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TMI Blog1990 (12) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... ttedly is exigible to duty under Tariff Item No. 16A(i) of Schedule-I to the Central Excises and Salt Act, 1944 hereinafter referred to as 'the Act'. Factory Unit No. I situated at No. 122, Industrial Suburb, Rajajinagar, Bangalore, is a factory belonging to M/s. Regal Rubbers which had been manufacturing identical goods in the aforesaid factory. The appellant took on sub-lease the rights in respect of the premises, equipments, and machinery etc., of the aforesaid factory from M/s. Regal Rubbers. Thereafter, the appellant started production of similar products with effect from 1st December, 1981 after obtaining L4 licence to manufacture such rubber products in the said factory. As required, the petitioner filed a classification list under Rule 173B of the Central Excise Rules (hereinafter referred to as the Rules) showing the manufactured rubber products as dutiable under Tariff Item No. 16A(i) of the Schedule-I but entitled to exemption from payment of duty under Notification No. 80/80 dated 19-6-1980 as amended, issued under Rule 8 of the Rules. The classification list as approved on 27-11-1981 and monthly returns filed thereafter were also accepted in due course. 3. On 13-5-198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of that factory for such exemption. After clubbing together the clearances, full exemption from payment of excise duty was to be granted in respect of the first clearances of Rs. 7.5 lakhs, and only partial exemption was permissible in respect of the value of the next clearances to the extent of Rs. 7.5 lakhs. 5. The learned single Judge has upheld the legality of the order Annexure-G holding that in terms of the exemption notification, it was permissible to take into account the aggregate value of clearances made from a factory during the financial year, even though the clearances may be by more than one independent manufacturer or owner whose goods have been manufactured in any factory. He has further held that the notice issued under Sec. 11A of the Act was in accordance with law. 6. Learned Counsel for the appellant has urged before us three main submissions : Firstly, it was submitted that the interpretation of the notification dated 19-6-1980 by the Assistant Collector as well as the learned single Judge is erroneous. Secondly, it was contended that once the classification list had been approved, the order approving the classification list should not be reviewed by the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (b) of this paragraph, shall not in either case exceed rupees seven and a half lakhs in any financial year. 2. Nothing contained in this notification shall apply to a manufacturer :- (i) if the aggregate value of clearances of all excisable goods by him or on his behalf, for home consumption, from one or more factories, during the preceding financial year, had exceeded rupees twenty lakhs, (ii) if the aggregate value of clearances of the specified goods by him or on his behalf, for home consumption, from one or more factories during the preceding financial year, had exceeded rupees fifteen lakhs. 3. Where a manufacturer has not cleared any specified goods in the preceding financial year, or has cleared any such goods for the first time or after the 1st day of August in the preceding financial year, the exemption contained in this notification shall be applicable to such manufacturer. (a) if he files a declaration with the Asst. Collector of Central Excise: (i) that the aggregate value of clearances of all excisable goods by him or on his behalf, for hom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the clearances which attract nil rate of duty, and Rs. 7.5 lakhs in respect of clearances for which concessional rate of duty was prescribed. This obviously means that the aggregate value of total clearances from any factory shall not exceed Rs. 15 lakhs, out of which clearances valued at Rs. 7.5 lakhs shall get full exemption while the remaining Rs. 7.5 lakhs shall attract concessional rate of duty. Under the proviso, it is immaterial whether the specified goods in any factory are manufactured by or on behalf of one manufacturer or more than one manufacturer. Clause (2) of the notification further clarifies the type of manufacturers to whom the benefit of exemption shall not be extended. There are two classes of manufacturers, who-are excluded from the benefit of exemption namely (a) a manufacturer, whose aggregate value of clearances of all excisable goods by him or on his behalf from one or more factories, during the preceding financial year exceeded rupees 20 lakhs, and (b) a manufacturer whose aggregate value of clearances of the "specified goods" in like manner during the preceding financial year exceeded Rs. 15 lakhs. Simply stated manufacturers whose aggregate value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of Rs. 7.5 lakhs shall earn total exemption, and the next clearances valued at Rs. 7.5 lakhs shall attract only concessional rate of duty. This means that the total clearances from any one factory, whether on behalf of one or more manufacturers, that shall be eligible for the benefit of total or partial exemption, shall not be more than Rs. 15 lakhs. Any clearances over and above Rs. 15 lakhs shall attract the normal rate of duty. But this is not all. It must further be shown that the manufacturer of the specified goods is one who is not excluded under Clause 2. Similarly, the factory where the goods are manufactured is not one excluded under Clause 4. In a nutshell a manufacturer of specified goods is entitled to the benefit of exemption to the extent of aggregate value of clearances not exceeding Rs. 15 lakhs out of which the clearances to the extent of Rs. 7.5 lakhs are entitled to complete exemption from payment of excise duty while the balance not exceeding Rs. 7.5 lakhs attract concessional rate of duty. The total clearances from any factory, whether by or on behalf of one or more manufacturers eligible for total or partial exemption shall not exceed Rs. 15 lakhs. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied. It appears that the respondents later discovered the fact that during the same financial year M/s. Regal Rubbers had cleared specified goods from the same factory of an aggregate value exceeding Rs. 7.5 lakhs and had claimed exemption. When this fact came to their notice, a show cause notice was issued by them in exercise of powers under Sec. 11A of the Act. 10. It was then contended that the respondents could not review their earlier order approving the classification list in the garb of exercise of powers under Sec. 11A of the Act. According to the appellant this was not a case covered by Sec. 11A of the Act, and if the authorities wished to withdraw the order approving the classification list, they had necessarily to take recourse to the provisions under the Rules and take up the matter by way of revision or appeal. On the other hand, the case of the respondents is that by reason of the mistake on the part of the respondents the classification list was approved and the appellant was given benefit of total exemption from payment of excise duty. This amounted to a "short levy" of excise duty and therefore the provisions of Sec. 11A of the Act were applicable for recovery of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty has been levied, the Department will not be able to take any action under Rule 10. Rule 10A cannot apply when a short-levy is made through error or mis-construction on the part of an officer, as such a case is specifically provided by Rule 10. Therefore, in our opinion, the proper interpretation to be placed on the expression "paid" is "ought to have been paid"........" It was observed after referring to decided cases: "Applying the above principles to the case on hand, the expression "paid" in Rule 10 can be reasonably read as "ought to have been paid". Similarly even in cases where there has been a nil assessment due to one or other of the circumstances mentioned in Rule 10 and if subsequently it is found that duty is payable, then the entire amount of duty should be considered to have been short-levied...." ".......It follows that in order to attract Rule 10, it is not necessary that some amount of duty should have been assessed and that the said amount should have also been actually paid. That provision will apply even to cases where there has been a nil assessment in which case the entire duty later on assessed must be considered to be the duty originally short-levied... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the excise duty payable on the specified goods was recoverable under Rule 10A of the Rules. In Sanjana's case the Court held that even where nil duty was levied when duty was in law payable, that would amount to a short levy of duty under Rule 10. In view of these two decisions of the Supreme Court it must be held that when the authorities under the Act approved the classification list and extended to the appellant the benefit of total exemption from payment of excise duty by endorsement of nil duty on the classification list, excise duty payable was short levied. For recovery of such excise duty short levied, the provisions of Sec. 11A of the Act were attracted. In the instant case, it is not necessary to consider whether this case is covered by main part of Sec. 11A or by the proviso to sub-section (1) of Sec. 11A, because in the instant case, the notice to show cause was admittedly issued within 6 months from the relevant date. The question of limitation therefore does not arise in the instant case. 11. It was contended by the appellant that once the classification list had been approved, the order granting the approval could not be reviewed by the same authority in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the proper officer that tariff classification rate of duty leviable in respect of all goods of item No. 4 was approved until further orders, thereby approving the list whereunder benefit of exemption had been claimed. 12. There is no dispute about the particulars of the goods furnished by the appellant and accepted by the proper authority under the Act. It is not the case of the respondents that the classification of goods was wrongly made and that requires to be reviewed. If there was no exemption notification, the classification list filed by the appellant could not be found fault with because it gave a correct description of the goods manufactured and the tariff item under which they fell. It is by reason of the endorsment made by the proper officer regarding exemption from payment of excise duty that, it became necessary to modify the order of approval. In our view what is sought to be done is not to review the classification list but merely to correct the endorsement of the proper officer extending to the goods manufactured the benefit of exemption under the notification dated 19th June, 1980 as amended from time to time. The mistake was only in relation to the applicabil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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