IMPORTANT POINT
Filing of the declaration by the manufacture being the foundation for availing the benefit under the Notification issued in exercise of powers conferred by Rule 174-A of the Rules, the consequences of its non-compliance are denial of benefits under the Notification.

Headnote:Central Excise Act, 1944-Central Excise Tariff Act, 1985-Central Excise Rules, 1944-Rule 174-A-Exemption Notification-Claim of benefit of-Manufacturer is required to make a declaration and give an undertaking, as specified in the form annexed while claiming exemption for the first time and thereafter before 15th day of April of each financial year-Appellants engaged in manufacture of articles of plastic i.e. Plastic insulated wares and vaccum flasks-They had two factories-All the goods manufactured in their main factory were fully exempt from duty during the relevant period-Only a minor portion of production was carried out in another factory-Show cause notice as to why duty shall not be levied and penalty imposed for failure to take out L-4 licence required for manufacture of excisable goods-Appellants claim that they were covered by notification No. 11/88 dated 15.4.1988-Declaration and the undertaking were not submitted by appellants-Whether CEGAT was justified in holding that exemption from operation of Rule 174 was not available to appellants-(Yes).
Held : Notification 11/88 deals with exemption from operation of Rule 174 to exempted goods. The Notification has been issued in exercise of powers conferred by Rule 174-A of the Rules. Inter-alia it is stated therein that, where the goods are chargeable to nil rate of duty or exempted from the whole of duty of excise leviable thereon, the goods are exempted from the operation of Rule 174 of the Rules. The goods are specified in the Schedule to the Central Excise Tariff Act, 1985 (in short the Tariff Act ). The proviso makes it clear that where goods are chargeable to nil rate of duty or where the exemption from the whole of the duty of excise leviable is granted on any of the six categories enumerated, the manufacturer is required to make a declaration and give an undertaking, as specified in the Form annexed while claiming exemption for the first time under this Notification and thereafter before the 15th day of April of each financial year. As found by the forums below, including CEGAT, factually, the declaration and the undertaking were not submitted by the appellants. This is not an empty formality. It is the foundation for availing the benefits under the Notification. It cannot be said that they are mere procedural requirements, with no consequences attached for non-observance. The consequences are denial of benefits under the Notification. For availing benefits under an exemption Notification, the conditions have to be strictly complied with. Therefore, CEGAT endorsed the view that the exemption from operation of Rule 174, was not available to the appellants. (Para 6)

ORDER

Arijit Pasayat, J.-The appellants assail correctness of the order passed by the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi (in short CEGAT ). In the appeal before the CEGAT, the appellants had challenged a duty demand of Rs. 14,95,893 and penalty of Rs. 5,000/-, as imposed by the Adjudicating Authority and confirmed by the Collector, Central Excise and Customs (Appeals). CEGAT dismissed the appeal.

2. Background facts are: according to the appellants, they are engaged in the manufacture of articles of plastic i.e. Plastic insulated wares and vacuum flasks. They had two factories, one at Talegaon and the other at Chinchwad. The former one was considered to be the main factory. It was claimed that during the period of dispute, i.e. from 1.3.1990 to 21.8.1990, major portion of the articles manufactured by them in terms of value were exempt from Central Excise Licensing Control under Rule 174-A of the Central Excise Rules, 1944 (in short the Rules ). Since all the goods manufactured in their main factory were fully exempt from duty during the relevant period, only a minor portion of production was carried out in the Chinchwad factory. A show cause dated 28.8.1990 was served by the Central Excise authorities requiring them to show cause as to why duty shall not be levied and penalty imposed for failure to take out L-4 licence required for the manufacture of excisable goods falling under Chapter headings No. 3924.90 (Casserole) and 3909.60 (Rigid Polyurethene Foam) falling during the relevant period and for the failure to file the list of excisable goods. It was alleged that there was failure to determine the duty liability and also that they had not maintained accounts of the excisable goods. They were called up to show cause why duty should not be demanded and penalty should not be imposed for contravention of various provisions of the Central Excise Act, 1944 (in short the Act ). The appellants took the stand that since the products manufactured were chargeable to nil rate of duty and since they were also exempted from Licensing Control under Notification 11/88 (NT)-CE dated 15.4.1988, there was no liability or requirement on their part to obtain L-4 license. It was further submitted that the Superintendent of Central Excise had been informed about the aforesaid aspects by letter dated 4.4.1990. As regards the Rigid Polyurethene Foam is concerned, the appellants claimed that the said item was non-excisable, as held in the assessee s own case for an earlier period. As regards the manufacture of goods at Chinchwad factory, the appellants took the stand that the said factory was a subsidiary unit of their main factory and all the materials required for the manufacture of goods were supplied by the main factory and the sales were also effected from the main factory. The Adjudicating Officer held that merely because exemption was granted under certain Notification, that does not make the product a non-excisable item even when the item was fully exempt. It was, therefore, obligatory on the part of the appellants to follow the requisite procedures before manufacturing goods at the Chinchwad factory. As regards the claim that the appellants were covered by notification No.11/88 (NT)-CE dated 15.04.1988, the adjudicating officer found that the appellants had not complied with the requirements, as contained in the Notification. He also found that the appellants had started the manufacturing in the premises of M/s. Top Plastics Pvt. Ltd. right from March, 1990 at Chinchwad even before the aforesaid M/s. Top Plastics Pvt. Ltd. had applied for cancellation of their licence on 21.08.1990. He also noted that the appellants had obtained the L-4 licence only on 28.03.1990. Since they have not filed the prescribed declaration under Notification No.11/88, were not exempt from the operation of Rule 174 of the Rules. It was also held that the appellants had carried out manufacturing activities without following the requisit

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2004 Supreme(SC) 160

IMPORTANT POINTFiling of the declaration by the manufacture being the foundation for availing the benefit under the Notification issued in exercise of powers conferred by Rule 174-A of the Rules, the consequences of its non-compliance are denial of benefits under the Notification.

IMPORTANT POINT
Filing of the declaration by the manufacture being the foundation for availing the benefit under the Notification issued in exercise of powers conferred by Rule 174-A of the Rules, the consequences of its non-compliance are denial of benefits under the Notification.