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TMI Blog2019 (9) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... 24 January, 2006 under Rule 25 of the Central Excise Rules, 2002 [2002 Rules] with an option to the Appellant to redeem the confiscated goods on payment of redemption fine of Rs. 7,00,000/-. The order also seeks to impose a penalty of Rs. 9,40,43,236/- upon the Appellant. It also directs the Appellant to pay interest. 2. Central Excise Appeal No. 348 of 2007 has been filed by Anil Kumar Jain, Factory Manager, to assail that part of the order dated 15 November, 2006 passed by Commissioner that imposes a penalty of Rs. 5 lakhs upon him under Rule 26 of the 2002 Rules. 3. Central Excise Appeal No. 349 of 2007 has been filed by Mahendra Kumar Jain, Managing Director, to assail that portion of the order dated 15 November, 2006 passed by Commissioner that imposes a penalty of Rs. 5 Lakhs upon him under Rule 26 of 2002 Rules. 4. Central Excise Appeal No. 350 of 2007 has been filed by Anoop Kumar, Authorised Signatory to assail that portion of the order dated 15 November, 2006 passed by the Commissioner by which a penalty of Rs. 5 Lakhs has been imposed under Rule 26 of the 2002 Rules. 5. The aforesaid four appeals were earlier allowed by the Tribunal by order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g kadhai. The paste gathered from the big kadhai after an hour is transferred in moulds and put in a shed. After 48 hours, the blocks that emerge are cut into sizes of required shape, marked with stamping machine and finally put in cartons after packing them with a printed wrapper. 8. Earlier, as noticed above, firewood was used by the Appellant for heating and boiling in the production and processing of the product. Thereafter, Liquified Petroleum Gas [LPG] was used from January, 2002 up to December, 2002 for heating and boiling. After December, 2002, Compressed Natural Gas [C.N.G.] has been used for heating and boiling required in the above process. This CNG was delivered by M/s. Gas Authority of India Ltd. through a pipeline to a station located at the factory premises and gas was supplied to the 49 burners through internal lines. 9. Prior to 1996 'soap' fell under Chapter Heading No. 34.01 of the First Schedule of the Central Excise Tariff Act, 1985 [The Tariff Act]. Sub-heading No. 3401.10 related to 'soap' in any form which was subject to 30% Tariff duty but in terms of Notification No. 12/1994, dated 1 March, 1994 it was provided that 'Soaps' under Heading 34.01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Tariff Act, 1985 (5 of 1986) as amended by the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005), (hereinafter referred to as the Central Excise Tariff Act), specified in the corresponding entry in column (2) of the said Table, from so much of the duty of excise specified thereon under the First Schedule to the Central Excise Tariff Act (hereinafter referred to as the First Schedule), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table. S. No. Chapter or heading or sub-heading or tariff item Description of goods Rate of duty 33. 3401 Soap, in or in relation to the manufacture of which no process has been carried on with the aid of power or of steam Nil 14. Thus, with effect from 28 February, 2005, the excise duty on soap, in or in relation to the manufacture of which no process has been carried on with the aid of power or of steam was provided as "nil". 15. The Appellant, ever since it started manufacturing "Laundry Soap", has not been paying Central Excise duty because initially up to 1996 the levy of Central Excise duty was exempted under the Notification dated 1 March, 1994 and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be 'electricity' and not any other power. In this connection reference was made to certain decisions, to which reference shall be made at the appropriate stage, to demonstrate that the definition of 'power' in the Factories Act would not be relevant for the purposes of the Tariff Act. Reference was also made to the Circulars dated 22 March, 1968 and 25 March, 1968 issued by the Board that clarified that use of 'gas' for heating purpose cannot be treated as use of 'power' for heating of chocolates and steel furniture. The Appellant also pointed that no action had been taken by the Department against similar units using 'gas' for heating and this had resulted in hostile discrimination. The Appellant also stated that the extended period of limitation could not have been invoked by the Department. 19. The Commissioner, however, did not accept the submissions advanced on behalf of the Appellant. The Commissioner held that since the term 'power' was not defined in the Central Excise Act, 1944, its meaning could be ascertained with the help of other statutes, namely, Section 2(g) of the Factories Act, 1948. The finding of the Commissioner in this regard is reproduced below : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the operative part of the order is as follows : "As regards Point No. (ii) above, it is established from the discussion in the preceding paras that the party had been using power in the manufacture of Laundry Soaps and as such the 'Laundry Soaps' manufactured by the party fall under Chapter sub-heading No. 3401.11 instead of Chapter sub-heading No. 3401.12 of the Central Tariff. They party are, therefore, not entitled to avail the benefit of 'Nil' rate of duty for goods falling under Chapter sub-heading No. 3401.12 of the Central Excise Tariff nor they are entitled to avail the benefit of exemption contained at Serial No. 33 of the Notification No. 3/2005, dated 24-2-2005. As such, Central Excise duty amounting to Rs. 9,32,35,179/- and Education Cess amounting to Rs. 8,08,054/- not paid by the party on the clearance of 'Doctor' brand 'Laundry Soaps' for the period January, 2002 to February, 2006 is recoverable from the party. 