vil Appeal No 2 15 152 NM of 1986 etc
From the Order dated 851984 of the Customs Excise and Gold ControlAppellate Tribunal New Delhi in Appeal No 253083 D  Cross objections 2784 Order No 25884 D and Misc
Order No 67 84 D AK Ganguli P Parmeswaran and Hemant Sharma for the Appellant
Gobinda Mukhoty and PN Gupta for the Respondent
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
This is an appeal under section 35Lb of the Central Excises  Salt Act 1944 hereinafter referred to as the Act  against the judgment and order of the Customs Excise and Gold Control Appellate Tribunal New Delhi hereinafter referred to as the Tribunal  dated 8th May 1984
The appeal is by the revenue
The respondent Decent Dyeing Co was dyeing acrylic yarn on job charges
The acrylic yarn was being received by the respondent from traders in the market or from the manufacturers of hosiery goods and were returning the same to them after completing the required process
The respondent was paying duty at the rate of Rs 10 per kg
in terms of notification No 12575 CE dated 12th May 1975 on the presumption that base yarn had discharged duty liability before it was received for dyeing
A show cause notice requiring the respondent to show cause to the Assistant Collector of Central Excise as to why central excise duty amounting to Rs4300 at Rs24 per Kg
leviable on 180 kgs
as applicable to base yarn under tariff item 18i of the Central Excise Tariff should not be demanded under rule 92 of the Central Excise Rules 1944 was issued to the respondent
The Assistant Collector of Central Excise directed the respondent to deposit an amount of Rs4300 on the basis 432 of the demand of duty at Rs24 per kg
on 18000 kgs
and directed the respondent to deposit the said amount under the proper head
On appeal the Appellate Collector of Central Excise confirmed the said demand
There was an appeal and the Appellate Tribunal upheld the contention of the respondent
The Appellate Tribunal found that the case related to a demand for payment of differential duty for the period May 1976 to July 1976 with reference to texturing of base acrylic yarn received by the respondent from the manufacturers of such base yarn
The respondent the Tribunal held had cleared such textured yarn on payment of duty at Rs 10 per kg
claiming the benefit of notification No 12575
The differential duty payment was Rs24 per kg
leviable on the base yarn
The respondent denied theft liability but it was upheld as mentioned hereinbefore
It was contended on behalf of the appellant before the Tribunalthat duty on base yarn was payable by the manufacturers of the base yarn only and the burden of showing that the said duty had not been paid by the manufacturers was on the revenue
The authorities had however held that the appellant was liable to
pay the differential duty since the appellant had failed to prove the payment of duty on the base yarn and therefore the said orders were bad
On the other hand on behalf of the revenue it was contended that it was for the respondent to prove that the duty had been paid on the base yarn and if the appellant was paying the duty of Rs 10 per kg
Only under notification relied upon and in the absence of proof of payment of duty the base yarn the orders of the lower authorities making the respondent liable to pay the duty were correctly passed
The Tribunal found that the respond ent was not the manufacturer of base acrylic yarn
The work done by the respondent on the base yarn was by way of textu rising the same
In respect of the same the duty payable on the textured yarn produced out of base yarn is the duty for the time being leviable on the base yarn if not al ready paid plus Rs20 per kg
Under notification No 12575 the duty was reduced to the duty for the time being leviable on the base yarn if not already paid plus Rs 10 per kg
In this connection it is relevant to refer to notifi cation No 125 75
The notification which was issued under sub rule 1 of rule 8 of the Central Excise Rules 1944 stated that the Government exempted the texturised yarn of the description specified in column 3 of the Table annexed thereto and falling under sub items of item No 18 of the First Schedule to the Act as are specified in the corre sponding entries in column 2 of the said Table from so much of the duty of 433 excise leviable thereon as is in excess of the duty speci fied in the corresponding entries in column 4 of the said Table
The relevant portion of the Table annexed to the said notification reads as follows section No Sub Item No Description Rate of duty 1
ii Textured Yarn produced The duty for the out of base yarn time being leviable on the base yarnif not already paid plus ten Rupees per kilogram
Admittedly the respondent had paid duty at Rs 10 per kg
and had been allowed to clear the goods
The demand for differential duty by way of duty payable on the base yarn was not in dispute
On the base yarn the Tribunal held the manufacturer was liable to pay duty only since purchasers of the base yarn from the market could naturally assume that duty on the base yarn would have been paid by the manufac turer before removal and that it was for the department to verify the fact of such payment and take action against the manufacturer if base duty had not been paid
