Case Law Details
Commissioner of Central Excise Vs Black Gold Rubber (CESTAT Chandigarh)
CESTAT Chandigarh held that area-based exemption vide notification No. 50/2003 dated 10.06.2003 is available as per substitution in the said notification vide notification no. 34/2005 dated 30.09.2005.
Facts- The respondent is engaged in the manufacture of Tread Rubber, Cushion, Solution falling under Chapter 4006.10 and 4005.90 of the First Schedule to the Central Excise Tariff Act, 1985.
The respondent filed a letter dated 13.08.2004 declaring that they are entitled to avail area based exemption under Notification No. 49/50/2003 dated 10.06.2003. In the said declaration, the respondent stated that they have made substantial expansion of plant and machinery and thereby increased the installed capacity by more than 25% which entitles them to the benefit of the said notification.
On examination of these documents, the department came to the conclusion that the unit is not entitled to exemption in terms of Notification No. 50/2003 dated 10.06.2003 as the unit is not located in the specified Khasra No./Hadbast No.
On these allegations, a show cause notice dated 07.07.2006 was issued to the respondent. After following due process of adjudication, the Assistant Commissioner held that the respondent is entitled to avail the exemption under Notification No. 50/2003 dated 10.06.2003 from the date of filing their declaration.
Aggrieved by the said order of the Assistant Commissioner, the department filed appeal before the Commissioner (Appeals) and the same was rejected. Being aggrieved, the present appeal is filed.
Conclusion- Held that we do not dispute the settled principle that exemption notification has to be construed strictly but in the present case, we find that Notification No. 34/2005 dated 30.09.2005 which was issued by way of a substitution and the respondent’s unit which was located in the said Hadbast and Khasra Nos. 110 (1 to 418) have been substituted and the Revenue Authority of the State has also clarified that the respondent is entitled to benefit of said notification.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
Present appeal has been filed by the department against the impugned order dated 04-12-2007 passed by the Commissioner (Appeals) whereby the Commissioner (Appeals) has dismissed the appeal of the Revenue and upheld the order passed by the original authority.
2. Briefly the facts of the present case are that the respondent is engaged in the manufacture of Tread Rubber, Cushion, Solution falling under Chapter 4006.10 and 4005.90 of the First Schedule to the Central Excise Tariff Act, 1985. The respondent filed a letter dated 13.08.2004 declaring that they are entitled to avail area based exemption under Notification No. 49/50/2003 dated 10.06.2003. In the said declaration, the respondent stated that they have made substantial expansion of plant and machinery and thereby increased the installed capacity by more than 25% which entitles them to the benefit of the said notification. In support of their claim, they have also submitted the required documents in the form of a certificate dated 17.08.2004 issued by the chartered engineer and also a certificate issued by the chartered accountant indicating that the value of addition of plant and machinery installed for substantial expansion has been shown in their books of accounts. Certificate dated 26.09.2005 of state Revenue authorities showing that the unit is situated in notified area of the notification. On examination of these documents, the department came to the conclusion that the unit is not entitled to exemption in terms of Notification No. 50/2003 dated 10.06.2003 as the unit is not located in the specified Khasra No./Hadbast No. On these allegations, a show cause notice dated 07.07.2006 was issued to the respondent calling upon them to explain as to why the benefit of said notification should not be denied to them. After following due process of adjudication, the Assistant Commissioner, Central Excise Division, Shimla vide Order-in-Original dated 29.08.2006 held that the respondent is entitled to avail the exemption under Notification No. 50/2003 dated 10.06.2003 from the date of filing their declaration. Aggrieved by the said order of the Assistant Commissioner, the department filed appeal before the Commissioner (Appeals) who vide Order-in-Appeal dated 04.12.2007 rejected the appeal filed by the department; hence the present appeal.
3. Heard both the sides and perused the material on record.
4. Learned D.R. appearing on behalf of the Revenue submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. She submits that Khasra No. 147 was specified by issuing Notification No. 34/2005-CE dated 30.09.2005 and it has been specifically mentioned in the said notification that “This Notification shall come into force on the 1st day of October, 2005”. She further submits that by no stretch of imagination, it can be presumed that it has retrospective effect. She also submits that the Commissioner (Appeals) has wrongly relied upon the decision of Hon’ble High Court as the facts of filing of appeal against the order of the Assistant Commissioner were not before the Hon’ble High Court. She also submits that it is well settled position of law that exemption notification should be construed strictly and that no extended meaning can be given to exempted item to enlarge the scope of exemption granted by the notification as held in various decisions cited below:
(a) Excon Bldg. Material Mfg. Company Pvt Ltd vs. CCE, Bombay – 2005 (186) ELT 263 (SC)
(b) Commissioner of CE Allahabad vs. Ginni Filaments Ltd – 2005 (181) ELT 145 (SC)
(c) Commissioner of CE, Meerut vs. Modi Rubber Ltd – 2001 (133) ELT 515 (SC)
(d) Commissioner of CE, Hyderabad vs. Sunder Steels Ltd – 2005 (181) ELT 154 (SC)
(e) State of Jharkhand vs. Ambay Cements – 2004 (178) ELT 55 (SC)
5. On the other hand, learned counsel appearing on behalf of the respondent defends the impugned order passed by the Commissioner (Appeals) wherein the Commissioner (Appeals) has held that the respondent is entitled to avail the benefit of exemption Notification No. 50/2003 dated 10.06.2003 read with Notification No. 34/2005 dated 30.09.2005. The learned counsel in his written submissions has given the chronology of dates and events leading to grant of benefits of exemption notification to the respondent. He also submits that the present issue has arisen only because of the interpretation of Notification No. 34/2005-CE dated 30.09.2005 and the reason for the same is that in the table appended to the said notification Hadbast and Khasra Nos. “110 (1 to 418)” have been substituted but para 2 of the said notification stipulates that this notification shall come into force on the 1st day of October, 2005. He further submits that since Khasra Nos. have been substituted, therefore, in terms of legal interpretation of “substitution”, they stand incorporated in the parent notification that too from 10.06.2003 itself. In support of his
submissions, he relies upon the following decisions:
(i) Madhu Sudan Mittal vs. UOI – (2023) 2 CENTEX 307 (Jhar.)
