2000 (11) TMI 140 - SC - Central Excise

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

COLLECTOR OF C. EX. Versus HIMALAYAN CO-OP. MILK PRODUCT UNION LTD.

COLLECTOR OF C. EX. Versus HIMALAYAN CO-OP. MILK PRODUCT UNION LTD. - 2000 (122) E.L.T. 327 (SC), [2001] 123 STC 403 (SC), 2000 AIR 3669, 2000 (4) Suppl. ... 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.