistant Collector changed the base period for the fourth factory to 1973.74 when its true base period was 1973-74, 1974-75, 1975-76. The base period for the other three factories was 1973-74 which was the financial year when the clearances from all the three factories taken together were the highest. This was in accordance with notification 271/76-CE which amended notification 198/76-CE. At the hearing on 11-10-1983, the appellants went unrepresented. The bench decided to hear the appeal and called upon the counsel for the department to present his case. Mr. A. K. Jain, learned counsel for the department made arguments on behalf of the department.
4. He argued that the clubbing by the Assistant Collector was not incorrect because the assessment had to have one base clearance which must be calculated by taking clearances by or on behalf of one manufacturer from one or more factories. From the wording of notification 198/76-CE it is clear that the benefit is to a manufacturer (and not to a factory) who has one or more factories. It is evident that there must be one base clearance if there is one manufacturer. He said that scheme of the notification requires what the Assistant Collector did and the appeal should be rejected.
5. First of all, we must note that while the base clearance of first three factories is to be fixed under paragraph 2 (2)(c), the base clearance of the fourth factory is to be fixed with reference to paragraph 2(2)(b). This is because the first three factories started production before 1-4-1973 (in fact they started even before 1-10-1972), the fourth factory started clearance only after 1-4-1973.
There was an amendment to 198/76-CE by notification 271/76-CE, which changed the manner of computing the base clearance for factories from where the clearances started before 1-4-1973. But there is no dispute about the base period of the first three factories which is 73-74, nor about the base period of the fourth factory which is 73-74, 74-75, 75-76 ; and the figures of base clearances of 1,584.625.300 kg. for the first three factories and 584,980 kg. for the fourth factory are not subjects of disagreement. It is only that the Assistant Collector took the total of the two base clearances as the base clearance for that the manufacturer that is questioned. Both sides have quoted amending notification 271/76-CE but this amendment makes no difference to the subject before us. [Even the explanation brought in by the amending notification refers to factories which commenced production on or after 1-10-1972 but commenced clearance before 1-4-1973. There are no factories of this kind here.] Quoting notification 271/76-CE appears to have been the result of confusion on the part of the two sides : this notification merely changes the formula for reckoning the base clearance of factories that produced after 1-10-1972 but cleared before 1-4-1973. What we have to decide is whether the Assistant Collector was correct in adding the base clearances of the fourth factory to the base clearance of the first three factories to arrive at a common base clearance of the four factories.
6. The South India Carbonic Gas say that by doing so, the Assistant Collector has changed the base period of the fourth factory from 73-74, 74-75, 75-76 to 73-74, the base period for the first three factories.
The appellants say there is no authority for this. A careful reading notification 198/76-CE sub-paragraph (2) of paragraph 2 would, in our opinion, support the appellant. This sub-paragraph reads thus "After comparing the clearance of specified goods under sub-paragraph (1), the base period and base clearances, in relation to a factory, shall be determined as under : - (a) Where the specified goods were or are clearanced from a factory for the first time on or after the 1st day of April, 1976, the base period shall be the year 1975-76, and the base clearances shall be nil; (b) where the specified goods were cleared from a factory for the first time on or after the 1st day of April, 1973, but not later than the 31st day of March, 1976, the base period shall be the three financial years, namely, 1973-74, 1974-75 and 1975-76 and the base clearances shall be one-third of the aggregate of the clearances of such goods during such base period ; (c) where the specified goods were cleared from the factory for the first time earlier than the 1st day of April, 1973, the base period shall be the year in which the aggregate of the clearances of such goods during any of the financial years 1973-74, 1974-75 and 1975-76 was the highest and the clearances during such base period shall be the base clearances".
7. It will be noted that determination of base clearance, with which this sub-paragraph deals, is in relation to a factory. It is not as if the notification does not recognize the possibility that there can be two or three factories where base clearances may be the different by reason of Ihe fact that the sub-paragraph specifies 3 categories of factories in clause (a) (b) and (c) in each of which can fall one or more factories. Indeed amending notification 271/7 6-CE envisages fixation of a common base clearance for more than one factories in such manner that the highest clearance for all factories, in any financial year of the base period is to be taken as the base clearance. There seems to be no other meaning in dividing factories according to the date on which they first cleared the specified goods and in elaborating the method of determing the base clearance for each category. Thus, for different categories of factories, different base clearances have been indicated, each factory to be bracketed with other factories of the same category ; but there is nothing anywhere in the notification which requires that after the base clearances for different categories of factories have been determined, such base clearances must then be added together to arrive at the final grand base clearance. Not only is there no sanction for this in the notification ; but such action will result as the appellants correctly say, in changing the base period. It has to be remembered that the base clearances are arrived at by reference to the base period or periods and these periods are not always the same for factories in different categories. Even the method of selecting the base clearance differs for the different categories. For example, for category (b), the base clearance is taken as 1/3rd of the aggregate of clearances of such goods during 73-74, 74-75, 75-76, while for categories which fall in the proviso (inserted by 271/76-CE) the base clearance is taken by the clearance from all factories in any of the financial years 73-74, 74-75, 75-76 when it (clearance) was the highest, that years being taken as the base period. From this it is easy to see that South India Carbonic Gas has two base periods and two base clearances, determined on very different formulae. If the base clearances are added together, it will result in a situation where the different base clearances and base periods become interchanged and a factory has such a base period that cannot be arrived at for it. For example, the fourth factory has base period 73-74, 74-75, 75-76; by combining the two base clearances, the first three factories will have 74-75 and 75-76 as base periods additionally, when their true base periods is 73-74. We can find nothing in the notification anything that permits this or anything that requires such combination.
We therefore, have to conclude that the action of the Assistant Collector and the Appellate Collector was wrong. We allow the appeal.
8. The fourth factory i.e. the factory that has its base period 73-74, 74-75, 75-76 should have its base clearance unlinked from the other three factories and its duty liability determined accordingly. On the above principles the other three factories will have their duty liabilities determined as well. All duties recovered incorrectly as a result of the order of the Assistant Collector shall be refunded to the manufacturer.