TaxTMI 
TaxTMI 
1987 (2) TMI 299
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of Rs. 2,91,620.57 and Rs. 45,256,57 demanded by show cause notice dated 30-10-1984 being the cess payable under Central Excise Rule 9(2) read with Section 3(1) of the Jute Manufactures Cess Act, 1983, during the period from 1-5-1984 to 30-9-1984 on sacking cloth produced and captively consumed within the factory and the differential amount of cess short-paid on gunny bags. 3.  The appeals against the two aforesaid orders were dismissed by the Collector (Appeals) by his order dated 4-11-1985 which is impugned in the present proceedings. 4.  The basis on which the Collector (Appeals) dismissed the appeals is this. While jute yarn/twine fell under the same serial number of the Schedule to the Jute Manufactures Cess Act, sacking cloth falls under a different serial number. Similarly, sacking cloth and bags are specified under different serial numbers. Therefore, when sacking cloth is captively consumed for production of jute bags or yarn/twine is captively consumed for production of sacking cloth, cess has to be paid on the goods so consumed. The entries in the Schedule being different, the provisions of Central Excise Rules 9 and 49 would not be applicable for the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....road and/or for distribution and consumption within the factory." 8.  It is Dr. Singhvi's contention that, according to the aforesaid Rule 3 of the Jute Manufactures Cess Rules (hereinafter referred to the Cess Rules, for brevity's sake), Cess is payable on finished jute manufactures removed for sale for home consumption or export. Captive consumption within the factory of production, as in the present case, does not attract Cess since that would not amount to removal for sale for home consumption or for export. Dr. Singhvi also draws our attention to Central Excise Notification No. 56/72, dated 17-3-1972 issued by the Central Government under Central Excise Rule 8(1) which exempts Jute twist, yarn, thread, ropes and twine, all sorts, falling under item No. 18-D of First Schedule to Central Excises and Salt Act, 1944 (the said First Schedule is hereinafter referred to as the CET), and consumed within the factory in which it is produced for the manufacture of jute manufactures falling under item No. 22A of the C.E.T., from the whole of the duty of excise leviable thereon. It is submitted that jute manufactures produced and captively consumed in the same factory for the manuf....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... It is also submitted that the Trade Notices issued by different Collectorates would not affect the position prior to 1-10-1984. 12.  We have carefully considered the submissions of both sides. Section 3(4) of the Cess Act makes the provisions of the Central Excise Act and the Central Excise Rules (including those relating to refunds and exemptions from duty) applicable "so far as may be" to the levy and collection of cess under the Cess Act. Now, what is the effect of this provision? We think it is this. All the provisions of the Central Excise Act and the Central Excise Rules (so far as they may be applicable) are made applicable to the levy and collection of Cess under the Cess Act. That is to say, the machinery or procedural provisions of the Central Excises Act and the Rules will, unless the context otherwise warrants, be the machinery or procedural provisions for levy and collection of the cess under the Cess Act. Section 3(4) of the Cess Act has thus achieved the purpose that would have been achieved had all the relevant provisions of the Central Excises Act and the Central Excise Rules been written into the Cess Act and the Cess Rules. Now coming specifically to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on and consumption within the country. Thus, from 1-10-1884, cess, in effect, became payable only when finished jute manufactures were removed from the factory for sale, home consumption or export abroad. Consequently, cess which was payable (not being exempted) on jute manufactures used within the producing factory for manufacture of other jute manufactures till the Cess Rules were promulgated, ceased to be payable on and from 1.10.84. Rule 3 achieved the object which on exemption notification would have. 14.  Our above view would also flow from a plain reading of the provisions of the Central Excise Laws (Amendment and Validation) Act 1982 (Act No. 58 of 1982). Sections 2(2) and 2(3) of the said Act are reproduced below :- "(2) Every Central law providing for the levy and collection of any duty of excise when makes the provisions of the Central Excises Act and the rules made thereunder applicable by reference to the levy and collection of the duty of excise under such Central law shall have, and shall be deemed always to have had, effect with respect to the matters dealt with in sub-section (3) in the manner provided in that sub-section and this Act s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee manufactured a type of fabric called "Calikut special" which consisted of 38.48% cotton and 61.52% of artificial silk. At the intermediate stage of production, the fabric contained 46% art silk and 54% cotton. The Central Excise department was treating the final product as falling under item No. 22 CET ("Rayon or artificial silk fabrics") because of its percentage composition. At some stage, the department sought to tax the intermediate product under item No. 19 CET ("Cotton fabrics") by virtue of its percentage composition. The Supreme Court disapproved the assessment of the intermediate product having regard inter alia to the process involved in the manufacture of "Calicut special". The processes involved after the intermediate stage (bleaching, heat Setting etc.) formed an integral part of manufacture of "Calicut special". The Court observed that the classification of the manufactured product for the purpose of excise duty would depend upon its nature and character at its final stage of production unless the contrary intention appears from the statute. In this connection, the Court also took note of the fact that Section 2(f)(vii) of the Central Excises Act had subsequently m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is contention with reference to the provisions of Rule 9. The Rule provides that no excisable goods shall be removed from the place of production inter alia for the manufacture of any other commodity in or outside such place until the excise duty leviable thereon has been paid in the manner prescribed. The Rule is subject to several provisos. The third proviso inserted by Central Excise Notification No. 187/83, dated 9-7-1983 is relevant for the present purpose. It reads as follows :- "Provided also that such goods may be removed without payment of duty leviable thereon, if they are consumed or utilised in the place where such goods are produced or manufactured or any premises appurtenant thereto so specified under this sub-rule, either as raw material or as component parts for the manufacture of any other commodity which - (i) is excisable goods specified by the Central Government by notification under sub-rule (1) of Rule 56A. (ii) falls under the same item number in the First Schedule to the Act as such goods so consumed or utilised fall under, and (iii) is neither exempt from the whole of the duty of excise leviable thereon nor is chargeable to nil rate of duty. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y trade notices by different Collectors) that sacking bags and sacking cloth both fall under item No. 3. There is no contention raised before us to the contrary. Item No. 10 reads "any other article of jute manufacture". The view that sacking cloth and sacking bags are both covered by the term "sacking" (serial No. 3) appears to us to be the correct view. In this view, since sacking cloth and sacking bags both fall under the same serial number of the Schedule, the aforesaid requirement of the 3rd proviso to Rule 9 is fulfilled. Therefore, the demand for Cess in respect of sacking cloth captively consumed in the appellant's factory for the manufacture of sacking bags during the period to 1-10-1984 cannot be sustained and is not aside. 21.  It is further seen from the Assistant Collector's order No. 29/85 that the appellants have been paying cess on jute gunny bags at the rate applicable to jute sacking cloth. The demand for Rs. 44,256.57 represents the difference between the duty leviable under serial No. 10 of the Schedule (whereunder the department held sacking bags would fall) and that leviable under Serial No. 3 (i.e. sacking). Since, as we have seen, sacking cloth and s....