22. The contention of the Appellant that the extended period of limitation could not have been invoked was repelled. Regarding the imposition of penalty upon Shri Anoop Kumar, Authorized Signatory, the Commissioner found that he controlled the day t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and Exemption Notification becomes redundant. Therefore, in order to obviate this redundancy it is absolutely necessary to interpret the term 'power' in a restricted manner to mean 'electricity' only; (v) The tariff item and the exemption notification have also been published in the gazette in both English and Hindi. In the Hindi version of the Gazette, the expression "Vidyut" has been used which means "lightening, electricity, electric charge". Thus,, when the Hindi version of the expression refers to "electricity", the corresponding English version using 'power' has to be understood and interpreted to be 'electricity' only; (vi) The Appellant has been subjected to hostile discrimination as there are number of other manufacturers engaged in soap making that have adopted identical process, but no proceedings have been initiated against such manufacturers and they have been granted the benefit of the exemption notifications; and (vii) In any view of the matter, the extended period of limitation could not have been invoked. 25. Shri Santosh Kumar Agarwal, Learned Authorized Representative of the Department has, however, support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of Excise Duty, but according to the Department since the process has been carried out by the Appellant after January, 2002 with the aid of 'power', it would fall under sub-heading No. 3401.19 and, therefore, would be subject to 20% Excise levy. With effect from 28 February, 2005, soap, in or in relation to the manufacture of which, no process has been carried on with the aid of person or of steam for heating would attract 16% Central Excise Duty, but, in view of the Notification dated 24 February, 2005, it would be exempted from payment of Excise Duty. It has, therefore, to be determined whether in the manufacture or in relation to the manufacture of soap, any process has been carried on with the aid of power or of steam. 30. The expression, 'power' has neither been defined in the Tariff Act or in the Notifications or the Act. The Department seeks to rely upon the definition of 'power' under the Factories Act and the dictionaries. According to the Appellant, neither of these two can be resorted. 31. What has, therefore, first to be examined is whether the definition of 'power' defined in the Factories Act can be taken aid of while understanding the meaning of 'po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to the aid of the Department. 35. The meaning of the expression 'power' as contained in dictionaries should also not be blindly applied to the meaning of the expression 'power' as contained in the Tariff Act and the exemption notification and an attempt should be made to find out a meaning which would achieve rather than frustrate the object-of granting exemption and that meaning should be preferred which does not lead to uncertainty or unintended results. 36. In this connection, it will be useful to refer to a decision of the Supreme Court in Pappu Sweets and Biscuits v. Commissioner of Trade Tax, UP, Lucknow [2004 (178) E.L.T. 48 (S.C.)]. The question that arose for consideration before the Supreme Court was whether 'toffee' is a 'sweetmeat or a commodity of a like nature because this would determine whether the industrial unit would be entitled to exemption from payment of Sales Tax under a Notification dated 27 July, 1991 issued by the State of Uttar Pradesh, in exercise of its powers conferred under Section 4A of the Uttar Pradesh Sales Tax Act, 1948. Units making sweetmeat, namkeen, reori, gazak and commodities of the like nature and restaurants were not entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such industries by suffering loss of revenue. What is however necessary to note is that Annexure II is an exclusionary part of exemption notification. The High Court did not examine the issue from this angle and also failed to appreciate that exclusionary part of an exemption notification has to be construed rather Strictly. Even though the word used in exclusionary part of an exemption notification has a wide dictionary meaning or connotation, only that meaning should be given to It which would achieve rather than frustrate the object of granting exemption and which does not lead to uncertainty or unintended results. 