Gujarat High Court
Morvi Vegetable Products Ltd vs Commissioner Of Central Excise on 18 September, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 216 of 2006
With
R/TAX APPEAL NO. 217 of 2006
With
R/TAX APPEAL NO. 218 of 2006
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
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1 Whether Reporters of Local Papers may be allowed NO
to see the judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy NO
of the judgment ?
4 Whether this case involves a substantial question NO
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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MORVI VEGETABLE PRODUCTS LTD.
Versus
COMMISSIONER OF CENTRAL EXCISE
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Appearance:
MR DEVAN PARIKH SENIOR ADVOCATE WITH MR NIRAV P SHAH(6475)
for the Appellant(s) No. 1
MR CB GUPTA(1685) for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 18/09/2024
Page 1 of 31
Uploaded by CHANDRESH N. SIDDHAPURA(HC01109) on Fri Oct 04 2024 Downloaded on : Sat Oct 05 22:09:48 IST 2024
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COMMON ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
[1] These Tax Appeals are filed under Section 35G of the
Central Excise Act, 1944 (for short, "the Act") proposing the
common question of law arising out of the order
No.A-580-582/WZB/05/C-II/E.B. dated 11th October 2005 passed
by the Customs Excise and Service Tax Appellate Tribunal, Mumbai
(for short, "the CESTAT") in Appeal Nos.81/00 and E/2994/05 and
E/2995/05.
"Whether or not the Hon'ble Tribunal has clearly erred in law
in interpreting notification No. 115/86-CE dated 1.3.1986 to
read therein a mandatory requirement for the
assessee to maintain charge-wise register, failure whereof
would render the assessee not eligible to exemption?"
[2] The brief facts of the case are that the appellant is
engaged in the business of manufacturing vegetable products
falling under Chapter 15 of the Schedule to the Central Excise
Tariff Act, 1985.
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[2.1] The appellant follows various procedures under the
Central Excises and Salt Act, 1944 (for short, "the Act") and the
Central Excise Rules, 1944 (for short, "the Rules").
[2.2] The Government of India, in exercise of its powers,
issued a Notification No.115/86 dated 1st March 1986 as amended
wherein it contains the provisions for granting exemption to
vegetable product falling under Sub-Heading No.1504 of the
Schedule to the Central Excise Tariff Act, 1985 subject to increased
use of the specified minor oils and conditions. The said Notification
No.115/86-C.E. dated 1st March 1986 reads as under:
"In exercise of the powers conferred by sub-rule (1) of
rule 8 of the Central Excise Rules, 1944, and in supersession
of the notification of the Government of India in the Ministry
of Finance (Department of Revenue) No. 99/84-Central
Excises, dated the 30th April, 1984, the Central Government
hereby exempts vegetable product, falling under sub-heading
No. 1504.00 of the Schedule to the Central Excise Tariff Act,
1985 (5 of 1986), made from--
(i) indigenous cotton-seed oil,
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(ii) any one or more of the other indigenous minor oils
specified in the Table hereto annexed (hereinafter
referred to as the "specified minor oils"), or
(iii) a mixture of any one or more of the aforesaid oils
with any other oil,
from so much of the duty of excise leviable thereon which is
specified in the said Schedule (read with any relevant
notification, issued by the Central Government under sub-
rule (1) of Rule 8 of the said Rules, and for the time being in
force, in relation to the duty of excise so chargeable) as is
equivalent to the amount calculated at the rate of--
(i) Rs. 30 per tonne of such vegetable product for each
additional percentage point of increase in the use of
cotton seed oil in such vegetable product, in excess of
15% of the total oils used; and
(ii) Rs. 100 per tonne of such vegetable product for
each additional percentage point of increase in the use
of specified minor oils in such vegetable product, in
excess of 3% of the total oils used :
Provided that the total amount of exemption available under
this notification shall not exceed Rs. 1,000 per tonne of such
vegetable product or the duty of excise for the time being
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payable on such vegetable product, but for this exemption,
whichever is less.
