2000 (11) TMI 140 - SC - Central Excise

Interpretation of Tax Exemption for Manufacturing Liquid Nitrogen: Specific Investment Unit Rule

The Supreme Court upheld the Tribunal's decision that the exemption under the Notification applies only to the capital investment in the plant and ... Interpretation of a Notification issued by the Central Government under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, exempting goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 Held that:- In our view the Tribunal rightly preferred the view taken in the case of Devidayal [1981 (1) TMI 78 - HIGH COURT OF JUDICATURE AT BOMBAY]. The factual hurdles like a common generator may be in use by different units in the factory complex as indicated in the case of Golden Press (1985 (1) TMI 65 - HIGH COURT OF ANDHRA PRADESH AT HYDERABAD) can well be worked out by devising proper method while apportioning the value of different plants proportionately. In no way such hurdle, as posed, would change the meaning of a Notification which on the face of it and by the plain language used therein has unambiguous and clear meaning. Such Notifications by which exemption or other benefits are provided by the Government in exercise of its statutory power, normally have some purpose and policy decision behind it. Such benefits are meant to be provided to the investors and manufacturers. Therefore, such purpose is not to be defeated nor those who may be entitled for it are to be deprived by interpreting the notification which may give it some meaning other than what is clearly and plainly flowing from it.In view of the discussion held above, we find no merit in the appeals and they are hereby dismissed. Issues Involved:1. Interpretation of the Notification issued by the Central Government under Rule 8(1) of the Central Excise Rules, 1944.2. Determination of capital investment for exemption eligibility under the Notification.3. Applicability of the Notification to the specific case of manufacturing liquid nitrogen.Issue-wise Detailed Analysis:1. Interpretation of the Notification issued by the Central Government under Rule 8(1) of the Central Excise Rules, 1944:The core issue revolves around the interpretation of a Notification dated 19-6-1980, which exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944, from excise duty, subject to certain conditions. The Notification stipulates that the exemption applies to the first clearances of said goods for home consumption up to a value not exceeding rupees thirty lakhs, provided the total capital investment on the machinery installed for manufacturing said goods does not exceed rupees ten lakhs. The term 'said goods' is crucial as it refers specifically to goods falling under Item 68, which in this case is liquid nitrogen.2. Determination of capital investment for exemption eligibility under the Notification:The Assistant Collector of Central Excise initially rejected the manufacturer's claim for exemption, arguing that the total capital investment in all plants and machinery in the factory, including those manufacturing butter and skimmed milk powder, should be considered. This interpretation was upheld by the Collector (Appeals). However, the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) overturned this decision, stating that only the capital investment in the plant and machinery manufacturing liquid nitrogen should be considered, as liquid nitrogen is the 'said goods' under Item 68. The Tribunal remanded the matter to the original adjudicating authority to compute the capital investment specifically for the liquid nitrogen plant and any common machinery used.3. Applicability of the Notification to the specific case of manufacturing liquid nitrogen:The Supreme Court upheld the Tribunal's decision, emphasizing that the Notification clearly refers to 'said goods' as those falling under Item 68. Therefore, only the capital investment in the plant and machinery manufacturing liquid nitrogen should be considered for the exemption. The Court rejected the appellants' argument that the total investment in all plants and machinery should be considered, reiterating that the Notification's language is unambiguous and specific to the goods under Item 68. The Court also noted that the Tribunal's reliance on the Bombay High Court's decision in Devidayal Electronics & Wires Ltd. v. Union of India was appropriate, as it distinguished between 'factory' and 'industrial unit,' supporting the interpretation that only the investment in the specific unit manufacturing the exempted goods should be considered.Conclusion:The Supreme Court dismissed the appeals, confirming that the exemption under the Notification dated 19-6-1980 applies solely to the capital investment in the plant and machinery manufacturing liquid nitrogen, the 'said goods' under Item 68. The Court emphasized that the purpose of such Notifications is to provide benefits to investors and manufacturers, and this purpose should not be defeated by misinterpreting the clear and plain language of the Notification.