TMI Blog1992 (9) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... d as under :- 2. The first petitioner is a Company incorporated under the Companies Act, 1956, and the second petitioner is a shareholder of the first petitioner Company. The first petitioner "Company" manufactures tyres and tubes to be fitted to motor vehicles and other equipments and for this purpose has a factory at Bhandup, Bombay. For the purpose of manufacturing tyres, the Company purchases, inter alia, diverse raw materials and components. Amongst such components is a product known as Tyre Cord Warp Sheet (for short, "TCWS"). This TCWS is made out of either rayon or nylon. In Para 6 of the Petition, the petitioners have set out the process of manufacture of tyres. The petitioners also purchase synthetic latex or synthetic rubber which is used in the Dip Solution known as "RFL" solution. The TCWS are dipped in the said solution and are, thus, processed or rubberised. After processing the TCWS in the said solution, the TCWS are known as processed or rubberised TCWS. The processed or rubberised TCWS are used in the manufacture of lyres. It appears that, initially, under the Tariff Advice issued by the Central Board of Excise . Customs bearing No. 30 of 1978, dated 12th June, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special duty of excise or as the case may be; (b) the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 already paid on the goods of the descriptions specified in the corresponding entry in column 3 of the Table. To put it briefly, if in the manufacture of the final product viz. tyres, tubes and flaps mentioned in column 5 of the Table reproduced above, the input of synthetic rubber, mentioned in column 3 in the above table, was used, the manufacturer would get exemption from so much of the duty payable on the final product viz. tyres, tubes and flaps, as is equivalent to the duty paid on the input viz. synthetic rubber. Notification No. 95 of 1979, dated 1st March, 1979, has two provisos which read as under : (i) the input specified in column (3) of the said Table against a particular serial number in column (1) thereof are used in the manufacture of final products specified in the corresponding entry in column (5) of the said Table against the said serial number; and (ii) in relation to the exemption under this notification, the procedure set out in Rule 56A of-the aforesaid rules is followed." (Emphasis supplied) 5. On the basis of this Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany had approached the Delhi High Court, the question of allowing of the benefit of Notification in respect of the use of synthetic rubber in the manufacture of tyres could not be considered till the case was decided by the Delhi High Court. It is this letter, Exh. "U", dated 23rd August, 1982 which has been challenged in the present Petition. 7. On behalf of the respondents, Assistant Collector Nagwekar has filed the Affidavit-in-Reply contending that synthetic rubber was used not in the manufacture of tyres falling under Tariff Item 16, as required under the Notification, Exh. "F', but that synthetic latex or synthetic rubber falling under Tariff Item 16AA was used in the manufacture of TCWS. Since TCWS was a separate intermediate product, the case of the respondents is that the petitioners are not entitled to claim the benefit of the Notification, Exh. "F", dated February 28,1982. The Affidavit also stated that as far as the claim of the petitioners for "proforma credit" was concerned, the petitioners would not be entitled to claim any proforma credit in view of the provisions of Rule 56A of the Central Excise Rules. 8. We have heard both the learned Counsel at length viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule (1) of Rule 56A, as also sub-clause (a) of clause (ii) of sub-rule (2) of Rule 56A. Shri Desai contended that in order to avail of the benefit of "proforma credit" under Rule 56A, what was necessary was not the mere compliance with the procedure laid down in sub-rule (3) of Rule 56A, but that it was also necessary to comply with the substantive part of sub-rule (1) and sub-rule (2) of Rule 56A. 11. .Secondly, on the question of exemption, Shri Desai contended that in a fiscal statute like the Central Excises and Salt Act, 1944, the words have to be construed strictly. The words "used in the manufacture of appearing in the Notification No. 95 of 1979, at Exh. "F", must be, therefore, according to the learned Counsel, construed strictly. So construed, Shri Desai contends that, synthetic rubber cannot he said to have been used in the manufacture of tyres. Submission is that on dipping the TCWS in the dip solution, an intermediate product viz. processed TCWS comes into being. It maybe that processed TCWS is used in the manufacture of tyres. But he contends that synthetic rubber cannot be said to be used in the manufacture of tyres and hence, no benefit of the exemption Notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstantial benefits. The Petition has been pending in this Court for nearly 10 years. Both Counsel are agreed that the pendency of the Writ Petition in the Delhi High Court and any decision arrived at in the said Writ Petition has no bearing whatsoever on the questions of law raised in this Writ Petition. Either on the question of grant of proforma credit under Rule 56A or on the question of exemption under the Notification, Exh. "F", the Counsel on either side are agreed that the Writ Petition pending in the Delhi High Court can have no bearing at all. On the questions of law, the parties have addressed us at length. There is hardly any disputed question of facts involved in the Petition. Hence, we are of the; view that it would not be proper, at this stage, to drive the petitioners in this case to the alternate remedy of Appeals under the statute and further delay the proceedings. It must, however, be mentioned in this context that against the impugned communication, Exh. "U", the petitioners have already filed an Appeal under Section 35 of the Central Excises and Salt Act which is pending. Since, however, we have heard both the Counsel at length on the question of interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le (3) reads as under :- (3) (i) A manufacturer so permitted shall- (a) give prior notice to the proper officer before the excise duty paid or the countervailing duty-paid material or component parts or finished product are received in his factory to enable the proper officer to be present at the time of the receipt of such material or component parts of finished product, as the case may be; (b) bring to the factory the material or component parts or finished product in original packing under cover of A.R.I. of such other documents as may