ORDER
K. Prakash Anand, Member (T)
1. In this case appellants claim benefit of Notification No. 16/82-C.E., dated 14th February, 1982 which provides partial exemption from duty in respect of polyester fibre manufactured from wastes by the process of recycling wastes. The department rejects the claim on the ground that the fibre cannot be said to be manufactured exclusively out of wastes. When the party went up in appeal before Collector of Central Excise (Appeals), Madras, the view of Assistant Collector was upheld.
2. We have heard Dr. Gauri Shankar, Senior Advocate and Shri Arora and Shri Rajappa, Advocates on behalf of the Appellant and Shri K.C. Sachar, JDR on behalf of the department.
3. Dr. Gauri Shankar has stated that the point at issue in this matter is fully covered in favour of the appellant by the decision of the Supreme Court in the case of Aluminium Corporation of India Limited v. Union of India and Ors. 1978 E.L.T. (J 452) and Union of India and Ors. v. Tata Iron & Steel Co. Ltd.,, Jamshedpur, 1977 E.L.T. (J 61). It is also submitted that the decision of the Madras High Court in the case of Indian Organic Chemicals Ltd. v. Union of India and Ors., 1983 E.L.T. 34 is also in accordance with the views of the Supreme Court in the two cases.
4. Shri K.C. Sachar, JDR for the respondent briefly submits that he would like to reiterate the stand taken by the department before the lower authorities. He submits that the raw material in this case comprises a nominal amount of 4% waste and 96% of it is made up of virgin chips. It is submitted that fibre made out of such a blend cannot be considered a manufacture out of waste. The learned Departmental Representative adds that the decision of the Madras High Court in the case of Indian Organic Chemicals Ltd. (supra) cannot support the appellant’s claim in the present matter. In that case, the party had sought the benefit of Notification No. 37/78 which granted, exemption to fibre/tops manufactured out of duty-paid waste. The petitioners had claimed that they used in the process of manufacture MEG (Glycol) as an assisting agent, but it was admitted that the ” meg” used was fully recovered back in the process, subject to a minimal loss due to handling. The view taken by the Court was that all that was required was that the source of the end product must be duty-paid. It was held that since MEG, (Glycol) had been used only as an assisting agent, this could not deprive the Petitioners of the benefit of the relevant notification. In the present matter, Shri Sachar says, the issue is not the use of-a foreign ingredient as an assisting agent. The plain fact of the matter is that fibre is being manufactured only from the nominal quantity of 4% waste chips and 96% virgin chips. Shri Sachar also adds that the decision of the Supreme Court in the case of Aluminium Corporation of India Limited (supra) can also not apply to the present matter as the issue in that Case was whether the concession which was intended in respect of duty paid material used in the manufacture of final product should be denied merely because some non-duty paid material had been used. It is, in this background, that the Supreme Court decided that a pro tanto remission should be granted in respect of duty-paid material used in the final product. The whole object in that case was to see that duty was not charged twice in respect of the same material. It is also submitted that the ratio in the case of Union of India and Ors. v. Tata Iron & Steel Co. Ltd., Jamshedpur is also essentially the same, that is, to grant exemption in case the final product is manufactured out of duty-paid material and in administering this notification, we have to go by the simple wording thereof and decide whether the final product is or is not manufactured out of duty paid material.
5. We have carefully considered the facts of the case the submissions made before us and the case law cited. In the case of Aluminium Corporation of India Limited v. Union of India and Ors. (supra), the Supreme Court had before it Notification No. 29/60-Central Excises, dated 1st March, 1960 according to which where ingots, bars, blocks, slabs, billets, shots and pellets made out of aluminium scrap or scrap obtained from virgin metal on which excise duty had already been paid were used for making fresh items like sheets, there was to be a reduction in the rate of duty leviable on the final product. As a result, a manufacturer who had paid Rs.. 300/- for the items at the intermediate stage of manufacture would, on use of such items in the later stage of manufacturing finished goods, get concession to that extent by being charged only Rs. 200/- per metric tonne. The department had taken the view that the concessional rate of Rs. 200/- per metric tonne was applicable only to those aluminium manufactures which were made out of duty-paid aluminium in any crude form and that this would not cover aluminium manufactures made partly out of duty-paid and partly out of non-duty paid crude. On this, the Supreme Court observed as follows :-
“We wonder where the author of this order discovers in the statutory notification the exclusion from exemption altogether of manufactures partly out of duty-paid crude and partly out of non-duty paid crude. If 99% of duty-paid crude was used for manufacture of sheets etc., should the final product be exigible to tax at Rs. 500/- per metric tonne? Would it not virtually mean that merely because a wee bit of non-duty paid crude was mixed the party is penalised by payment of Rs. 800/- per MT? An odd and un-reasonable result! Shri Sanghi for the respondent rightly asked whether a manufacturer who used 1% duty-paid and 99% non-duty paid slabs in producing sheets can get way with it from liability for duty at the rate of Rs. 500/-? No, not at all. Such an assessee will get the benefit of the concessional rate (shall we call it rebate?) only to the extent of 1%, and will be subject to full payment at Rs. 500/- for the rest…”.
Accordingly, it was held that the appellant was entitled to pro tanto remission.
6. In the case of Union of India and Ors. v. Tata Iron & Steel Co. Ltd., Jamshedpur (supra), the Supreme Court again had the occasion to observe that where duty-paid pig iron is mixed with non-duty paid pig iron proportionate relief cannot be refused on the ground that non-duty paid material has also been used. The Supreme Court observed as follows :
“The High Court rightly said that the notification does not say that the exemption is granted only when duty-paid pig iron is used and that the exemption would not be available if duty-paid pig iron is mixed with other non-duty paid materials. If the intention of the Government were to exclude the exemption to duty-paid pig iron when mixed with other materials, then the notification would have used the expression “only” or “exclusively” or, “entirely” in regard to duty-paid pig iron. The subject of the notification was to grant relief by exempting duty-paid pig iron”.
