TMI Blog2006 (12) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... n company, M/s. Shree Ranganatha Exports Pvt. Ltd. The applicant is formed with a view to manufacture Indian Mouth Freshener (popularly know as "Mukhwas"). The applicant has been allotted a Modular Industrial Flat in SIDCO Industrial Area, Jammu which is a Notified Area within the meaning of Notification No. 56/2002-C.E. dated 14-11-2002, as amended, which was issued under the Section 5A of the C.E. Act. Among the ingredients of Indian Mouth Freshener which the applicant proposes to manufacture, the following constitute the main raw materials : (a) Fennel Seeds (Saunf Variyali etc.) (b) Sugar Coated Fennel Seeds (c) Coriander Seeds (Dhana Dali) (d) Scented Shredded Betel Nuts (Sugandhi Supari) (e) Cardamom (Elachi) (f) Sugar Crystals (g) Lime (h) Dry Dates (i) Food Grade Flavours (j) Saffron or Essences of Saffron (k) Menthol The applicant has also obtained the requisite permission from the Directorate of Industries and Commerce for the purpose of manufacturing the said product. On these facts, the applicant has set forth the following two questions to seek advance ruling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not relevant for the present discussion. The NCCD, AED and EC - duties collected under the aforementioned Acts - shall be in addition to the duty of excise under the CE Act. Though for the purpose of levy and collection of the said three duties provisions of the CE Act and the Rules made thereunder are made applicable, those duties cannot be construed as 'duty of excise' under the CE Act. Notification No. 56/2002-C.E. dated 14-11-2002 clearly stipulates that exemption contained therein is restricted to 'duty of excise' levied under First and Second Schedule of the Tariff Act and Additional Duty of Excise (Goods of Special Importance) Act, 1957 and Additional Duty of Excise (Textiles and Textile Articles) Act, 1978. The said notification is to be read as an independent notification and no words can be added to or subtracted from it. Mr. Vikram Nankani, learned Counsel appearing for the applicant, invited our attention to the comments of the Commissioner to contend that in so far as question no. 1 is concerned, since the classification has been agreed to by the Commissioner, he has nothing to add. It will be apposite to read Chapter Entry 2106.90 20 of First Schedule to the Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore the duties in dispute would also be within the purview of the exemption under the Notification. Mr. B.K. Singh, JDR as well as Mr. A.K. Roy, Jt. CDR, on the other hand have argued that as the notification exempts only duties of excise levied under the First and the Second Schedule to the Tariff Act, no other duty can be said to be within the purview of the exemption notification. It is further submitted that in view of the pronouncement of the Supreme Court in M/s. Rukmani Pakkwell Traders [2004 (165) E.L.T. 481 (S.C.)] it is well-settled that the exemption notification has to be construed strictly. 4. To appreciate the contentions of the learned Counsel for the parties it would be apt to read here Notification No. 56/2002-C.E., dated 14-11-02 :- "In exercise of the powers conferred by sub-section (1) of Section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of Section 3 of the Additional Duties of Excise (Textiles Textile Articles) Act, 1978 (40 of 1978), the Central Government being satisfied that it is necessary in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht in law in holding that 'strawboard' is covered by the term 'paper and pulp' appearing in paragraph F of Part I read with Part III of the First Schedule to the Finance Act, 1965 (Act 10 to 1965)? Assessment years 1966-67 and 1967-68 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that 'strawboard' is covered by the term 'paper and pulp' appearing at Item 16 of the Fifth Schedule to the Income-tax Act, 1961 and in allowing the assessee's claim under Section 80-E of the Act?" On the view that the strawboard industry is covered within the expression 'paper and pulp' the High Court answered the questions in favour of the assessee and against the Revenue. Against the judgment of the High Court the Revenue appealed to the Supreme Court. The Hon'ble Supreme Court dismissed the appeal and observed : "The expression has been used comprehensively. It is necessary to remember that when a provision is made in the context of law providing for concessional rates of tax for the purpose of encouraging an industrial activity a liberal construction should be put upon the language of the statute". In Bajaj Tempo case (Supra), t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from a partner in the joint venture and claimed exemption. Both the Deputy Commissioner as well as the High Court rejected the claim. The Hon'ble Supreme Court directed the Joint Commissioner to decide the matter afresh. The claim for exemption was rejected by the Joint Commissioner. On appeal, the High Court upheld the claim of exemption against which the Government went in appeal before the Hon'ble Supreme Court. Dismissing the appeal the Hon'ble Supreme Court, held : "In the present case, as stated above, we have to go by the interpretation of the notification(s) in the light of the policy. However, even if one goes by the strict interpretation of the notification(s) we are in agreement with the view