1994 (9) TMI 361 - SC - Central Excise

Classification of Melamine Faced Particle Boards (MFPBs) under the relevant tariff item - manufacture of particle boards - whether MFPBs can be called unveneered particle boards within the meaning of Item-6 of the table appended to Notification No. 55 of 1979? - HELD THAT - We are of the opinion that on principle the decision of the Court in Mangalore Chemicals - 1991 (8) TMI 83 - SUPREME COURT and in Union of India v. Wood Papers 1990 (4) TMI 55 - SUPREME COURT referred to therein - represents the correct view of law. The principle that in case of ambiguity a taxing statute should be construed in favour of the assessee - assuming that the said principle is good and sound - does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals and other decisions viz. each such exception/exemption increases the tax burden on other members of the community correspondingly. Once of course the provision is found applicable to him full effect must be given to it. As observed by a Constitution Bench of this Court in Hansraj Gordhandas V.H.H Dave 1968 (9) TMI 112 - SUPREME COURT that such a Notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute there is no room for any intendment that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification i.e. by the plain terms of the exemption. Applying the above principles we must hold that the words un-veneered particle boards in Item-6 of the table appended to the Exemption Notification cannot and do not take in melamine faced particle boards. Indeed the learned counsel for the Revenue contends and is our opinion rightly that the said entry does not admit of any doubt that it is dear and specific and that it covers only unveneered particle boards and nothing else. For the above reasons the appeal fails and is dismissed with costs.

Summary

Issues Involved:
1. Classification of Melamine Faced Particle Boards (MFPBs) under the relevant tariff item.
2. Eligibility of MFPBs for exemption u/r 8(1) of the Central Excise Rules, 1944, as per Exemption Notification No. 55 of 1979.
3. Interpretation of exemption provisions in case of ambiguity.

Summary:

1. Classification of Melamine Faced Particle Boards (MFPBs):
The appellant, engaged in the manufacture of particle boards, claimed that MFPBs should be classified as 'unveneered particle boards' under Item No. 6 of the table appended to Exemption Notification No. 55 of 1979, thereby qualifying for total exemption from duty. The Tribunal, however, classified MFPBs under Tariff Item-68, making them dutiable. The Supreme Court upheld the Tribunal's decision, stating that MFPBs cannot be considered 'unveneered particle boards' as they undergo a different manufacturing process and are commercially distinct products.

2. Eligibility for Exemption:
The appellant argued that MFPBs should benefit from the exemption provided by Notification No. 55 of 1979. The Tribunal rejected this claim, and the Supreme Court agreed, noting that the melamine facing process results in a product that is not 'unveneered particle boards'. The Court emphasized that in commercial parlance, MFPBs and unveneered particle boards are not considered the same, and thus, MFPBs do not qualify for the exemption.

3. Interpretation of Exemption Provisions:
The appellant contended that any ambiguity in the exemption notification should be resolved in favor of the assessee. The Supreme Court disagreed, citing precedents that exemptions from taxation should be construed strictly. The Court stated that a person claiming an exemption must clearly establish their eligibility. In this case, the term 'unveneered particle boards' did not encompass MFPBs, and thus, the appellant could not benefit from the exemption.

Conclusion:
The Supreme Court dismissed the appeal, affirming the Tribunal's classification of MFPBs under Tariff Item-68 and denying the exemption under Notification No. 55 of 1979. The Court also ordered the appellant to pay the arrears of duty and allowed the respondents to encash the bank guarantees provided by the appellant.