Advocates Appeared:
Dolly Saxena,F.S. Nariman, R.K. Lukose

ORDER

V.T. Raghavachari, Member (J)

1. Since the issue involved in these three appeals is common they were heard together. The said issue relates to eligibility of benefit under Notification No. 201/79 to M/s. Madras Rubber Factory Ltd. in respect of duty paid by them on rubber process oil, renacit-VII and Stearic acid, consumed by them in the manufacture of masticated rubber in their Kottayam factory, which masticated rubber they removed to their other factories at Madras, Arkonam and Goa for further manufacture of rubber tyres and other rubber products. Their request in this regard had been turned down by the Collector of Central Excise, Madras under his orders dated 17.11.1980 and 20.10.1980 but on appeal the said orders had been set aside by the Central Board of Excise and Customs. The Central Government was of the view that the said order of the Central Board was not proper, legal and correct. Accordingly, notice dated 21.12.1981 was issued by the Central Government under Section 36(2) of the Central Excises and Salt Act. The proceedings so initiated were subsequently transferred to this Tribunal and the same is the subject matter of appeal No. 1413/ 81 -D. The other two appeals arise out of the refund applications made by M/s. Madras Rubber Factory Ltd., the claims arising with reference to benefit under Notification No. 201/79 in respect of duty paid on the 3 raw materials mentioned supra. The lower authorities had rejected their claims and the appeals are against the said orders.

2. The reasons for rejection of the refund claims were that the 3 raw materials (falling under Item 68 GET) were consumed in the manufacture of masticated rubber [falling under Item 16-A(2) CET] Which was free of duty and was then transferred to other factories (though of the same manufacturer) and hence the benefit under Notification No. 201/79 was not available. This was also the view of the Collector of Central Excise who had passed the order-in-original in appeal No. 1413/81. In setting aside the said order the Central Board of Excise and Customs was of the view that Notification No. 201/79 does not deny benefit even if the product manufactured out of raw-materials falling under Item 68 CET is subsequently removed to another factory of the same manufacturer for further processing into yet another product. The Central Board was of the view that given the organisation of Madras Rubber Factory Ltd. and the pattern of manufacture adopted by them it was unavoidable that they should spread their manufacturing process over different factories. The Board held that the intention behind Notification No. 201/79 was to allow the assessee relief in respect of duty paid on the goods under Item 68 CET when such goods are used in the manufacture of other excisable products and in the circumstances the further manufacture in another factory of the same manufacturer would not be a ground to reject the benefit claimed. The Board observed that it may be necessary for the Department to make suitable administrative arrangements for identification of the duty paid inputs with reference to the clearances of the final product manufactured by the same manufacturer and that once such identification is established the exemption in terms of Notification No. 201/79 would be admissible. It is this view that did not find favour with the Central Government resulting in the issue of the notice dated 21.12.1981.

3. We have heard Shri F.S. Nariman, Sr. Advocate for M/s. Madras Rubber Factory Ltd. and Shrimati Dolly Saxena, SDR for the Department.

4. In the notice issued by the Central Government under Section 36(2) of the Central Excises and Salt Act the Government had in para 8 thereof directed that pending decision by the Government in the said proceedings the operation of the order of the Central Board was being stayed. M/s. Madras Rubber Factory Ltd. had taken objection to the said ex parte stay and had approached the Delhi High Court under Civil Writ Petition No. 948/82. Under order dated 5.4.1982 the High Court had stayed the said direction in paragraph 8 of the notice as an interim measure and, subsequently, on 6.8.1982, made absolute the said interim order. Shri Nariman submitted that following the said orders a suitable procedure had been worked out between M/s. Madras Rubber Factory Ltd., and the Department under which the 'Department verified the quantum of the 3 raw materials that had gone into the manufacture of the masticated rubber removed to the other factories elsewhere and this information was contained in the excise records under which the material was transmitted to the other factories and that after due verification the quantum eligible for exemption in terms of the above notification in respect of the final goods manufactured at the other factories was also worked out to the satisfaction of the Central Excise Officers in those factories and accordingly relief was being enjoyed by M/s. Madras Rubber Factory Ltd. in terms of this arrangement and that this arrangement was being successfully implemented ever since the orders of the High Court above mentioned and that the arrangement is effective even now. Shri Nariman referred to this in connection with his observations on certain earlier judgments of this Tribunal, in the case of M/s. MRF Ltd. themselves and with reference to the present issue itself, wherein the Tribunal had accepted the contention of the Department and held that it would be impossible to work out the relief under Notification No. 201/79 unless the final products are' manufactured in the very same factory in which the raw materials under Item 68 were received and consumed. We shall make reference to this later.

