P.G. Chacko, Member (J)
1. The respondents were engaged in the manufacture of cement, falling under Sub-heading 2502.20 of the Schedule to the Central Excise Tariff Act, 1985, in their mini-plant of licensed capacity of 200 TPD (tonnes per day). They filed classification list No. 1/89-90 effective from 27-4-1989 claiming therein the benefit of concessional duty under Notification No. 23/89-C.E., dated 1-3-1989 as amended by Notification No. 123/89-CE., dated 27-4-1989. The classification list was approved by the jurisdictional Assistant Collector provisionally and the party was asked to produce the licensed capacity certificate as required under Notification 23/89-G.E. as amended. The respondents could not produce the certificate at that time. Department, therefore, by show cause notice dated 16-7-1990 proposed to deny the benefit of concessional duty for the period 1-5-1989 to 31-12-1989 and recover the differential duty for the said period under Section 11A of the Central Excises & Salt Act (CESA), 1944. In their reply to the show cause notice, the respondents submitted that they had already produced the required certificate. They also cited an earlier order of the jurisdictional Collector of Central Excise on the same issue, which was in their favour, and contended that the said order was binding on the Assistant Collector. They also raised the plea of time-bar against the show cause notice. The Assistant Collector, who adjudicated the dispute, confirmed the demand of differential duty to the extent of Rs. 21,55,645.80 on the clearances of cement for the period, 1-5-1989 to 31-8-1989. This order of adjudication was set aside by the Collector (Appeals) in the appeal filed by the party against the said order. Hence the Revenue’s appeal now before the Tribunal.
2. Heard both sides. Shri Ravinder Babu, JDR, reiterated the findings recorded by the adjudicating authority and prayed for setting aside the order of the lower appellate authority. Shri A. Upadhyay, Advocate who argued for the respondents, submitted that the Assistant Collector had gone beyond the scope of the show cause notice by relying on the respondents’ letter to the P.W.D. Superintending Engineer (National Highways) as well as the affidavit alleged to have had been sworn by them before the Superintending Engineer, both of which had not been relied on in the show cause notice. Ld. advocate added that the respondents had not at all filed any affidavit with the Superintending Engineer. He defended the order of the Collector (Appeals) by relying on case law on interpretation of fiscal statutes and Exemption Notifications. Counsel also submitted that the demand of duty as raised in the show cause notice dated 16-7-1990 for the period May-August 1989 was time-barred. He urged us to reject the appeal.
3. The issue before us is whether the benefit of Notification No. 23/89-C.E., dated 1-3-1989 as amended was available to the respondents for the period 1-5-1989 – 31-8-1989.
4. Notification No. 23/89-C.E., dated 1-3-1989 reads as follows :-
In exercise of the powers conferred by Sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts cement falling under sub-heading No. 2502.20 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and manufactured in a factory using vertical shaft kiln with the total licensed capacity as certified by the Director of Industries in the State Government, not exceeding 200 tonnes per day, from so much of the duty of excise leviable thereon under the said Schedule as is in excess of the amount calculated at the rate of Rs. 115/- per tonne:
[Notification No. 23/89-C.E. dated 1-3-1989]
The following amendments were made to the above opening paragraph of the Notification by Notification No. 123/89-C.E., dated 27-4-1989 :-
(a) the words “using vertical shaft kiln” shall be omitted;
(b) after the words “Director of Industries in the State Government”, the words “or the Development Commissioner for Cement in the Government of India, Ministry of Industry” shall be inserted.
5. The period of dispute in the instant case is 1-5-1989 – 31-8-1989. For this period, Notification No. 23/89-C.E. as amended as above exempted cement (falling under Sub-heading 2502.20 of the Tariff) manufactured in a factory with the total licensed capacity as certified by the Director of Industries in the State Government or the Development Commissioner for Cement in the Government of India, Ministry of Industry not exceeding 200 TPD, from so much of the duty of excise leviable at Tariff rate as was in excess of the amount calculated @ Rs. 115/- per tonne.
6. In the memorandum of appeal, the Revenue has conceded that the concessional rate of duty under Notification No. 23/89-C.E. as amended was available to cement units with licensed capacity not exceeding 200 TPD, for the period 1-5-1989 to 31-8-1989. We note that, in his order of adjudication, the Assistant Collector had also found to the same effect. The adjudicating authority, however, denied the benefit of the Notification to the assessees on the ground that, going by the production of the unit for 1988-89 (91,000 tonnes) and 1989-90 (94684 tonnes), it could be found that their actual installed capacity was 300 TPD = 99000 TPA (tonnes per annum), which was well above the ‘prescribed limit’ of 200 TPD = 66000 TPA. It is this decision of the original authority that is sought to be restored.