Under the relevant tariff item the duty as mentioned before was fixed as the duty for the time being leviable on the base yarn if not already paid plus Rs20 per kg
reduced to Rs 10 per kg
under the notification
The notification does not change the basic position so far as base duty is concerned from the aforesaid stand
The Tribunal held that the revenue was entitled to claim duty inclusive of the duty paid on base yarn only on proof that the duty on the base yarn had not been already paid unless otherwise in the normal course the presumption inevitable in view of the nature of the business be that the duty on base yarn had been paid
If that is so that cannot be the responsibility or the burden of the respondent to prove that the duty on base yarn had already been paid
It further appears that when the appeal was filed before the Collector the respond ent had disclosed the names of the persons from whom they had received the yarn as also the names of the manufacturers enclosing the copies of the relevant record
But even then the revenue had not chosen to verify these facts and the Collector Appeals had passed his order on the basis that it was for the respondent to prove the actual payment of base duty
This approach is not proper approach
It is not correct to state that the respondent alone should have special knowledge of the fact of payment of base duty and it was therefore for the respondent to prove the said fact
In that view of the matter the 434 Tribunal held in favour of the respondent
We are of the opinion that the Tribunal was right
Excise is a duty on manufacture
The liability of pay ment of this duty is on the manufacturer
The language of the notification referred to hereinbefore indicates that only the duty for the time being leviable on the base yarn if not already paid plus ten rupees per kg
was the liabili ty
The description of manufacture was textured yarn pro duced out of base yarn
We are clearly of the opinion that in view of the facts and the circumstances of the case the Tribunal was right in the view it took
In this connection it is instructive to refer to rule 49 of the Central Excise Rules 1944 which deals with duty chargeable only on the removal of the goods from the factory premises or from an approved place of storage
Reference was also made before the Tribunal and our attention was also drawn to the deci sion of the Delhi High Court in Sulekh Ram  Sons vs Union of India  Ors 1978 ELT J 525 where under rule 9 of the Central Excise Rules it was held by the Delhi High Court that under excise system no goods can be removed from the place of manufacturer without first paying the excise duty therefore a purchaser can presume that goods are duty paid
It would be intolerable if the purchasers were required to ascertain whether excise duty had already been paid as they have no means of knowing it
It has to be borne in mind that duty of excise is primarily a duty levied on a manufacturer or a producer in respect of the commodity manufactured or produced
See the observations of Lord Simonds in Governor General in Council vs Province of Madras 72 Indian Appeals 91
In a situation of this nature the Delhi High Court held that the processor was in the similar position as a purchas er of the goods
In that view of the matter we are of the opinion that the Tribunal was right in the view it took
We have heard learned counsel for the appellant and considered the matter
We find no merit in the appeal for the reasons mentioned above
In that view of the matter this appeal must fail and is accordingly dismissed without any order as to costs
Appeals dismissed
435 CIVIL APPEAL NOS
214 1 42 NM OF 1986
Collector of Central Excise Chandigarh Versus 1
Ms Navrang Dyeing Co  Ors
Ms Capital Dyeing Co This is an appeal under section 35Lb of the Act from the judgment and order of the Tribunal dated 17th April 1984
For the reasons in civil Appeals Nos 2151 52 these appeals must also fail and are accordingly dismissed without any order as to costs


Summary:
The appellant was engaged in the manufacture of polyes ter fibre man made falling under tariff item 18 of the erstwhile Central Excise Tariff
In its manufacture the appellant was using among other things ethylene glycol and DMT Dimethyle Tetraphthalate duty paid ethylene glycol falling under tariff item No 68
During the course of manufacture of polyester fibre two basic raw materials DMT and Glycol interact and thereby certain waste comes into existence
This interaction also gave rise to methanol a by product
Notification No 20179 dated 461979 exempted all excisable goods on which duty of excise was leviable and in the manufacture of which any goods failing under tariff item 68 had been used from so much of the duty of excise as was equivalent to the duty of excise paid on the imputs
Exemption notification No 20179 was amended by notifi cation No 10281 with effect from 11th April 1981
By this amended notification a second proviso was added which provided that the credit of the duty allowed in respect of inputs could not be denied or varied on the ground that part of the inputs was contained in any waste refuse or by product arising during the manufacture irrespective of the fact that such waste refuse or by product was exempt from the whole of duty of excise leviable thereon or was charge able to nil rate of duty
