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. Appearing before us for the appellants, Shri Khaitan explained that the appeal related to a claim for refund of duty paid in excess by the appellants, who, in terms of Notification No. 198/76-C.E., dated 16-6-76, were entitled to partial exemption from duty on their excess production of tea. Shri Khaitan stated that their claim had been rejected on the ground of limitation. According to him there was no dispute regarding the facts, but only as regards the correct interpretation of the conditions of the aforesaid notification.
3. A point had been raised in this case by the Central Excise authorities that the appellants, who were the owners of two different tea estates, should have claimed the benefit of the exemption separately in respect of each of the tea estates, and not jointly on the combined clearances of both, as they had done. Subsequently they had submitted claims separately in respect of each tea estate.
According to Shri Khaitan, the notification clearly specified that the exemption was in respect of clearances "from one or more factories in excess of the base clearances by or on behalf of a manufacturer", and therefore where a manufacturer produced the same goods from more than one factory, the production of all his factories had to be taken together. We may mention that prima facie Shri Khaitan's argument in this regard appears to be correct. However, as pointed out by Shri Tayal, the learned representative of the Department, this question need not occupy us further at this stage because even if the first (combined) claim made by the appellants is taken into account, it would still, in accordance with the main argument of the Department, be barred by limitation as having been made more than six months from the payment of duty, which according to them was the relevant date.
4. The clearances took place in the financial year 1977-78, that is, 1-4-77 to 31-3-78. The excess production in respect of which the appellants sought the partial exemption under the notification, took place from 4-11-77 to 26-11-77 (the factory closed down thereafter for the rest of the financial year). On 28-5-77 the appellants submitted their declaration of clearances for the preceding years, as required in terms of the Shillong Central Excise Collectorate. In this they showed the combined clearances of both their tea estates. The Department's confirmation of the base period and base clearances as declared by the factory was conveyed to them on 29-6-77. Their clearances of excess production took place, as already stated, from 4-11-77 to 26-11-77.
They did not however avail themselves of the benefit of the partial exemption straightaway, by paying the reduced amount of duty (namely 75 per cent of the effective rate), but paid duty under the Self Removal Procedure at the full effective rate. On 28-9-78 they submitted their combined claim for refund of the excess duty paid on excess clearances from both their factories during the abovementioned period. This claim was rejected by the Assistant Collector as time-barred, since it had not been made within the period of six months from the date of payment, as laid down in Rule 11 of the Central Excise Rules, 1944. Their appeal to the Appellate Collector was also rejected. It is against this order of rejection that the present appeal before us has been filed.
5. It appears that before the Appellate Collector a plea was advanced that Rule 11 of the Central Excise Rules had no application to the present case. No such argument was advanced before us and we are not therefore called upon to deal with it.
6. Shri Khaitan's main argument was that, having regard to the wording of Notification No. 198/76, dated 16-6-76, clearances during an entire financial year should be taken into account. According to him, if duty was paid in excess, without taking the benefit of the notification, the time-limit for claiming refund would start running from the end of the financial year, namely 31-3-78 or 1-4-78 in this case. In other words, the right to claim refund accrued only at the end of the financial year. The appellants had made their refund claim on 28-9-78, which was within six months from the end of the financial year. Accordingly, their claim, which was with reference to their excess clearances during the financial year 1977-78, should be taken as within time, and allowed.
7. Explaining his argument with reference to the wording of the above notification, Shri Khaitan pointed out that it repeatedly made references to clearances "during any financial year. For this purpose the clearances during different financial years had to be compared. The base period, in terms of paragraph 2(2) of the notification, was a financial year, either one of the financial years 1973-74, 1974-75 or 1975-76, or all the 3 financial years, the average production during 3 financial years being taken. The qualifying period during which excess clearances over the base period were entitled to the partial exemption was also a financial year, namely, 1976-77, 1977-78 or 1978-79. Shri Khaitan also pointed to paragraph l(c) of the notification, wherein it was laid down that if the Central Government was satisfied that there had been a substantial alteration in the pattern of clearances in any financial year subsequent to the base period the exemption could be disallowed. This would also show that the exemption was with reference to a financial year.