Explanation.-- In this notification,--
(1) "Vegetable product" means any vegetable oil or fat
which, whether by itself or in admixture with any other
substance, has by hydrogenation or by any other
process, been hardened for human consumption;
(2) "rice bran oil of edible grade" means the rice bran
oil which conforms to the standards of quality of edible
oils specified for rice bran oil in the Prevention of Food
Adulteration Rules, 1955, under the Prevention of Food
Adulteration Act, 1954 (37 of 1954), as amended from
time to time;
(3) the percentage of cotton seed oil or specified minor
oils used in the manufacture of the vegetable product,
shall be calculated with reference to the weight of such
oils and the total weight of the mixture of oils
immediately before such mixture is subjected to the
process of hydrogenation for conversion into the said
vegetable product;
(4) the amount of exemption shall, at the option of the
manufacturer, be calculated either on the basis of
individual charge or on monthly basis :
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Provided that where the manufacturer opts for the
exemption on monthly basis, the individual charges
which are not eligible for exemption under this
notification shall be excluded from the eligibility of
concession on such monthly basis :
Provided further that where a manufacturer exercises
such option, he shall be eligible to vary the option only
once during the financial year after giving one calender
month's notice in writing to the proper officer;
(5) where the percentage point increase is in a fraction,
the increase in respect of such fraction shall also be
taken into account for calculating the amount of such
exemption."
[2.3] It is the case of the appellant that the appellant was not
aware as to how to claim the benefit thereunder. The said
exemption was based upon the use of the cotton seed oil. The
appellant somehow claimed the benefit under the said Notification
based upon the figures of concurrent use of the said raw-material.
[2.4] The appellant also addressed a letter dated 1 st March
1986 stating that the appellant is consuming more than 15% cotton
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seed oil in their Vanaspati and they would be paying duty under
protest.
[2.5] The appellant filed three refund claims for the months
of March, April and May 1986 claiming the refund as under:
Sr. No. Period Amount (Rs.)
01 March, 1986 Rs.8,32,680.00
02 April, 1986 Rs.3,62,423.35
03 May, 1986 Rs.6,61,677.95
[2.6] The Assistant Commissioner, Central Excise, Division-II,
Rajkot, after scrutinizing the claims filed by the appellant and on
the basis of the evidence placed on record by the appellant along
with the claims, sanctioned the same after deducting duty on the
ground that the amount refunded was profit and therefore,
sanctioned the refund as under:
Sr. Period Order-in-Original Amount of
No. refund
sanctioned
01 March 1986 22/86/AC/RJT dated 27.6.86 Rs.7,56,981.82
02 April 1986 23/86/AC/RJT dated 27.6.86 Rs.3,03,315.21
03 May 1986 24/86/AC/RJT dated 3.7.86 Rs.6,01,525.41
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[2.7] Thereafter, three show cause notices were issued calling
upon the appellant to show cause as to why the amount of refund
granted to the appellant should not be recovered under Section
11A of the Act as the assessee did not maintain the accounts
showing quantity of cotton seed oil utilized in individual charge
taken for Hydrogenation of vegetable products. As a result of
which, the information regarding percentage of cotton seed oil used
in the individual charge was not available as well as the appellant
had not filed specific option for claim of refund on monthly basis as
provided in Explanation 4 of the Notification No.115/86-C.E. dated
1st March 1986 though the claims were preferred on monthly basis.
[2.8] The appellant challenged the show cause notices before
this Court by preferring the writ petition. The appellant was
protected by this Court on furnishing Bank Guarantee for 25% of
the amount in cash. The petition filed by the appellant was
disposed of by permitting the department to file an appeal before
the appellate authority against the order of refund.
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[2.9] The respondent accordingly filed an appeal before the
Commissioner of Central Excise (Appeals), Ahmedabad. It was
disposed of vide order-in-original dated 8th September 1995
remanding the matter to the Assistant Commissioner of Central
Excise, Division-II, Rajkot.
[2.10] On remand, the Assistant Commissioner of
Central Excise, Rajkot decided the issue ex parte as the appellant
could not remain present. The adjudicating authority confirmed the
demand in its entirety vide common Order-in-Original No.s.21 to
23/Refund/96 dated 16th February 1996.
