TMI Blog2017 (4) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... m para 7 of the said judgment that, actually, the order of the Tribunal was that the product in question was not marketable and it is not exigible; but the assessee questioned the maintainability of the appeal also on the ground that, even if the goods were exigible, the further question would arise as to whether the duty payable was completely exempted by way of a notification. By virtue of sub-section (2) to Section 35L, the courts are obliged to proceed on the basis that a decision relating to “taxability” or “excisability” is to be treated as a question which has a relation with the rate of duty. This is virtually a deeming provision and, therefore, we need not actually explore the question even as to whether it really has a relation with the rate of duty. The appeals are not maintainable for the reason that the appeals are maintainable only before the Supreme Court under Section 35L of the Excise Act in the context of the interpretation we have placed on the words “taxability” and “excisability”. We need not, therefore, further explore the question whether de hors sub-section (2), the case would fall under sub-section (1) of Section 35G or Section 35L, as the case may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehradun. The Company addressed letter dated 30.11.2002 indicating that it wished to start manufacturing of ACSR Conductor and Steel Tubular Poles. A request was made that these products be endorsed in the existing central excise registration certificate. The Company addressed letter dated 11.07.2003. Therein, they indicated that they have started manufacturing of ACSR Conductors w.e.f. 01.04.2003. It was pointed out that they would be availing excise exemption benefits under Notification No. 50/2003-CE dated 10.06.2003 as a new industrial unit. The SSI Registration showing the product ACSR Conductor being endorsed w.e.f. 01.04.2003 was made available (photocopy). The Company addressed another letter dated 27.11.2003 giving description of the goods and giving the date on which the option under Notification No. 76/2003 dated 05.11.2003 was exercised, which was 20.07.2003. It was stated that the unit was a new one. A clarification was sought by the Superintendent of Central Excise vide letter dated 06.08.2004 in regard to the discrepancy noted in letters dated 11.07.2003 and 27.11.2003, as, while on the one hand, in letter dated 11.07.2003, 01.04.2003 was intimated as the date of prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Company had not correctly availed exemption in the clearances of the excisable goods. It is, inter alia, found with reference to the CBEC s Excise Manual of Supplementary Instructions that, in respect of provisions for registration under Rule 9 of the Central Excise Rules, 2002, separate registration is required in respect of separate premises, only except in cases where two or more premises are actually part of the same factory (where process are interlinked) but are segregated by a public road, canal, railway line, etc. It was found that, if the intention of the Company was to create a new unit in separate premises, they would have applied for separate registration. It was found that there was no new unit. In the balance-sheet for the years 2002-2003 and 2003- 2004, both the units were shown simultaneously, wherein, apart from mentioning their depreciation on investment, they are shown together. The balance-sheet is referred to in order to find that they do not show separate units, but a common balance-sheet. It is, further, found that the Conductor unit is not separate from the Cylinder unit in legal terms. The following finding may be seen: 22.3 The noticee in hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area, as the case may be, specified in Annexure-II appended hereto, from the whole of the duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the said Acts. Provided that the exemption contained in this notification shall apply subject to the following conditions, namely:- (i) The manufacturer who intends to avail of the exemption under this notification shall exercise his option in writing before effecting the first clearance and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year; (ii) The manufacturer shall, while exercising the option under condition (i), inform in writing to the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, with a copy to the Superintendent of Central Excise giving the following particulars, namely:- (a) name and address of the manufacturer; (b) location / locations of factory / factories; (c) description of inputs used in ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n areas mentioned in Annexure-II, but which have undertaken substantial expansion by way of increase in installed capacity by not less than twenty-five per cent, on or after the 7th day of January, 2003, but have commenced commercial production from such expanded capacity, not later than the 31st day of March, 2007. 