8. It was put to Shri Khaitan that Rule 11 of the Central Excise Rules specifically laid down that the time-limit would start running from the date of payment of duty. It was also pointed out that normally an assessee would be in a position to know the quantum of his clearances during the base period as well as the quantum of his clearances during the current period, so that immediately the latter exceeded the former, the fact that he was thereafter entitled to the benefit of the partial exemption would be known to him. It was also pointed out that an assessee could, under the Self Removal Procedure, avail himself of the benefit of the partial exemption the moment his clearances during the current year exceeded this during the base period, and in fact this appeared to have been the practice. Shri Khaitan did not deny that such a practice had been in vogue. He however argued that whatever might have been the practice, the appellants were entitled to claim the benefit of a strict legal interpretation, and according to him that interpretation was that the right to the exemption (and consequently to refund) accrued only at the end of the financial year.
9. Shri Khaitan also stated that his argument was supported by a decision of the Kerala High Court in the case of T.T. Pylunny Royal Smiths, Kunnakulam v. Union of India and Ors., reported in 1978 E.L.T.(J 705) (Ker,) and of the Andhra Pradesh High Court in the case of Auric Engineering Private Limited v. Assistant Collector of Central Excise and Ors., reported in 1980 E.L.T. 620 (A.P.). He also cited a decision of the Appellate Collector of Central Excise, New Delhi in the case of Navyug Industries reported in 1978 E.L.T. (J 110). He also relied on the judgment of the Delhi High Court in the case of Modi Rubber Ltd. v. Union of India and Ors., reported in 1983 E.L.T. 24 (Del.). At the time of the hearing he did not have the references to the above authorities with him, and undertook to send them subsequently. Shri Khaitan also made it clear that he did not seek any further hearing in the light of the references to be furnished by him.
10. Replying for the respondent Collector, Shri Tayal submitted that in terms of Rule 11 of the Central Excise Rules, the limitation would run from the date of payment of duty, which in each case would be at the time of the clearance. In the present case, the clearances having taken place between 4-11-77 and 26-11-77, the time-limit would be upto six months from these dates. Since the first claim had been made more than six months afterwards, namely on 28-9-78, the claim, according to him, was clearly time-barred.
11. Shri Tayal submitted that under the Central Excise Rules there was no authority for holding that limitation could be computed on the basis of financial years. In this connection Shri Tayal relied upon the judgment of a Division Bench of the Kerala High Court in the case of Assistant Collector of Central Excise, Ernakulam v. T.T. Pylunny, Proprietor, Royal Smiths, Kunnakulam, reported in 1983 E.L.T. 2156 (Ker.). (It transpired only later, when Shri Khaitan sent his list of references, that one of the judgments relied upon by him was that of the Single Judge of the Kerala High Court in the same case which was later reversed by a Division Bench in the judgment cited by Shri Tayal). In that case, which related to an exemption in favour of small scale manufaturers, whose clearances during a financial year did not exceed Rs. 2 lakhs, the Kerala High Court had held that, although the realisation that the goods cleared did not exceed the maximum limit of Rs. 2 lakhs which alone would qualify for exemption, might come only at the end of the assessment year, there was nothing to prevent an assessee making an application for refund at the time each clearance was made, upto the admissible limit of Rs. 50,000.
12. Shri Tayal submitted that Notification No. 198/76 did not anywhere state that the exemption could be availed of only at the end of the financial year. In the absence of any such condition, the exemption could be availed of straightaway, as soon as clearances during the current financial year exceeded clearances during the base period.
According to Shri Tayal, the notification did not envisage that there would be a system of refund, since the benefit of exemption was concurrently available, and it was only in exceptional cases that occasion for claiming a refund would arise. Shri Tayal accordingly submitted that the appeal deserved to be rejected.
13. In reply, Shri Khaitan submitted that the judgment of the Kerala High Court cited by Shri Tayal appeared to be against the appellants.
However, according to him it was not binding on the Tribunal and should not prevent us from taking an independent view on his submissions.