[2.11] Being aggrieved, the appellant preferred an
appeal before the Commissioner of Central Excise and Customs
(Appeals) who rejected the appeal vide order dated 13th October
1999 on the ground that there being a delay on the part of the
appellant in filing the appeal. The Commissioner of Central Excise
and Customs (Appeals) also decided the appeal on merits after
considering the case record and the submissions made by the
appellant in the appeal memorandum and the submissions made
during the course of personal hearing by observing as under:
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"It is observed from the case record that the appellants
had not fulfilled the requirement of filing a specific option for
claiming exemption on monthly basis or individual charge
basis as required in Explanation 4 to Notification No.11/586-
CE dated 1.3.86. The appellants have also not maintained
any charge wise account of cotton seed oil as required vide
Explanation 3 of the said Notification. It is found that the
said notification envisaged the exemption of vegetable
product for each additional percentage of increase in the use
of the cotton seed oil in such vegetable products in excess of
15% of the total oil subject to the ceiling of Rs.1,000/- per
metric ton of such vegetable product. The said Notification
did not envisage any grant of refund on the basis of cotton oil
seed or minor oil used in the vegetable product. In view of
this it is found that the Assistant Commissioner has correctly
confirmed the demand in question.
It is also covered from the case record that the
appellants were issued SCN and were also given an
opportunity to explain their case in person. But they have not
availed the sold opportunity as is evident from the findings of
impugned order passed by the adjudicating authority. In the
circumstances the appellants arguments that they have not
been issued SCN nor given chance to represent their case in
person is actually incorrect.
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On view of above I do not find any infirmity in the
impugned order passed by the adjudicating authority. I
thereafter uphold the same was reject the appeals."
[2.12] The appellant challenged the order passed by the
appellate authority dated 13rd October 1999 before the CESTAT by
preferring three appeals which were rejected by the CESTAT vide
impugned order dated 11th October 2005 by observing as under:
"5. In terms of Notification No. 115/86-CX vegetable
products falling under sub heading 1504.00 were exempted if
the same were made from indigenous cotton seed oil, any
one or more of the other indigenous minor oils specified in
the table annexed to the notification or a mixture of any one
or more of the aforesaid oils with any other oils.
6. The amount of exemption was to be calculated at the
rate specified in the notification which provided different
rates depending upon the use of specified minor oils for each
additional percentage point of increase. Explanation attached
to the said notification provided the method for arriving at
the percentage of cotton seed oil, which was to be calculated
with reference to the weight of such oil and the total weight
of mixture of oil for better appreciation, we reproduce below
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the explanation 3 and 4 of the notification:
(3) the percentage of cotton seed oil or specified minor
oils used in the manufacture of the vegetable product,
shall be calculated with reference to the weight of such
oils and the total weight of the mixture of oils
immediately before such mixture is subjected to the
process of hydrogenation for conversion into the said
vegetable product;
(4) the amount of exemption shall, at the option of the
manufacturer, be calculated either on the basis of
individual charge or on monthly basis."
7. As is clear from the reading of the above condition of
the notification, the percentage of cotton seed oil or specified
oil was to be calculated with reference to the weight of such
oils and the total weight of the mixture oils immediately
before such mixture is subjected to the process of
hydrogenation (emphasis provided). As such, the percentage
use of the specified minor oil was required to be ascertained
for the purpose of exemption on charge wise basis i.e. the
percentage of such oil as compared to the total weight of the
mixture immediately before hydrogenation. Admittedly, the
appellants had not maintained any charge wise account of
cotton seed oil as was required under explanation 3 to the
notification. The notification envisaged the exemption of
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vegetable products for each additional percentage of increase
in the use of cotton seed oil for manufacture of vegetable
products in the excess of 15% of the total oil subject to the
ceiling of Rs. 1,000/- MT of such vegetable product.
