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2020 (2) TMI 1114
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....he Table) and cleared matches so manufactured by them without payment of duty during the material period from September 2010 to August 2011. The department was of the view that the appellants are not eligible for the benefit of Notification since the match splints purchased by them have been manufactured using the aid of power. Show Cause Notices were issued proposing to demand the duty along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalty. In appeal, Commissioner (Appeals) upheld the demand, interest as well as penalties, however, directed to requantify the duty and the penalty payable after extending cum-duty benefit as also claim made for CENVAT credit wherever applicable. Aggrieved by such order, the appellants are now before the Tribunal. 3. On behalf of the appellants, Id. counsel S/Shri S. Renganathan, S. Venkatachalam and M. Kannan appeared and argued the matter. It is submitted that the appellants were purchasing machine dipped match splints from other match manufacturers on which excise duty was paid by therm The duty on the dipped match splints is determined on kil....
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....ng under Chapter heading 6401 which is entitled for exemption from duty under Notification No. 49/86-CE, the above said circular is squarely applicable to the present case. The Board clarified that when parts of footwear manufactured using aid of power is purchased and used for manufacture of footwear, without the aid of power, the benefit of exemption would be eligible to the manufacturer. Notification 49/86 is similar to Notification 4/2006. 3.5 The Notification 4/2006 states that the exemption would be eligible if none of the specified processes have been carried out with the aid of power. The department does not have a case that the appellants have carried out any processes in their factory with the aid of power. Though the units of the appellants have purchased the dipped match splints which have used power to manufacture the same, the appellant having paid duty on such dipped match splints and then used for manufacture of matches (packing, bundling etc.) without the aid of power, the exemption is eligible. 3.6 The Id. Counsel relied upon the following decisions to argue that if power is not used in the manufacture, then exemption would be available even if power is used....
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....ing duty paid match splints and using them for packing in boxes. The suppliers are discharging duty on the dipped splints treating them as matches. If dipped splints are matches, then there cannot be further manufacture of matches-taking place in the appellants' factory. 3.10 After omission of Rule 14 of Central Excise Rules, 2002 with effect from 1.4.2003 by Notification No. 12/2003-CE (NT) dated 1.3.2003, there is no restriction in packing duty paid matchsticks and there is no requirement that duty should be paid at the packing stage by way of affixing central excise stamps on the match boxes. Prior to the omission of Rule 14 of Central Excise Rules, 2002, the Notification No. 50/2001-CE (NT) dated 28.6.2001 was applicable. As per the said notification, duty has to be paid on the matches cleared for home consumption by way of affixing central excise stamps. Now Rule 14 of Central Excise Rules, 2002 is omitted and the payment of duty is on matchsticks and not at the stage of packing in boxes and duty is collected on matchsticks on kilogram basis. If duty is on match boxes, it would have been per item / per box and not on kilogram basis. 3.11 He contended that the appella....
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....ation clearly specifies that none of the specified processes should be carried out with the aid of power and without circumscribing the use of power to any specified premises or factory. The claim of the appellant that no power was used within the factory is not acceptable. With reference to manufacture of matches, which is cleared by the appellant, aid of power has been used for manufacture of dipped splints. He much stressed on the decision of the Hon'ble Supreme Court in the case of Standard Fireworks Industries (supra). In the said case, it was held that when cutting of steel wires or treatment of paper is a process of manufacture for fireworks and therefore if power is used in such process, even if such usage of power is. outside the factory of manufacture, it amounts to usage of power in the manufacture of fireworks. In the instant case, dipping of splints has been carried out with the aid of power. This is one of an important process in the manufacture of safety matches. When power has been used in manufacture of safety matches, even though the appellants have not used power in their factory for giving the sides of match boxes red phosphorous coating and packing of machi....
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....ls the benefit of notification. If a manufacturer does not use power in the process carried out by him, which results in the production of the goods cleared by him, the benefit of notification ought not to be denied. The dipped match splints procured by the appellants from other manufacturers have suffered excise duty. It is not the case of the department that the suppliers who manufactured the dipped splints using the power have also availed the benefit of notification. So also there is no allegation that the appellants herein are in any way connected to the manufacturers / suppliers of machine made dipped splints. There is no allegation that there is cash flow or any such hidden financial transactions between the appellants and the suppliers of dipped splints. Such suppliers of dipped splints are totally unconnected with the appellants herein. 6.2 The authorities below have placed reliance on the decision of. the Hon'ble Supreme Court in the case of Standard Fireworks Industries (supra) to hold that when the dipped splints are processed by using aid of power, the appellants who put further use of such dipped splints to manufacture matches is not eligible for the exemption.....