8. Likewise, by the same amendment, in Annexure-II under the sub-heading district Dehradun , as against Serial No. 11 in Column 3, it was substituted as follows: in column (3), for the existing entry, the entry Village Selakui, Central Hope Town and Camp Road 9. Lastly, by Notification issued in the year 2006, the words not later than the 31st day of March, 2007 , occurring in both clauses (a) (b) of paragraph 2, stand substituted by the words not later than the 31st day of March, 2010 . 10. It is on the said basis that the duty was found to be recoverable along with interest and imposition of penalty on the Company including upon the Directors. This led to appeals being filed before the Tribunal. The Tribunal, by its order, has allowed the appeals. The following is the finding recorded by the Tribunal: 7.1 We do not agree with the contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turing unit is located in the Industrial area/ estate mentioned in Annexure II and III and the khasra no. of the plot of land on which the unit is located is mentioned against that Industrial area. Just because the village in which the Industrial area falls was wrongly mentioned and the village name is corrected by amending notification, it does not mean that before the amendment, the unit was not located in the notified Industrial area and was not eligible for exemption. 11. In regard to the question relating to the conductor unit being eligible for exemption, the Tribunal held that the conductor unit was set up during October, 2002 to December, 2002 period. It is, further, held that there is no dispute that, during this period, a total of 3000 meters had been manufactured and only 300 meters were cleared on payment of duty. The production increased during January, 2003 to March, 2003 to 46137 meters. During April, 2003 to June, 2003, the production increased to 442100 meters. Adverting to the word new , it was held as follows: 8.3 The word new , as per Chambers 21sth Century Dictionary means recently made, brought, built, ---- ,etc. recently discovered, never havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and if the desired quality, the necessary adjustments are made. The running of a plant during its commissioning is only a trial run meant to make the necessary adjustments in the machinery and calibrate them to optimise their productivity. Commercial Production starts only when the commissioning i.e. trial run is complete. Though during trial run, there may be some production and the manufacturer may have sold the same, the plant cannot be said to have commenced commercial production during that phase. The plant can be treated as having commenced commercial production only after completion of trial run i.e. commissioning. 12. It was found that production during the period prior to April, 2003 was only trial production. Merit was found in the contention of the Company that commercial production started in April, 2003 and, therefore, it became eligible for exemption from July, 2003 when the necessary declaration was filed. Thereafter, the Tribunal proceeded to deal with the cylinder unit and found merit in the contention that capacity expansion need not be achieved in each section or part of the factory. A factory manufacturing more commodities in different sections has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question: Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. (5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which - (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1). (7) When an appeal has been filed before the High Court, it shall be heard by a bench of not less than two Judges of the High Court, and shall be decided in accordance with the opinion of such Judges or of the majority, if any, of such Judges. (8) Where there is no such majority, the Judges shall state the point of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in 2015 (315) ELT 561 (All.); and Commissioner of Central Excise, Panchkula vs. Special Machine, reported in 2009 (242) ELT 330 (P H). The argument is that the question decided by the Tribunal in this case is directly related to the rate of duty. A question having a relation with rate of duty is the exclusive preserve of the Apex Court on a conjoint reading of Sections 35G and 35L. If an exemption is available, the rate of duty will become zero or nil when there is a complete exemption. If there is only a partial exemption, the rate of duty will be reduced from the normal rate in accord with the terms of the exemption notification. When the Tribunal decides that the goods are exempted under the notification, it would have a direct impact on the rate of duty. Therefore, the appeal would lie before the Apex Court. 19. The decision of the Apex Court in Navin Chemical s case (supra) has been the starting point of a line of decisions, which have dealt with the meaning of the words any question having a relation with rate of duty . The matter arose under the Customs Act, wherein the words determination of any question having a relation to the rate of duty for the purpose of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of any goods or valuation of any goods for the purposes of assessment of duty includes the determination of a question.