(ii) Mehler Engineered Products India Pvt Ltd vs. UOI – 2018 (364) ELT 27 (Mad.)
(iii) Commissioner of CE & ST, Bangalore vs. Fosroc Chemicals India Pvt Ltd – 2015 (318) ELT 240 (Kar.)
6. After considering the submissions made by both the sides and perusing the material on record and the various decisions relied upon by both the parties, we find that both the authorities below have held that the respondent is entitled to the benefit of exemption Notification 50/2003 dated 10.06.2003 read with Notification No. 34/2005 dated 30.09.200. The only issue to be decided by us in the present appeal is that whether the respondent is entitled to the benefit of exemption Notification No. 50/2003 dated 10.06.2003 read with Notification No. 34/2005 dated 30.09.2005 with respect to respondent’s unit located at Hadbast No. 110 & Khasra No. 147 or not?
7. We have gone through both the notifications produced on records and we find that Khasra Nos., on which the respondent’s unit is located, have been substituted by Notification No. 34/2005 dated 30.09.200 and in the said notification Hadbast & Khasra Nos. 110 (1 to 418) have been substituted in place of the original Hadbast & Khasra Nos. 110 (1 to 41). Since these Khasra Nos. have only been substituted and as per the settled principle of legal interpretation, substitution leads back to be original notification by which the respondent was entitled to the benefit of these notifications. In this regard, it is pertinent to reproduce the findings recorded in para no. 13 in the case of Madhu Sudan Mittal (supra) :
“13. Thus, it is evident that both the amendments, i.e., amendment dated 1-3-2016 and 6-6-2016, are by way of substitution. Since, both the amendments are by way of substitution and the amendment by way of substitution relates back to the original document, as has been held by Hon‟ble Apex Court in Zile Singh v. State of Haryana and Government of India and others v. Indian Tobacco Association 2005 Taxmann.com 1015/ 2005 (187) ELT 162 (SC) [(2005) 7 SCC 396], both the amendments by way of substitution of the provision as contained in the original notification will be deemed to have applicable with effect from the date of notification dated 20.06.2012.”
Similarly, the Hon’ble Madras High Court in the case of Mehler Engineered Products India Pvt Ltd (supra) has held as under :
“9.5 In the case of Government of India v. Indian Tobacco Association reported in 2005 (187) E.L.T. 162 (S.C.) while dealing with the exemption notification which was issued by way of substitution, it was held as follows :-
“15. The word „substitute‟ ordinarily would mean „to put (one) in place of another‟ or „to replace‟. In Black’ s Law Dictionary, Fifth Edition at page 1281, the word „substitute‟ has been defined to mean „to put in the place of another person or thing‟ or „to exchange‟. In Collins English Dictionary, the word „substitute‟ has been defined to mean to serve or cause to serve in place of another person or thing; „to replace (an atom or group in a molecule) with (another atom or group); or „a person or thing that serves in place of another, such as a player in a game who takes the place of an injured colleague‟.
16. By reason of the aforementioned amendment no substantive right has been taken away nor any penal consequence has been imposed. Only an obvious mistake was sought to be removed thereby.
17. There cannot furthermore be any doubt whatsoever that when a person is held to be eligible to obtain the benefits of an exemption notification, the same should be liberally consumed.”
10. The legal principles deducible from the above decisions is that if subsequent Act amends an earlier one in such a way as it incorporate itself or a part of itself into the earlier, the Act must be construed as „retrospecti ve‟. This is so, because, the word “substituted” would mean ‘to put one in the place of another‟ or „to replace‟. Thus, on account of such substitution whatever consequences which have to follow would naturally be applicable to the assessee by such substitution. Thus, notification dated 22- 2-2016 in Notification No. 51 of 2016-Cus.(ADD) having substituted Entry 5402 47 in the notification dated 21-10-2015 bearing Notification No. 51 of 2015, it would mean that the Entry in the Notification dated 21-10-2015 shall be 5402 47 for all purpose and it shall be so with effect from 21-10-2015.”
Further the Hon’ble Karnataka High Court in the case of Commissioner of CE & ST, Bangalore vs. Fosroc Chemicals India Pvt Ltd (supra) has observed in para 13 as under :
“13. ……… As the said amendment is clarificatory in nature, that is the reason why it was brought by way of “substitution”. The effect of the said substitution is that the cenvat Rules 2004 are to be read and construed as if the altered words had been written into the Rules of 2004 with pen and ink and the words “to a developer of the SEZ for their authorized operation” was there from the inception.”
Further, we do not dispute the settled principle that exemption notification has to be construed strictly but in the present case, we find that Notification No. 34/2005 dated 30.09.2005 which was issued by way of a substitution and the respondent’s unit which was located in the said Hadbast and Khasra Nos. 110 (1 to 418) have been substituted and the Revenue Authority of the State has also clarified that the respondent is entitled to benefit of said notification.
8. By following the ratio of the decisions relied upon by the respondent (cited supra), we are of the considered view that there is no force in the appeal of the Revenue and consequently, we dismiss the same by upholding the impugned order.
9. In result, the appeal filed by Revenue is dismissed.
(Order pronounced in the court on 18.04.2023)
Author Bio
