Wool Worth (I) Ltd. vs Uoi & Others

*     IN THE HIGH COURT OF DELHI AT NEW DELHI


                                              Date of Decision: 03.01.2014
+                        W.P.(C)874/1998


      WOOL WORTH (I) LTD.                                   .... Petitioner
                         Through:     None.

                         versus

      UOI & OTHERS                                        ..... Respondents

Through:

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.V.EASWAR S. RAVINDRA BHAT, J. (OPEN COURT)

1. In this proceeding an order of the erstwhile Central, Excise & Gold (Control) Appellate Tribunal (hereinafter referred to as "Tribunal") dated 11th December 1997, in appeal, preferred by petitioner, has been challenged.

2. The petitioner at the relevant time was engaged in the manufacturing of Wool Worsted Yarn. It was declared as 100% Export Oriented Unit and entitled to beneficial treatment in terms of revenue and export-import laws. Claiming that on account of its expansion which was sought to have been undertaken sometime after 1993, the petitioner contended that cement and WP(C) 874/1998 Page 1 of 5 other such inputs purchased for the construction activities undertaken by it to house its unit, were entitled to the benefit of excise duty levied. It relied upon the notification No. 1 of 1995. Since this claim was not accepted by the authorities under the Central Excise and Salt Act 1944, the petitioner approached the Tribunal wherein vide the impugned order his claim was rejected. The Tribunal held as follows:

"We note that the applicant is 100% Export Oriented Unit. 100% export oriented units are entitled to certain benefits. We find that in the instant case cement was procured locally. The appellants claimed that cement is capital goods and, therefore, they were entitled to the benefit of duty paid on cement under Notification No. 1/95. We have perused this Notification. We find that this Notification covers the goods used in or in relation to the manufacture of the export product or the packing material used in packing the export goods. This notification does not cover any other item. No other Notification was brought to our notice which entitled them exemption from payment of duty on cement or treating it as capital goods. In the absence of such Notification we hold that no benefit of duty on cement will be available to the appellants under Notification No. 1/95 as the goods manufactured by them is worsted yarn. In this view of the matter the appeal is rejected."

3. This court has considered the contentions. The basic notification relied upon in this case in the course of the proceedings before the Tribunal was notification No. 1/95 CE dated 04.01.1995, subsequently amended on 26.05.1995, 14.09.1995 and 20.10.1995. The notification, inter-alia, states that in exercise of the power conferred under Section 5A of the Act, the Central government in public interest hereby exempts excisable goods, specified in Annexure 1 of the notification No. 1/95 CE (hereinafter referred to as „the said goods‟) specifically described in Schedule CE 1995 (5 of 1996) and produced in manufacture in a 100% export oriented undertaking. The exemption notification relied upon in this case i.e. No. 1 of 1995, as amended subsequently, has been placed on record. It states inter-alia that Central government after considering that it was necessary in public interest that goods mentioned in Schedule I of the said notification, when bought in connection with manufacturing and packaging of articles or for manufacture or development of electronics hardware, manufacture/development of electronics software of particular unit etc. would be exempt from the whole of duty of excise leviable thereon under Section 3 of the Central Excise Act, 1944. Annexure A-1 mentions "capital goods and spares thereof". The petitioner attempted in this case to persuade the Court to hold the expression "capital goods" to be including WP(C) 874/1998 Page 3 of 5 cement used by it in the construction of the factory that would be used by the manufacturing unit including machinery and equipment. On the face of it the argument appears to be attractive. However, the Court has considered the other entries in the list. Each of the entries mentions specifically articles such as material handling equipments, office equipments, spares and consumables thereof, raw materials, components, packaging materials, tools, jigs, fixtures, prototypes, drawing, blue prints and charts. This Court is inclined to reject the petitioner‟s argument that inputs materials such as cement used for construction of industrial estates or industrial property would fall within the description of capital goods. If the intention of the government was to enable such a wide interpretation, the specific mention of „capital power plant‟ and „raw materials‟, dispels the notion. The only exception to the list of articles and goods which have been specifically granted exemption is the reference to captive power plant for which the government intends to provide exemption having regard to the fact that the EOU will utilise the power plant in entirety. In all other cases, the reference would be with respect to the specific matter. For instance raw material would be primarily eligible to the end product i.e. goods and articles produced for the purpose of 100% export. No other interpretation would be without clear guideline and enable the statutory WP(C) 874/1998 Page 4 of 5 authority as well as courts to keep increasing the number of articles and goods which have per se no relationship with the manufacturing activities undertaken.

4. For the above reasons, this court finds that there is no infirmity or illegality in the impugned order. The writ petition is accordingly dismissed.

S. RAVINDRA BHAT, J R.V.EASWAR, J JANUARY 03, 2014 acm WP(C) 874/1998 Page 5 of 5