- (a) relating to the rate of duty for the time being in force, whether under the Customs Tariff Act, 1975 (51 of 1975), or under any other Central Act providing for the levy and collection of any duty of customs, in relation to any goods on or after the 28th day of February, 1986; or (b) relating to the value of goods for the purposes of assessment of any duty in cases where the assessment is made on or after the 28th day of February, 1986; or (c) whether any goods fall under a particular heading or sub-heading of the First Schedule or the Second Schedule to the Customs Tariff Act, 1975 (51 of 1975), or that any goods are or not covered by a particular notification or order issued by the Central Government granting total or partial exemption from duty; or (d) whether the value of any goods for the purposes of assessment of duty shall be enhanced or reduced by the addition or reduction of the amounts in respect of such matters as are specifically provided in this Act. 21. Thereafter, the court held as follows: 11. It will be seen t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .09.2010, a Bench of the Karnataka High Court in CCE, Mangalore vs. Mangalore Refineries Petrochemicals Ltd., reported in 2011 (270) ELT 49 (Kar.), took the view that an order of the appellate Tribunal deciding the issue whether the goods are entitled to exemption relates to the rate of duty and the appeal before the High Court was not maintainable. We may, incidentally, notice from para 7 of the said judgment that, actually, the order of the Tribunal was that the product in question was not marketable and it is not exigible; but the assessee questioned the maintainability of the appeal also on the ground that, even if the goods were exigible, the further question would arise as to whether the duty payable was completely exempted by way of a notification. The learned Judges proceeded to deal with, inter alia, the meaning of the words rate of duty and noted, to begin with, the explanation to Section 35E, which was identical to explanation added under the Customs Act, which was considered in Navin Chemical s case (supra). The learned Judges also referred to a judgment of the Apex Court in paragraph 27, which reads as follows: 27. The Supreme Court had an occasion to consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment . It is a valuation of every man s estate or setting down how every one shall pay, or be charge with, to any tax. By the use of the expression rate a relation between the taxable income and the tax charge is intended, but the relation need not be of the nature of proportion of fraction. The Explanation to sub-section (5) of Section 35E of the Central Excise Act, the expression includes the determination of a question relating to the rate of duty, to the value of goods for the purposes of assessment; to the classification of goods under the Tariff and whether or not they are covered by an exemption notification; and whether the value of goods for the purposes of assessment should be enhanced or reduced having regard to certain matters that the said Act provides for. Questions relating to the rate of duty an to the value of goods for purposes of assessment are questions that squarely fall within the meaning of the said expression. A dispute as to the classification of goods and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment. Whether the value of goods fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts the interest of the manufacturers who are parties thereto, but also to the manufacturers of those products throughout the country. In a country governed by Parliamentary legislation because of the territorial bifurcation in forming states and because of the divergent opinion which is possible, the excise duty payable would vary from place to place. In order to, bring uniformity in the levy of excise duty throughout the country and consequently to see that the country s finance is not affected, the Parliament has vested the jurisdiction to decide the disputes with the Apex Court. Therefore, we see a duty policy underlining this bifurcation of the jurisdiction between the Apex Court and the High Courts. All other matters other than what is set out above, which relates to the individual manufacturers and all disputes based on assessment orders which have attained finality, such as the benefits to which they are entitled to, refunds, duty drawbacks, rebates, etc., which relate to a particular manufacturer falls within the jurisdiction of the High Courts. 