Elson Machines Private LTD. vs Collector Of Central Excise

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1988 Supreme(SC) 699

SUPREME COURT OF INDIA
R.S. PATHAK, CJI., RANGANATH MISRA, J.
M/s. Elson Machines Pvt. Ltd., Appellant
Versus
Collector of Central Excise, Respondent.
Civil Appeal No. 603 of 1985
Decided on 15-11-1988.

Advocates appeared
Mr. Dushyant Dave, Mr. R. Karanjawala and Mr. Manik Karanjawala, Advocates, for Appellant; Mr. G. Ramaswami, Addl, Solicitor General, Mr. N. S. Das Bahl and Ms. S. Relan, Advocates. with him, for Respondent.

Advocates:
DUSHYANT A.DAVE, G.RAMASVAMY, MANIK KARANJAVALA, R.KARANJAWALA, S.Relan

Headnote:
Central Excise Rules, 1944 – Rule 8(1) - Claiming clearances -Duty - Appellant is a private limited company - It has its registered office and factory in 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, Central Government issued Notification, which as it stood during relevant period, exempted from duty excisable goods falling under certain Item Numbers of First Schedule to Central Excises and Salt Act, 1944 as specified in Table annexed to the Notification and of particular description set forth in that Table - Appellant availed of exemption under Notification for the periods claiming that clearances during preceding years were confined to stipulated limit - Excise Authority, in the belief that appellant had wrongly availed of exemption as its clearances exceeded the limit of 15 lakhs, issued notice to appellant to show cause against an assessment of differential duty for those periods - 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 - In the further appeal before the Customs, Excise and Gold Control Appellate Tribunal the entire question was whether appellant had exceeded the limit when effecting clearances during financial year and was not entitled to exemption for the period – Held, next contention is that the goods in question cannot be said to have been cleared from factory and therefore could not be included within value of clearances from the factory - Submission is that goods were employed in manufacture of monoblock pumps within factory itself - Court are not impressed by this contention - As soon as manufacture of 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 - Next submission on behalf of appellant is that 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 - 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 appellant that no recovery has been made by appellant from its constituents , it is said, demand should be set aside - Reference is made to Collector of Customs and Central Excise v. Oriental Timber Industries, (1985) 20 ELT 202 - Court have perused the facts of that case and court find that the order made by Court there, so far as this aspect is concerned, was made on a concession of counsel for Union of India and on the footing that 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 - Court are also not satisfied that the facts upon which relief was granted in that case arise before us in this case - Appeal dismissed.

JUDGMENT

PATHAK, CJI. :— This appeal is directed against the judgment and order of the Customs, Excise and Gold Control Appellate 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.

2. 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.

3. 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 19th 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."

4. 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 30 September 1981. In the further appeal before the Customs, Excise and Gold Control Appellate Tribunal the entire question was whether the appellant had exceeded the limit of Rs. 15 lakhs when effecting clearances during the financial year 1980-81 and was, therefore, not entitled to exemption for the period 1 April 1981 to 30 September 1981.

5. 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."

6. The Appellate Tribunal observed that in terms of the Explanation the cleara

Click Here to Read the rest of this document