7. The adjudicating authority was patently in error as rightly observed by ld. Collector (Appeals). The Assistant Collector was obviously carried away by considerations of actual production and thus overlooked the plain meaning of the term “licensed capacity” used in the Notification. The licensed capacity of the respondents’ cement plant was 66000 TPA (i.e. 200 TPD) as per licence dated 17-6-1983 from the competent authority in the Ministry of Industry, Government of India. This fact was confirmed by the Ministry in their letter dated 22-1-1999 sent in reply to the Assistant Collector’s letter on the subject. The Ministry’s letter categorically stated that the licensed capacity of the plant continued as above, as any endorsement for higher capacity of 300 TPD as requested by the party was yet to be made in the licence on account of non-fulfilment of certain conditions relating to pollution control. As long as the limit of production capacity figured as 66000 TPA = 200 TPD in the industrial licence and any higher capacity was not duly endorsed therein by the competent authority,’ the “licensed capacity” would continue to be 200 TPD. Since there is no dispute of the fact that there was no such endorsement in the licence by the competent authority till 31-8-1989 and that the licence was valid throughout the period of dispute, there can be no gainsaying of the fact that the respondents’ licensed capacity of cement plant for the period of dispute was 200 TPD. The lower appellate authority’s finding to this effect has to be upheld.
8. The subject notification speaks of “licensed capacity” only and not of what the adjudicating authority preferred to call “actual production capacity” or “installed capacity” or “actual installed capacity”, nor does the notification contain any mention of what the appellants have referred to as “recognised capacity”. “Licensed capacity” can only be what is prescribed as production capacity in the industrial licence issued by the competent authority. It is in this sense only that the expression has been used in the notification. The rule of strict interpretation should be applied to fiscal statutes and exemption notifications thereunder. The reliance placed by ld. Advocate on the Orissa. High Court’s judgment in the case of Raj Exports v. NALCO Ltd. [1996 (87) E.L.T 349 (Ori.)] is opposite to this context. In that case, the court restated the settled principle of law that, to interpret fiscal laws, each and every word expressed in the statute had to be construed strictly and there could not be any liberal interpretation with greater flexibility. The subject notification being one issued under the provisions of a fiscal statute, the High Court’s ruling is applicable to interpretation of the words and expressions used in the notification.
9. Counsel for the respondents also relied on the Supreme Court’s decision in Union of India v. Tarachand Gupta & Bros. [AIR 1971 S.C. 1558] in the context of arguing on certain jurisdicrional limits of departmental authorities. In that case, the respondents were holders of an import licence, under Import Policy, for import of parts and accessories of motor cycles and scooters. Under the said licence, they imported certain goods in two consignments which arrived in two different ships on two different dates. They sought to clear the goods as motor cycle parts. The Customs authorities who examined the goods held that the goods covered by both the consignments put together constituted 51 sets of “Rixe” mopeds in a completely knocked down (CKD) condition. Show cause notices were issued, pursuant to which the Deputy Collector of Customs held an enquiry into the matter and ultimately passed an order of confiscation (with redemption fine in lieu thereof) and penalty upon the finding that the imported goods were not motor cycle parts and accessories permissible under Entry 295 of the Schedule to the Import Control Order but were motor cycles/scooters in CKD condition prohibited in terms of Entry 294 of the said Schedule. The aggrieved party challenged the Deputy Collector’s order. The dispute eventually came up before the apex court. The Supreme Court, after examining Entries 294 and 295 ibid read with the relevant provisions of the Imports and Exports (Control) Act, 1947 as well as the relevant provisions of the Sea Customs Act, 1878, held as under:
The result is that when the Collector examines goods imported under a licence in respect of goods covered by entry 295 what he has to ascertain is whether the goods are parts and accessories, and not whether the goods, though parts and accessories, are so comprehensive that if put together would constitute motor cycles and scooters in CKD condition.
The respondents’ licence admittedly authorised them to import goods covered by entry 295. They could, therefore, legitimately import, on the strength of that licence, all and several kinds of parts and accessories of motor cycles and scooters. The only question, therefore, before the Collector was whether the respondents’ licence covered the goods imported by them, i.e. whether the goods were parts and accessories. If they were, the imports were legitimate and no question of their being not covered by the licence or the respondents having committed breach of Section 3 of the Imports and Exports (Control) Act or Section 167 (8) of the Sea Customs Act could possibly arise.
Ld. Advocate could, in our view, legitimately claim support from the above decision to his contention that, in the instant case, the Customs authorities jurisdiction was limited to ascertaining whether the assessees licensed capacity was 200 TPD or higher.
10. We note that the Assistant Collector overstepped his jurisdictional realm by making a roving expedition into what had transpired between the respondents and the licensing authorities. All what he could have done was to see whether the respondents were holding an industrial licence from the competent authority for manufacturing 200 TPD or more of cement. Once the assessees produced proof of licensed capacity of 66000 TPA = 200 TPD for the period 1-5-1989 to 31-8-1989 and further proof of any higher capacity having not been endorsed in their licence for such period, it was not open to the Assistant Collector to deny the benefit of the notification to them by substituting his own concepts for the expression “licensed capacity” in the Notification.
11. The respondents’ licensed capacity of production for the period of dispute was 66000 TPA = 200 TPD and, therefore, they were eligible for the benefit of concessional duty on cement for such period in terms of Notification No. 23/89-C.E. (as amended). In view of this finding we are not dealing with any other question raised in this appeal. The impugned order of ld. Collector (Appeals) is upheld and the present appeal is rejected.