2005 Supreme(SC) 1340

2005(7) Supreme 701
Supreme Court of India
(From Customs, Excise and Gold (Control) Appellate Tribunal, West Zonal Bench, at Mumbai)
S.B. Sinha & R.V. Raveendran, JJ.
M/s. Compack Pvt. Ltd. —Appellant
versus
Commissioner of Central Excise, Vadodara —Respondent
Civil Appeal No 8030 of 2004
Decided on 7-10-2005
Counsel for the Parties :
For the Appellant : Ramesh Singh, Ms. Bina Gupta, Mrs. Rakhi Ray, Ms. Inklee Barooah and Ms. Bina Gupta, Advocates.
For the Respondent : Gopal Subramanium, Additional Solicitor General, Dayan Krishnan, P. Parmeswaran and Gautam Narayan, Advocates.

Headnote:Central Excise Act, 1944—Central Excise Rules, 1944—Rules 8 and 57G —Cardboard containers—Appellant Company engaged in manufacture and production of cardboard containers availed MODVAT credit of specified duties on plastic coated paper known as ‘LDPE coated paper’—It did not avail of any MODVAT credit in respect of base paper or base paperboard—Appellant filed a MODVAT Declaration declaring LDPE Coated Paper as input which was intended to be used in or in relation to final excisable goods, namely, Composite Paper Containers—During the period 1992 to 1993, the said composite containers were cleared by appellant on payment of basic excise duty at a rate of 5% ad valorem—Demand for recovery of differential duty stating that appellant was not eligible for the concessional rate of duty prescribed in exemption Notification No. 67/82-CE dated 28.2.1982—Appellant’s case that three layers of carton consist of base paper and only one layer of carton consists of plastic coated paper—Tribunal denied benefit of exemption notification to appellant without considering the import thereof that it refers to the MODVAT credit directly that too only on base paper—Matter remitted back to Assistant Commissioner for determination of the question.

       Held : The said notification was issued in terms of sub-rule (1) of Rule 8 of the Central Excise Rules, 1944. By reason thereof, printed carton, boxes, containers and cases whether in assembled or unassembled condition falling under Chapter 48 of the schedule appended to the Central Excise Tariff Act, would receive the benefit of exemption subject to the condition that the appropriate duty of excise or additional duty leviable under Section 3 of the Customs Tariff Act has already been paid in respect of the base paper used in their manufacturing. (Para 16)

       The proviso appended to the notification contains an exception thereto stating that if MODVAT credit is availed of, no such exemption shall be available to the manufacturer. The ‘Explanation’, however, raises a legal fiction that if a base paper or a paperboard, if purchased from the market, would be deemed to be duty paid. The eligibility clause contained in the notification, thus, is confined to use of base paper or paperboard used in the manufacture of printed cartons, boxes, containers and cases. A container may consist of inputs other than base paper or paperboard. It has not been shown before us that to avail the exemption, the containers are required to be manufactured ‘only’ or ‘purely’ from the base paper or base paperboard. Had the same been the intention of the legislation making authority they could have said so explicitly. Once the eligibility criteria is satisfied by the assessee, as noticed hereinbefore, the conditions are required to be construed liberally. (Para 19)

       The notification does not state that exemption cannot be granted in a case where all the inputs for manufacture of containers would be base paper or paperboard. In manufacture of the containers some other inputs are likely to be used for which MODVAT credit facility has been availed of. Such a construction, as has been suggested by the learned counsel for the Respondents, would amount of addition of the words “only out of” or “purely out of” the base paper cannot be countenanced. The notification has to be construed in terms of the language used therein. It is well-settled that unless literal meaning given to a document leads to anomaly or absurdity, the golden rule of literal interpretation shall be adhered to. (Para 20)

       The Tribunal denied the benefit of the said notification to the Appellant herein without considering the import thereof that it refers to the MODVAT credit directly that too only on base paper. Similarly, the finding of the Tribunal that the container must be manufactured only from base paper may render the exemption notification inapplicable in a large number of cases. The Appellant, however, is not correct in contending that it would be entitled to the exemption notification in respect of the entire container. It would be entitled to exemption only to that extent for which excise duty has been paid i.e. on paperboard. As the question as to whether three layers of base paper have been used for manufacture of the container or not has not been raised before any authority the matter is remitted back to the Assistant Commissioner, Central Excise and Customs for determination of the said question. Paras 24 and 25)

       (ii) Interpretation of Statutes—Exemption Notification—Whereas eligibility clause in relation to an exemption notification is given strict meaning wherefore the notification has to be interpreted in terms of its language—Once an assessee satisfies the eligibility clause, exemption clause therein may be construed literally—An eligibility criteria deserves a strict construction although construction of a condition thereof may be given a liberal meaning. (Para 11)