PETITIONER:
ELSON MACHINES (P) LTD.
Vs.
RESPONDENT:
COLLECTOR OF CENTRAL EXCISE
DATE OF JUDGMENT15/11/1988
BENCH:
PATHAK, R.S. (CJ)
BENCH:
PATHAK, R.S. (CJ)
RANGNATHAN, S.
CITATION:
1989 AIR 617 1988 SCR Supl. (3) 878
1989 SCC Supl. (1) 671 JT 1988 (4) 373
1988 SCALE (2)1320
CITATOR INFO :
RF 1991 SC 999 (6)
ACT:
Central Excise Rules, 1944-R. 8(1)--Exemption from duty
granted under Notification No. 80/80/ C.E. dated 19-6-1980--
Whether captive consumption of specified goods within the
factory for manufacture of specified goods falling under a
different item can be excluded while determining the
clearance value.
HEADNOTE:
As a measure of concession to small-scule manufacturers,
Notification No. 80/80-C.E. dated 19-6-1980 issued under r.
8(1) of the Central Excise Rules, 1944 exempted from duty
certain excisable goods and, paragraph 2 thereof stipulated
inter alia that the concession would not be available to a
manufacturer if the aggregate value of clearances of the
specified goods by him for home consumption during the
preceding financial year had exceeded Rs.15 lakhs.
Explanation V thereto provided that where any specified
goods were used within the factory of production for further
manufacture of any other specified goods and, where both the
former and the latter categories of specified goods fell
under the same item of the First Schedule to the Central
Excises and Salt Act, 1944, the clearances of the former
category of specified goods shall not be taken into account
for calculating the aggregate value of clearance under the
notification.
The appellant which was engaged in the business of
manufacturing and selling electric motors, availed of the
aforesaid exemption for the periods 1-4-1980 to 30-11-1980
and 1-4-198l to 30-9-198l. The Excise Authority issued a
demand for payment of duty on the ground that its clearance
exceeded the limit of Rs.15 lakhs. On appeal, the demand for
the period 1-4-1980 to 30-11-1980 was set aside but the
demand for the Period 1-4-l98l to 30-9-1981 was sustained.
On further appeal, the Appellate Tribunal observed that for
the year 1980-81 the appellant had disclosed a clearance of
Rs.13,43,443.55 on account of electric motors for home
consumption and Rs.6,51,138.50 on account of electric motors
"for captive consumption" in the manufacture of monoblock
pumps. The Tribunal held that while electric motors were
mentioned under Tariff Item 30, power driven pumps were
specified under Tariff Item 30-A, and therefore, the
electric motors captively consumed as inputs in the
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PG NO 879
manufacture of power driven pumps could not be excluded. The
further contention that the appellant had mistakenly stated
that electric motors had been used for monoblock pumps
whereas only rotors and stators which were integral
components of monoblock pumps had been used and therefore
the same Tariff Item was attracted entitling it to the
concession was also rejected by the Tribunal.
Dismissing the appeal,
HELD: The contention that the goods in question could
not be said to have been cleared from the factory since they
were employed in the manufacture of monoblock pumps within
the factory itself has no force. As soon as the manufacture
of the goods was completed they must be regarded as goods
available for clearance from the factory, and there is
nothing to show that when fitted into monoblock pumps they
were not removed to another part of the factory for that
purpose. The process of manufacture of those goods is
distinct, separate and complete in itself and at the end of
the manufacturing process, the goods in question represent a
completed product. [882E-F]
Whether the goods in question were rotors and stators and
whether they formed integral components of monoblock motors
is a question of fact considered and concluded by the
Tribunal and it cannot be entertained at this stage [882B]
JUDGMENT:
CIVIL. APPELLATE JURISDlCTlON: Civil Appeal No. 603 of
1985.
From the Judgment and Order dated 27.8.1984 of the
Customs Excise and Gold (Control) Appellate Tribunal New
Delhi in Appeal No. 1711/83-B in Order No. 643/84-B.
Dushyant Dave, R. Karanjawala and Mrs. Manik Karanjawala
for the Appellant.
G. Ramaswami, Additional Solicitor General, N.S. Das
Bahl and Ms. S. Relan for the Respondent.
The Judgment of the Court was delivered by
PATHAK, CJ. This appeal is directed against the judgment
and order of the Customs, Excise and Gold Control Appellate
PG NO 880
Tribunal on the question whether the appellant is
disentitled to the concession granted by Notification No.
80/80-C.E. dated 19 June 1980 to small scale manufacturers
in the matter of Central Excise duty.
The appellant is a private limited company. It has its
registered office and factory in the State of Gujarat. It is
engaged in the business of manufacturing and selling
electric motors.
In exercise of the powers conferred by sub-rule (1) of
rule 8 of the Central Excise Rules, 1944, the Central
Government issued Notification No. 80/80-C.E. dated 19 June
1980, which, as it stood during the relevant period,
exempted from duty excisable goods falling under certain
Item Numbers of the First Schedule to the Central Excises
and Salt Act, 1944 as specified in the Table annexed to the
Notification and of the particular description set forth in
that Table. But paragraph 2 of the Notification declared:
“Nothing contained in this notification shall apply to
a manufacturer,–
(i) if the aggregate value of clearances of all
excisable goods by him or on his behalf, for home
consumption, from one or more factories, during the
preceding financial year, had exceeded rupees twenty lakhs.”
(ii) if the aggregate value of clearances of the
specified goods by him or on his behalf, for home
consumption, from one or more factories, during the
preceding financial year. had exceeded rupees fifteen
lakhs.”
