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      AUTHORITY FOR ADVANCE RULINGS

              (CENTRAL EXCISE, CUSTOMS & SERVICE TAX)

NEW DELHI

 

 

P R E S E N T

 

 

        Hon'ble Mr. Justice Syed Shah Mohammed Quadri (Chairman)

              Dr. B.A. Agrawal (Member)

 

    

Tuesday, the Fifth December Two Thousand Six

 

 

Ruling No. AAR/31(CE)/2006

        IN

APPLICATION NO. AAR/07(CE)/2006

                       

                        Applicant                                               M/s Surbhi Industries

                                                                                    A-4, Nebula Apartments, Nr Grand

                                                                                    Bhagwati Hotel

                                                                                    Bodakdev

                                                                                    Ahmedabad-380015

 

Commissioner concerned                       Commissioner of Customs & Central Excise, Jammu

 

                        Present for the Applicant                        Mr. Vikram Nankani, Advocate

Mr. Tarun Gulati

                                                                                    Mr. Chetan Pandya

Mr. Tushar Jarwal

                                                                                   

                        Present for the Commissioner                 Mr. A.K. Roy, Joint CDR

                        concerned                                           Mr. B.K. Singh, JDR

CESTAT, New Delhi

 

 

   R U L I N G

                  (By Hon'ble Mr. Justice Syed Shah Mohammed Quadri)

 

 

In this application under section 23C of the Central Excise Act, 1944 (for short "the CE Act"), the applicant, M/s Surbhi Industries, a partnership firm, is a joint venture  of a non-resident, Mr. Shyarn Mani, and an Indian company, M/s Shree Ranganatha Exports Pvt. Ltd.   The applicant is formed with a view to manufacture Indian Mouth Freshener (popularly know as "Mukhwas").   The applicant has been allotted a Modular Industrial Flat  in SIDCO Industrial Area, Jammu which is a Notified Area within the meaning of Notification No. 56/2002-CE dated 14.11.2002, as amended, which was issued under the Section 5A of the CE Act.  Among the ingredients of Indian Mouth Freshener which the applicant proposes to manufacture, the following constitute the main raw materials :

a)                 Fennel Seeds (Saunf. Variyali etc)

b)                 Sugar Coated Fennel Seeds

c)                  Coriander Seeds (Dhana Dali)

d)                 Scented Shredded Betel Nuts (Sugandhi Supari)

e)                 Cardamom (Elachi)

f)                    Sugar Crystals

g)                 Lime

h)                  Dry Dates

i)                    Food Grade Flavours

j)                    Saffron or Essences of Saffron

k)                  Menthol

 

The applicant has also obtained the requisite permission from the Directorate of Industries and Commerce for the purpose of manufacturing the said product.  On these facts, the applicant has set forth the following two questions to seek advance ruling of the Authority :

 

"1.        Whether the Proposed Product i.e. Indian Mouth Freshener to be manufactured will be classified as "Pan Masala" under CETSH 2106.9020?

 

2.         In case the answer of the first question is in affirmative then whether all the duties discharged under Rule 8 of the Central Excise Rules, 2002 such as Basic Excise Duty [BED], Special Excise Duty [SED], National Calamity Contingent Duty [NCCD], Additional Duty of Excise on Pan Masala [AED (Pan Masala)] and Education Cess on the aggregate of duties discharged through Account Current [PLA] after Mandatory utilization of available CENVAT Credit under the CENVAT Credit Rules, 2002 at the end of the month, are eligible for exemption and refund as envisaged in Notification 56/2002-CE dated 14.11.02 as amended?"

 

2.         On 26.07.06, Commissioner of Customs & Central Excise, Jammu submitted his comments on the application of the petitioner.

 

In regard to Question No. 1 it is stated that as per the supplementary note No. 1 of the Chapter 21 of the Central Excise Tariff Act, 1985 (for short "the Tariff Act"), "Pan Masala" means any preparation containing betel-nuts and any one or more of the ingredients like lime & katha but not  tobacco, whether or not containing any other ingredient such as cardamom, copra or menthol.  The list of raw materials furnished by the applicant, (which does not include tobacco) shows that the product will qualify to be Pan Masala within the meaning of the explanation to supplementary note no. 1 of Chapter 21 of the Tariff Act and is classifiable under Chapter Heading No. 2106.90 20 of the Tariff Act. 