25. The said reasoning has been followed by the Allahabad High Court in Commissioner of Customs and Central Excise vs. Eco P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question directly involved in this dispute relates directly and proximately to the rate of duty of excise for the purposes of assessment. In other words, the issue raised in these petitions directly relates to dispute whether or not they are covered by the exemption notification, which can conveniently be gone into in an appeal filed under Section 35Lof the Act. 27. When this matter was being heard, this Court pointed out to the learned counsel for the respondents that the sheet anchor of all these authorities would appear to be the explanation to sub-section (5) of Section 129D of the Customs Act and the explanation to Section 35E of the Central Excise Act, which was inserted by the amendment in the year 1988. But Section 35E has undergone drastic changes. The Court pointed out to the learned counsel that sub-section (5) of Section 35E has been repealed by Act 25 of 2004 and the omission became effective w.e.f. 21.12.2004. Section 35E, itself, has undergone other changes with which we are not concerned. It was brought to the notice of the learned counsel for the respondents that Section 35L, itself, has undergone another amendment, which was inserted by Act 25 of 2014, with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Courts, have purported to follow the decision in Navin Chemical s case (supra), despite the following: (i) The explanation, though inserted in Section 35E, was never brought into force. (ii) The explanation, itself, stands obliterated by the amendment carried out as early as in December, 2004. (iii) The foundation for the judgments provided by the statutory provision stood removed. Apparently, this aspect was not brought to the notice of the courts. 30. On being confronted with this situation and also the insertion of sub-section (2) in Section 35L, the following arguments were addressed before us: Learned counsel would submit that even without the aid of the explanation, when the Tribunal decides that a person is not entitled to or is entitled to the benefit of an exemption notification, a decision is necessarily rendered, which has a relation with the rate of duty. He reminds the Court that, what the statute requires to oust the jurisdiction of the High Court, is a decision not on the rate of duty, but a decision which has a relation with the rate of duty, no doubt, arising out of assessment proceedings. He would submit that the said test would be satisfied in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench referred to Navin Chemical s case (supra) and Union of India vs. Auto Ignition Ltd., 2002 (142) ELT 292 (Bom.), which we have already referred to, and proceeded to hold as follows: 10. The question involved in the case on hand is whether the Unit has satisfied the locational eligibility, which in our view has no relation with the rate of duty or value of goods for the purposes of assessment. That being the factual and legal position, we hold that the appeal filed by the Union of India is maintainable in this Court under section 35G of the Act. 34. In regard to the state of case-law relating to Section 35L after insertion of sub-section (2) by the Finance Act 2 of 2014, learned counsel relied on the judgment of the Delhi High Court in Commissioner of Central Excise, Delhi-II vs. Pawan Kumar Bansal, reported in 2015 (315) ELT 529. There, the question of law was as to whether the activity involved amounted to manufacture under Section 2(f). The court took the view that, having regard to sub-section (2) of Section 35L, the question having relation to rate of duty includes determination of taxability or excisability and the appeals were filed after the said pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpreted. Items made from copper attract duty at the rate of ₹ 3500 PMT whereas circles made from brass attract nil rate of duty. As stated above, in this case, the Department has not disputed the fact that the circles were manufactured by the assessee from brass. This is expressly recorded in the findings given by the Tribunal. 37. Learned counsel for the Revenue also brought to our notice a decision in Collector of Central Excise, Patna vs. Usha Martin Industries, reported in (1997) 7 SCC 47. Therein, the question involved was whether the benefit of exemption granted under certain notifications could be claimed in respect of commodities made out of raw materials on which no excise duty was payable. The notifications provided for final product exemption being exempted if they were produced from material on which appropriate amount of duty had already been paid . In the notification, it was inter alia provided that iron and steel products were exempted, if they were made from certain materials or a combination thereof on which appropriate duty of excise had already been paid. We may notice paragraph 6 of the said judgment, which reads as follows: 6. There is no dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at benefit of exemption from duty can legitimately be claimed by the respondents in respect of those goods referred to in the notifications under consideration the raw materials of which were not exigible to any excise duty at all. In the result, we dismiss all these appeals. 