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....hout aid of power from sheets which had been tinned, printed, coated as lacqured by others with the aid of power. Similar exemption was provided by Notifications 153/86 and 102/88 dated 1-3-1988. It is not the case of the Department that the Tops and Bottoms of the metal container were being manufactured by the appellants on job work basis, It is undisputed fact that the appellants have not used power in their own factory where meta/ containers were being manufactured by them. They have purchased the tops and bottoms on payment of duty from other manufacturers. The fact that the M/S, Sterling Components were using power will not make the use of power by the Appellants as Sterling Components is an independent entity. The facts of the present matter are different from the decision of the Supreme Court in. the case of Standard Fire Works as well as the case of Merchant Steel Industries. In Merchant Steel case the a el/ants therein were send in the Tin sheets for getting them printed and lacquered by M/S. Gujarat Works case the appellants were sending steel wires to different people to be cut to sizes and paper used to be made over for being cut into small strips and to be given specia....
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....t Tariff is different from the earlier Tariff. In the present case parts are manufactured by a manufacturer with the aid of power. Such parts manufactured with the aid of power are purchased by another manufacturer of footwear who used such arts for manufacture of footwear without the aid of power. So Ion the second manufacturer does not use an ower in or in relation to manufacture of footwear either in his factory or in the factory of his job workers, it cannot be construed that power has been used in manufacture of footwear only because the raw materials bought and used by him had been manufactured with the aid of power. This case is squarely governed by Circular No. 4 87-C.E. dated 19-6-1987 F. No. 13/1/87-cx,l). In view of the above, footwear falling under Chapter heading 6401.19 will be entitled to exemption from duty under Notification No. 49/86-C.E., if they are made out of parts which have been manufactured with the aid of power. " 6.5 Though the above circular is with regard to use of power in manufacture of footwear, the Board has clarified that when parts of footwear were manufactured with the aid of power, such parts purchased by another manufacture....
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....1944, these activities amount to manufacture. The contentions put forward by the counsel stating that the activity does not amount to manufacture, therefore, does not find favour with us. 7. Following the decision in Omega Packing P. Ltd. (supra) as also appreciating the facts and the evidences presented by the case, we are of the view that the appellants are eligible for the benefit of notification. The demand confirmed disallowing the benefit of notification is therefore set aside. The impugned orders are set aside. The appeals are allowed with consequential relief, if any. (Order pronounced in the open court on________________) (SULEKHA BEEVYC. MEMBER (JUDICIAL) (P. VENKATA SUBBA RAO) MEMBER (TECHNICAL) Per P Venkata Subba Rao 1. The facts of the case and the arguments made on both sides have been detailed by Hon'ble Member (Judicial) and I find no reason to reiterate them. The question to be decided in this case is whether or not the appellants are entitled to the benefit of Notification No. 4/2006 -CE dated 1.3.2006 (S.No. 72) in respect of the matches manufactured and cleared by them during the period September 2010 to August 2011. This notif....
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....e that the benefit is available if the power is not used by the person claiming the benefit of the exemption notification or his job workers. Therefore, the place of use of power is irrelevant. The person who uses the power is also irrelevant. The only thing that is relevant is that the power should not have been used in any of the six processes mentioned therein. It does not matter if the power is used in any of the other processes in the manufacture of the matches, the benefit is still available as long as the power is not used .in the above six processes. If power is used in any of the above six processes, then the benefit of the exemption notification is not available regardless of who used the power in that process or on whose account. 2. The assessee could either undertake the entire manufacture themselves or outsource any of the processes to a job worker (who completes the process on account of the assessee) or they could purchase goods from a vendor (who completes the process on his own account and sells to the assessee) and then complete the remaining processes. It is immaterial as far as the notification is concerned which method is adopted. What is crucial is whether ....
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....and directs any changes which it feels is necessary. It is for this reason, the power of making legislation is delegated to the Government which is answerable to the Parliament and not to other arms of the State. 7. It is therefore, not open for the Tribunal to enlarger the scope of the notification by reading into it the additional words that do not exist. Even if it is viewed that the exemption notification can also be interpreted to mean that the power should not be used by the assessee or his job workers only, it cannot be denied that a plain reading of the exemption notification forbids the use of power in processes without reference to who undertakes the processes. 8. Over years, two different approaches were taken while interpreting the exemption notifications strict and liberal or purposive construction. Beneficial exemption notifications have, at times, been interpreted so as to serve the purpose of the exemption notification without being unduly restricted by the words of the notification, Both approaches to interpret the notifications were taken even by the Supreme Court and therefore the issue was referred to the five member Constitutional bench of the Hon f ble S....
