TMI Blog1993 (12) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... not eligible for any exemption as the final products viz. electric toasters and room heaters were wholly exempt from duty. The sale invoices for the period 1986-87 and 1989-90 were resumed for examination and it was revealed that the appellants had manufactured and cleared some parts of electric toasters and room heaters viz. elements, handle, unit set knobs, feet rubber gromohet, etc. Similarly some parts of room heaters viz. rods, elements and C.R.C. sheet parts were manufactured and captively consumed by them in the manufacture of room heaters. During the period 1986-87 the appellants cleared toasters and various parts of toasters and heaters and parts of heaters on payment of appropriate duty after availing exemption of Rs. 15 lakhs under Notification 175/86 dated 1-3-1986. Since the notification provided exemption upto a limit of Rs. 15 lakhs no duty was paid on toasters and room heaters during the period 1986-87 and 1987-88. With effect from 1-3-1988 room heaters and electric toasters were wholly exempt from duty under Notification 124/88 dated 1-3-1988. A show cause notice was issued to the appellants on 16-8-1990 on the basis that parts of electric toasters and room heater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty under Notification 155/86. The appellants also availed of small scale exemption vide Notification 175/86. The notification inter alia refers to aggregate value of clearances upto which exemption under the notification is available. Para 3 provides a ceiling limit on the aggregate value of clearances of all excisable goods in the preceding financial year. The appellants did not include the value of clearances of rotors and stators captively consumed within the factory of production in the manufacture of centrifugal P.D. pumps falling under Heading 84.13 which are exempt under Notification 155/86 for the period 1986 to 1989-90. A show cause notice was issued on 28-2-1991 proposing recovery of differential duty of Rs. 23,25,333 allegedly short paid by reason of non-inclusion of clearance value of rotors and stators in the aggregate value of clearances of Rs. 75 lakhs during 1986-87 and on the ground that the ceiling limits of Rs. 15 lakhs prescribed in Notification 175/86 had been exceeded during 1986-87, 1987-88 and 1989-90 on inclusion of their value. In reply to the notice, the appellants relied upon Explanation III to Notification 175/86 to support their stand that the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ketability of the parts is concerned, there are sale invoices of the party on record which clearly establish that the parts in question were marketable and were actually marketed. The said parts are, therefore, exdsable and attract duty @ 20% ad valorem under Notification No. 160/86 dated 1-3-1986. So far as Explanation III under Notification 175/86 is concerned, it clarifies as to how the aggregate value of clearances is to be computed. The Explanation would be relevant if both the intermediate and final products are cleared under one and same Notification 175/86. The decision of the Hon ble CEGAT cited by the party is relevant only in a situation where the parts and final products are cleared under same notification. In the instant case, room heaters were exempt under Notification 160/86 dated 1-3-1986 and toasters were exempt under Notification 124/88 dated 1-3-1988. But the parts of electric toasters and room heaters attracted @ 20% ad valorem under Notification No. 160/86 dated 1-3-1986 as amended. Since the party captively consumed certain parts manufactured by them in the manufacture of electric toasters and room heaters the provisions of Notification 217/86 dated 2-4-1986 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase where a manufacturer avails of the credit of duty paid on inputs used in the manufacture of the specified goods under rule 57A of the said rules, from so much of the duty of excise leviable thereon which is specified in the said Schedule (read with any relevant notification issued under sub-rule (1) of rule 8 of the said Rules and in force for the time being) as is equivalent to an amount calculated at the rate of 75% of such duty or an amount calculated at the rate of 10% ad valorem, whichever is higher; (ii) in any other case from the whole of the duty of excise leviable thereon; Therefore, by virtue of this clause, the value of parts of toasters and room heaters would be exempt. However, clearances of these parts for captive consumption would not be reckoned for computing the value of clearances in terms of Explanation III. The effect of Explanation III would be that though the appellants had cleared parts valued at Rs. 25,65,907.22 for captive consumption, its aggregate value of clearances would continue to be nil in view of Explanation III, since the value of these parts so computed and captively consumed is not includible in the value of clearances. Therefore, even f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue to be exempt as the appellants would not cross the ceiling limit of Rs. 15 lakhs specified under Notification 175/86. The duty demand and penalty are therefore, not sustainable. 7. E/3349/91-B - In this case there is no dispute that all the items manufactured by the appellants including power driven pumps and rotors and stators are duly covered by the annexure to the notification. The case of the Department is that specified goods are those which are exempted under Notification 175/86 as amended whereas in the instant case the centrifugal P.D. pumps are exempt from the whole of duty leviable thereon under Notification 155/86 and therefore, though clearances of centrifugal P.D. pumps themselves are not to be included for the purpose of computing the aggregate value of clearances, the clearances of rotors and stators have to be included. 