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TMI Blog2012 (12) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise Rules, 2002 made vide Notification 24/2003-C.E. (N.T.), dated 25-3-2003, there is no provision in rules to consider goods used in the same factory for further manufacture to be removed from the factory. Since according to the appellants excise duty is payable on removal of goods from a factory the demands are not maintainable. Since this issue was never raised before the lower authorities, the Supreme Court vide its order dated 19-1-2011 in Civil Appeal Nos. 2973/2006 and 2912/2006 directed that the matter should be argued before the Tribunal and the decision of the Tribunal should be placed before the Apex Court for disposal of the appeals pending before the Apex Court. The present proceeding is for deciding this new legal issue raised. 2. We have heard both sides extensively on 14-2-2012. The Revenue wanted to submit a written submission after consulting the Ministry of Finance about the position in law. Such written submissions were filed on 9-4-2012 and a copy of the affidavit was given to the Counsel of the appellants. Thereafter the Counsel for the appellants filed a re-joinder on the written submissions on 20-4-2012. Now the matter is being examined f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cesses from the basic raw material as also factories which do some intermediate process only or just a process before the despatch of products suitable for consumption by ultimate consumers (i.e. other than industrial consumers). Let us illustrate this statement by taking the example of a cotton fabric to be sold to individual consumers for their use. There are factories which start from cotton fibre do processes for making yarn, weaving the yarn to make fabric, processes like printing, dyeing etc. to make the fabric marketable to the individuals. Factories having facility to do such processes at more than one stage may be called composite mills. There are also factories which only make yarn, factories which get yarn and weave it to make fabric out of it and factories which do processing like dyeing, printing etc. The taxation system tries to achieve uniform tax incidence on the final product irrespective of whether the goods are processed in a composite factory or in disintegrated factories. If at all there is a policy bias it is for encouraging disintegration of manufacturing activities, as may be seen from exemptions provided for small sale units, and not towards encouraging ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mal course, not only will exemption be provided for engines manufactured and used in the same factory but exemption will be provided also for engine manufactured in another factory for use in such tractors subject to verification of end use to achieve parity between the two situations. But of course the demand for exemption may not stop at the stage of engines, but exemption may be asked for material and parts to be used in engines. In such situations Government decides the stage backwards up to which exemptions have to be given and issues notification according to policy decision taken in the matter. 10. Let us take one more example which is imaginary. Bicycles are exempted from excise duty. But government has not extended this exemption so that the basic raw material namely steel used in manufacture of bicycles also is exempt. So a manufacturer of cycles who gets steel required from a manufacturer of steel has to pay excise duty on such steel. He cannot get Cenvat credit for such duty paid because his final product is exempted from duty. Now let us imagine a situation where SAIL starts manufacturing cycles in the factory in which they produce steel. Then if no duty is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standard defence for such situations does not come to the rescue of the appellants. 12. Now it is proper to record the legal submissions of both sides and decide on the matter in dispute. 13. The crux of the argument of the appellants is that prior to 20-2-1982, Rules 9 and 49 of Central Excise Rules, 1944 dealt with the issue as to when excise duty was payable. Then it was argued by a few that the Rules did not provide that duty was payable when any excisable goods were used in the factory of manufacture for further manufacture. The Delhi High Court held in Modi Carpets Limited and Another v. U.O.I. - 1980 (6) E.L.T. 320 (Del.) that there was no provision for demanding duty so long as the goods are not removed outside the factory, though there were many decisions to the contrary as in the following cases : (i) Oudh Sugar Mills Ltd. v. U.O.I. - 1982 (10) E.L.T. 937 (All); (ii) Maneklal Spinning and Manufacturing Co. Ltd. v. U.O.I. - 1978 (2) E.L.T. (J 618) (Guj.). 14. After the decision of Delhi High Court there were a plethora of Writ Petitions filed in various High Courts by composite textile mills praying for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose are omitted.] 19. By the said Notification, Rule 49 was amended by the addition of an Explanation thereto as follows :- "Explanation. - For the purposes of this rule, excisable goods made in a factory and consumed or utilised - (i) as such or after subjection to any process or processes; or (ii) for the manufacture of any other commodity, whether in a continuous process or otherwise, in such factory or place or premises specified under Rule 9 or store-room or other place of storage approved by the Collector under Rule 47, shall be deemed to have been issued out of, or removed from such factory, place, premises, store-room or other place of storage, as the case may be, immediately before such consumption or utilisation." 20. The provisions inserted by Notification No. 20/82-C.E., dated 20-2-1982 were retained in Rules 4 and 5 of the Central Excise Rules 2002 which are reproduced below : "4. Duty payable on removal. - (1) Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in Rule 8 or und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... processing required for the manufacture of the said goods done by another person but should bring back the same for the completion of the manufacturing process in his factory. Explanation II. - For the purposes of this rule, excisable goods manufactured in a factory and utilised, as such or after subjecting to any process, for the manufacture of any other commodity, in such factory shall be deemed to have been removed from such factory immediately before such utilisation. (4) Notwithstanding anything contained in sub-rule (1), Commissioner may, in exceptional circumstances having regard to the nature of the goods and shortage of storage space at the premises of the manufacturer where the goods are made, permit a manufacturer to store his goods in any other place outside such premises, without payment of duty subject to such conditions as he may specify. 