 

In regard to Question No. 2, it is submitted that the aforementioned Chapter Heading attracts various types of duties such as Basic Excise Duty (BED) @ 37.5% (levied under First Schedule to the Tariff Act), National Calamity Contingent Duty (NCCD) @ 23% (levied under the Finance Act, 2001), Additional Duty (AED) @ 5.5% (levied under Finance Act, 2005) and Education Cess (EC) @ 2% of aggregate of all duties (levied under Finance(No.2) Act, 2004).  Notification No. 56/2002-CE dated 14.11.02 as amended exempts 'Duty of Excise' levied under the First Schedule and the Second Schedule to the Tariff Act and additional duty of excise under the Additional Duty of Excise (Goods of Special Importance) Act, 1957 and Additional Duty of Excise (Textile and Textile Articles) Act, 1978 which is not relevant for the present discussion.  The NCCD, AED and EC - duties collected under the aforementioned Acts - shall be in addition to the duty of excise under the CE Act.  Though for the purpose of levy and collection of the said three duties provisions of the CE Act and the Rules made thereunder are made applicable, those duties cannot be construed as 'duty of excise' under the CE Act.  Notification No. 56/2002-CE dated 14.11.2002 clearly stipulates that exemption contained therein is restricted to 'duty of excise' levied under First and Second Schedule of the Tariff Act and Additional Duty of Excise (Goods of Special Importance) Act, 1957 and Additional Duty of Excise (Textile and Textile Articles) Act, 1978.  The said notification is to be read as an independent notification and no words can be added to or subtracted from it.  

 

            Mr. Vikram Nankani, Learned Counsel appearing for the applicant, invited our attention to the comments of the Commissioner to contend that in so far as question no. 1 is concerned, since the classification has been agreed to by the Commissioner, he has nothing to add. 

 

            It will be apposite to read Chapter Entry 2106.90 20 of First Schedule to the Tariff Act which is in the following terms :-

Tariff Item

Description of goods

Unit

Rate of Duty

2106

 

Food preparations not elsewhere specified or included

 

 

----

---

--------

--

--

2106 90 20

---

Pan Masala

Kg.

37.5%

2106 90 30

---

Betel nut product known as "Supari"

Kg.

16%

----

---

--------

--

--

----

---

--------

--

--

 

            The term "Pan Masala" is defined in the supplementary note No. 1 of the Chapter Notes of Chapter 21 (Miscellaneous Edible Preparations) of the Tariff Act to mean any preparation containing betel-nuts and any one or more following ingredients, namely, lime and katha (catechu) but not tobacco, whether or not containing any other ingredient, such as cardamom, copra or menthol.  From the list of the ingredients of the product furnished by the applicant, noted above, it is apparent that tobacco is not mentioned among them  and that the product satisfies the definition of Pan Masala.  It follows that the correct classification of the product is under Tariff Item 2106 90 20.

 

            The controversy in this application is with regard to the interpretation of Notification No. 56/2002-CE dated 14.11.02 to ascertain as to what duties are exempted therein. 

 

            Mr. Nankani has stated that since Special Excise Duty (SED) is not levied on the product he would delete the said duty from the question.  Now the following duties remain the subject matter of question no. 2 - (a)  Basic Excise duty (BED); (b) National Calamity Contingent Duty (NCCD); (c) Additional Excise Duty on Pan Masala (AED) and (4) Education Cess(EC).  It is pointed out from the comments of the Commissioner that the claim of the applicant for exemption in respect of BED under the said notification has been conceded.  The claim of the applicant for exemption survives in respect of  three duties, namely, NCCD, AED and EC (hereinafter referred to as "the duties in dispute").

 

3.         Mr. Nankani would contend that Section 2A of the CE Act provides that reference to the expressions mentioned therein shall be construed to include a reference to CENVAT and Rule 3 of CENVAT Credit Rules, 2004 permits the manufacturer or producer of final products to take credit of NCCD, AED and EC along with BED, therefore the duties in dispute would also be within the purview of the exemption under the Notification.  Mr. B.K. Singh, JDR as well as Mr. A.K. Roy, Jt. CDR, on the other hand have argued that as the notification exempts only duties of excise levied under the First and the Second Schedule to the Tariff Act, no other duty can be said to be within the purview of the exemption notification.  It is further  submitted that in view of the pronouncement of the Supreme Court in M/s Rukmani Pakkwell Traders1 it is well-settled that the exemption notification has to be construed strictly.

