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Regarding exemption from excise duty on goods manufactured from duty paid
goods
Circular
No. 125 dated 15th May 1995
I
am directed to say that doubts have been raised regarding the interpretation of
certain notifications under which exemption from excise duty has been given
on certain goods manufactured from duty paid goods.
2.
There are a number of notifications, which exempt specified goods
provided such goods have been made from other goods on which the appropriate
duty of excise has already been paid. To illustrate, Notification No. 35/95-CE
dated 16.3.1995 exempts specified yarn, if made from yarn on which appropriate
excise duty has been paid. Similarly, Notification No. 28/95-CE dated 16.3.95
exempts twine, cordage, rope etc. made from duty paid yarn, monofilament yarn.
The above illustrations are not exhaustive; and there are similar other
notifications as well.
3.
Board has issued instructions from time to time that is such cases, even
if the inputs are exempted from excise duty, the exemption on the finished goods
cannot be denied on that ground. Still, cases have been brought to notice where
exemption is being denied on the ground that the inputs did not bear any excise
duty.
4.
In this context, a copy of the instructions issued by the Board in F.No.
339/6/80-TRU in the context of Notification No. 180/61 dated 23.11.61 in
enclosed. It was clarified by the Board that in the case of S.O dyes made from
exempted dyes, the exemption cannot be denied on the ground that the inputs ware
exempted from the whole of the duty of excise. This logic would apply to other
similar cases also where exemption has been given on the consideration that the
finished products have been made from inputs on which appropriate duty of excise
has already been paid.
Regarding
Interpretation of Notification No. 180/61 dated 23.11.61 � Clarification 6th
December 1980
I
am directed to state that a doubt has been raised whether the benefit of
concession of duty in respect of the four specified dyes in Notification No.
180/61 dated 23.11.61 would be available when they are made from primary dyes
which have availed full exemption of duty under the Notification 71/78 dated
1.3.78 since superseded by Notification No. 80/80 dated 19.6.80. The doubt has
arisen in this case on account of the fact that while the primary dyes have
availed full exemption of duty, Notification 180/61 allows the exemption to
the specified secondary dyes only when the primary dyes are such "on which
excise duty or countervailing customs duty has already been paid". The
matter was referred to the Ministry of Law who have opined that the specified
secondary dyes manufactured from primary dyes in this case are entitled to
exemption under Notification No. 180/61 even though the primary dyes had availed
full exemption of duty under Notification No. 71/78 or 80/80. An extract of the
opinion of the Ministry of Law is enclosed. The Board has accepted the opinion
of the Ministry of Law.
The
receipt of this letter may please be acknowledged.
Notification
No. 180/61 was issued at a time when on exemption was available to primary dyes.
It appears that from 1.4.78 liberal exemption has been granted for small-scale
manufacturers of dyestuffs upto the first clearances of Rs. 5 lakhs in a
financial year if the total clearances of dyestuffs by the manufacturers in the
preceding financial year were less than Rs. 15 lakhs (vide Notifications Nos.
71/78 and 80/ 80).
The
question for consideration is whether exemption under Notifications No. 180/61
could be granted after the advent of the other two Notifications Nos. 71/78 and
80/80.
Exemption
under Notification 180/61 will be available "if and only if such dyes are
manufactured from any other dye on which excise duty or countervailing customs
duty has already been paid". The crucial words in the exemption
notification are "duty has already been paid".
The
two interpretations possible are that it might mean duty which has actually been
paid or which ought to have been paid.
We
are dealing with a case where no duty is payable in respect of certain goods by
virtue of exemption notifications. If these goods are assessed to duty, the duty
payable would be nil. In this context, reference may be made to the definition
of "assessment of duty by the proper officer and includes reassessment,
provisional assessment under Rule 9B, summary assessment under Rule 37 A and
post-judgement assessment under Rule 173Q and any order of assessment in which
the duty assessed is nil.
In
N.B. Sharma vs. The Elephantine Spinning and Weaving Mills (AIR 1971 SC 2039),
the Supreme Court had also occasion to consider the meaning of the expression
"paid" occurring in rule 10 of the Central Excise Rules. One
contention was that it means, "actually paid". The Supreme Court held
that the proper interpretation to be placed on the expression "paid"
is " ought to have been paid". The court also referred to certain
other enactments where also such an interpretation has been placed on the said
expression.
In
the light of the above, it would appear that the secondary dye manufacturers
would be entitled to the exemption under Notification No. 180/61 even after the
advent of the exemption Notifications 71/78 and 80/ 80.
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