ORDER
K.S. Venkataramani, Member (T)
1. These two appeals arise out of a common order of the Collector of Central Excise (Appeals), Bombay, dated 30-11-1989. Facts, in brief, are that both the appellants are Registered Co-operative Society having three separate units, viz. a Sugar Factory manufacturing Sugar and Molasses, a Distillery where ethyl alcohol is manufactured from molasses and an Acetone Plant to manufacture Acetone from Ethyl Alcohol. They are preparing proforma invoices for the removal of Molasses from sugar factory to the distillery and for the removal of Ethyl Alcohol to the Acetone Plant and the transactions between the three divisions are made at the prices fixed by the Government of India under the Molasses Control Order, 1961 and Ethyl Alcohol Price Control Order, 1971.
The Govt. of India introduced a new scheme ‘money credit’ of Ethyl Alcohol under the provisions of Section AAA to Chapter V of Central Excise Rules, 1944 vide Notification 231/87, dated 1-10-1987. The appellants, herein, started availing of money credit under this notification. The Department was, however, of the view that the provisions in sub-para (ii) of para (b) of the Notification 231/87 were not fulfilled by the appellants inasmuch as no price was paid on the quantity of molasses which was manufactured in their own factory and utilised for further manufacture of ethyl alcohol in their own distillery. On the basis of the above interpretation, the jurisdictional Superintendent issued a show cause notice to the appellants, M/s. Rajaram Bapu Patil Sahakari Sakhar Karkhana asking as to why money credit of Rs. 2,81,503/- availed of by them during the period February, 1988 to June, 1988 should not be disallowed and penalty should not be imposed. Similarly, in the case of the appellants, Krishana SSK, were issued with a show cause notice as to why the credit of Rs. 1,45,908.00 should not be disallowed and as to why the credit amounts, already utilised, should not be recovered under 57 P of the Central Excise Rules. These demands were confirmed by the Assistant Collector in his adjudication order against which appeals were preferred by these two appellants and the Collector (Appeals) in the impugned order held that by virtue of para (b)(ii) of Notification 231/87, notified prices either of ethyl alcohol or molasses is required to be paid, which is not the case in respect of both these appellants as no purchase or sale is involved in the transactions between the different divisions of the same unit. Therefore, he rejected the appeal.
2. Shri K.P. Joshi, the Ld. Counsel represented Krishana Sahakari Sakhar Karkhana and Shri A.P. Kumtakar, Ld. Consultant appeared for Rajaram Bapu Patil SSK. It was submitted that the stand taken by the Department in interpreting the Notification 231/87 makes the concession designed for such factories as the appellants totally nugatory. On the other hand, the intention of the Government was made clear by a subsequent amendment to the Notification 231/87 issued on 1-11-1989 by which this clause was deleted from the Notification. They also cited and relied upon the copy of the Departmental clarification in Trade Notice No. 224/90, dated 23-7-1990 issued by the Pune Collectorate by which it was clarified that money credit should be permitted even prior to 1-11-1989 in cases where molasses, alcohol and chemicals have been manufactured by a unit within the same factory, if on verification it has been proved that duty on molasses has been paid at increased rates with effect from 1987. They also relied upon the adjudication order passed by the Assistant Collector of Central Excise, Mysore Division of the Bangalore Collectorate on the same issue, dated 19-6-1989 in the case of M/s. Mysore Sugar Co. wherein the Assistant Collector had held that money credit was available to such assessees. They also referred to and relied upon the Tribunal’s decision in the case of Vam Organic Chemicals Ltd. v. Collector of Central Excise -1989 (39) ELT 72 (Tri.) wherein the same notification was considered by the Tribunal and it was held to be applicable to ethyl alcohol produced captively. Relying upon the Supreme Court decision in the case of N.B. Sanjana, Assistant Collector of Central Excise, Bombay and Ors. v. The Elphinstone Spinning and Weaving Mills Co. Ltd. -1978 (2) ELT (J 399), it was submitted that the term ‘paid’ should include payable. They pointed out in both these cases duty has been paid at the higher rate on the prices notified by the Government and, therefore, money credit has been rightly availed of. They also referred to the Press Note issued by the Ministry of Industry (Deptt. of Chemicals & Petro-Chemicals) to explain the rationale of the concession extended to chemical units utilising indigenous ethyl alcohol.