40. He pointed out that the said judgment has been overruled by a larger Bench in Collector of Central Excise, Vadodra vs. Dhiren Chemical Industries, reported in (2002) 2 SCC 127, wherein the Bench inter alia noticed the judgment in the case of Motiram Tolaram vs. Union of India, reported in (1999) 6 SCC 375, and held as follows: 7. In our view, the correct interpretation of the said phrase has not been placed in the judgment in the case of Usha Martin. The stress on the word appropriate has been mislaid. All that the word appropriate in the context means is the correct or the specified rate of excise duty. 8. An exemption notification that uses the said phrase applies to goods which have been made from duty paid material. In the said phrase, due emphasis must be given to the words has already been paid . For the purposes of getting the benefit of the exemption under the notification, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which, as we have already noticed, is identical to Section 35E of the Excise Act. It would appear that, just as explanation to Section 35E was never enforced, the explanation to Section 129D of the Customs Act was also not enforced. But, we are confronted with the further development, which is that, in December 2004, Parliament has omitted both the explanations, i.e. explanation to Section 129D of the Customs Act and also the explanation to Section 35E of the Excise Act. 43. We need not, therefore, be detained any longer by the case-law based on the explanation in deciding the appeals before us. But, we would, out of deference to the arguments of the learned counsel for the respondents that, going by clause (c) in the explanation, the issue relating to availability of benefit of exemption notification would also be a question having a relation to the rate of duty, deal with the same. Clause (c) reads as follows: (c) whether any goods fall under a particular heading or sub-heading of the First Schedule or the Second Schedule to the Customs Tariff Act, 1975 (51 of 1975), or that any goods are or not covered by a particular notification or order issued by the Central Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods, which are excluded from the purview of the exemption notification. It may also provide for different kinds of goods in the notification, some of which are completely exempt and some where there is a lesser amount provided. If we may illustrate with the facts of this case, the exemption notification provides for complete exemption in respect of goods, which are mentioned in the First Schedule to the Customs Tariff Act excluding those goods which are provided in the negative list. This is a case, where there is no dispute that the goods are covered by the exemption notification, in the sense that the goods, which are manufactured by the respondent company, namely, cylinders and conductors, are covered by the notification being goods mentioned in Schedule I to the Act. They are also not goods figuring in the negative list. Therefore, no decision is involved in regard to whether the goods are or are not covered by the particular notification. 45. Learned counsel for the respondents would submit that such disputes are indeed covered by clause (c). According to him, clause (c) must be interpreted as embracing within its scope all questions arising out of the notification and it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation with the rate of duty or the value of goods. In case, the decision relates to a question, which has a relation with the rate of duty or valuation, appeal is provided directly to the Supreme Court under Section 35L. The further statutory provision, we must bear in mind, is only the provision of sub-section (2) of Section 35L, which provides that, for the purpose of this chapter, the determination of any question having a relation to the rate of duty shall include the determination of taxability or excisability of goods for the purpose of assessment. If an appeal is maintainable before the Supreme Court, quite obviously, an appeal would not be maintainable before the High Court. The effect of sub-section (2) of Section 35L of the Act: 49. The Legislature must be treated as being aware of the judgment rendered by the Apex Court in Navin Chemical s case (supra) interpreting explanation to Section 129D of the Customs Act, as also the interpretation placed by various High Courts in decisions in question, which arose under the Central Excise Act. We must also be conscious of the fact that it had omitted the explanation in the year 2004. What then is the purport and object o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The word goods has not been defined in the Act. But it has to be understood in the sense it has been used in Entry 84 of the Schedule. That is why Section 3 levies duty on all excisable goods mentioned in the Schedule provided they are produced and manufactured. Therefore, where the goods are specified in the Schedule they are excisable goods but whether such goods can be subjected to duty would depend on whether they were produced or manufactured by the person on whom duty is proposed to be levied. The expression produced or manufactured has further been explained by this Court to mean that the goods so produced must satisfy the test of marketability. Consequently it is always open to an assessee to prove that even though the goods in which he was carrying on business were excisable goods being mentioned in the Schedule but they could not be subjected to duty as they were not goods either because they were not produced or manufactured by it or if they had been produced or manufactured they were not marketed or capable of being marketed. 