Earlier in the case of proforma credit procedure under rule 56 A of the Central Excise Rules clarification had been issued by the Collector of Central Excise under trade notice dated 1971980 to the effect that proforma credit was permissible even where at an intermediate state of manufacture a final product which was fully exempt from duty came into being provided that the fully exempted product was consumed in 263 the production or manufacture of the finished product
This trade notice categorically stated that the clarification would also be applicable to exemption notification No 20179
The appellant claimed set off of duty paid on ethylene glycol used in the manufacture of polyester fibre under notification No 20179
The Assistant Collector of Central Excise held on 681980 that no proforma credit was allowa ble in respect of ethylene glycol usedconsumed in the methanol the ethylene glycol residual waste and polyester fibre waste
The Collector of Central Excise Appeals however allowed the appeals filed by the appellant and set aside the Assistant Collector s order and the demands
The Collector observed that the procedure under notification No 20179 was materially the same as the procedure under rule 56A of the Central Excise Rule
The revenue went up in appeal before the Customs Excise was contended on behalf of the revenue that prior to 11th April 1981 there was no provision in notification No 20179 entitling the manufacturer to obtain credit of the duty of excise already paid on the inputs resulting in waste or by products or refuse which arose in the manufacture of excisable products which used the inputs that the trade notice issued pertained to rule 56 A and not to the notifi cation that the rule and notifications were different enactments and the provisions of one could not be read into another even after 11th April 1981 that the exemption was only in respect of duty on inputs in the manufacture of excisable goods and their waste by product or refuse and that since methanol was not excisable it was not eligible for set off of duty on the glycol content in its manufac ture
On behalf of the appellant however it was contended that glycol was used totally in the production of polyester fibre that methanol resulted out of the reaction of DMT and glycol and that the Government always maintained parity between rule 56 A and notification No 20179
The Tribunal was of the opinion that the Collector s observation that the procedure under notification No 20179 was materially the same as the procedure under rule 56 A and consequently the amending notification deemed to have retro spective effect was not in the absence of any such indica tion acceptable
In the premises the Tribunal allowed the appeals of the Revenue
264 Allowing the appeals this Court HELD 1 On an analysis and comparison of the notifi cations No 20179 No 10281 and the circulars it is clear that the clarification in the form of trade notice issued in respect of rule 56 A was as much applicable to that rule as to notification No 20179
272D 2 It is true that when in a fiscal provision is benefit of exemption is to be considered this  should be strictly considered
But the strictness of the construction of exemption notification does not mean that the full effect to the exemption notification should not be given by any circuitous process of interpretation
After all exemption notifications are meant to be implemented and trade notices in these matters clarify the stand of the Government for the trade
272E F 3 The quantity of ethylene glycol required to produce a certain quantum of polyester fibre is determined by the chemical reaction
It is not possible to use a lesser quan tum of the ethylene glycol to prevent methanol from arising for producing a certain quantity of polyester fibre
It is not as if the appellants have used excess ethylene glycol wantedly to produce the methanol
It is also clear that the appellants are not engaged in the production of methanol but in the production of polyester fibre
272H 273A 4 The Tribunal in the instant case failed to inter pret the words of the exemption notification No 20179 properly and fully
The said notification exempted all excisable goods on which the duty of excise was leviable and in the manufacture of which any goods falling under Tariff Item No 68 ie inputs had been used from so much of the duty of excise already paid on the inputs
The excisable goods namely polyester fibre were not wholly exempt from duty nor chargeable to nil rate of duty
It cannot be read in the notification that the notification would not be available in case non excisable goods arise during he course of manufacture
In fact the Tribunal seems to have erred in not bearing in mind that exemption notification was pressed in service in respect of polyester fibre which is excisable goods and not in respect of methanol which arises as a by product as a part and parcel of chemical reaction
It ap pears further on a comparison of the rule 56 a and the notification No 20179 that these deal with identical situations
272F 273C D Indian Aluminium Co Ltd  Anr
AK Bandyopadhyay  Ors  referred to