Judgment:
1. This is an appeal against the order of the Collector of Central Excise, Madras, C. No. V/26AA/15/ 1/81 CX. Adj.I dated 10.6.1982 requiring M/s. United Metal Industries to pay duty of Rs. 327,910.60 on 903.335 metric tonnes of iron and steel products manufactured out of imported billets. The order of the Collector also demands differential duty of Rs. 1,324.62 on 10.035 tonnes of flats. The learned counsel for M/s. United Metal Industries, Mr. Beri, however, said that they are not pressing the second matter.
2. The main problem arose, because M/s. United Metal Industries imported 903.335 metric tonnes MS billets from the United Kingdom and made products like MS flats, angles and squares. They took exemption under notifications No 206/63-CE, 76/72-CE and 55/80-CE and cleared the goods out. The collector came to the conclusion that Notifications No.206/63-CE, 76/72-CE and 55/80-CE were not applicable, the first because it covered products under sub-item (ia) of item 26AA and, therefore, the notification was not applicable to the products made by them.
Notification No. 76/72-CE. was sought to be applicable to products under items (ii) and (iii) of item 26AA, if they are made from old and used rerollable scrap without undergoing the process of melting or from fresh unused rerollable scrap on which the appropriate amount of duty has already been paid. The imported billets would not be old and used rerollable scrap and, therefore, they would be regarded as fresh unused rerollable scrap. In view of the fact that the imported goods had paid only countervailing duty, the Collector held that this would not be acceptable as payment of the appropriate amount of duty.
3. Notification No. 55/80-CE was similarly rejected by the Collector, because the proviso to this notification extended the concession only if the products are made from semi-finished steel on which duty at the appropriate rate had already been paid. The imported billets having paid only countervailing duty, this notification would not be applicable to the products.
4. The learned counsel for the appellants began by saying that the Collector was not empowered to make this recovery, because it should have been made under section 11A of the Central Excises and Salt Act.
Instead he has proceeded under rule 9(2) of the Central Excise Rules.
The dispute is covered only by section 11A, and, therefore, these proceedings are totally irregular and void.
5. All the three notifications No. 206/63-CE, 76/72-CE and 55/80-CE are applicable to the goods produced from the imported MS billets. He read the context of the three notifications and stressed the fact that duty at the appropriate rate is to be understood differently from duty of excise. In the proviso to notification No. 55/80-C.E. the words are "on which duty at the appropriate rate has already been paid." When this is the phraseology, the exemption shuts out the narrow interpretation that only excise duty is in contemplation; duty can be any duty, whether it is customs duty or excise duty. Obviously the imported billets could not have paid any duty but customs duty; since they have paid the appropriate duty that was applicable to them, they have paid duty at the appropriate rate. They were not required to pay duties of excise at the appropriate rate, but only duty at the appropriate rate. The duty appropriate to them is the customs duty that they paid. Duty of excise would not be appropriate to them and they could not have paid such duty.
6. Even otherwise, the MS billets paid countervailing duty which is equal to the excise duty leviable on similar goods produced in India.
Therefore, even if we take the restrictive definition, the MS billets have suffered a duty equal to the excise duty and have, therefore, in fact, paid excise duty.
7. When an exemption wants to refer to the excise duty, it says so explicitly. In this case the framers of the exemption notification had before them the picture of semi-finished steel which may pay either excise duty or which may pay, if they are imported, customs duty. What the exemption giver wanted was that the raw material i.e. the semi-finished steel products, should pay whatever duty was appropriate to them whether customs or excise and that they should not escape paying the duty due on them. Once they pay that duty, they become semi-finished steel on which duty at the appropriate rate has been paid. There can, therefore, be no argument, said the counsel, that notification No. 55/80-CE can and does apply to the products they made from the imported MS billets.
8. Notification No. 76/72-CE has the same kind of language. It exempts iron and steel products falling under sub-items (ii) and (iii) of item 26AA if made from fresh unused rerollable scrap "on which the appropriate amount of duty has already been paid" as is equivalent to the duty of excise leviable on the semi-finished steel. Here also the notification refers only to appropriate amount of duty and like notification 55/80-CE, payment of the proper customs duty which includes an amount called the countervailing duty, a duty equal to the central excise duty on similar goods produced in India. The raw material i.e. MS billets have paid the appropriate amount of duty.
9. Notification No. 206/63-CE also exempts the products if made from billets on which the appropriate amount of duty of excise has alreay been paid.
10. The learned SDR said that the appeal has no merits and the MS billets not having paid the appropriate excise duty, the exemption cannot be given.
11. The argument of the learned counsel for M/s. United Metal Industries is not correct. All these notifications 55/80-CE, 206/63-CE and 76/72-CE were issued by the Central Government in exercise of its powers under rule 8 of the Central Excise Rules, 1944. No other power was exercised in the grant of these exemptions carried by these notifications. Since the exemptions were made under rule 8 of the Central Excise Rules, we will have to see what this rule provides. It provies : "The Central Government may, from time to time, by notification in the official gazette, exempt, subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such goods.
The exemption to be given is from the whole or any part of duty leviable on such goods, subject to such conditions as may be specified in the notification. Evidently, therefore, the exemption as well as the conditions specified in the notification will need to be within the frame of reference of the rules, unless the text of the notification itself makes allusions to a different frame. Thus the notification may refer to countervailing duty or the additional duty leviable under the Customs Tariff Act, 1975. Countervailing duty and additional duty leviable under the Customs Tariff Act obviously cannot be "duty" spoken of in rule 8, because they clearly refer to duties which are not and cannot be "duty" under the Central Excise Rules. They have been named and identified as duties under the Customs Tariff Act, different from the "duty", i.e. duty leviable under the Central Excise Act and rules and, therefore, the countervailing duty or additional duty leviable under the Customs Tariff Act is not duty leviable under the Central Excises and Salt Act and the rules.
12. When the notification refers to such duties, we know that they are not duties under the Central Excise Rules. And, therefore, when the notification speaks of duty, it can mean nothing but the duty to which rule 8, the exempting rule, is relevant. The exempting rule is one of the Central Excise Rules, 1944, another of which defines duty [in rule 2(v)] thus : Section 3 of the Act i.e. the Central Excises and Salt Act, 1944, has these provisions : There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set forth in the first schedule.
It is easy to see from the above that the duty that rule 8 is relevant to is the duty of excise leviable under section 3 of the Act on goods manufactured in India. When a notification under rule 8 refers to a duty without reference to any other Act as relevant to it, that duty is the duty leviable under the Central Excises and Salt Act. When the notification under rule 8 seeks to involve any other central law like the Customs Tariff Act, it must refer specifically to such Act; in the absence of any such specific reference, we cannot read in the word "duty", a duty other than the duty leviable under the Central Excises and Salt Act.
13. A duty of customs leviable as additional duty under the Customs Tariff Act is not a duty defined under the rules and the payment of such duty cannot be relevant for purposes of reading the three notifications claimed by the appellants. We are not able to agree that the word "duty must be distinguished from "duty of excise". In our view the two mean the same.
14. We reject the contention of the learned counsel for M/s. United Metal Indutries that the Collector could not have taken this action since only a demend under section 11A was valid. We can see no basis for this argument.