ORDER
A.C.C. Unni, Member (J)
1. This is an appeal filed against the order-in-original of the Additional Collector of Central Excise, Pune dated 12-9-1988 by which a duty demand of Rs. 27,887.24 was confirmed against the appellants and penalty of Rs. 25,000/- imposed.
2. Appellants are engaged in the manufacture of motor vehicles classifiable under Chapter 87 and diesel operated 1C engines classifiable under Chapter 84. They also manufacture component parts for use in the manufacture of the motor vehicles as well as 1C engines.
3. The Department issued a SCN dated 23-3-1988 followed by corrigendum issued on 7-7-1988 asking the appellants to show cause why duty amounting to Rs. 27,887.24 on the component parts used in the manufacture of stationary type of 1C engines [which were classifiable under erstwhile T.I. 29(ii) during the period 28-2-1986 to 31-3-1987] should not be recovered and penalty should not be imposed under Rule 173Q read with the relevant Sections/Rules. The Department alleged that the appellants had incorrectly availed exemption under Notification No. 217/85, dated 8-10-1985 as amended by Notification No. 79/86, dated 10-2-1986 (effective from 28-2-1986) inasmuch as the appellants had used component parts such as pistons, piston rings, gudgeon pins, engine valves, gaskets, nozzles and nozzle holders, circlips and filter elements for the manufacture of stationary 1C engines classifiable under Chapter Subheading 8408.00. It was alleged that since the said component parts were not allowed the benefits of exemption under Notification No. 75/86, the exemption had been wrongly availed. According to the SCN, Notification No. 75/86 applied only to parts and accessories used on motor vehicles, tractors and trailers.
4. When the matter was adjudicated the Additional Collector by the impugned order dismissed the present appellants’ contention that Notification No. 75/86 did not debar the parts listed in the Notification such as piston rings, engine valves, gaskets, pistons, etc. obtained under Chapter X procedure when used in the manufacture of stationary type of 1C engines since 1C engines are also covered under sub-heading 8408.00. The Additional Collector observed that under Notification No. 75/86 component parts of diesel oil operated 1C engines were not included within the category of parts and accessories of motor vehicles, tractors and trailers which had been specifically excluded from the purview of Notification No. 217/85 as amended by Notification No. 75/86 and, therefore, not eligible for exemption under Notification No. 75/86. He, therefore, held that Items like pistons, piston rings, etc. which were used on receipt under Chapter X for the manufacture of stationary type of diesel oil operated 1C engines in the factory of the present appellants would not be eligible for exemption under Notification No. 75/86. He further held that the exemption given under the Notification are only for parts and accessories of motor vehicles, tractors and trailers the reference to Chapter 84 was only by way of illustration and not by way of inclusion so as to cover 1C engines, even though, stationary type of 1C engines also fall under Chapter 84. He also held that the appellants were liable under Section 11A for wilful mis-statement inasmuch as they had failed to intimate the factual position regarding use of piston, piston rings, etc. for use in the manufacture of stationary type of 1C engines.
5. Arguing the case for the appellants before us Shri C.L. Lodha, ld. Counsel submitted that in the instant case the Department had tried to read a condition in the exemption Notification No. 75/86 read with the previous Notification No. 249/82 which was absent in the said Notification. He submitted that Notification No. 249/82 had exempted parts and accessories of motor vehicles, tractors and trailers falling under T.I. 34A of the erstwhile Tariff from the whole of duty of excise if they were intended to be used as original equipment (OE) parts in the manufacture of 1C engines falling under T.I. 29. The Notification further provided that if the intended use was at a place other than a factory of production of the said goods, Chapter X procedure should be followed. Pursuant thereto the appellants had obtained a licence for doing so. The 1C engines manufactured by the appellants were of two types, (i) for use as prime mover for transporting vehicles and (ii) stationary type of 1C engines operated with diesel oil. Both these types of engines were classifiable under T.I. 29. On 10-2-1986 a further Notification (Notification No. 75/86) was issued superseding Notification No. 249/82 by which exemption was given to specified parts and accessories falling under Chapter 68, 73, 84, 85 or 87 of the Schedule to the Central Excises and Salt Act, 1944 if such goods were intended to be vised as OE parts in the manufacture of 1C engines falling under Chapter 84. The Notification also provided that when the use of such parts was made in a place other than the factory of production, Chapter X procedure has to be followed. Consequent on the issue of Notification No. 75/86, the appellants obtained a fresh licence.