expressed by the High Court that the first part of the notification(s), as distinct from the second part, does not refer to the "land". If the argument of the department is accepted that the first part of the notification would apply only if Tata Cummins Ltd. is the owner of the land and building in which its factory is located then we are not only giving a narrow interpretation to the notification which would defeat the object underlying the incentive policy but also it would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from duty polypropylene spun yarn falling under T.I. 18E, but not blended spun yarn containing 52% polypropylene and 48% viscose. There was difference of opinion in regard to the interpretation of the notification between two Members of CEGAT. The third Member, namely, the President of the Tribunal agreed with the Member taking the view that the term 'polypropylene spun yarn' used in the said notification means yarn spun out of polypropylene fibres and will not include blended yarn manufactured by the appellant-company (52% polypropylene and 48% viscose). On appeal, the Hon'ble Supreme Court observed : "Since it is case of exemption from duty, there is no question of any liberal construction to extend the term and the scope of the exemption notification. Such exemption notification must be strictly construed and the assessee should bring himself squarely within the ambit of the notification. No extended meaning can be given to the exempted item to enlarge the scope of exemption granted by the notification." In Commissioner of Central Excise, Trichy v. Rukmani Pakkwell Traders [2004 (165) E.L.T. 481 (S.C.)], the respondent was a trader in scented supari which was marketed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o mentioned cases support the view we have taken above. 6. Now reverting to the interpretation of the notification, a plain reading of the excerpt of the notification, quoted above, shows that : (i) it is issued under Section 5A of the CE Act read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, sub-section (3) of Section 3 of the Additional Duties of Excise (Textiles Textile Articles) Act, 1978; (ii) it exempts goods specified in the First Schedule and the Second Schedule to the Tariff Act (except the goods specified in Annexure-I); (iii) the exemption relates to so much of the duty of excise or additional duty of excise, as the case may be, leviable on the said goods under any of the aforementioned three said Act; (iv) the quantum of duty exempted is equivalent to the amount of duty paid by the manufacturer of goods, other than the amount of duty paid by way of utilization of Cenvat credit under the Cenvat Credit Rules, 2002 (now 2004). Admittedly BED and SED are levied under the First Schedule and the Second Schedule respectively of the Tariff Act. It has already been pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dispute by the respective charging sections therefore they form part of the excise duty so they are also exempted under the said notification. He relied on judgments of the Hon'ble Supreme Court in CIT Kerala v. K. Srinivasan [(1972) 4 SCC 526] and M/s. Bisra Stone Lime Co. v. Orissa State Electricity Board [(1976) 2 SCC 167]. In Mr. Srinivasan's case (supra) the question before the Hon'ble Supreme Court was whether Income-tax includes surcharge and the additional surcharge. Having referred to the history of the legislation of the Finance Act, 1964 it was held that the term 'Income-tax' as employed in Section 2 of the Finance Act, 1964 included surcharge as also special and additional surcharge whenever provided which are also surcharges within the meaning of Article 271 of the Constitution. In M/s. Bisra Stone Lime's case (Supra), one of the contentions raised before the Hon'ble Supreme Court was whether Orissa Electricity Board has power to levy a surcharge under the provisions of the Act. It was held that the word surcharge was not defined in the Act, but etymologically, inter alia, surcharge stood for an additional or extra charge for payment. In our opinion none of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 56/2002-C.E., dated 14-11-2002 in those circulars. Those circulars relate specifically to the subjects dealt with therein and we do not think they can be called in aid by the applicant to claim exemption under Notification No. 56/2002-C.E., dated 14-11-2002. The last contention of Mr. Nankani is that the applicant is entitled to partial relief in regard to Education Cess (EC) as one of the components, namely, Basic Excise Duty (BED) is exempted, therefore 2% should be calculated after excluding the BED. The proposition appears to be attractive but it does not stand to the scrutiny. It has been pointed out above that by Finance (No. 2) Act, 2004 the Education Cess is levied and collected on all excisable goods under the CE Act or any other law for the time being in force. The rate of EC is 2% of aggregate of (i) Basic Excise Duty; (ii) National Calamity Contingent Duty (NCCD); and (iii) Additional Duty of Excise. There is a fundamental distinction between abolition of duty and exemption of duty. Where in principle Basic Excise Duty (BED) is leviable under the Tariff Act but certain goods are exempted under CE Act on fulfilments of conditions specified in the exemption notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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