 

4.         To appreciate the contentions of the Learned Counsel for the parties it would be apt to read here Notification No. 56/2002-CE dated 14.11.02 :-

 

            "In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles & Textile Articles) Act, 1978 (40 of 1978), the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule & the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the goods specified in Annexure-I ........................... .............................................. from so much of the duty of excise or additional duty of excise, as the case may be, leviable thereon under  any of the said Acts as is equivalent to the amount of duty paid by the manufacturer of goods, other than the amount of duty paid by utilization of CENVAT Credit under the CENVAT Credit Rules, 2002."

           

Before embarking upon the interpretation of this notification it will be apposite to notice here the principles laid down by Courts to construe an exemption notification.  Mr. Nankani has argued that since exemption under the notification is granted to encourage the industry in industrial area of Jammu, the exemption notification should be construed liberally so as to include the duties in dispute (NCCD, AED & EC) as exempted duties thereunder.

 

5.           The  Learned    Counsel    relied    on    the   decision of the Hon'ble Supreme Court in CIT vs. Straw Board Manufacturing Co. Ltd.2 and in M/s Bajaj Tempo Ltd. vs. CIT3. He submitted that the principle laid down by the Hon'ble Supreme Court in the case of State of Jharkhand vs. Tata Cummins Ltd. and Anr4 would apply in interpretation of exemption notification.  

            In Straw Board's case (Supra 2) the assessee claimed concessional rate of Income Tax, development rebate at higher rate and deduction under Section 80E of the Income Tax Act on the ground that the manufacture of strawboard was a priority industry.  The claim of the assessee was rejected by the Income Tax Officer  who took the view that the manufacture of strawboard was not covered by the words 'paper and pulp' in the relevant Schedules pertaining to the relevant assessment years.  The Appellate Assistant Commissioner dismissed the appeal of the assessee.   On further appeal to the Appellate Tribunal it was held that the manufacture of strawboard was a priority industry and the assessee was end to the statutory rebates claimed by it.  At the instance of the Revenue, the following questions were referred to the High Court.

"Assessment year 1965-66

           

Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that 'strawboard' is covered by the term 'paper and pulp' appearing in paragraph F of Part I read with Part III of the First Schedule to the Finance Act, 1965 (Act 10 to 1965)?

 

Assessment years 1966-67 and 1967-68

 

Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that 'strawboard' is covered by the term 'paper and pulp' appearing at Item 16 of the Fifth Schedule to the Income Tax Act, 1961 and in allowing the assessee's claim under Section 80-E of the Act?"

 

 

On the view that the strawboard industry is covered within the expression 'paper and pulp' the High Court answered the questions in favour of the assessee and against the Revenue.  Against the judgement of the High Court the Revenue appealed to the  Supreme Court.  The Hon'ble Supreme Court dismissed the appeal and observed :

 "The expression has been used comprehensively.  It is necessary to remember that when a provision is made in the context of law providing for concessional rates of tax for the purpose of encouraging an industrial activity a liberal construction should be put upon the language of the statute".

 

 

            In Bajaj Tempo case (Supra 3), the assessee claimed  benefit of partial exemption from tax under Section 15C of Income Tax Act, 1961 on the ground that the company was a new undertaking.  The finding of the Tax Tribunal was that the assessee was a new company and that it could not be said to have been formed by the reconstruction of promoter company.  The dispute centred round the question whether the company was formed by transfer of building or material used in the previous business.  The said Section 15C contained a restrictive provision in clause (i) of sub-section (2) thereof, which provided that the section would apply to any industrial undertaking which was not formed by the splitting up or the reconstruction of business already in existence or by transfer to a new business of building, machinery or plant previously used in other business.  The Hon'ble Supreme Court noted that the limited question was whether the assessee could be denied the benefit, when it had been found by the Tribunal to be a new company, under Section 15C (1) because of operation of clause (i) of sub-section (2) thereof.  The High Court on a literal construction of clause (i) answered the question against the assessee.  The Hon'ble Supreme Court observed thus:

 

"The legislature by this clause intended to control any attempt or effort to abuse the benefit intended for new undertaking by change of label.  The intention was not to deny benefit to genuine new industrial undertaking but to control the mischief which might have otherwise taken place.  A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally.  Since a provision intended for promoting economic growth has to be interpreted liberally, the restriction on it, too, has to be construed so as to advance the objective of the section and not to frustrate it.  It is necessary to resort  to a construction which is reasonable and purposive to make the provision meaningful." 

 

            In Tata Cummins Ltd case (Supra 4) the Hon'ble Supreme Court was considering the question of claim of exemption under Industrial Policy 1995.  The dispute related to enment of tax exemption. One of the pre-conditions for the grant of the benefit of the policy was that the factory of the unit was situated on a leased land which  had been acquired by way of a registered lease for a minimum period of 15 years.  The company took lease of the land from a partner in the joint venture and claimed exemption. Both the Deputy Commissioner as well as the High Court rejected the claim.  The Hon'ble Supreme Court directed the Joint Commissioner to decide the matter afresh.  The claim for exemption was rejected by the Joint-Commissioner.  On appeal, the High Court upheld the claim of exemption against which the Government went in appeal before the Hon'ble Supreme Court.  Dismissing the appeal the Hon'ble Supreme Court, held:

 "In the present case, as stated above, we have to go by the interpretation of the notification(s) in the light of the policy.  However, even if one goes by the strict interpretation of the notification (s) we are in agreement with the view expressed by the High Court that the first part of the notification (s), as distinct from the second part, does not refer to the "land".  If the argument of the department is accepted that the first part of the notification would apply only if Tata Cummins Ltd. is the owner of the land and building in which its factory is located then we are not only giving a narrow interpretation to the notification which would defeat the object underlying the incentive policy but also it would be against the very text of the said notification (s) which omits the word 'land' from the first part of the notification."

 

It would also be useful to refer to the following decisions of the Hon'ble Supreme Court:- 

Union of India and others vs. Modi Rubber Limited  & Ors case5.          That case dealt with exemption notifications issued under the Excise Act.  The question before the Hon'ble Supreme Court was what should be the true import of the expression 'duty of excise' employed in  notifications issued by the Government of India under sub-rule (1) of Rule 8 of Central Excise Rules 1944 (Notification No. 123/74-CE dated 1.8.74 and No. 27/81-CE dated 1.3.81); in other words the question was whether the said expression was limited in its connotation only to basic duty of excise levied under the Central Excises and Salt Act, 1944 or it also covered Special Duty of Excise levied under various Finance Bills and Acts, Additional Duty of Excise levied under Additional Duty of Excise (Goods of Special Importance) Act, 1957 and any other kind of duty of excise levied under central excise enactment.  On construing the said notification, the Hon'ble Court pronounced as follows :

            "It is, therefore, clear that where a notification granting exemption is issued only under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 without reference to any other statute making the provisions of the Central Excises and Salt Act, 1944 and the Rules made thereunder applicable to the levy and collection of special, auxiliary or any other kind of excise duty levied under such statute, the exemption must be read as limited to the duty of excise payable under the Central Excises and Salt Act, 1944 and cannot cover such special, auxiliary or other kind of duty of excise.  The notifications in the present case were issued under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 simpliciter without reference to any other statute and hence the exemption granted under these two notifications must be construed as limited only to the duty of excise payable under the Central Excises Act, 1944".  

           

In Rajasthan Spinning & Weaving Mills Ltd6  vs. Collector of Central Excise, Jaipur the question of interpretation of notification No. 332/77-CE dated 1.12.77 fell for consideration of the Hon'ble Supreme Court.  The notification exempted from duty polypropylene spun yarn falling under T.I. 18E, but not blended spun yarn containing 52% polypropylene and 48% viscose.  There was difference of opinion in regard to the interpretation of the notification between two Members of CEGAT.  The third Member, namely, the President of the Tribunal agreed with the Member taking the view that the term 'polypropylene spin yarn' used in the said notification means yarn spun out of polypropylene fibres and will not include blended yarn manufactured by the appellant company (52% polypropylene and 48% viscose).  On appeal, the Hon'ble Supreme Court observed :

"Since it is case of exemption from duty, there is no question of any liberal construction to extend the term and the scope of the exemption notification.  Such exemption notification must be strictly construed and the assessee should bring himself squarely within the ambit of the notification.  No extended meaning can be given to the exempted item to enlarge the scope of exemption granted by the notification." 