6. Shri Lodha strongly contended that in terms of Notification No. 75/86 parts intended to be used as OE parts in the manufacture of 1C engines falling under Chapter 84 of the CETA, 1985 was clearly eligible for exemption. The only condition in the Notification was that where the use of the parts was in a factory other than the factory of production, procedure under Chapter X should be followed. There was nothing either in Notification No. 75/86 nor under the previous Notification to show that the exemption covered only 1C engines used as prime movers. Ld. Counsel contended that as long as the parts were used in the manufacture of 1C engines classifiable under Chapter 84 the conditions of the Notification were fully satisfied and benefit of exemption could not be denied. Ld. Counsel also submitted that all the facts relating to the production of the parts and their use were fully known to the Department from 1982 onwards and the appellants had been availing the exemption after obtaining specific CT 2 certificate from the Department. He submitted that in these circumstances, raising of the demand for the period 28-2-1986 to 31-3-1987 was barred by limitation. He also submitted that in the circumstances of the case no question of any contravention of the Rules attracting penalty was also involved. He relied on the Apex Court decision in ITO v. T.S. Devhmtha Nadar reported in AIR 1968 SC 623 and M/s. Hemraj Gordhandas v. H.H. Dave, Assistant Collector of Central Excise and Customs, Surat and Ors., 1978 (2) E.L.T. (J 350) in support of his contention that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words used in the statute.
7. Defending the impugned order ld. DR contended that the proviso [Clause (a)] to Notification No. 75/86 clearly specified that the parts and accessories mentioned in the Table to the Notification should be those which are intended to be vised as original equipment parts in the manufacture of 1C engines falling under Chapter 84. He drew attention to the opening part of the said Notification by which exemption was given only to “parts and accessories of motor vehicles, tractors (including agricultural tractors) and trailers falling under 68,73,84,85 or 87”. He submitted that the intention as apparent from the opening portion was only to exempt parts and accessories of motor vehicles, tractors etc. and not to any machinery which is vised for purposes other than as prime movers of motor vehicles, tractors, etc. He therefore submitted that the lower authorities had correctly held against the appellants. On the question of time bar, ld. DR submitted that the SCN has specifically invoked Rule 196 dealing with duty leviable on excisable goods. He also drew attention to the fact that Rule 196 occurs in Chapter X dealing with the remission of duty on goods in certain circumstances. In view thereof the time limit under Section 11A would not be applicable in the present case. He relied on IFFCO v. CCE, 1989 (41) E.L.T. 474 in support of his contention.
8. We have considered the rival submissions. The question relates to the interpretation of Notification No. 75/86 which read as follows :-
Notification No. 75/86-C.E., dated 10-2-1986
In exercise of the powers conferred by Sub-rule (1) of rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 249/82-Central Excise, dated the 1st November, 1982, the Central Government hereby exempts parts and accessories of motor vehicles, tractors (including agricultural tractors) and trailers, falling under Chapter 68, 73, 84, 85 or 87 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), and specified in the Table annexed hereto from the whole of the duty of excise leviable thereon under section 3 of the Central Excises and Salt Act, 1944 (1 of 1944).
THE TABLE
————————————————————-
Sr. No. Description of Goods ------------------------------------------------------------- (1) (2) ------------------------------------------------------------- 1. Brake linings; 2. Clutch facings; 3. Engine valves; 4. Gaskets; 5. Nozzles and nozzle holders; 6. Pistons; 7. Piston rings; 8. Gudgeon pins; 9. Circlips; 10. Shock absorbers; 11. Sparking plugs; 12. Thinwalled bearings; 13. Tie rod ends; 14. Electric horns; 15. Filter elements, inserts and cartridges : ------------------------------------------------------------- Provided that - (i) it is proved to the satisfaction of an officer not below the rank of an Assistant Collector of Central Excise that the said goods are intended to be used as original equipment parts in the manufacture of - (a) internal combustion engines falling under Chapter 84 of the said schedule; (b) motor vehicles, tractors (including agricultural tractors) and trailers falling under Chapter 87 of the said Schedule; or (c) parts and accessories of motor vehicles, tractors (including agricultural tractors) and trailers falling under the said schedule; and (ii) in respect of such use elsewhere than in the factory of production of the said goods, the procedure set out in Chapter X of the Central Excise Rules, 1944, is followed. 2. This notification shall come into force on 28th day of February, 1986.