8. We note that in the case of Wipro Ltd., vs. UOI,
reported in 1997 (94) ELT 470 (SC), the Ho'ble Supreme
Court while examining the identical issue in respect of the
Notification dated 01/03/1987 has held that a concessional
benefit in respect of vegetable products using specified minor
oil can be claimed under the Notification only in the manner
prescribed therein and in the fulfillment of the condition
specified in the notification for this purpose. Accordingly, the
Hon'ble Supreme Court has held that inasmuch as the credit
was not taken by the manufacturer on the date of which the
oil had been so hydrogenated, expressed the requirement
prescribed in the notification for claiming the credit was not
fulfilled and the non compliance of this essential condition
itself is sufficient to sustain the dismissal of the appellant's
claim on merits. In the present case also we find that
condition 3 of the notification for arriving at a percentage of
cotton seeds oil or specified minor oil used immediately
before hydrogenation has not been satisfied. In addition, the
appellant has also not exercised the option for calculation of
such exemption either on monthly basis or on new charge
basis as envisaged in explanation 4 to the notification. For all
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these reasons, we are of the view that the appellants were
not entitled to refund claim already sanctioned to them and
the impugned orders confirming recovery of the same are
required to be upheld.
9. Examined from the other angle also the refund claim
was not available to the appellants inasmuch as the duty was
paid by them in accordance with the approved classification
list. No such claim was made in the classification list and as
such, there was no challenge by way of appeal to the
approval of the classification list. The duty burden having
been discharged in accordance with the approved
classification list, the subsequent refund claim without any
challenge to such approval was not admissible, in view of the
law laid down by the Hon'ble Supreme Court and in the case
of Flock India, reported in 2000(120) ELT 285."
[3] This Court vide order dated 11 th September 2006
admitted these Tax Appeals on the aforesaid common question of
law.
[4] Learned Senior Advocate Mr. Devan Parikh for the
appellant submitted that the Assistant Commissioner of Central
Excise, while granting the refund, has scrutinized the record
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produced by the appellant along with refund claims and thereafter,
considering the Notification No.115/86, allowed the refund to the
appellant. It was submitted that the adjudicating authority,
appellate authority and the CESTAT have committed a grave error
in reversing the order and in granting the refund by misinterpreting
the Explanation (3) and Explanation (4) of the said Notification. It
was submitted that the Notification clearly demonstrates the intent
on the part of the Government to grant partial exemption from duty
depending upon the use of cotton seed oil or specified minor oil in
excess of 15% or 3% respectively in the manufacture of the
vegetable products.
[4.1] Referring to the Explanation (4) of the said
Notification, it was submitted that nowhere it is provided for any
procedure to be followed by the person availing exemption under
the said Notification. It was submitted that the CESTAT has ignored
the purport and intent of the Notification inasmuch as the entire
process of Hydrogenation of the cotton seed oil is a continuous
process and therefore, there is no requirement of individual charge
to be maintained by the appellant for usage of the cotton seed oil
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or minor oil for manufacture of the vegetable products.
[4.2] It was further submitted that the appellant has filed the
refund claims for the month of March, April and May 1986, which
was immediately after the Notification dated 1 st March 1986 and
therefore, the appellant was not aware as to how to exactly follow
the procedure prescribed in the said Notification.
[4.3] It was submitted that the Assistant Commissioner of
Central Excise, after verification of the record and considering the
data and the documents submitted by the appellant, granted refund
by Memorandum dated 27th June 1986.
[4.4] Learned Senior Advocate Mr. Parikh referred to the
Memorandum dated 27th June 1986, which contains the details
with regard to the refund claims granted as per the said
Notification on scrutiny of the claims considering the data
submitted by the appellant.
[4.5] It was submitted that the Assistant Commissioner of
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Central Excise, after scrutinizing the claims, reduced the same to
Rs.7,56,981.82 for the month of March 1986 as against the claim
made by the appellant for Rs.8,32,680/-.
