1997 (8) TMI 77 - SC - Central Excise

Exemption applies to goods made from raw materials with no excise duty; s.37B read broadly, earlier circulars binding

COLLECTOR OF CENTRAL EXCISE, PATNA Versus USHA MARTIN INDUSTRIES

SC held that the exemption notifications extend to goods made from raw materials on which no excise duty was payable, rejecting a narrow reading of the ... Excise duty - goods made from raw materials - Binding Nature of Circulars - expression in the notification i.e. 'on which appropriate amount of duty has been paid' - Whether the benefit of excise duty exemption (granted by the Central Government as per certain notifications) can be claimed in respect of commodities made out of raw materials on which no excise duty was payable - HELD THAT:- One reason is that Central Government wanted to save certain raw materials and the end products made with them from double duty. Another idea, as could be discerned from it, is that the reason which prompted the Central Government to absolve one commodity from duty must as well be applicable to the other commodity which is made out of the former. Therefore, we are not disposed to afford a narrow interpretation to the expression (i.e. on which the appropriate amount of duty of excise has already been paid) as excluding all cases where nil duty was paid for the input materials. Having bestowed our consideration on the rival contentions we are persuaded to accept the argument of the learned counsel for respondent for the main reason that the Central Government could have inserted the same proviso in the notification now under consideration, by way of modification or amendment if the Government wanted that meaning to be adopted to it. We find considerable force in the contention that absence of any such proviso in the notification (under our consideration) is consistent with the construction sought to be placed on it by the respondents. Section 37B of the Act enjoins on the Board a duty to issue such instructions and directions to the excise officers as the Board considers necessary or expedient 'for the purpose of uniformity in the classification of excisable goods or with respect to levy of duty excised on such goods'. It is true that Section 37B was inserted in the Act only in December, 1985 but that fact cannot whittle down the binding effect of the circulars or instructions issued by the Board earlier. Such instructions were not issued earlier for fancy or as rituals. Even the pre-amendment circulars were issued for the same purpose of achieving uniformity in imposing excise duty on excisable goods. So the circular, whether issued before December, 1985 or thereafter should have the same binding effect on the department. Thus, looking from different angles we are inclined to take the view that benefit of exemption from duty can legitimately be claimed by the respondents in respect of those goods referred to in the notifications under consideration the raw materials of which were not exigible to any excise duty at all. In the result we dismiss all these appeals. Issues Involved:1. Whether the benefit of excise duty exemption can be claimed for commodities made from raw materials on which no excise duty was payable.2. Interpretation of the phrase 'on which appropriate amount of duty of excise has already been paid' in the context of excise duty exemption notifications.3. Relevance and binding nature of circulars issued by the Central Board of Excise and Customs.Detailed Analysis:1. Benefit of Excise Duty Exemption:The central issue in these appeals was whether excise duty exemption could be claimed for commodities produced from raw materials on which no excise duty was payable. The relevant notifications exempted commodities from excise duty if they were produced from materials on which the appropriate amount of duty of excise had already been paid. The Tribunal upheld the claims made by certain manufacturers, leading the Revenue to file these appeals.2. Interpretation of the Notification Phrase:The specific phrase under scrutiny was 'on which appropriate amount of duty of excise has already been paid.' The Revenue argued that this phrase meant that the exemption could not apply to goods made from raw materials that were exempt from duty. However, the Tribunal and the Court found that the notification's intention was to prevent double taxation and to apply the same rationale for exemption to both raw materials and the final product. The Court emphasized that the word 'appropriate' should not be sidelined and that the meaning of 'already paid' should be interpreted in the context of the notification as a whole.3. Relevance of Previous Judgments:The Revenue cited previous judgments, such as Ahura Chemical Products Pvt. Ltd. v. Union of India and Andhra Re-Rolling Works, Hyderabad v. Union of India, to support their interpretation. However, the Court found these cases distinguishable. In Ahura Chemical Products, the context was different as it involved goods purchased from the open market, making the observations obiter. In Andhra Re-Rolling Works, the exemption was partial, not total, and thus not directly applicable to the present case.4. Circulars Issued by the Central Board of Excise and Customs:The Court considered the circulars issued by the Central Board of Excise and Customs, which instructed that exemptions should not be denied even if the inputs were exempted from excise duty. The Court noted that these circulars aimed to achieve uniformity and were binding on the department. The Court emphasized that the department could not take a stand contrary to these instructions, especially when others had acted based on them.5. Binding Nature of Circulars:The Court reiterated that circulars issued by the Board, whether before or after the insertion of Section 37B in the Act, were binding on the department. The Court cited several decisions affirming that the Revenue could not take a stand contrary to the Board's instructions. The Court highlighted that when a notification was not free from doubt, the benefit of doubt should be given to the assessee.Conclusion:The Court concluded that the benefit of exemption from duty could legitimately be claimed by the respondents for goods made from raw materials that were not subject to any excise duty. The appeals were dismissed, upholding the Tribunal's interpretation and the binding nature of the Board's circulars.