Judgment:
1. These three appeals raising common question of fact and law were heard together and are being disposed of together. Appeals Nos. 912 & 913/86 are revenue appeals where M/s Kashmir Vanaspati are the respondents and appeal No. 420/86 is an appeal of M/s Kashmir Vanaspati where C.C.E. Chandigarh is the respondent. The questions involved being similar, appeals are being decided together.
2. The main question to be decided in all these appeals is whether the nickel catalyst, bleaching activated earth and activated carbon (admittedly classifiable under Tariff Item No. 68 GET) used by M/s Kashmir Vanaspati (hereinafter referred to as the appellants) in the course of manufacture of vegetable product are entitled to the benefit of notification No. 201/79-CE (hereinafter referred to as the said Notification) or not. Another question that would arise is whether the demand raised by the Revenue against the appellants was in time.
3. The admitted facts are that nickel catalyst is used as a catalyst in the production of vegetable products. It appears that there cannot ordinarily be production of vegetable product on a commercial scale without the use of catalyst. The said Notification grants exemption to goods falling under item No. 68 GET in the following parts :- "Set off of duty on all excisable goods on use of duty paid goods falling under item 68 (Tariff items 1 to 68). - 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. 178/ 77-Central Excises, dated the 18th June, 1977, the Central Government hereby exempts all excisable goods (hereinafter referred as "the said goods"), on which the duty of excise is leviable and in the manufacture of which any goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) have been used, as raw materials or component parts (hereinafter referred 'as "the inputs"), from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs".
Certain conditions are attached and a procedure is prescribed by the Notification. These constitute the remaining part of the notification.
4. The Asstt. Collector held that the nickel catalyst is a cleaning agent used in the manufacturing process of vegetable product and cannot be termed as a raw material, for production of vegetable product in terms of the said Notification. He further held that as the appellants took credit before filing the declaration, the provisions of paras 1 & 2 of the appendix attached to the said Notification were contravened and that the amount taken as credit should be recovered.
5. These orders were upheld by the Collector, Central Excise (Appeals), except that he held the demand for credit availed of more than six months prior to the date of show cause notice as time-barred.
6. We heard Shri Lachman Dev, for the Appellants and Shri Shishir Kumar, the learned SDR for the Revenue. According to the learned Consultant for the Appellants Shri Lachman Dev, a number of decisions of the CEGAT in similar matters held that for the purpose of the said notification, ft is not necessary that the inputs should form part of the final product either exquisitely or implicitly. He cited the following cases in support of his argument : 1. 1987(28) ELT 529 (Tribunal) C.C.E. Allahabad v. Hindustan Aluminium Corporation, Mirzapur.
2. 1985(21) ELT 901 (Tribunal) C.C.E. Bhubaneshwar v. Titaghur Paper Mills.
3. 1985(22) ELT 163 (Tribunal) SRB Seshasayee Paper and Boards Ltd. v. C.C.E. 4. 1985(22) ELT 594 (Tribunal) Andhra Sugars Ltd. v. Collector of Central Excise, Guntur.
Sh. Lachman Dev submitted that applying the ratio of the judgments in these matters, the catalyst used by the appellants should be considered to be eligible to the benefit of the said notification. He explained that the catalyst is used up in a single operation in most cases and in two operations in the remaining few cases.
7. Shri Lachman Dev also submitted that there was a letter written to the Central Excise authorities on 1.4.82 with which a declaration as prescribed by the said notification was enclosed. He, however, had no evidence to show, that such a declaration reached the Department. At this stage we questioned the SDR who stated that no such declaration is on file. Shri Lachman Dev stated that on 6.9.82 another declaration was filed and explained that though credit was taken prior to 6.9.82, the credit was not availed of after 6.9.82. He submitted that filing the declaration was only a technicality and the failure to observe the technicality should not act as a bar to the appellants from availing the benefit of the said notification.
8. The learned Consultant argued that Section 11A of the Central Excises and Salt Act applied to the instant demand and therefore the time-bar prescribed therein applied to the demand, which was raised after more than 6 months from the relevant date. Referring to the Revenue's appeal, he submitted that having raised the demand under Section 11A the Revenue now cannot argue that Section 11A of the Act did not apply.
9. Shri Shishir Kumar, the learned SDR opposing the arguments submitted that the nickel catalyst is neither a raw material nor a component part. He referred us to the definition of raw material contained in the Revenue's appeal and submitted that in this case nickel catalyst cannot at all be considered as covered by the definition. In this context, the learned SDR relied upon the following judgments.(Tribunal) SRB Andhra Pradesh Paper Mills Ltd. v. C.C.E., Guntur.
2. 1985(22) ELT 810 (Tribunal) C.C.E. Calcutta v. H.M.M. Ltd. Calcutta.
10. He submitted that the notification No. 201/79 had several conditions attached to it and even if the appellants were held to be eligible to the benefit of the said notification, they had to follow the conditions prescribed therein to be eligible for the benefit thereof. He also made the submission that wherever goods were received prior to filing the declaration, they cannot be eligible for the benefits.
11. Shri Shishir Kumar submitted that the said notification itself made provision for the recovery of amounts and no time limit was fixed for the purpose. He, therefore, submitted that limitation prescribed in Section 11A of the Act is not applicable here.
12. In reply, Shri Lachman Dev submitted that demands under the notification are subject to the provisions of Section 116 and relied on a judgment of the Tribunal reported 1986(26) ELT 42 (Tri.) SRB Premier Tyres Ltd. v. C.C.E. Cochin.