 

            In Commissioner of Central Excise, Trichy vs. Rukmani Pakkwell Traders7, the respondent was a trader in scented supari which was marketed under the brand AAR with a photograph of Mr. A.R. Ramaswamy, the founder of AAR group of Companies.  The respondent claimed benefit of Notification No. 1/93-CE dated 28.2.93 which granted exemption, amongst others, to scented supari.  Clause 4 of the notification provided that exemption contained therein would not apply to specified goods bearing brand name or trade name (registered or not) of another person.  On the view that the goods were not exempted under the said notification, a show cause notice was issued  to the respondent. After considering the reply of the respondent, the Assistant Collector confirmed the demand which was upheld on appeal by the respondent.  On further appeal to CEGAT, the claim of the respondent was upheld resting its reasoning on a circular issued by the CBEC.  Allowing the appeal of the Revenue the Hon'ble Supreme Court held:

"It is settled law that exemption notifications have to be strictly construed.  They must be interpreted on there own wording.  Wordings of some other notification are of no benefit in construing a particular notification.  Clause 4 of this notification and the explanation make it clear that the exemption will not apply if the specified goods (i.e. scented supari) bears a brand or trade name of another person.  Neither in clause 4 of the notification nor in explanation IX  is it provided that the specified goods must be the same or similar to the goods for which the brand name or trade name is registered.  The Tribunal has in adopting the above reasoning effectively added to the notification words to the effect 'brand name or trade name' in respect of the same goods.  This is clearly impermissible".  

           

From the above discussion of the case law, the principle that emerges is that to avail the benefits of an exemption notification a person has to comply strictly with the terms of the notification.  Nothing can be added to the notification nor can any part of it be ignored  in giving effect to it when the language is plain and unambiguous.  The principle that a provision in a taxing statute granting incentives for promoting growth and development of industrial activity has to be construed liberally, applies to give effect to the intention of the legislature or industrial policy.  The rule does not extend to reading  in the exemption notification the provisions of other notifications issued under other statutes.  The last two mentioned cases support the view we have taken above.

 

6.         Now reverting to the interpretation of the notification, a plain reading of the excerpt of the notification, quoted above, shows that:

(i)                 it is issued under section 5 A of the CE Act read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, sub-section (3) of section 3 of the Additional Duties of Excise (Textile & Textile Articles) Act, 1978; 

(ii)               it exempts goods specified in the First Schedule and the Second Schedule to the Tariff Act (except the goods specified in Annexure-I);

(iii)             the exemption relates to so much of the duty of excise or additional duty of excise, as the case may be, leviable on the said goods under any of the aforementioned three said Act; 

(iv)              the quantum of duty exempted is equivalent to the amount of duty paid by the manufacturer of goods, other than the amount of duty paid by way of utilization of CENVAT Credit under the Cenvat Credit Rules, 2002 (now 2004). 

 