8. Explanation HI to Notification 175/86 clearly stipulates that where any specified goods inputs are used for further manufacture of specified goods within the factory of production, the clearance of such inputs for such use shall not be taken into account for the purposes of calculating the aggregate value of clearances under this n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not includible in the aggregate value of clearances in terms of Explanation III to the notification. The impugned orders are set aside and the appeals allowed with consequential relief if any due to the appellants. 10. [Contra per: P.C. Jain, Member (T)]. - I have carefully gone through the order proposed by my learned Sister, Ms. Jyoti Balasundaram. But I regret, with due respect, my inability to persuade myself to agree with the discussions and conclusions reached by her. 11. I am inclined to agree with the findings of the lower authorities that Explanation in to the Notification 175/86 would be applicable only where the final specified goods (in which specified goods used as inputs) are being cleared under the Notification 175/86; Explanation III would not be applicable where the final specified goods - room heaters and toasters in one matter and power driven pumps (p.d. pumps) in another matter - are being cleared as exempted under notifications other than 175/86. 12. Learned Sister in her order has set out only the main portion of the Notification 175/86 and Explanation III. For the sake of clarity and proper appreciation, I reproduce the relevant extracts, includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified goods under sub-clause (1) of clause (a) or as the case may be, under this clause, shall not be less than an amount calculated at the rate of 5 per cent ad valorem: Provided further that the aggregate value of clearances of the specified goods in terms of clause (a) and clause (b) of this paragraph taken together, shall not exceed rupees seventy five lakhs. 2. The aggregate value of clearances of the specified goods from any factory by one or more manufacturers in any financial year under clauses (a) and (b) of paragraph 1, shall not exceed rupees thirty lakhs and sixty lakhs respectively: Provided that the aggregate value of clearances of the specified goods from any factory by one or more manufacturers in any financial year in terms of clause (a) and clause (b) of paragraph 1 taken together, shall not exceed rupees seventy five lakhs. Explanation III: Where any specified goods (hereinafter referred to as inputs) are used for further manufacture of specified goods within the factory of production of inputs, the clearances of such inputs for such use shall not be taken into accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not to count the clearances of inputs - specified goods namely rotors and stators - for arriving at the aggregate value of clearances of specified goods. There is no further effect of this Explanation. But we have definitely to take into account the aggregate clearance of p.d. pumps in terms of Notification 175/86. 13.3 Similar is the position in respect of the other goods regarding room heaters, toasters and their parts. In other words, both specified goods utilised as inputs and final specified goods are cleared under Notification 175/86. If the final specified goods are not cleared under Notification 175/86, as in the instant matters. Explanation III to the said notification cannot be made use of by the appellants. 13.4 Reliance on Dukart [1987 (29) E.L.T. 446] is misplaced. In that case final specified goods were cleared under Notification 80/80 and therefore benefit of Explanation VI to that Notification 80/80 (in similar terms as Explanation in to Notification 175/86) was extended by not counting the clearances of specified goods inputs utilised in the manufacture of final specified goods). 14. If the interpretation placed by the learned advocate is accepted, full ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lower authorities have denied the benefit of Notification 175/86-C.E., dated 1-3-1986 to the appellants involved in these two appeals by reading a condition in Explanation-III that only the value of the specified goods exempted under Notification 175/86-C.E., dated 1-3-1986 can be excluded from the purview of the said notification. 20. As rightly held by the learned Sister Hon ble Member (J) there is no warrant for imposing any such condition which is not specifically provided for in the notification. 21. It is well settled that a notification has to be interpreted strictly and that there is no scope for intendment. 22. Further, the interpretation adopted by the learned Member (T) and by the lower authorities will militate against the specific provisions of Explanation u to the said notification which is reproduced below : Explanation II - For the purposes of computing the aggregate value of clearances under this notification, the clearances of any excisable goods, which are chargeable to nil rate of duty or, which are exempted from the whole of duty of exise leviable thereon by any other notification (not being a notification where exemption from the whole of the duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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