be approved by the Central Board of Excise and Customs in this behalf or Bill of Entry evidencing the payment of excise duty or the countervailing duty; 14. In view of the above provisions of Rule 56A, what Shri Korde contends is that the Notification at Exh. "F" contemplates grant of proforma credit and in order to be eligible to claim the benefit of the said Notification, all that is required under the proviso to the Notification, Exh. "F", is that the petitioners must comply with the procedure set out in sub-rule (3) of Rule 56A. As against this, what Shri Desai contends is that having regard to the scheme of Rule 56A, it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... component part and the finished excisable goods do not fall in the same Tariff Item inasmuch the input of synthetic rubber falls under Tariff Item 16AA whereas the finished products viz. tyres, tubes and flaps, fall under T.I.16, In our view, therefore, the Petitioners would not be entitled to claim any proforma credit under Rule 56A in the facts of the present case. 15. At the end of the arguments in the course of his rejoinder Shri Korde invited our attention to a decision of this Court in the case of Jaysynth Dyechem Pvt. Ltd. v. Union of India, reported in 1991 (51) E.L.T. 246 and contended that the benefit of proforma credit can be claimed even under the exemption notification, Exh. "F". On a perusal of the said decision in the case of Jaysynth Dyechem Pvt. Ltd. (supra) we are of the view that the question which fell for consideration of the Court was in relation to the grant of exemption subject to following the procedure laid down in Rule 56A. This was a case of claim for grant of exemption and not for granting proforma credit. Shri Korde then invited our attention to the decision of a learned Single Judge of this Court in the case of Steel Age Industries Ltd. and another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions which have a direct bearing on the question involved. We may briefly refer to the said decisions. 17. In the case of J.K. Cotton Spinning Weaving Mills Co. Ltd. v. The Sales Tax Officer, Kanpur and Another, reported in 1965 (Vol. 16) Sales Tax Cases, page 563, the expression "in the manufacture of goods" appearing in Section 8(3)(b) of the Central Sales Tax Act, 1956 fell for interpretation. It has held that the expression "in the manufacture of goods" appearing in Section 8(3)(b) of the said Act should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is 50 integrally connected with the ultimate production of the goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, goods required for that process would f"U within the expression "in the manufacture of goods". In the case before the Supreme Court, the process of designing was held to be distinct to the actual process of,turning out finished goods viz. textile, but there was no warrant for limiting the meaning of the expression "in the manufacture of goods" to the process of product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly come in the market, to be brought or sold and be known in the market as such. It was, therefore, held that anything that enters into and forms part of the process must be deemed to be raw material or component part of the end-product an must be deemed to have been used in completion or manufacture of the end-product. In Para 4 of the Judgment at page 204 of the Report, the Supreme Court referred with approval its earlier decision J.K. Cotton Spinning Weaving Mills Co. Ltd. (supra). 19. Our attention has then been invited to the Supreme Court decision in the case of Collector of Central Excise v. Ballarpur Industries Ltd., reported in 1989 (43) Excise Law Times page 804. The question here was whether Sodium Sulphate which was used in the chemical recovery cycle of Sodium Sulphate which forms an essential constituent of sulphate cooking liquor used in the digestion operation of paper and paper-boards could be said to be used in the manufacture of finished product. The argument of the Revenue was that the benefit could not be claimed by the assessee since sodium sulphate, was burnt out and did not remain in the finished product as such. It was, therefore, contended that Sodium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finally, Shri Korde invited our attention to the Supreme Court decision in the case of Collector of Central Excise v. Rajasthan State Chemical Works, reported in 1991 (55) Excise Law Times page 444. This was a case where the question was as to whether the assessee was entitled to claim the benefit of the exemption notification in respect of all the goods falling under residuary Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944, in or in relation to the manufacture of which no process was ordinarily carried out with the aid of power. In relation to the manufacture of final product, it was held that manufacture involves series of processes and if power was used for the purpose of transportation of the raw material to the platform at the kiln head and the pumping of brine into the salt pan, it must be held that power was used in relation to manufacture. In Para 12 of the Judgment at page 448 of the Report, the Supreme Court observed thus in respect of the word 'manufacture' ; "12. Manufacture thus involves series of processes. Process in manufacture or in relation to manufacture implies, not only the production but the various stages through which the raw m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners will have to approach and satisfy the concerned authorities in, accordance with the amended law. He has invited our attention to- (i) the decision of the Division Bench of Karnataka High Court in the case of Union of India v. Southern Asbestos Cement Ltd., reported in 1992 (60) E.L.T. 185 (Kar.), and (ii) the decision of this Court in the case of Western India Textures Ltd. v. Union of India, reported in 1992 (60) E.L.T. 200 (Bom.). Relying upon the provisions of the Amending Act No. 40 of 1991, which came into force on September 20,1991, Shri Desai contended in the fight of the said two decisions that the proper remedy for the petitioners to adopt would be to approach the concerned authorities who would decide the claim of exemption in accordance with law. We are inclined to accept this submission. 23. Shri Desai then invited our attention to the interim order obtained by the petitioners on 17-01-1983. The said interim order reads as under :- "MINUTES OF THE ORDER 1. Petition admitted. Rule Returnable on 4th April, 1983. 2. Interim Relief in terms of prayer (c). 3. The 1st Petitioner to furnish the requisite B-13 Bond to the Collector of Central Excise wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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