Admittedly BED and SED are levied under the First Schedule and the Second Schedule respectively of the Tariff Act.  It has already been pointed out that the duties in dispute  are levied under Finance Act, 2001, Finance Act, 2005 & Finance (No.2)Act, 2004 respectively.   A perusal of sub-section (1) of section 136 of Finance Act, 2001 which is the charging section shows that NCCD is levied and collected for the purpose of the Union by surcharge, a duty of excise and sub-section (2) thereof says that it is in addition to any other duties of excise chargeable on such goods under the Act or any other law for the time being in force; so also a combined reading of sub-section (1) of section 91 and  sub-sections (1) and  (2) of section 93 of the Finance(No.2) Act, 2004 shows that Education Cess, levied and collected on excisable goods, shall be in addition to any other duties of excise chargeable on such goods under the Act or any other law for the time being in force and sub-section (1) of section 85 of Finance Act, 2005 which is a charging section says that an additional duty  by surcharge is levied and collected and sub-section (2) thereof says that it is in addition to any other duty of excise chargeable on such goods under the Act or any other law for the time being in force.  The position stated above makes it clear that the duties in dispute are not levied and collected under the CE Act or the Additional Duties of Excise (Goods of Special Importance) Act, 1957.  It is, therefore, not possible to accept the contention of Mr. Nankani that as sub-section (3) of section 136 of Finance Act, 2001, sub-section (3) of section 93 of Finance (No.2) Act, 2004 and sub-section (3) of section 85 of Finance Act, 2005 specifically provide that the provisions of CE Act and the Rules made thereunder including those relating to refund, exemption from duties and imposition of penalty shall, as far as may be, apply in relation to levy and collection of duties in dispute as such the exemption granted under the Notification would include the said duties in dispute (NCCD, AED & EC).  Merely because for the purposes of levy, collection, refund, etc. the machinery provisions of Central Excise Act are referred to in the said Acts for levy and collection of duties in dispute by no stretch of imagination the levy under the CE Act can be said to include levy and collection of the said duties in dispute (NCCD, AED and EC). 

 

The second limb of the contention of Mr. Nankani is that as the word "surcharge" is used in respect of duties in dispute by the respective charging sections therefore they form part of the excise duty so they are also exempted under the said notification.  He relied on judgements of the Hon'ble Supreme Court in CIT Kerala vs. K. Srinivasan8 and M/s Bisra Stone Lime Co. vs. Orissa State Electricity Board9

 

In Mr. Srinivasan's case (supra 8) the question before   the   Hon'ble Supreme  Court  was  whether   Income  Tax includes  surcharge  and the  additional  surcharge.    Having referred to the history of the legislation of the Finance Act 1964 it was held that the term 'Income Tax' as employed in section 2 of the Finance Act, 1964 included surcharge as also special and additional surcharge whenever provided which are also surcharges within the   meaning

of article 271 of the Constitution.     In M/s Bisra Stone Lime's case (Supra 9), one of the contentions raised before the Hon'ble Supreme Court was whether Orissa Electricity Board has power to levy a surcharge  under the  provisions  of  the Act.  It was held that the word surcharge was not defined in the Act, but etymologically,  inter alia, surcharge stood for an additional or extra charge for payment.  In our opinion none of the cases would help the applicant so as to treat NCCD, AED & EC within the meaning of BED leviable under the CE Act.

 

            It is surprising that on 27.11.2006, long after conclusion of the hearing of the case, the constituted attorney of the applicant has chosen to send a xerox copy of final order of the learned technical member of CESTAT10 in support of refund of the duties in dispute.  Apart from the fact that the said order is not binding on us, for the aforementioned reasons we are also not persuaded by the reasoning and the result in that case.

[[           

Adverting to the next  contention of the Learned Counsel it is true that section 2A of the CE Act does provide that reference to the expressions "duty", "duties", "duty of excise" and "duties of excise" shall be construed to include a reference to CENVAT and Rule 3 of CENVAT Credit provides that a manufacturer or producer of a final product shall be allowed to take credit of, inter alia,   duties of excise specified in the First Schedule to Tariff Act leviable under the Excise Act; the duty of excise specified in the Second Schedule to the Tariff Act leviable under the Excise Act; the additional duty of excise leviable under section 3 of the Additional Duties of Excise Act; the National Calamity Contingent Duty leviable under section 136 of the Finance Act 2001 and the Education Cess on excisable goods leviable under section 91 read with 93 of Finance (No.2) Act, 2004,  but from these provisions it does not follow that the duties in dispute become part of duty of excise or additional duty of excise leviable on goods specified in the First Schedule and the Second Schedule of the Tariff Act.   Modi Rubber Limited & Ors (Supra 5) squarely applies to the case on hand. The obvious conclusion is that the notification does not exempt goods on which duty is levied under Acts  different from the CE Act and Additional Duties of Excise (Goods of Special Importance) Act.       