14. The Case Law cited by Sh. Lachman Dev for M/s Kashmir Vanaspati dealt with the provisions of the same Notification but the inputs concerned in those judgments were different. Nickel catalyst was not examined in any of the appeals. Therefore, we are not going into the details of the judgment. The Question as to whether Nickel Catalyst is eligible to the benefit of the said Notification has necessarily to be decided with reference to Notification itself. This Notification exempts (subject to stated conditions) excisable goods if they are used as the raw materials and components parts of other excisable goods. The essential conditions for availing the said Notification are :- (iv) The inputs should have been used as raw materials or components parts.
The first two conditions apply to what may be called the outputs. There is no dispute about the same. Condition No. (iii) applies to inputs. It is not anybody's case that the nickel catalyst does not fall under item No. 68 CET.15. That brings us to the 4th condition. This condition is that the inputs should have been used as 'raw materials' or 'components parts'.
The use of nickel catalyst in the manufacture of vanaspati appears to be as a cleaning agent in the manufacture of the said vegetable product. The manufacture of vegetable product does not stop with the use of catalyst. After emergence of the vegetable product, the catalyst is not present in the final product. Therefore, the catalyst cannot be considered to be raw material.
16. This view is strengthened by the meaning of the word 'raw material' contained in the Law Lexicon by Shri T.P. Mukherjee, 1482 (Vol. 2).
"Raw material, as commonly understood, is used in process of manufacture. Printing machinery will certainly not come under the category of "raw material". - In re K.T. Kosalram, A.I.R. 1986 Mad.
113 at 116 : 1967 Mad. L.W. (Cri.) 48 : (1967) 1 Mad. LJ. 373 : 1967 Mad. LJ. (Cri.) 341.
In the absence of a definition in the relevant Act, it is not open to the Court to adopt the definition of the words "raw materials" given in other local Acts or in the Central Sales Tax Act. The Court can only interprect the word "raw material" according to the common parlance or as defined in the dictionary. The words "raw material" as used in the definition of "manufacture" denote merely material from which a final product is made; in other words, which after undergoing process gets converted into a distinct product.
-Commissioner Sales Tax v. Standard Metal Industries, (1980) 45 S.T.C. 229 at 231 (Delhi)." 17. That brings us to the question as to whether the catalyst is a component part of vegetable product. Component part has not been defined in the Notification or anywhere in the Central Excise.
18. Examining the word "component part" the Law Lexicon by Sh. T.P.Mukherjee, 1982 (Vol. 1) records as follows :- "Dictionary meaning of the word "component" as given in the Oxford Concise Dictionary is "contributing to the composition of a whole." The Shorter Oxford Dictionary (1955 - Edn.) gives the meaning of the word thus : "Composing; making up; constituent. A constituent oart or element".
"Part" is defined as that which with another or others makes up a whole, a portion, section, element, constituent".
In bunk and Wagnalls New Standard Dictionary of the English Language (1953 - Edn.) 'component' is explained as "forming part or ingredient, constituent; a constituent element or part." "Part" means that which goes with others to constitute the whole.
The meaning given in Webster's International English Dictionary (Vol. I, 9th Edn.) is: "Serving or helping to form, comprising-constituting, constituent the component parts of natural bodies." It appears, therefore, that for an article to be called a component part, it is not necessary that even after it becomes part of another article, it should still retain its identity. All that is necessary to make an article, a component part is that it goes into the composition of another article. If an article is an element in the composition of another article made out of it, such an article may well be described as a component part of the other article. It may be that the final product made may be in the nature of the compound in which case, the elements forming the component parts may not be capable of any more separate identification. Equally, it may be that when a machinery is assembled out of several parts forming that machinery, those parts even after their being fitted may retain their individuality or identity." 19. It is the admitted position that the nickel catalyst is not present in the final vegetable product. Probably its presence in the final product constitutes a health hazard. Considering the above extract from the Law Lexicon we have no hesitation in holding that nickel catalyst is not a component part of vegetable product.
20. As a result, we find that nickel catalyst cannot be considered as a "raw material" as a "component part". Therefore, nickel catalyst used in the manufacture of vegetable product cannot be extended to the benefit of the said Notification No. 201/79 CET.21. The question that then arises is whether the demand raised by the department is time-barred. The Revenue's argument is that the Notification itself provides for recovery of the credit availed of without any time limit and, therefore, there cannot be a question of time-bar under Section HA of the Central Excises and Salt Act, 1944.
The argument of the learned Consultant for M/s Kashmir Vanaspati is that the demand in question was raised under Section 11A and therefore there is no question of applying the Notification for purposes of limitation. The Appellate Collector's order has acted on the same view.
We have considered the position carefully. "The demand-cum-show-cause notice" dated 8.8.83 threatened recovery under Section 11A of the Act.
The Asstt. Collector's order merely confirms the demand "as detailed and demanded in demand show cause notice referred to above". Therefore, it is clear that the demand has been raised under Section 11A of the Act. It is not for the Revenue to make a new plea that the demand was made under some other provision when no such provision was invoked against the licensee. We have also taken note of the case law cited by 5h. Lachman Dev in this regard (supra). In view of this, we do not go into the question as to whether a demand can be raised under a Notification which is an exemption notification. Consequently, we held that the impugned order, which held part of the demand as time-barred, is correct in law.
22. Summing up, we hold that nickel catalyst is not entitled to the benefit of Notification No. 201/79 CET. We further hold that the Collector of Central Excise (Appeals/'was correct in holding that part of the demand was time barred.
23. For the same reasons we further hold that bleaching activated earth and activated carb of are also not eligible to the benefit of the said Notification, being neither raw materials nor component parts.