14. We have carefully considered the arguments advanced by both sides.
In the first instance we would refer to the judgments cited by Shri Khaitan. Taking first the judgment of the Kerala High Court in the case of T.T. Pylunny Royal Smiths, Kunnakulam v. Union of India and Ors., 1978 ELT (J 705) (Ker.) it is interesting to find that the latter judgment of the same High Court on the same case, which has been cited by Shri Tayal, takes a contrary view. But apart from this we find that all the 3 authorities cited by Shri Khaitan deal with a different situation. They are concerned with exemption notifications for small scale manufacturers. A feature of those notifications was that such small scale manufacturers were entitled to exemption from duty in respect of their production during a financial year upto what may be called the lower limit, provided their total clearances during the same financial year did not exceed what may be called the upper limit. In the case dealt with by the Kerala High Court, the lower limit was Rs. 50,000 and the upper limit was Rs. 2 lakhs. In the case dealt with by the Andhra Pradesh High Court, the lower limit was 20 tonnes and the upper limit was 49 tonnes. Thus, a manufacturer who was confident that his total production during the financial year would not exceed Rs. 2 lakhs (or 40 tonnes) could straightaway get the benefit of full exemption on his first clearances during the financial year upto Rs. 50,000 (or 20 tonnes). If, however, his calculation went wrong, and before the end of the financial year his total production crossed the upper limit, he was liable to pay duty on his total production, including the first "free" slab upto the lower limit. In the 3 cases cited by Shri Khaitan, the assessees, who were perhaps not certain whether their total clearances during the financial year would or would not cross the upper limit, did not avail themselves of the benefit of exemption on their clearances upto the lower limit. At the end of the financial year, finding that they were entitled to the exemption, they submitted claims for refund of the duty paid on the free slab, but had their claims rejected as time-barred. It was in cases of this nature that the Kerala High Court and the Andhra Pradesh High Court (and the Appellate Collector of Central Excise, Delhi, evidently following these High Courts) held that the time limit would start running only from the end of the financial year. The reason for this finding has been clearly stated in the Single Judge judgment of the Kerala High Court as follows :- "It is only at the end of the financial year that one can know whether he is entitled for exemption from payment of excise duty as per Ex. P 1 notification. As the petitioner pertinently points out in the O.P., it is not as if that a refund application should be filed whenever excise duty is paid. One cannot refuse to pay excise duty when sales are effected, because one cannot be sure at that time whether his total turnover will or will not exceed rupees two lakhs by the end of the financial year." Similar reasoning was applied by the Andhra Pradesh High Court and by the Appellate Collector of Central Excise, Delhi.
15. If Notification No. 198/76 dated 16-6-76 is seen, it will be found that the situation under that notification is materially different from that under the notifications which were the subject of interpretation by the Kerala and Andhra Pradesh High Courts. Notification No. 198/76 is not confined to small assessees but is applicable to all manufacturers of the specified goods. Again, the notification contains precise formulae for working out the base period and the base clearances, so that a manufacturer need not be in any doubt as to the precise point of time at which his clearances during the current year exceed the level of clearances during the base period. There is no comparison with the situation under the notifications granting exemption to small scale manufacturers, where it could be said that until the end of the financial year an assessee might be in doubt as to whether or not he would qualify for exemption even on clearances upto the lower limit. Therefore, in regard to clearances under the exemption for excess production contained in Notification No. 198/76, the considerations which led the Honourable High Courts of Andhra Pradesh and of Kerala (which subsequently reversed its view on appeal) to hold that limitation would start running at the end of the financial year were not present at all. There is nothing in that notification to indicate that the right to exemption would accrue only at the end of the financial year, and therefore nothing which could override the specific provisions of Rule 11 of the Central Excise Rules. It is also a matter of common knowledge of which we can take judicial notice (and which Shri Khaitan fairly did not seek to controvert) that as a matter of practice assessees were in fact availing themselves of the benefit of the exemption as soon as they calculated that their clearances during the current financial year exceeded their clearances during the base period. We are unable to accept Shri Khaitan's argument that this was only a matter of practice, and not in accordance with a strict interpretation of the notification because, as we have explained above, there is nothing in the notification which would justify a. departure from the specific provisions of Rule 11. Nor would the considerations of equity which were present in the cases before the Kerala and Andhra Pradesh High Courts apply to the situation under notification No.198/76.
16. It is interesting to note that in its subsequent appellate decision dated 16-1-79 in the case of Assistant Collector of Central Excise, Ernakulam v. T.T. Pylunny, Proprietor, Royal Smiths, Kunnakulam, 1983 ELT 2156 (Ker.} cited by Shri Tayal, the Division Bench of the Kerala High Court reversed its original judgment in the case of T.T. Pylunny Royal Smiths, Kunnakulam v. Union of India and Ors., 1978 ELT (J 705) (Ker.) cited by Shri Khaitan. The substance of the Division Bench judgment has already been set out in para-^ graph 11. As regards the judgment of the Delhi High Court in the case of Modi Rubber Limited, we observe that Shri Khaitan had relied upon it for the proposition that a notification must be construed in accordance with its words and not by going into the object which the authority had in mind. This is a general proposition which will not assist the appellants in this case, since our conclusions are based on the wording of the relevant notification and the Central Excise Rules and not on the basis of any assumed intention.
17. In the result, we find that the orders of the authorities below were correct. We accordingly reject the appeal.