[4.6] Learned Senior Advocate Mr. Parikh further submitted
that the CESTAT has also erred in relying upon the decision of the
Hon'ble Supreme Court in the case of Wipro Limited vs. Union of
India reported in 1997 (94) ELT 470 as the said decision would
apply to the facts of the case as the Hon'ble Supreme Court has
dealt with a specific condition in the Notification which was
specifically provided therein, whereas in the facts of the present
case, the Notification No.115/86 only prescribed the condition
which is alleged to have not been fulfilled by the appellant. It was
submitted that in the facts of the case of Wipro Limited (supra), the
Hon'ble Supreme Court held that the credit is required to be taken
on the date on which the oil is taken from the Hydrogenation as
provided under the Notification by interpreting the said
Notification to the effect that if the credit is not taken on the said
date, the same cannot be taken at all for non-compliance of the
essential conditions. It was therefore submitted in the facts of the
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case that the said decision has no application as the issue involved
is about not fulfilling the procedure prescribed in Explanation (4)
of the said Notification. It is submitted that it is not the case of the
respondent that the appellant is not entitled to any exemption as
provided in the said Notification, however, the only allegation from
the show cause notice stage as well as the order-in-original is to the
effect that the appellant has not maintained any charge-wise
account for the cotton seed oil, as required vide Explanation (3) of
the said Notification and the appellant did not file any option to
maintain the refund claim on monthly basis and due to such
alleged default on the part of the appellant, the exemption resulted
into refund and was ordered to be recovered by the impugned
order. It was therefore submitted that such action on the part of the
respondents authorities for recovery of the refund which was
already sanctioned after proper scrutiny of the record, is contrary to
the intended purport of the Exemption Notification granting
exemption to the appellant on usage of the cotton seed oil for more
than 15% in the manufacture of the vegetable products.
[4.7] It was further submitted that reliance placed by the
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respondents on Explanation (3) and (4) is misplaced inasmuch as
there is no mandatory requirement for maintaining the record by
the appellant on individual charge-wise usage of the cotton seed
oil. It was submitted that Explanation (3) merely clarifies that
calculation of percentage must be made at the stage of mixture of
oil immediately before Hydrogenation and Explanation (4) grants
the manufacturer the option to claim month-wise or charge-wise. It
was therefore submitted that the CESTAT has committed an error
in concluding that the assessee is mandatorily required to maintain
the Register showing the charge-wise consumption. It was
submitted that both the Explanations only prescribed the method of
calculation of the percentage of the usage of the cotton seed oil or
other minor oil which are used or mixed prior to the Hydrogenation
for the purpose of manufacture of the vegetable products.
[4.8] Learned Senior Advocate Mr. Parikh therefore
submitted that the appellant was not required to demonstrate the
existence of such fact of maintaining the register showing charge-
wise consumption as there is no such requirement in the said
Notification. It was submitted that while granting refund, the
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Assistant Commissioner of Central Excise verified the record with
regard to the consumption of the cotton seed oil and thereafter
granted the refund and merely because the appellant has not
maintained the individual charge-wise consumption as there is a
continuous process of manufacture for the purpose of usage of the
cotton seed oil for the manufacture of the vegetable products, the
refund claim which has already been granted could not have been
rejected.
[4.9] It was therefore submitted that reliance placed by the
respondents on Explanations (3) and (4) are misplaced as one
cannot draw an inference that maintenance of charge-wise Register
is a must to claim the benefit of the Exemption Notification. The
Explanation cannot override the substantive provisions of the
Notification giving benefit of the Exemption as the appellant is
entitled to the benefit of refund even otherwise on the basis of the
data maintained by the appellant with regard to usage of the cotton
seed oil which admittedly was found to be in excess of more than
15% which entitles the appellant to get the exemption under the
said Notification.
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[4.10] It was further submitted that the records
maintained by the appellant under the provisions of the Act as well
as under the Essential Commodities Act are more than sufficient to
demonstrate the substantial large consumption of cotton seed oil
much above the required consumption of 15% as per the said
Notification.
[4.11] It was submitted that it is not in dispute that the
appellant was maintaining Form - IV Register which is a statutory
register under the provisions of the Act meant for consumption of
raw material which was produced before the Assistant
Commissioner of Central Excise along with the refund claim
showing the daily consumption of the cotton seed oil for the
relevant period of March to June 1986.
[4.12] It was submitted that the statutory register clearly
demonstrates the usage of the cotton seed oil for the relevant
period and accordingly, the respondents authorities could not have
revised or recalled the order of refund on the basis of the
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application applying the provisions of Explanation (3) and (4) of
the said Notification.