9. The duty of excise being on production and manufacture which means bringing out a new commodity, it is implicit that such goods must b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn to the market. That it would be such an article which would attract the Act was brought out in Union of India vs. Delhi Cloth and General Mills Ltd., 1963 Supp. (1) SCR 586 = AIR 1963 SC .. 13. Having traced the development of law that any goods produced or manufactured ipso facto do not attract duty unless they are marketable or capable of being marketed, we may now examine the dutiability of goods captively consumed. Prior to 1979 no duty was levied on such goods. But, as stated earlier, after amendment of rules 9 and 49 captively consumed goods become exigible to duty. The rationale for not treating such goods as excisable was same that since such goods were not brought to the market for buying and selling they could not be subjected to duty. But when the Rules were amended a fiction was created that any article produced or manufactured if captively consumed was statutorily presumed to satisfy the test of marketability. But this presumption can be rebutted if it is established that the article produced and captively consumed was neither goods nor marketable nor capable of being marketed. The duty is attracted not by captive consumption of any article but it must be a go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry that there should be large number of purchasers or any number of purchases; even a single purchaser would suffice. It also does not matter that, in a particular case, the goods are actually not sold, as what is necessary is the quality that the goods can be bought and sold. The goods must be usable and have a separate identity. All this would not bring the inquiry to an end. The further question, which must be answered in a case, where it is raised, is whether the goods in question are brought into being by manufacture as is defined in the Act. See in this regard, Union of India vs. Ahmedabad Electricity Co. Ltd. others, reported in (2003) 11 SCC 129. 55. The decision in Moti Laminates Pvt. Ltd. others vs. Collector of Central Excise, Ahmedabad, reported in (1995) 3 SCC 23 has been followed in Commissioner of Central Excise-I, New Delhi vs. S.R. Tissues (P) Ltd. another, reported in (2005) 6 SCC 310 and Escorts Limited vs. Commissioner of Central Excise, Faridabad, reported in (2015) 9 SCC 109. In Escorts Limited (supra), the Apex Court has inter alia held as follows: For excise duty to be chargeable under the constitutional entry read with Section 3 of the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the commercial identity of the articles known to the market for being bought and sold. The fact that the product in question is generally not being bought and sold or has no demand in the market would be irrelevant. The product should not be known in the market with any commercial name. The moment a product is commercially known in the sense of fulfilling the practical test of being known to persons in the market who buy and sell, the test is satisfied. The fact that the product is generally not bought or sold or has no demand in the market is irrelevant. 56. Lastly, the goods must be produced or manufactured in India. It is only if all these conditions are satisfied that the levy of excise duty, meaning thereby the imposition of excise duty under the Act, becomes available against the manufacturer or producer of the goods. If the word excisability is understood in this sense, then, virtually, excisability would be a question, which would be far more comprehensive. If all these questions are answered against the assessee in a given case or, in other words, if the goods are found to be excisable goods, the exact entry under the Tariff Act is located, if the goods are al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that on 27th February, 1987, the appellant had in their factory a stock of the said product which were fully manufactured, packed and ready for sale and the inventory of the said stock was prepared by the Supdt. of Central Excise on 1st March, 1987. Reliance was placed on several decisions of the different High Courts, namely, decision of the Madhya Pradesh High Court in Kirloskar Brothers Ltd. v. Union of India, [1978] ELT 33; Union of India v. Kirloskar Brothers Ltd., [1978] ELT 690, decision of the Bombay High Court in Synthetic Chemicals Pvt. Ltd. v.S.C. Coutinho, [1981] ELT 414, decision of the Bombay High Court in New Chemicals Ltd. v. Union of India, [1981] ELT 920 decision of the Madras High Court in Sundaram Textiles Ltd. v. Asstt. Collector of Central Excise, [1983] ELT 909, decision of the Allahabad High Court in Union of India v. Delhi Cloth General Mills, [1973] ELT 177. On the other hand, the revenue contended that the goods forming the prebudget stocks were very much excisable goods and that for the purpose of collecting duty, date of manufacture was not material under the scheme of the Act even though the taxable event is the manufacture. It was, therefore, cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oval. The levy is and remains upon the manufacture or production alone. Only the collection part of it is shifted to the stage of removal. Once this is so, the fact that the provisions of the Central Excise Act are applied in the matter of levy and collection of special excise duty cannot and does not mean that wherever the Central Excise duty is payable, the special excise duty is also payable automatically. That is so as an ordinary rule. But insofar as the goods manufactured or produced prior to March 1, 1978 are concerned, the said rule cannot apply for the reason that there was no levy of special excise duty on such goods at the stage and at the time of their manufacture/production. The removal of goods is not the taxable event. Taxable event is the manufacture or production of goods. 