5. The case for the Department is that the procedure prescribed in the appendix to Notification No. 201/79 would be capable of observance only if the initial consumption of the raw materials under Item 68 CET as well as the final manufacture of the "said goods" takes place in the same factory. The terms in the main part of the notification are also relied on as in support of this argument. On the other hand the contention of Shri Nariman is that the purpose behind the notification is to grant benefit whenever goods falling under Item 68 CET are consumed for the manufacture of further goods and that the provisions of the appendix to the notification are merely procedural in nature. His contention is that in such circumstances the terms of the notification should be purposively interpreted in such a manner that the interpretation would lead to grant of benefit to the assessee subject to the assessee being able to satisfy the authorities as to the quantum of the input material that had gone into the manufacture of the final goods, irrespective of the process of final manufacture being carried out in a factory different from a factory in which the raw material has been received, so long as the two factories are of the same manufacturer. In fact his contention is that so long as the initial receipt of the raw materials, and the consumption thereof leading to the final manufacture of the said goods, are by the same manufacturer it is irrelevant that the manufacturing process is not carried out in a single factory but in different factories (of the same manufacturer) situated in different places.

6. This question in connection with the present assessee, M/s. Madras Rubber Factory Ltd. themselves, had come up for consideration earlier before this Tribunal. Under order No. 759/84-C, dated 15.10.1984 (In excise appeal No. W/81-C); order No. 130/85-C (in appeal No. 1143/81), dated 1.2.1985 and under order Nos. 116-117 of 1986-D, dated 19.2.1986 (in E-A. Nos. 316/81 and 2835/85-D) the contention now raised by M/s, Madras Rubber Factory Ltd. has been rejected by this Tribunal and that of the Department upheld. Shri Nariman contends that we should not feel bound by the said decisions since these decisions proceeded mainly on the basis that it would be impossible to correlate the quantum of the raw materials (that had gone into the production of masticated rubber) with the final production of tyres and other rubber products [falling under Item 16-A(2)] and since this correlation was the very essence of relief under Notification No. 201/79 no relief could be granted under the Notification when the consumption of the raw materials is not in the same factory which produced the final goods. Shri Nariman submits that the very fact that subsequent to the order of the Delhi High Court the Department and the assessees were able to work out a suitable procedure for establishing such a correlation and the fact that such a procedure has been working satisfactorily for the past over 5 years, should suffice to establish that the basis on which the Tribunal passed its earlier orders was defective. It is therefore his submission that we should not feel bound by the said decisions, but on the other hand, interpret the terms of the notification in a manner consistent with the intention behind the notification and in a manner as would fulfil the said intentions and not defeat the said intention. It is in support of this argument that he has submitted that the provisions in the appendix to the notification are merely procedural in nature. Shri Sachar contended that there is no room for any intendment in construing the provisions of a taxing statute and that the plain terms should govern the rights of parties. He said that the said principle, as laid down by the Supreme Court of India in M/s. Hemraj Goverdhan Dass (1978 ELT 3-350), should be applied in construing the terms of the notification and if so done the eligibility in respect of manufacture in a different factory (though of the same manufacturer) would be ruled out.