[4.13] Learned Senior Advocate Mr. Parikh also pointed
out that there is no prejudice to the Revenue if the appellant does
not make a charge-wise register and claim a month wise exemption
inasmuch as it is obvious from proper intelligible analysis of the
Notification as in a given case the consumption of some charge is
less than 15% and consumption of those charge is more than 15%
would be utilized and just to bring the exemption figures of the
other charge upto 15% mark. It was therefore submitted that from
any point of view, a strict interpretation of the Explanation as relied
upon by the respondents authorities is without any basis. It was
therefore submitted that the adjudicating authority including the
CESTAT have failed to understand the primary, mathematical and
reality of the Notification in question and non-maintenance of the
charge-wise register is not a fatal to the refund claim made by the
appellant on the basis of the Exemption Notification when it is not
in dispute that the appellant has consumed much cotton seed oil
much more than the required percentage of oil taken as a whole
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and it would not prejudice the Revenue in any case.
[4.14] It was therefore submitted that the refund claim
granted to the appellant as per Notification No.115/86 is required
to be restored as there is no mandatory requirement for the
assessee to maintain charge-wise register and failure whereof could
not render the appellant not eligible to the exemption.
[5] On the other hand, learned advocate Mr. C. B. Gupta
for the respondents submitted that there are concurrent findings of
facts recorded by the three authorities below. It was submitted that
as far as the facts of the case are concerned, the same are not in
dispute. It was submitted that the Exemption Notification
No.115/86 provides for granting exemption to the assessee who is
using the cotton seed oil and other minor oil in excess of 15% or
3% as the case may be and for that purpose, Explanation provided
in the said Notification stipulates the calculation method and
procedure for calculation of the percentage of the cotton seed oil or
specified minor oil used in the manufacture of the vegetable
products with reference to the weight of such oil and total weight
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of the mixture of oil immediately before such mixture is subjected
to the process of Hydrogenation for conversion into the vegetable
products. It was further submitted that Explanation (4) clearly
stipulates that the amount of exemption shall be at the option of
the manufacturer be calculated either on the basis of the individual
charge or on monthly basis. It was therefore submitted that the
appellant has neither given any option that the appellant is to claim
the refund on the basis of the calculation on the basis of individual
charge or on monthly basis. It was pointed out that it is not in
dispute that the appellant did not maintain the record on the basis
of the individual charge or usage of the cotton seed oil and in
absence of any option exercise by the appellant to make the
calculation on monthly basis, the adjudicating authority as well as
the appellate authority have rightly come to the conclusion that the
appellant is not entitled to the benefit of the Exemption
Notification in absence of any fulfillment of Explanation (3) and
(4) as prescribed the calculation of percentage of the cotton seed
oil.
[6] It was further submitted that the CESTAT after
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considering the facts of the case has rightly relied upon the decision
of the Hon'ble Supreme Court in the case of Wipro Limited (supra)
wherein the Hon'ble Apex Court while examining the identical
issue in respect of the Notification has held that concessional
benefit in respect of vegetable products using the specified minor
oil can be claimed only in the manner prescribed therein and on
fulfillment of the conditions specified in the Notification for the
said purpose. It was therefore submitted that there is an express
requirement prescribed in the Notification for claiming the credit
which was not fulfilled and non-compliance of the essential
condition is sufficient to sustain the dismissal of the refund claim of
the appellant on merits. It was submitted that as per condition No.3
of the said Notification for calculation of the percentage of the
usage of the cotton seed oil or specified minor oil in the
immediately before the Hydrogenation, the same has not been
satisfied by the appellant and it was therefore submitted in addition
that the appellant has also not exercised the option for calculation
of such Exemption either on monthly basis or on individual charge
basis, as envisaged in Explanation (4) of the Notification. It was
submitted that on reading the Notification as a whole, there is a
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mandatory requirement to maintain the charge-wise register and
failure whereof would make the appellant ineligible to claim the
exemption under the Notification No.115/86. It was prayed that
these appeals being devoid of merit and the Exemption Notification
is a self-explanatory, no interference is called for.
[7] Having heard the learned advocates for the respective parties
and considering the facts of the case, the only short question which
arises for our consideration, which is proposed while admitting
these appeals, is as to whether the Tribunal has rightly interpreted
the Notification No. 115/86-CE dated 1st March 1986 to read
therein a mandatory requirement for the assessee to
maintain charge-wise register, failure whereof would render the
assessee not eligible to exemption.