59. Referring to the judgment in Wallace Flour Mills Co. Ltd. (supra), the court also inter alia held as follows: 13. In our opinion, the decision in Wallace Flour Mills does not lay down a contrary proposition neither does it support the contention of Shri Vellapally. That was a case where the goods were excisable goods prior to 1.3.1987, though by virtue of an exemption notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty only intended to deal with the question whether the goods figure in the list? Is the word excisability intended to comprehend the question whether the goods in question are both excisable as defined and also intended to address the aspect whether the goods can be visited with excise duty, meaning thereby, that all the questions, which must be answered against the assessee before he can be visited with the excise duty, which is a tax on manufacture of excisable goods? If that is the interpretation to be placed on excisability , then what was the need to also use the word taxability ? 62. A decision on excisability or a decision on taxability by the Tribunal after the amendment in 2014 would confer exclusive jurisdiction on the Supreme Court. First, let us see what is the meaning to be attributed to the word excisability . One way of looking at the word excisability is whether the goods in question are excisable goods. The starting point of an inquiry as to whether excise duty is payable is whether the goods are excisable goods, as the charge of excise duty under Section 3 is on excisable goods. Excisable goods are clearly defined in Section 2(d) of the Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y notification in the Official Gazette, direct an amendment of the First Schedule and the Second Schedule to be made so as to substitute for the rate of duty specified in the First Schedule and the Second Schedule in respect of such goods, - (a) in a case where the rate of duty as specified in the First Schedule and the Second Schedule as in force immediately before the issue of such notification is nil, a rate of duty not exceeding fifty per cent ad valorem expressed in any form or method; (b) in any other case, a rate of duty which shall not be more than twice the rate of duty specified in respect of such goods in the First Schedule and the Second Schedule as in force immediately before the issue of the said notification: Provided that the Central Government shall not issue any notification under this sub-section for substituting the rate of duty in respect of any goods as specified by an earlier notification issued under this sub-section by that Government before such earlier notification has been approved with or without modifications under sub-section (2). Explanation:- Form or method , in relation to a rate of duty of excise means the basis, namely, valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bear in mind also the section notes, chapter notes, besides the rules of interpretation. A perusal of section (i) Chapter 1, which deals with live animals / animal products, would show that, under the column rate of duty , it is left blank. Passing on to Chapter 2 of section (i), which deals with meat and edible meat offal, the rate of duty is shown as nil. The same is the position with respect to chapters 3 and 4 of section (i). Thus, for the products in Chapters 2 to 4 of section (i), the rate of duty is nil. But, nonetheless, it is quite clear that it is the rate of duty and capable of being increased vide exercise of powers under Section 3 of the Tariff Act. That nil rate is also a rate of duty is also referred to by the decisions of the Apex Court. Nil rate of duty is also provided for in the exemption notification. Apparently, the exemption notification, which was the subject matter of the decision of the Apex Court in Wallace Flour Mills Co. Ltd. vs. Collector of Central Excise, Bombay (supra), was one such notification. This is clear from a reference to the decision of the Apex Court in Collector of Central Excise, Hyderabad others vs. Vazir Sultan Tobacco Company Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods. (2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from payment of duty of excise, under circumstances of an exceptional nature to be stated in such order, any excisable goods on which duty of excise is leviable. (2A) The Central Government may, if it considers it necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub- section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification in the Official Gazette at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be. (3) An exemption under sub-section (1) or sub-section (2) in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds specified in Chapters 1 to 98 by Notification 12/2012 dated 17.03.2012. 