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1991 Supreme(Cal) 499
High Court of Calcutta
S.C. Sen, J.
Texmaco Ltd. – Appellant
Versus
Union of India – Respondent
Civil Order 14170 (W) of 1991
Decided On : Dec 02, 1991
R.N. Bajoria, S.K. Bagaria, C.M. Ghoravat, N.C. Roy Chaudhary, Prantosh Mukherji
The exemption under Notification No. 217/86-C.E. is available to the petitioner as it has not availed any credit of duty on the inputs used in the manufacture of the stabled wagons under Rule 56A or 57A of the 1944 Rules. The first proviso to Notification No. 452/86-C.E. does not bar the petitioner from availing the exemption under Notification No. 217/86-C.E.
Headnote:
CENTRAL EXCISE - Exemption from duty - Notification No. 217/86-C.E. and 452/86-C.E. - Interpretation - Stabled Wagons - Whether classifiable as parts of railway wagons - Whether exemption under Notification No. 217/86-C.E. available - Whether credit of duty on inputs used in manufacture of stabled wagons availed under Rule 56A or 57A of Central Excise Rules, 1944 - Held, stabled wagons are inputs used in manufacture of final products, namely completed wagons - Exemption under Notification No. 217/86-C.E. available - No credit of duty on inputs used in manufacture of stabled wagons availed under Rule 56A or 57A - Writ petition allowed.
Fact of the Case:
Texmaco Limited (petitioner) manufactures and sells Railway Wagons pursuant to contracts with the Ministry of Railways. The Railway Board supplies free of cost various items like Wheel Sets, Centre Buffer Couplers, Air Brake Equipment, etc. (Free Supply Items) to the petitioner. The wagons are manufactured by the petitioner using the Free Supply Items as well as other raw materials/parts obtained or manufactured by it. Central Excise duty on the manufacture of wagons is leviable under sub-heading No. 8606.00 of the Schedule to the Central Excise Tariff Act, 1985. A notification dated November 20, 1986, exempts wagons from so much of the duty of excise leviable thereon as is in excess of the rates specified in the Table annexed to the notification, provided no credit of duty on any of the inputs used in the manufacture of the wagons has been availed under Rule 56A or 57A of the Central Excise Rules, 1944.
Finding of the Court:
The show cause notice issued by the Assistant Collector of Central Excise, Khardah, alleging that the incomplete wagons called "Stabled Wagons" are independent and different marketable commodities classifiable as parts of railway wagons under sub-heading No. 8607.00 of the Schedule to the 1985 Act, is not justified in law. The stabled wagons are inputs used in the manufacture of final products, namely completed wagons. The exemption under Notification No. 217/86-C.E. is available to the petitioner as it has not availed any credit of duty on the inputs used in the manufacture of the stabled wagons under Rule 56A or 57A of the 1944 Rules.
Issues: 1. Whether the stabled wagons manufactured by the petitioner can be considered to be independent goods with a market of its own? 2. Whether the petitioner is entitled to the exemption under Notification No. 217/86-C.E. even though it has availed the benefit of fixed rate of duty under Notification No. 452/86-C.E.? 3. Whether the first proviso to Notification No. 452/86-C.E. bars the petitioner from availing the exemption under Notification No. 217/86-C.E.?
Ratio Decidendi: 1. The stabled wagons are inputs used in the manufacture of final products, namely completed wagons, and fall under Chapter 86 of the Excise Tariff Act. 2. The exemption under Notification No. 217/86-C.E. is available to the petitioner as it has not availed any credit of duty on the inputs used in the manufacture of the stabled wagons under Rule 56A or 57A of the 1944 Rules. 3. The first proviso to Notification No. 452/86-C.E. refers to credit of duty availed under Rule 56A or 57A. Notification No. 217/86-C.E. is issued under Rule 8(1) granting exemption from levy of duty. It is not issued under Rule 56A or 57A for allowing availment of the credit. Therefore, the first proviso to Notification No. 452/86-C.E. does not bar the petitioner from availing the exemption under Notification No. 217/86-C.E.
Final Decision: The writ petition is allowed. The show cause notice and the proceedings pursuant thereto are quashed.
Suhas Chandra Sen, J.
1. THE petitioner, Texmaco Limited (in short the company), carries on the business, inter alia, of manufacturing and selling Railway Wagons, pursuant to and in terms of contracts entered into from time to time with the Ministry of Railways, Government of India, the Railway Board supplies to the Company various items free of cost, such as, Wheel Sets, Centre Buffer Couplers, Air Brake Equipment etc. (hereinafter referred as Free Supply Items). THE wagons are manufactured by the Company by using the Free Supply Items as well as other raw materials/parts obtained or manufactured by it.
2. CENTRAL Excise duty on the manufacture of wagons is leviable under sub-heading No. 8606.00 of the Schedule to the CENTRAL Excise Tariff Act, 1985, the material provisions of which are as under:
By a notification, bearing No. 452/86-C.E., dated November 20, 1986 as amended, the Central Government has exempted the wagons of the description mentioned in Table annexed to the said Notification from so much of the duty of excise leviable thereon as is in excess of the rates specified in the said Table. The said exemption is available provided no credit of duty on any of the inputs used in the manufacture of the said wagons has been availed under Rule 56A or 57A of the Central Excise Rules, 1944.
3. THE arguments on behalf of the petitioners as well as the respondents have centered around the two notifications issued by the Government of India, both dated 2nd April, 1986. THE Notifications are No. 217/86-Central Excises and No. 452/86-Central Excises. THE second notification has been amended from time to time on 20th November, 1986 and again on 15th April, 1987. There has been further amendments to this notification but those amendments are not material for the purpose of this case.
4. THE material part of the two notifications are as under : NOTIFICATION No. 217/86-CENTRAL EXCISES : 1. In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods specified in column (2) of the Table hereto annexed (hereinafter referred to as 'inputs') manufactured in a factory and used within the factory of production, in or in relation to the manufacture of final products specified in column (3) of the said Table, from the whole of the duty of excise leviable thereto, which is specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of duty of excise leviable thereon or is chargeable to nil rate of duty.
Explanation.... NOTIFICATION No. 452/86-CENTRAL EXCISES 2. In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby makes the following amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 214/86-Central Excise, dated the 25th March, 1986, namely :- In the said notification, in the opening paragraph-(i) THE existing Explanation shall be numbered as Explanation I; and (ii) after Explanation I as so numbered, the following Explanation shall be inserted, namely :-
Explanation: .... Exemption to specified goods falling under Chapter 86. - In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts the goods of the description specified in column (3) of the Table hereto annexed and falling under sub-heading No. of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as is specified in the corresponding entry in column (2) of the said Table from so much of the duty of excise leviable thereon which is specified in the said Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table : Provided that no cre