9. As will be observed from the above, what has been exempted by the Notification are parts and accessories of “motor vehicles, tractors, (including agricultural tractors) and trailers falling under Chapter 68, 73, 84, 85 or 87”. Clause (i) of the proviso thereto states that the exemption will be subject to the satisfaction of the proper officer that the goods are intended to be used as original equipment in the manufacture of three types of goods mentioned at Items (a) to (c). It is a well settled rule of construction of legislative texts that a proviso is intended to carve out a certain area out of the larger area of the subject matter covered by the main provision. The opening portion of Notification No. 75/86 specifying the items exempted from duty refers to parts and accessories of “motor vehicles, tractors (including agricultural tractors) and trailers” falling under Chapter 68,73,84,85 or 87. The proviso thereunder talks of the satisfaction of an officer not below the rank of an Assistant Collector of about the intended use “of the said goods” as original equipment parts in the manufacture of certain goods specified as Items (a) to (c). Item (a) refers to “internal combustion engines falling under Chapter 84”. Item (b) refers to “motor vehicles, tractors (including agricultural tractors) and trailers falling under Chapter 87” and Item (c) refers to “parts and accessories” of motor vehicles, tractors (including agricultural tractors) and trailers…”. Clause (ii) of the proviso further provides that where such use is made in a place other than in the factory of production of the parts and accessories, Chapter X procedure has to be followed. It will be observed that the opening portion of the Notification contains no mention of 1C engines but only of motors vehicles, tractors and trailers which means that the parts and accessories mentioned in the Tables have necessarily to be parts and accessories of motor vehicles, tractors, (including agricultural tractors) and trailers which are all vehicles and are meant to be mobile. Since the purpose of the proviso is to carve something out of the main provision and not to add something to what has been covered by the main provision, it cannot be deemed to include 1C engines which are stationary. Item (a) covers only those 1C engines which become part of motor vehicles, tractors or trailers. Stationary 1C engines which are not part of motor vehicles, tractors or trailers cannot, therefore, be said to be covered by the exemption Notification. In the instant case the appellants have claimed exemption for stationary 1C engines operated with diesel oil. In view of the foregoing we hold that stationary 1C engines will not be eligible for the exemption. As regards the ld. Counsel’s submission that there cannot be any intendment in fiscal statutes, we agree with him that no intention beyond the meaning of clear words can be inferred in a fiscal statute. However, we note that the cases relied on by the ld. Counsel do not deal with a situation like the present one where the question is of construing of an exemption notification and not a charging section. The Apex Court had also held in Union of India v. Wood Papers Ltd., 1990 (47) E.L.T. 500 that in the case of exemption notifications there are two stages of interpretation. At the first stage the question to be considered is whether the subject falls within the exemption. Rules of strict interpretation would apply at this stage. But once it is ascertained that the subject falls within its scope full play has to be given and it calls for a wider and liberal construction. In the instant case the question whether parts and accessories used in stationary 1C engines (i.e. other than those used in motor vehicles, tractors, etc.) is covered by the exemption notification is to be construed strictly. Applying the ratio in the aforementioned Apex Court decision we hold that Item (a) of clause (i) of proviso to Notification No. 75/86 does not include 1C engines of a stationary type.
10. As regards the question of limitation we find force in the ld. DR’s contention that in the instant case the demand has been confirmed under the provisions of Rule 196 which falls within Chapter X of the Rules dealing with remission of duty. We agree with the ld. DR that for invoking Rule 196, there is no warrant for referring to the grounds for extended period under proviso to Section 11A(1) as has been laid down by this Tribunal supra.
11. In view of the above findings we do not see any reason to interfere with the impugned order.
12. In the result, the appeal is rejected and the impugned order upheld.