7. There can be no doubt that the intention behind the issue of Notification No. 201/79 was to grant benefit for manufacturers who consumed, in the course of their manufacture, raw materials falling under Item 68 CET. The argument put forward in the notice issued by the Government is that the raw materials (the 3 goods mentioned earlier) were consumed in the manufacture of masticated rubber (which was free of excise duty) and it is this masticated rubber that finally went into production of the "said goods" and hence benefit under the notification was not available in respect of duty payable on the final goods. But Shri Nariman points out that even the Department had been permitting this benefit so long as the consumption of the raw materials and the production of the final product (said goods) was in the same factory i.e. at Kottayam, as is admitted in the affidavits filed. It is seen from the said affidavits that benefit under notification was in fact being granted in the manner abovesaid. Therefore, the submission that the consumption of the 3 raw materials was not directly in the manufacture of the final goods but in the manufacture of intermediate product (masticated rubber) would not appear to be a ground, even according to the Department, to deny benefit under the notification. We may note that in order No. 759/8/f-C, dated 15.10.1984 one of us (Shri G. Sankaran) had pointed out in his separate but concurring order that a circumstance to be taken into consideration was that the product received as input at the Madras Factory was masticated rubber failing under item 16-A and Item 68 and, for that reason, benefit of the notification would not be available with reference to the resultant product i.e. tyres. It may be noted that masticated rubber comes into existence as an intermediate product in the manufacture of tyres and there can be no dispute that the initial input (3 in number) find their way into the final resultant product (Tyres). It was evidently taking this circumstance into consideration that benefit of the notification was being allowed by the Department itself in the Kottayam factory as noted above. The question is whether the fact that it is only the intermediate product (masticated rubber) that is manufactured in the factory in which the raw materials are consumed but not the final product (which is manufactured in another factory of the same manufacturer) should deny the benefit under the notification for that reason.

8. As already stated the intention behind the notification is to grant benefit. In a recent case the Supreme Court has held (Girdhari Lal and Sons -MANU/SC/0544/1986 : AIR 1986 SC 1499) as follows :

"So we see that the primary and foremost task of a Court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed. Having ascertained the intention, the Court must then strive to so interpret the statute as to promote/advance the object and purpose of the enactment. For this purpose, where necessary the Court may even depart from the rule that plain words should be interpreted according to their plain meaning. There need be no meek and mute submission to the plainness, of the language. To avoid patent injustice, anomaly or absurdity or to avoid invalidation of a law, the Court would be well justified in departing from the so-called golden rule of construction so as to give effect to the object and purpose of the enactment by supplementing the written word if necessary."

It cannot be denied that if the notification is interpreted in the above said manner the benefit thereof would be available to M/s. Madras Rubber Factory Ltd. even when the manufacture of the final product is in a factory different from the factory in which the raw materials are consumed so long as it would be possible to establish to the satisfaction of the authorities the correlation between the quantum of raw materials consumed and the resultant final product. Shri Nariman further relies on the observations of this Tribunal in Addison Co. Ltd. v. Collector of Central Excise MANU/CE/0157/1985 : 1985 (22) ELT 437 where, dealing with the question of interpretation of statutes, the Tribunal observed that the words in the statute should be ordinarily understood in a manner in which they would effectuate the object of the legislation.

9. We may also refer in this connection to the decision of the Tribunal in the case of Vikrant Tyres MANU/CE/0091/1985 : 1985 (21) ELT 620 in which it was held (dealing with a case under Notification No. 201/79 itself) that even when an assessee claimed that he could not correlate the quantum of inputs that went towards the manufacture of excisable goods and free goods, the Department should make an attempt to grant relief by working out the quantum on pro rata basis after calling for the necessary information.

10. In view of the above discussion we hold that the order of the Central Board dated 2.5.1981 was proper and does not require any interference. Excise Appeal No. 1413/81-D is accordingly dismissed and the notice dated 21.12.1981 is discharged. Excise Appeal Nos. 205/81 and 787/83 are allowed and orders of the lower authorities are set aside, the matters being remitted to the Assistant Collectors concerned for consideration afresh of the refund claims in terms of this order.