11. A correct reading of the notification further discloses that the words 'commodities of like nature' in Entry 18 were meant to include commodities other than those specifically mentioned. What they, indicate is that other commodities of like nature also were not to get benefit of the exemption. To that extent they did widen the scope of the Entry but they cannot be construed to have the effect of enlarging the meaning of the word 'sweetmeat'. As that was not the purpose of including those words in the Entry the High Court was not justified in holding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court had in two cases held that toffee is a sweetmeat. But it was so held in a different context and no evidence was led by the State to show that thereafter, the dealers in toffees and consumers started treating them as sweetmeat. In the Hindi version of the Notification for the word sweetmeat the word 'Mithai' is used. The word 'Mithai' has a definite connotation and it can be said with reasonable amount of certainty that people in this country do not consider toffee as 'mithai'. The High Court committed a grave error in holding that as some manufacturers of toffees sell their products by describing them as sweets. It can be said that in commercial circles toffee is known as sweetmeat." [emphasis supplied] 37. The Supreme Court observed that though the definition of the word 'sweetmeat' is very wide and any food which is sweet and rich in sugarcane be described as 'sweetmeat' and since 'toffee is a confection of sugar and other materials and being rich in sugar would be 'sweetmeat' in its wider sense, but items like 'sweetmeat', 'namkeen', 'reori' and 'gazak' are usually prepared by shopkeepers and restaurants for selling them to the customers and they are not 'manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion where the word 'mithai' was used. The Supreme Court observed that the word 'mithai' has a definite connotation and it can be said with a reasonable amount of certainty that people in this country do not consider 'toffee' as 'mithai'. This is what was also observed by the Supreme Court in Commissioner of Trade Tax, Uttar Pradesh v. Associated Distributors Ltd. [(2008) 7 SCC 409] and Park Leather Industry (P) Ltd. and Another v. State of U.P. and Others [(2001) 3 SCC 135]. Paragraph 23 of the decision of the Supreme Court in Park Leather Industry is reproduced below : "23. Even otherwise, our above view is supported by the Hindi version of the definition. As has been set out in the case of Krishi Utpadan Mandi Samiti it is well known that in U.P. all legislations are in Hindi. Of course as English version is simultaneously published. Undoubtedly, if there is conflict between the two then the English version would prevail. However, if there is no conflict then one can always have assistance of the Hindi version in order to find out whether the word used in English includes a particular item or not. In the Hindi version the word used as "Chamra". There can be no dispute tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central Excise Act, 1944 dealing with the 'Confectionery' in the First Schedule to the Tariff Act that fell for consideration in the aforesaid Circular is reproduced below : "CONFECTIONERY, Coco powder and chocolates In or in relation to the manufacture of which any process is ordinarily carried on with the aid of power, namely :- (1) Chewing Gums (2) Cocoa powder (3) Drinking chocolates, chocolates in the form of granules or powder. (4) Chocolates in the form of blocks, slabs, tablets, bars pastilles or croquettes, or in any other form not otherwise specified whether or not containing nuts fruit kernels or fruits." 49. It is true that after the new Tariff Act came into force, the earlier circulars/guidelines/instructions/Tariff advices issued in the context of the erstwhile First Schedule to Central Excises and Salt Act, 1944, had been withdrawn by the Board by Circular dated 27 May, 1994, but the fact remains that the Board had clarified that the use of 'gas' for welding steel furniture parts or use of 'gas' for heating in the manufacture of coco powder cannot be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive 'power' a wide meaning, then there would have been no necessity to include 'steam' in the Tariff Item and the Exemption Notification. 53. It is, therefore, clear that only a restrictive meaning to the expression 'power' should be given which is not only in consonance with common parlance, but also in consonance with the Hindi version of the Tariff Act and the Exemption Notification as also the Circulars, referred to above. 54. The position that emerges from the aforesaid discussion is that 'power' used in Chapter 34 of the Tariff Act and the Exemption Notification dated 24 February, 2015 would be restricted to 'electricity'. The Appellant is engaged in the manufacture of 'soap' with the aid of gas and, therefore, no process has been carried on with the aid of 'power. The manufacture of 'soap' by the Appellant, therefore, would be subjected to 'NIL' rate of duty upto 27 February, 2005 and thereafter also would be subjected to 'NIL' rate of duty because of the exemption Notification dated 24 February, 2005. The Commissioner has, however, confirmed the demand by order dated 15 November, 2006 holding that the Appellant has been manufacturing 'soap' with the aid of 'powe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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