3. Shri L. Narasimha Murthy, Ld. JDR contended that the notification clearly required that the price fixed by the Government of India should have been paid on the molasses or on the alcohol. In the present cases of the appellants, three units are merely divisions of the same factory. The proforma invoices on which the materials were transferred, are not sales invoices denoting the transfer of the ownership of the material from one person to another. Therefore, the lower authorities were correct in their interpretation. The Ld. D.R., relied upon the well-settled legal position that there is no intendment in a notification and that an exemption notification has to be interpreted according to plain meaning of the language used in the notification itself.
4. On a careful consideration of the submissions made by the Ld. Counsel, the Ld. Counsultant and the Ld. D.R., it is seen that the question is one of interpretation of Notification 231/87. The relevant portion thereof is extracted below:
NOTIFICATION NO. 231/87-C.E.
“G.C.R. – In exercise of the powers conferred by Rule 57K of the Central Excise Rules, 1944 the Central Government hereby specifies –
(a) the goods of the description mentioned in column (3) of the Table hereto annexed and falling under the heading number or sub-heading number of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) indicated against such goods in column (2) of the said Table as the finished excisable goods (hereinafter referred to as the final products), and the Ethyl Alcohol used in the manufacture of such final products as the raw material, to which alone the provisions of Section AAA of Chapter V of the said rules shall apply; and
(b) Rs. 258 per kilo litre of the Ethyl Alcohol used in the manufacture of the said final products, as the rate at which the credit of money is to be given for use of such Ethyl Alcohol, and stipulates that the grant of credit at the said rate and the utilisation thereof for payment of duty on the said final products shall be subject to the provisions of the said Section AAA and the following conditions, namely :-
(i) the credit shall be taken only in respect of indigenous Ethyl Alcohol;
(ii) the credit shall be taken only in respect of such Ethyl Alcohol for which the manufacturer has paid the price notified under the order of the Govt. of India in the Ministry of Industry (Deptt. of Chemicals & Petro-Chemicals) No. 15021/6/87-Ch. II Desk, dated the 29th September, 1987:
Provided that where the Ethyl Alcohol is produced from molasses inside the factory where the said final products are manufactured, the credit may be taken in respect of Ethyl Alcohol produced from such molasses for which the manufacturer has paid the price notified under the order of the Government of India in the Ministry of Industry (Department of Chemicals and Petro-Chemicals) No. 15021/29/87-Ch. II Desk, dated the 25th September, 1987;
(iii) the credit taken during any calender month shall be utilised for payment of duty on the said final products only after the commencement of the succeeding month;
(iv) the credit taken may be utilised for payment of duty on any of the said final products and the amount of excess credit, if any available in the credit account, shall not be refunded to the manufacturer or utilised for payment of duty on any other excisable goods.”