5. Date for determination of duty and tariff valuation. - (1) The rate of duty or tariff value applicable to any excisable goods, other than khandsari molasses, shall be the rate or value in force on the date when such goods are removed from a factory or a warehouse, as the case may be. (2) The rate of duty in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether the said amendment has the effect of dropping Explanation-II printed under sub-rule (3) of Rule 4 re-produced in para 20 above. According to Revenue the Explanation-II has not been omitted. According to appellants Explanation-II has been omitted. If this issue is decided in favour of Revenue the entire basis of the argument of the appellants is wiped out. 24. Now we examine the arguments on either side on this crucial issue. 25. According to Revenue the Explanation-II in sub-rule (3) starts with the words "For the purpose of this Rule" and not with the words "For the purpose of this sub-rule". That being the case dropping of sub-rule (3) cannot result in dropping of an explanation placed below sub-rule but was applicable for the entire Rule 4. Revenue also points out that where an explanation was to be omitted, the amending notification specifically stated so. Amendment made to sub-rule (1) by the same Notification No. 24/03-C.E. (N.T.) can be seen in this regard. 25.1 According to the appellants "the onus is on the Department to prove and to irrefutably show despite the authoritative publication, Explanation-II after Rule 4(3) was not deleted. The onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decide whether the explanation has gone or not. 27. A position of law is not something to be proved by evidence. As per Section 57 of the Evidence Act, 1872, it is something to be judicially noticed based on gazette publications. So evidence in the form of publication of the amended Rules by any private publisher or the amended text placed on the web site of C.B.E. & C. are not relevant. The argument that the amended version as placed on the web site of C.B.E. & C. is an authoritative publication is not acceptable because such work is carried out by agency to which the maintenance of web site is outsourced with the help of low level employees of the Government. 28. The position is to be decided by taking into account the original notification published in gazette and the amending notification published in the gazette. There is no dispute about these. The dispute is how the amendment should be incorporated in the original notification. This is not a matter to be decided on the basis of evidence to be produced either by Revenue or by the appellants. No gazette notification showing the amended version has been produced before the Tribunal. So what is to be seen is that how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Explanations to Rules 9 and 49, although the goods which are produced or manufactured at an intermediate stage and, thereafter, consumed or utilised in the integrated process for the manufacture of another commodity is not actually removed, shall be construed and regarded as removed. The Legislature is quite competent to enact a deeming provision for the purpose of assuming the existence of a fact which does not really exist. It has been already noticed that the taxing event under Section 3 of the Act is the production or manufacture of goods and not removal. The Explanations to Rules 9 and 49 contemplate the collection of duty levied on the production of a commodity at an intermediate stage of an integrated process of manufacture of another commodity by deeming such production or manufacture of the commodity at an intermediate stage to be removal from such place or premises of manufacture. The deeming provisions are quite consistent with Section 3 of the Act. As observed by the Federal Court in Megh Raj's case (supra) there is in theory nothing to prevent the central legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out Rule 21 of Central Excise Rules providing for remission of duty lost or destroyed due to natural causes or unavoidable accident. If the interpretation canvassed by appellants is upheld Rule 21 becomes redundant. 34.2 They argue that Rule 4 does not talk about clearance from a factory but prescribes that "no excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided". They argue that as far as Cement clinker and Cement are produced in different places in the factory and removal from one to another can be done only after payment of duty since there is no other exemption. 34.3 They rely on Explanation under Rule 5 reading as under : Explanation. - If any excisable goods are used within the factory, 'the date of removal of such goods' shall mean the date on which the goods are issued for such use. 34.4 It is argued that this explanation which is still existing in all printed versions of the amended rules clearly shows that goods used in the same factory for further manufacture is treated as removed. 34.5 They rely on the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is manifestly dear from Rule 9 that it contemplates not only removal from the place where the excisable goods are produced, cured or manufactured or any premises appurtenant thereto, but also removal within such place or premises for captive consumption or 'home consumption', as it is called. Thus if a commodity which is manufactured in such place or premises and is used for the manufacture of another commodity, then it will be a case of removal for the purpose of payment of Excise duty. This, view which we take clearly follows from the expression "whether for consumption, export or manufacture of any other commodity in or outside such place". Thus consumption of excisable goods may be within such place or outside such place. The decisions which have taken the view that if a commodity manufactured within the factory in one plant is transferred to another plant for the purpose of production of another commodity will be removal for the purpose of payment of Excise duty are, in our opinion, correct It is not easily understandable why the definition of expression 'factory' under Section 2(e) of the Act has been taken resort to in some of the decisions for the purpose of interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s process or not), for manufacture of any commodity." 36. In view of the analysis of the Apex Court there was liability on goods captively consumed even without the explanations added. Apex Court wondered why the dispute arose in 1982. So the Tribunal should not be a forum to re-start such a dispute in the context of Notification No. 24/03-C.E. (N.T.) especially when we do not find any reason to do so. 37. The Hon'ble Apex Court had some doubt about duty liability in the case of goods transferred from one plant to another in an integrated process in the absence of the explanation. We are of the view that the process of manufacture of clinker and cement is not an integrated process for the purpose of duty liability because clinker is manufactured in batch process and cement is manufactured out of such clinker using separate machinery after transporting it from one place to another within the factory. The observation of the Hon'ble Rajasthan High Court was in a different context of Modvat credit for duty paid on explosives used in mines by a manufacturer of cement. In that context the rule required that the input on which Cenvat credit could be taken should have been used ..... X X X X Extracts X X X X X X X X Extracts X X X X
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