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....iable. 10. It has also been argued on behalf of the appellants that with respect to an exemption notification no. 49/86-CE for footwear, CBEC issued circular no. 1/93-CX dated 2-12-1993 indicating that the particular exemption notification is available even in cases where the suppliers of the inputs used power. Therefore, the same logic should apply to them. T find that in the first place, CBEC's circular is binding on the department but not on the Tribunal. Secondly, the circular dealt with a different exemption notification and it cannot be treated as a binding ratio and extended to other exemption notifications. Thirdly, the circular was issued at a. time when the issue of' how to interpret an exemption notification was not settled by the Constitutional bench of the Supreme Court in the case of Dilip Kumar (supra). Lastly, any clarification by the Board in the form of a Circular cannot prevail over the ruling of the Hon'ble Apex Court that the exemption notifications must be interpreted strictly with benefit of any doubt going against the assessee and in favour of the Revenue. Thus, I find that the circular relied upon does not carry the case of the appellants any....
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.... it proper to place the above application before the regular Bench for any order on the application. 3.1 The facts have been meticulously reflected in the Interim. Order and therefore, the same are not repeated here. The only issue to be decided by me is whether the appellants are eligible for the benefit of exemption of Notification No. 04/2006-C.E. dated 01.03.2006. 3.2 The Member (Judicial) has held that the appellants are eligible for the benefit of the Notification (supra) and has set aside the demand whereas, the Member (Technical) has held that the benefit of the exemption Notification (supra) is not available to the assessees and has accordingly confirmed the demand. The only question formulated by the Members on the Difference of Opinion is "whether the appellants are eligible for the exemption Notification No. 04/2006-C.E, dated 01,03.2006 as held by Member (Judicial) or they are not eligible for the exemption as held by Member (Technical)." 4.1 During the hearing on 16.10.2019, Shri. S. Renganathan, Shri. K. Ramachandran and Shri. S. Venkatachalam, Ld. Advocates, appeared for the appellants and inter alia contended that in Chapter Note 3 of Chapter 36, there is ....
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....t qua manufacture and not even qua person since the very purpose of impugned Notification is to encourage manufacturing sector wherein power is not at all used. 8.1 I consider it expedient to first set out some principles of interpretation that will guide me in this exercise. In Union of India Vs. Elphinstone Spinning & Weaving Co. Ltd., reported in AIR 2001 SC 724, the Hon'ble Apex Court formulated what it termed the cardinal principle of construction in the following words: "...a statute is a command of the Legislature. The interpreter must, therefore, in interpreting and construing the statute, identify the intention of the Legislature; that in identifying the intention of the Legislature by the process of constructing, the Court will have to adopt both literal and purposive approaches. This would mean that the true or legal meaning of an enactment is derived by construing the meanings of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief of its remedy to which the enactment is directed. 8.2 In State of Uttar Pradesh Vs. Vijay Anand reported in AIR 63 SC 946, the Hon'ble Apex Court inter alia when the la....
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....ect to in the most complete manner. 9.3 Firstly, the notification reads as:" Matches, in or in relation to the manufacture of which It is important that it is either in the manufacture or in relation to manufacture of Matches with no caveat to either of the 9.4 Secondly, the use of the word "ordinarily" in Sl. No. 72 in the exemption notification no. 4/2006-CE is thus of particular significance and cannot be ignored, It has the effect of further widening the scope of the restrictions. The restriction that the processes must not be carried out with the aid of power applies not just to the specific goods under consideration but the same goods whenever manufactured- In other words, if the specified processes in relation to such goods are, in the ordinary course of commerce, carried out with the aid of power, the restrictions would apply and the exemption would not be available. This conclusion may be reached dehors the facts of the specific cases at hand. Thus, in order to succeed in its claim for exemption, the burden on the assessee is heavy - it must prove that the specified or listed processes are not ordinarily carried out with the aid of power and not merely that power was....
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....ar circumstances, in respect of particular areas or sectors, with particular intentions. I am of the view that we must be circumspect in determining their analogous applicability to other circumstances. One size. does not fit all. There can be no generality. 14. The notification under consideration refers to many activities i.e., processes, right from procurement of inputs/raw. materials, that culminate in or in relation to manufacture of Matches and hence, there is no scope to ignore/omit any. process/es to claim the benefit. As regards raw materials, I need not burden myself with that issue as the exemption notification doesn't lt whisper anything about it, since the same is qua processes and not even qua manufacture or the manufacturer. Moreover, it v is none of the processes that is ordinarily carried on with the aid of power AND NOT the manufacture per ser that is carried on with or without the aid of power. That is, the center of gravity is the 'processes' and not 'manufacture'. 15. In its judgment in the case of M/S. Standard fireworks (supra), Hon'ble Supreme court has inter alia held as under: The Notification purports to allow exemption from duty only wh....