1975 (8) TMI 45 - SC - Central Excise

If 99 per cent of duty-paid crude were used for manufacture of sheets etc. should the final product be exigible to tax at Rs. 500/- per MT? Held that - By simple arithmetic worked out by the Collector of Central Excise and forwarded to the Central Government (Annexure E) the balance of stock of finished goods manufactured out of duty-paid slabs as on April 25 1960 was 93.5099 MT. This quantity was actually cleared on payment of duty at the rate of Rs. 500/- per MT. But having been made out of duty-paid slabs the exemption notification applied and only Rs. 200/- per MT was payable. Thus the excess collected i.e. Rs. 300/- per MT was refundable. This is no surviving dispute on this matter.

Summary

Issues Involved:
1. Construction of the notification issued by the Government of India dated April 20, 1960, under Rule 8(1) of the Central Excise Rules, 1944.
2. Entitlement of the appellant to a refund of over-levied excise duty.
3. Interpretation of the exemption notification and its application to the appellant's case.
4. The fairness and reasonableness of the tax administration's actions.

Issue-wise Detailed Analysis:

1. Construction of the Notification:
The appeal's fate hinged on interpreting a notification issued by the Government of India on April 20, 1960, under Rule 8(1) of the Central Excise Rules, 1944. This notification provided a qualified exemption to certain types of aluminium manufactures regarding excise duty. The appellant challenged the correctness of the view that led to the dismissal of its revision petition.

2. Entitlement to Refund of Over-levied Excise Duty:
The appellant sought a refund of over-levied excise duty, claiming that the composite manufacturing process involved intermediate products like ingots, slabs, billets, etc., which were subjected to excise duty before being used to manufacture finished products like plates, sheets, circles, etc. The appellant argued that the duty should be reduced proportionately for the finished products since the intermediate products had already been taxed.

3. Interpretation of the Exemption Notification:
The exemption notification dated April 20, 1960, aimed to simplify the excise duty system by switching to a single-point levy at the ultimate stage of manufacture. The notification stated that aluminium manufactures, such as plates, sheets, circles, strips, and foils, made from duty-paid aluminium in any crude form, were exempt from duty in excess of Rs. 200 per metric tonne. The Court interpreted this to mean that if intermediate products like ingots, slabs, billets, etc., had already paid the duty, the final products made from these should only be charged Rs. 200 per metric tonne.

4. Fairness and Reasonableness of Tax Administration:
The Court emphasized that good governance involves not only diligent tax collection but also ready refunds of excess levies. It criticized the complexity and lack of clarity in drafting legislation and notifications, which often led to unfair interpretations adverse to the assessee. The Court highlighted that a fair construction of fiscal legislation should be permissible and proper on the part of the government and taxing officers.

Conclusion:
The Court concluded that the appeal deserved to be allowed as a matter of law. The appellant was entitled to a refund of the excess duty collected, as the finished products were made from duty-paid intermediate products. The Court criticized the tax administration for its reluctance to grant refunds and the complexity of the notification's language, which led to prolonged litigation. The appeal was allowed with costs, emphasizing the need for simplicity and clarity in legislative language to ensure quick justice and less sterile litigation.