 

Mr. Nankani based the claim of the applicant on Circulars No. 641/32/2002-CX dated 26.6.2002 and No. 5/2005-Cus. dated 31.1.2005 issued by the Central Board of Excise & Customs for exemption of the duties in dispute.    The first mentioned circular relates to non-leviability of NCCD and EC on export of goods under bond, the second circular relates to leviability of EC on import of goods under Advance licence, DFRC, EPCG and DEPB.  There is no reference of notification no. 56/2002-CE dated 14.11.2002 in those circulars.   Those circulars relate specifically to the subjects dealt with therein and we do not think they can be called in aid by the applicant to claim exemption under notification no. 56/2002-CE dated 14.11.2002.

 

The last contention of Mr. Nankani is that the applicant is end to partial relief in regard to Education Cess (EC) as one of the components, namely, Basic Excise Duty(BED) is exempted, therefore 2% should be calculated after excluding the BED.  The proposition appears to be attractive but it does not stand to the scrutiny.  It has been pointed out above that by Finance (No.2) Act, 2004 the Education Cess is levied and collected on all excisable goods under the CE Act or any other law  for the time being in force.  The rate of EC is 2% of aggregate of (i) Basic Excise Duty; (ii) National Calamity Contingent Duty(NCCD); and (iii) Additional Duty of Excise.  There is a fundamental distinction between abolition of duty and exemption of duty.  Where in principle basic excise duty (BED) is leviable  under the Tariff Act but certain goods are exempted under CE Act  on fulfillments of conditions specified in the exemption notification, BED will form the component for purposes of determining the rate of EC.  But where BED is abolished it cannot be taken as a component for calculating EC.  Therefore, so long as BED is in force it will form a component of aggregate of duties for determining 2% EC which is leviable under the Finance (No.2) Act, 2004.  In this view of the matter we cannot give effect to the contention of the learned counsel.

 

                                    In the light of the above discussion we rule on :-

 

Question 1     that the proposed product i.e. Indian Mouth Freshener is classifiable as 'Pan Masala' under CETSH 2106.9020.

Question 2     in so far as Special Excise Duty (SED) is concerned,  it has been deleted from the question; the Commissioner has conceded the claim of the applicant for exemption in respect of Basic Excise Duty (BED) under the notification.   The remaining duties, discharged under Rule 8 of the Central Excise Rules, 2002 such as National calamity Contingent Duty (NCCD), Additional Duty of Excise on Pan Masala (AED [Pan Masala] and Education Cess on the aggregate of duties discharged through Account Current (PLA) after mandatory utilization of available CENVAT Credit under the CENVAT Credit Rules, 2002 at the end of the month, are not eligible for exemption and refund as envisaged in Notification 56/2002-CE dated 14.11.2002.

 

Pronounced by the Authority in the open Court on this 5th day of  December, 2006.

 

                                   

                                                Sd/-                                                                 Sd/-

                                    (Justice S.S.M.Quadri)                                  (B.A.Agrawal)

                                                 Chairman                                       Member

 

 

Registered /A D

 

 

F. No. AAR/07(CE)/2006                                                       Dated : 5th December, 2006

 

 

(A) This copy is certified to be a true copy of the Ruling and is sent to :-

                                                                                                          

 

1.                  M/s Surbhi Industries, A-4, Nebula Apartments, Near Grand Bhagwati Hotel, Bodakdev, Ahmedabad-380015

2.                  Commissioner, Customs & Central Excise Commissionerate, 350/6, Talab Tillo, Jammu (J&K)

3.                  Member(Central Excise), Central Board of Excise & Customs, North Block, New Delhi

4.                  Mr.A.K.Roy,Joint Chief Departmental Representative, Customs, Excise & Service Tax Appellate Tribunal, West Block-2, R.K.Puram, New Delhi-66.

5.                  Guard File

 

                 

(J.P. Mamgain)

Additional  Commissioner

1 2004(165)ELT 481(SC)

2 (1989) Supp (2) SCC 523

3 (1992) 3 SCC 78

4 (2006) 4 SCC 57

5 1986(25) ELT 849 SC

6 1995 (75) E.L.T. 36 (SC)

7 [2004] 165 E.L.T. 481 (S.C.)

 

8 (1972) 4 SCC 526

9 (1976) 2 SCC 167

10 In M/s Sun Pharmaceutical Industries v/s CCE, Jammu  (Appeal no. 1889-1890 of 2006)