The appellant availed of exemption under the
Notification for the periods 1 April 1980 to 30 November
1980 and 1 April 1981 to 30 September 1981 claiming that
the clearances during the preceding years were confined to
the stipulated limit. The Excise Authority, in the belief
that the appellant had wrongly availed of exemption as its
clearances exceeded the limit of 15 lakhs, issued notice to
the appellant to show cause against an assessment of the
differential duty for those periods. The appellant attempted
to show cause, but the Assistant Collector of Excise did not
accept the case set up by the appellant and imposed the
demand. On appeal the Collector of Central Excise (Appeals)
set aside the demand for the period 1 April 1980 to 30
November 1980, but he upheld the demand for the period 1
April 1981 to 3V September 1981. In the further appeal
before the Customs, Excise and Gold Control Appellate
PG NO 881
Tribunal the entire question was whether the appellant had
exceeded the limit of Rs.15 lakhs when effecting clearances
during the financial year 1980- 1981 and was, therefore, not
entitled to exemption for the period 1 April 1981 to 30
September 1981.
For the financial year 1 April 1980 to 31 March 1981 the
appellant had disclosed a clearance value of Rs.13,43,443.55
on account of electric motors for home consumption and a
clearance value of Rs.6,51,138.50 on account of electric
motors “for captive consumption” in the manufacture of
monoblock pumps. It was contended by the appellant that the
electric motors used for making monoblock pumps could not be
taken into consideration when calculating the clearances
eligible under the Notification. According to the appellant
the captive consumption did not amount to clearance. The
claim was disputed by the Department, which relied on
Explanation V to the aforesaid Notification dated 19 June
1980. The Explanation declared:
“Explanation V–Where any specified goods (hereinafter
referred to as inputs) are used for further manufacture of
specified goods (hereinafter referred to as finished goods)
within the factory of production of inputs and where such
inputs and finished goods fall under the same item of the
said First Schedule to the said Act, the clearances of such
inputs for such use shall not be taken into account for the
purposes of calculating the aggregate value of clearances
under this notification.”
The Appellate Tribunal observed that in terms of the
Explanation the clearances of inputs could not be taken into
account for calculating the aggregate value of clearances
only when the inputs and finished products fall under the
same item of the First Schedule to the Act. It pointed out
that while electric motors were mentioned under Tariff Item
30, power driven pumps were specified under Tarrif Item 30-
A. It said that consequently the electric motors captively
consumed as inputs in the manufacture of power driven pumps
could not be excluded when determining the appellant’s
clearances. The appellant urged that the appellant had
mistakenly stated that electric motors had been used for
monoblock pumps whereas only rotors and stators which were
integral components of monoblock pumps had been used, and
that, therefore, the same Tariff Item was attracted, thus
entitling the appellant to the concession. The submission
was rejected by the Appellate Tribunal. Accordingly, it
found that the appellant had exceeded the limit stipulated
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by Notification No. 80/80-C.E. dated 19 June, 1980, and
was, therefore, disentitled to the concession.
It is contended before us that the Appellate Tribunal
erred in rejecting the submission of the appellant that the
goods manufactured by the appellant did not entitle it to
the benefit of Explanation V of the Notification. lt is
urged that the goods in question were rotors and stators,
that they were integral components of monoblock motors and
could not be considered as components of general purpose
Motors and therefore fell within the same Tariff Item as
monoblock pumps. The question has been considered by the
Appellate Tribunal. It is a question of fact and we do not
propose to entertain it at this stage.
It is then urged that stators and rotors should be
considered under Tariff Item 68, which is a residuary item.
The Appellate Tribunal has proceeded on the basis that what
was manufactured by the appellant were electric motors. It
is only in the alternative that it considered the submission
of the appellant that the goods should be regarded as rotors
and stators. In the circumstances recourse cannot be had to
Tariff Item 68 by the appellant.
The next contention is that the goods in question cannot
be said to have been cleared from the factory and therefore
could not be included within the value of the clearances
from the factory. The submission is that the goods were
employed in the manufacture of monoblock pumps within the
factory itself. We are not impressed by this contention. As
soon as the manufacture of the goods was completed they must
be regarded as goods available for clearance from the
factory, and there is nothing to show that when fitted into
monoblock pumps they were not removed to another part of the
factory for that purpose. The process of manufacture of
those goods is distinct, separate and complete in itself and
at the end of the manufacturing process, the goods in
question represent a completed product.
The next submission on behalf of the appellant is that
the Classification Lists had been approved earlier and the
Excise Authority was estopped from taking a different view.
Plainly there can be no estoppel against the law. The claim
raised before us is a claim based on the legal effect of a
provision of law and, therefore, this contention must be
rejected.
Finally it is pointed out by counsel for the appellant
that no recovery has been made by the appellant from its
constituents and therefore, it is said, the demand should be
PG NO 883
set aside. Reference is made to Collector of Customs and
Central Excise and Anr. v. Oriental Timber Industries.,
[1985] 20 E.L.T. 202 (SC). We have perused the facts of that
case and we find that the order made by the court there, so
far as this aspect is concerned, was made on a concession of
counsel for the Union of India and on the footing that the
Union of India was not concerned with the collection of
additional duty for earlier years but was merely concerned
with the question of law involved in the case. We are also
not satisfied that the facts upon which relief was granted
in that case arise before us in this case.
In the result the appeal is dismissed with costs.
H.L.C. Appeal dismissed