[8] Therefore, it would be necessary to refer to the
Notification No.115/86 which is reproduced hereinabove. On
perusal of the Notification, it refers to the granting of exemption
from the excise duty on the vegetable products made from the
indigenous cotton seed oil or any one or more of the other
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indigenous minor oil specified in the table annexed to the
Notification or mixture of any one or more of such oil with any
other oil, as stipulated therein on condition that such vegetable
products for additional percentage point of increase in the use of
the cotton seed oil in excess of 15% and in case of specified minor
oil being 3% of the total oil used.
[9] The Notification also contains the Explanation with
regard to what is vegetable products or rice brand oil of edible
grade as far as Explanation (1) and (2) are concerned. We are
concerned with the interpretation of Explanation (3) and (4) which
provides the method of calculation of percentage of the cotton seed
oil or specified minor oil used in the manufacture of the vegetable
products. As per Explanation (3), percentage of use such cotton
seed oil or specified minor oil has to be calculated with reference to
the weight of such oil and total weight of the mixture of oil
immediately before the mixture is subjected to the process of
Hydrogenation for conversion into the vegetable products.
Explanation (1) provides that "vegetable product" means any
vegetable oil or fat which, whether by itself or in admixture with
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any other substance, has by Hydrogenation or by any other process
been hardened for human consumption. Explanation (4) provides
for an option to calculate the percentage of usage of cotton seed oil
or specified minor oil either on the basis of the individual charge or
on monthly basis. Considering the undisputed facts of the case, it
emerges from the record that the appellant has used the cotton
seed oil more than 15% per month. The Notification No.115/86
came into effect from 1st March 1986 and the appellant has filed
the refund claims for the months of March, April and May 1986
immediately after the Notification which are subject matter of these
appeals and accordingly, filed the refund claims without
understanding the process of calculation of percentage of usage of
the cotton seed oil. However, the Assistant Commissioner of
Central Excise, while sanctioning the refund, has applied the
provisions of Explanation (3) and (4) of the Notification for the
purpose of calculation of the use of cotton seed oil, which is found
to be more than 15%, which entitles the appellant for the benefit of
the Exemption Notification.
[10] It is a trite law that exemption in a Notification cannot
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restrict the benefit of exemption. Explanation (3) and (4) which are
invoked by the respondents authorities and confirmed by the
appellate authority and the CESTAT only provide methodology of
calculation of percentage as well as the percentage of usage of the
cotton seed oil so as to see that such usage of cotton seed oil is
more than in excess of 15% of the cotton seed oil used so as to
grant the benefit of exemption of Rs.30 per ton of such vegetable
products for additional percentage point of increase.
[11] In the facts of the case, once the appellant has
demonstrated before the Assistant Commissioner of Central Excise
along with the record produced before him that the appellant had
used the cotton seed oil more than 15% than the benefit of the
Notification, the Exemption Notification could not have been
denied by interpreting the same to the effect that there is a
mandatory requirement for the assessee to maintain charge-wise
register and failure whereof would render the assessee not eligible
for the exemption. On bare perusal of the Notification, it is clear
that there is no mandatory requirement to maintain the charge-
wise register as the Explanation (4) gives an option to the assessee
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for calculation either on the basis of the individual charge or on
monthly basis. As the appellant has filed the refund claim per
month, it goes without saying that the appellant has exercised the
option on monthly basis and in absence of any specific requirement
to file such option to claim the exemption under the said
Notification. In such circumstances, the allegation that the
appellant has failed to maintain individual charge for the usage of
the cotton seed oil is without any basis.
[12] For the foregoing reasons, we answer the question in
affirmative and in favour of the assessee and against the Revenue
to the effect that the Tribunal has clearly erred in law in
interpreting Notification No.115/86-CE dated 1st March 1986 to
read therein a mandatory requirement for the assessee to
maintain charge-wise register, failure whereof would render the
assessee not eligible to exemption. We are of the opinion that
merely because the assessee has filed the refund claim on monthly
basis without there being any individual charge basis, it is not
mandatory for the appellant to maintain the charge-wise register to
claim the benefit of the Exemption Notification No.115/86 dated 1 st
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March 1986. These appeals are accordingly allowed.
(BHARGAV D. KARIA, J)
(NIRAL R. MEHTA,J)
CHANDRESH
