Ceat Tyres of India Limited v. Union of India, (SC)
BS197002
SUPREME COURT OF INDIA
Before:- B.N. Agrawal and K.G. Balakrishnan, JJ.
CA No. 5374 of 1992. D/d.
22.11.2001.
Ceat Tyres of India Limited & Anr. - Petitioners
Versus
Union of India & Ors. - Respondents
Customs Act, 1962 Section 3 Central Excise Rules, 1944, Rules 56-A(2) Proviso and 8(1) - Manufactures of tyres - Denial of benefit of exemption as per Notification - Sustainability - Appellants, manufacturers purchase synthetic rubber, carbon black and rubber processing chemicals for use in manufacture of tyres - Benefit allowed to appellant in respect of carbon black and rubber processing chemicals and denial of exemption on ground of synthetic rubber is used in manufacture of tyre chord which is ultimately used in manufacture of tyres - Held, notification shows that central government specifically granted exemption inter alia in respect of synthetic rubber when used in manufacture of tyres - Notification itself states that material namely, synthetic rubber and tyres, do not fall under same item, whereas synthetic rubber is entry under item 16(AA), tyres on other hand, is under entry no. 16 - Nothing in Rule 56A to show that benefit of exemption notification will be available only if inputs and finished products fall under same item - Therefore, impugned order set aside - Appeal allowed.
[Paras 5 and 6]
ORDER
The appellants are manufacturers of tyres. They purchased synthetic rubber, carbon black and rubber processing chemicals for use in the ultimate manufacture of tyres. It claimed benefit of notification dated 1st March, 1979 issued under rule 8(1) of the Central Excise Rules as amended by notification dated 28th February, 1982. As per this exemption notification, benefit could be availed of in respect of an amount inter alia equal to the duty of excise plus special duty of excise or additional duty leviable under Section 3 of the Customs Act on the input namely, synthetic rubber, carbon black rubber processing chemicals. This notification of 1st March, 1979 required that for availing the benefit of the same, the procedure set out in rule 56A should be followed.
2. The assistant collector allowed the benefit to the appellant under the said notification in respect of carbon black and rubber processing chemicals. In respect of synthetic rubber, benefit was not allowed inasmuch as according to the assistant collector, the said item had been used in the manufacture of tyre chord which, in turn, was used in the manufacture of tyres. As the synthetic rubber was not directly used in the manufacture of tyres but used in the manufacture of another item, namely tyre chord, the benefit was denied notwithstanding the fact that ultimately the tyre chord was used in the manufacture of tyres.
3. The appellant then filed a writ petition before the High Court'. The High Court accepted the contention of the appellant, in view of the series of decisions of this Court, that if the input like synthetic rubber is used in the manufacture of intermediary product which is then used in the manufacture of tyres, the appellant would be entitled to the benefit of the exemption notification. The benefit was, however, denied to the appellant by the High Court on a construction placed on proviso to sub-rule (2) of 56A of the Central Excise Rules, 1944 which reads as follows
"Provided that no credit of duty shall be allowed in respect of any material or component parts used in the manufacture of excisable goods
(i) If such finished excisable goods produced by the manufacturer are exempt from the whole of the duty of excise leviable thereon or are chargeable to 'nil' rate of duty, and
(ii) Unless (a) Duty has been paid for such material or component parts under the same item as the finished excisable goods, or
(b) Remission or adjustment of duty paid for such material or component parts has been specifically sanctioned by the central government."
4. The High Court construed this proviso to mean that in order to get the benefit of the exemption notification the component part or the raw material in respect of which, claim is made, must fall under the same item. The High Court came to the conclusion that the appellant was not entitled to claim the benefit of the said exemption.
5. In our opinion, the High Court fell in error in overlooking the provisions of proviso (ii)(b) which provides that remission or adjustment of duty paid for such material or component would be allowed for which remission or adjustment has been specifically sanctioned by the central government. When the proviso is read as a whole, it is clear, that it is only one of the two conditions which has to be specified for a claim to succeed namely, either the material or the component and the finished excisable goods fall under the same item, as provided by (ii)(a) or remission or adjustment of duty is specifically sanctioned by the central government. In the present case, by virtue of the notification dated 28th February, 1982, the central government specifically granted exemption inter alia in respect of synthetic rubber when used in the manufacture of tyres. The notification itself states that the material namely, synthetic rubber and the tyres, do not fall under the same item, whereas synthetic rubber is entry under item 16(AA), tyres on the other hand, is under entry no. 16.
6. It is contended by Mr. Mukul Rohtagi, learned additional solicitor general that remission means, as provided by Section 5 of the Central Excise Act, 1944, remission of duty on goods found deficient in quantity. If the contention of the learned A.S.G. is correct, then it would mean that the notification dated 1st March, 1979 as amended from time to time would become absolutely redundant. The various inputs mentioned in the said notification and the finished items stipulated therein show that none of them fall under a common entry. Just as synthetic rubber and tyres fall under different items similarly all the inputs, mentioned in the said notification fall under item different from the items under which the finished products fall. The expression "remission or adjustment of duty" used in the aforesaid proviso to rule 56A does not mean that remission as contemplated by Section 5 of the Central Excise Act, 1944. The normal meaning of the word "remission or adjustment of duty" would, under the circumstances, mean a reduction or even exemption of duty which would otherwise be payable but for the grant of the exemption. It is only if notification is considered in this manner that the exemption notification of 1st March, 1979 becomes meaningful. There is nothing in rule 56A to show that the benefit of exemption notification will be available only if the inputs and the finished products fall under the same item.
7. The High Court did not, unfortunately, refer to the provisions of proviso (ii) (b) which, in our opinion, was clearly applicable in this case. We, therefore, set aside the impugned orders of the assistant collector and the High Court and allow the appeal of the appellant as a result of which, it would be entitled to the benefit of the said notification dated 1st March, 1979 as amended by the notification dated 28th February, 1982 in respect of synthetic rubber used by it in the ultimate manufacture of tyres. The benefit would be made available to the appellants in accordance with law.
.