In this case, the Government held that the respondent Company was not entitled to exemption under the relevant Notification No. 30/60 dated 1-3-1960 because re-melted scrap obtained from un-serviceable casting moulds, namely, ingot moulds, were used in conjunction with other non-duty paid pig iron in the manufacture of steel ingots. The Supreme Court upheld the view of the High Court that the Revenue authorities were in error in interpreting the relevant notification by confining exemption to steel ingots in which “entirely”, “exclusively” or “only” duty paid pig iron is used. The High Court held that the words “entirely”, “exclusively” or “only” are not used in the notification.
The ratio of the case was that the notification should be so interpreted that the statute would not cast a burden twice over for payment of tax on the tax payer unless the language of the statute is compellingly certain to that effect.
7. The Madras High Court in the case of India Organic Chemicals Ltd. v. Union of India and Ors. (supra) paid homage to the same principle when it held that in interpreting notifications of this nature, the expression “manufactured out of” does not mean that the end product should exclusively be produced out of the material specified. Therefore, the benefit of an exemption cannot be denied to a manufacturer who has used some other material in the process of such product.
8. We agree with the submissions made by the learned JDR that the facts in all the three foregoing cases cited by the appellants in their favour can be differentiated from the facts in the present case. It is true that in the case of Indian Organic Chemicals Ltd. v. Union of India and Ors. (supra), the High Court was impressed by the fact that MEG (Glycol) which had been used in the manufacture of the final product was in fact only an assisting agent which, at the end of the process of manufacture, got almost entirely recovered. Therefore, it had appeared that the final product could be considered to be a manufacture in which MEG had not been used at all. The decision of the Madras High Court, we agree, therefore, does not as such provide much support to the appellant’s claim in this case, but the fact is that the Court did make the observation that in interpreting notifications of this nature, the use of expression “manufactured out of” does not mean that the end product should exclusively be out of the material specified and that the benefit of exemption cannot be denied to a manufacturer who has used some other material also along with material specified.
9. Shri Sachar has also ably argued that the decision of the Supreme Court in the case of Aluminium Corporation of India Limited v. Union of India and Ors. (supra) and Union of India and Ors. v. Tata Iron & Steel Co. Ltd. (supra) was essentially based on the principle that where the raw material included duty-paid goods, the final product should not be required to pay duty again in respect of the duty-paid raw material content. But the fact remains that in the course of expression of its views, the Supreme Court had the occasion categorically to opine as to how notifications of the nature as before us should be interpreted and what is the meaning of the word “manufactured out of”. It has been said unequivocally that unless the relevant notification specifically provides for it, it is not correct to read such notifications as confining the exemptions to products made “entirely”, “exclusively” or “only” from the specified material and that proportionate relief should be given even in those cases where material other than that specified is used.
10. Accordingly, we allow this appeal.
V.T. Raghavachari, Member (J)
11. The fact of the case as well as the submissions of both sides have been lucidly set forth in the order prepared by Shri Anand. It is, therefore, unnecessary to repeat the same.
12. The dispute arose out of a classification list wherein benefit was claimed under Notification No. 16/82 in respect owaste. The lower authorities rejected that claim. The main argument for the appellants is that for eligibility for benefit under Notification No. 16/82-C.E., dated 14-2-1982 it would not be necessary that the polyester fibre should have been manufactured out of waste alone. In this case it is stated that 4% of waste was mixed with 96% of chips and the manufacture of the polyester fibre was out of the said mix. The claim for the appellants is that benefit was being claimed only with reference to that part of the fibre which could be said to have been manufactured out of the waste. It was submitted that the relief could be granted either with reference to the 4% of the final product being allowed to be removed at the concessional rate or, in the alternative, the entire product could be subjected to 96% of the normal rate. When asked by one of us as to how this rate of 96% of the normal rate could be pressed into service since no such rate is mentioned even in the notification the learned counsel submitted that if the principle pleaded for the appellants is accepted it would be open to the department to grant relief in either of the two manners suggested by him. It would appear to me that relief claimed in the alternative as mentioned above (by subjecting the entire product to 96% of the normal rate) would not be permissible as that would introduce a rate not contemplated even under the notification.
13. But on the issue whether the benefit should be denied merely because chips had also been included along with the waste the learned counsel had relied on the decisions in (Supra). The relevant passages from the judgments of the Supreme Court have been extracted in the order of Shri Anand. As observed therein one should not read into the notification [as has been done by the Collector (Appeals) in this case] the word “alone” in order to make the notification read that polyester fibre has to be manufactured from the waste alone in order to be entitled to the eligibility for exemption under the notification. The intention behind the notification was to grant benefit for the fibre manufactured out of the recycled waste. It would appear to me that the interpretation to be adopted in order’ to effectuate the intention behind the notification would be to make the eligibility for the benefit available pro rata on the final product, and not to deny it altogether by introducing the concept that for eligibility under the notification the manufacture should have been out of waste alone.
14. In this connection we may note that in 1980 when Notification No. 44/80-C.E., dated 24-4-1980 was issued it read that in order to claim benefit of exemption under the notification the fibres and tops should have been manufactured exclusively out of wastes. Therefore, the Government, whenever it felt inclined to confer the benefit of exemption on manufactures exclusively out of waste, took care to introduce this concept in issuing the notification itself. This would also give an indication that when no such word is to be found in the notification the intention was not to deny wholly the benefit if the manufacture was not exclusively out of the waste but to grant it pro rata.
15. In this view I agree that the appeal is to be allowed and the orders of the lower authorities set aside.