TABLE
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S. No. Heading Number or Sub-heading No. of the Schedule to Description of
the Central Excise Tariff Act, 1985 the final pro-
ducts
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1. x x x x x x
2. x x x x x x
3. x x x x x x
4. 2914.10 Acetone
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This is a notification under Rule 57K of the Central Excise Rules, 1944. In the case of the two appellants, Rule 57K of Central Excise Rules is applicable to the goods manufactured by them namely aceton which is covered by Sl. No. 4 of the Table of the Notification. It is also an admitted position that Ethyl Alcohol is used in the manufacture of acetone and that since it is their own production captively consumed, there is no doubt that it is Ethyl Alcohol indigenously produced. The Department is seeking to deny money credit under this Notification only on the basis of their interpretation of provisions in para (b)(ii) with its proviso which indicates that the credit shall be taken only in respect of Ethyl Alcohol for which price is notified by the Government of India, has been paid by the manufacturer which is the same condition for captively consumed Ethyl Alcohol also. The question is one of first of all determining whether at all the appellants, herein, come within the purview of the Notification. If they do, only thereafter, the question of interpreting the Notification liberally with reference to the intention thereof, or interpreting it in such a way as not to make the object of the Notification nugatory, will arise. In taking this view, the decision of the Supreme Court in the case of Union of India v. Wood Papers – 1990 (47) ELT 500 (SC) is of importance and provides a suitable guide. The Supreme Court observed “Literally exemption is freedom from liability, tax or duty and in fact an exemption provision is like an exception and on normal principle of interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment state revenue. But once exception or exemption becomes applicable no rule of principle requires it to be construed strictly.”
5. In other words, the Supreme Court laid down in the same judgment, “Do not extend or widen the ambit at the stage of applicability. But once that hurdle is crossed construe it liberally.” Accordingly, on the question of whether at all the appellants, herein, fall within the terms of the Notification, it is seen that the finished product “acetone” figures in the Table to the Notification 231/87 and that Ethyl Alcohol is used in its manufacture is also an admitted position, besides the fact that this Ethyl Alcohol is of indigenous origin. In such circumstances, it is to be held that the terms of the Notification issued under Rule 57K of the Central Excise Rules are applicable to the appellants, herein. Thereafter, will arise the question whether there is a case for liberal interpretation and in this context it is seen that the Department itself intended such units to avail of the money credit, as has been stated in the Trade Notice of the Pune Collectorate No. 224/90, dated 23-7-1990 and also in the Trade Notice No. 73/90, dated 3-8-1990 of the Meerut Collectorate, which is reproduced below:
“It has been brought to the notice that money credit under Rule 57K is being denied to units who are manufacturing molasses, then alcohol and then chemicals within the same factory on the ground that there is no sale of either molasses or ethyl alcohol manufactured within the same factory and thus price is not paid in accordance with condition (ii) to Notification No. 231/87-C.E., dated 1-10-1987 and proviso to said condition (ii). The matter has been examined. It is observed that the intention behind the money credit scheme under Notification No. 231/87-C.E., dated 1-10-1987 and Trade Notice No. 91/87, dated 3-11-1987 was basically to give relief of the excise duty paid on the molasses when ethyl alcohol made from such molasses is used in the manufacture of specified chemicals. However, condition (ii) and proviso thereto were added to ensure that duty on molasses is paid at increased rate w.e.f. 1-10-1987. It is, therefore, felt that money credit should be allowed even in cases where a unit is manufacturing molasses then the alcohol and then chemicals in the same factory even though a literal interpretation of condition (ii) and proviso thereto of the Notification aforesaid would mean the contrary. Notification No. 231/87 has since been amended by Notification No. 52/89, dated 1-11-1989 so as to remove the anomaly which condition (ii) and proviso thereto has created. Therefore, the problem stands resolved prospectively. However, since the intention of the Government was to grant money credit in the aforesaid case also, it has decided that money credit should be permitted even prior to 1-11-1989 in cases where molasses, alcohol and chemicals have been manufactured by a unit within the same factory if on verification it is proved that duty on molasses has been paid at increased rates w.e.f. 1987.”
Besides this, the fact that the Notification 231/87 itself was amended to delete the provision under clause (ii) is also significant. Moreover, that the appellants have fulfilled the requirement that the duty should have been paid at the higher rate on molasses is not disputed. In such circumstances, having regard to the intention behind the Notification, it will be reasonable to hold that the appellants, herein, are eligible for money credit under Notification 231/87, and in this view of the matter, the impugned order is not sustainable and is set aside, and the appeals are allowed.