69. We may advert to the CENVAT Credit Rules, 2004. The purport of these Rules is to provide for credit on duty paid on inputs and capital goods as provided therein in the payment of final excise duty and other levies. We notice that exempted goods has been defined in Rule 2(d), which reads as follows: (d) exempted goods means excisable goods which are exempt from the whole of the duty of excise leviable thereon, and includes goods which are chargeable to Nil rate of duty and goods in respect of which the benefit of an exemption under Notification No. 1 / 2011-CE, dated the 1st March, 2011 or under entries at serial numbers 67 and 128 of Notification No. 12/2012-CE, dated the 17th March, 2012 is availed. 70. Thus, it tends to indicate that a distinction may exist between a case, where there is a complete exemption from the whole of the duty and a case, where the goods are chargeable to nil rate of duty. An instance of its application can be found with reference to Rule 6(2), which provides for circumstances in which a manufacturer could take benefit of CENVAT credit and the word exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court further relied on Cadila Laboratories (P) Ltd. vs. CCE, reported in (2003) 4 SCC 12, wherein the court held that the burden would be on the department to show that what was available in the market is the same as the goods manufactured. The court took the view that the department had made no efforts to ascertain whether silver chloride having 50 per cent to 53 per cent silver content had a market. It was found that the department had failed to prove the test of marketability and, thereafter, the court proceeded to hold as follows: 11. Before concluding, we may point out that since 1990, when the case of Hindustan Zinc Ltd. came to be decided, the question of excisability of silver chloride has been cropping up and yet till this day no steps have been taken by the Department to go to the market and collect proper evidence of marketability. In most of the matters, we find lethargy and reluctance on the part of the Department to collect evidence on marketability and even in cases where market enquiry is made, it is made in a perfunctory manner. Consequently, despite the Department having a good case on classification, we are constrained to allow the appeal of the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instance, a consolidating Act containing in-congruous provisions lumped together. Even otherwise, the rule is subordinate to context as a less careful draftsman may use different words to convey the same meaning. A construction deriving support from differing phraseology in different sections of a statute may be negatived on considerations that it will lead to unreasonable or irrational results. 77. We may, in fact, refer to the judgment of the Apex Court in Kanhaiyalal Vishindas Gidwani vs. Arun Dattatraya Mehta and others, reported in AIR 2000 SC 3681. There, the court was dealing with Section 33 of the Representation of People Act, 1951. The court was dealing with Section 33 and the first proviso thereto. The contention taken by the appellant was that a different meaning is to be attributed to the word subscribe and mere signature is not sufficient. The court held as follows: 18. The above observations of this Court cannot be accepted as a ratio laid down. In our opinion, it is only an observation without laying down the principle which the petitioner is trying to deduce in his arguments. This view of ours is clear from the following further discussion of this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity . Here, we must pose the following questions, which are, in our view, enough to unravel the intention of Parliament. In a case, where the goods are found to be excisable as in the sense we have understood, there may be an exemption notification, which is in force. No doubt, it could be argued that, if the word excisability is understood in the same sense as taxability , the question relating to the availability of the exemption notification is outside the scope of both excisability and taxability ; in that, it could be said that it only means that the goods, which are excisable or taxable, are outside the net of taxation by virtue of the exemption notification. But, we would think that the better view and the right view could be that, in a case, where the goods are found excisable, Parliament intended in a case, where the Assessing Officer presses for payment, the assessee responds by pointing out that, though the goods are excisable, there is an exemption notification available, which protects him from actual taxation. If we understand the expression taxability in the said context, we would be acting in terms of the normal presumption, which is available when two diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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