G. Sankaran, Vice-President

1. By adjudication Order No. 23/85 dated 26-2-1985, the Assistant Collector of Central Excise, Visakhapatnam demanded from M/s Nellimarla Jute Mills Co. Ltd. (hereinafter referred to as "the appellants") under Central Excise Rule 9(2) read with Section 3(1) of the Jute Manufactures Cess Act, 1983, an amount of Rs. 3,77,095.68 being the cess on jute yarn produced and captively consumed by the appellants during the period from 1-5-1984 to 30-9-1984 confirming the show cause notice issued by the Superintendent of Central Excise on 30-10-1984.

2. Similarly, the Assistant Collector, by another order No. 29/85 dated 2-3-1985, confirmed the amounts of Rs. 2,91,620.57 and Rs. 45,256.57 demanded by show cause notice dated 30-10-1984 being the cess payable under Central Excise Rule 9(2) read with Section 3(1) of the Jute Manufactures Cess Act, 1983, during the period from 1-5-1984 to 30-9-1984 on sacking cloth produced and captively consumed within the factory and the differential amount of cess short-paid on gunny bags.

3. The appeals against the two aforesaid orders were dismissed by the Collector (Appeals) by his order dated 4-11-1985 which is impugned in the present proceedings.

4. The basis on which the Collector (Appeals) dismissed the appeals is this. While jute yarn/twine fell under the same serial number of the Schedule to the Jute Manufactures Cess Act, sacking cloth falls under a different serial number. Similarly, sacking cloth and bags are specified under different serial numbers. Therefore, when sacking cloth is captively consumed for production of jute bags or yarn/twine is captively consumed for production of sacking cloth, cess has to be paid on the goods so consumed. The entries in the Schedule being different, the provisions of Central Excise Rules 9 and 49 would not be applicable for the purpose of exemption.

5. We have heard Dr. L.M. Singhvi, Senior Advocate, and Shri A.M. Singhvi, Advocate, for the appellants and Smt. Dolly Saxena, Senior Departmental Representative, for the respondent.

6. Section 3 of the Jute Manufactures Cess Act 1983 (Act No. 28 of 1983), which came into force on the 1st May 1984 reads as follows:-

"3. Levy and Collection of cess on jute manufactures produced in India -

(1) There shall be levied and collected by way of cess for the purposes of the Jute Manufactures Development Council Act, 1983, on every article of jute manufacture specified in column 2 of the Schedule and produced in India, a duty of excise at such rate not exceeding the rate specified in the corresponding entry in column 3 thereof, as the Central Government may, by notification in the Official Gazette, specify:

Provided that until such rate is specified by the Central Government, the duty of excise shall be levied and collected at the rate specified in the corresponding entry in column 4 of the Schedule.

(2) The duty of excise levied under Sub-section (1) shall be in addition to the duty of excise leviable on jute manufactures under the Central Excises and Salt Act, 1944 (1 of 1944) or any other law for the time being in force.

(3) The duty of excise levied under Sub-section (1) shall be payable by the producer of a jute manufacture.

(4) The provisions of the Central Excises and Salt Act, 1944 (1 of 1944), and the rules made thereunder, including those relating to refunds and exemptions from duty, shall, so far as may be, apply in relation to the levy and collection of the duty of excise on jute manufactures under this Act."

7. The Central Government, in exercise of the powers conferred on it by Section 6(1) of the Jute Manufactures Cess Act (hereinafter referred to as the Cess Act), made the Jute Manufactures Cess Rules, 1984. The Rules were published under Notification No. 658 (E) dated 15th September, 1984, by the Ministry of Commerce, Department of Textiles. Rule 3 reads as follows:-

"3. Rate of Cess: Cess shall be payable at the rate specified by the Central Government in accordance with the Act from t