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PETITIONER: M/S HYDERABAD ASBESTOS CEMENT PRODUCTS & ANR.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT:       07/12/1999

BENCH: S.P.Bharucha, R.C.Lahoti, N.S Hegde

JUDGMENT:

     R.C.  Lahoti, J.

     C.A.    No........../99  (Arising   out  of  S.L.P.(C) No.12722/87) --------------------------------------

     Leave granted.

     The  appellants  manufacture and sell asbestos  cement products  such  as  sheets (corrugated or  plain),  pressure pipes,  couplings  etc.  These products require  cement  and asbestos fibre as raw materials.  Both the items consumed as raw  materials as also the finished products manufactured by the appellants are all excisable commodities under different tariff  items.  Asbestos fibre is covered by Tariff item 22- F.   Cement  is  covered by Tariff item  23.   The  finished products  manufactured by the appellants are excisable under Tariff  item 23-C.  In respect of cement and asbestos  fibre obtained from outside excise duties were duly paid under the relevant  tariff  items 23 and 22F.  In respect of  imported asbestos   additional   duty,   i.e.,  countervailing   duty equivalent  to excise duty was paid.  The finished  products of  the  appellants were not exempt from payment  of  excise duty  leviable thereon nor were they chargeable to nil  rate of  duty.   The appellants claimed the benefit  of  proforma credit  procedure by seeking credit for the payment of  duty paid  on  the  inputs  as against the duty  payable  on  the finished products and sought for permission of the Assistant Collector of Central Excise, Hyderabad under Rule 56A of the Central  Excise Rules, 1944 (hereinafter referred to as ‘the Rules’)  framed  under the provisions of the Central  Excise and  Salt  Act,  1944.  The Assistant Collector  refused  to grant  such  permission.   An appeal  preferred  before  the Collector   of  Central  Excise,   Hyderabad  failed.    The appellants  challenged both the orders before the High Court of  Andhra Pradesh by filing writ petition under Article 226 of  the  Constitution  which also has been  dismissed.   The decision  of the High Court under appeal is reported as 1987 (32) ELT 28 A.P.  The High Court has for itself analysed and examined  the  provisions of Rule 56A.  The High  Court  has also  cited in its support a division bench decision of  the High Court of Gujarat in Digvijay Cement Company Limited Vs. Union  of  India  - 1986 (25) E.L.T.   879.   The  aggrieved appellants have filed this special leave petition.

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     The  sole question arising for decision is whether the benefit  of proforma credit procedure specified in Rule  56A (1)  is available to the appellants though the raw materials consumed by the appellants in their manufacture of the final products are excisable under tariff items different from the one under which their final products are excisable.

     Rule   56A  was  introduced  on  8.12.1962.   It   has undergone  several changes from time to time which have been extensively noticed by the High Court of Gujarat in the case of  Digvijay  Cement Company Ltd.  (supra).  The rule as  it stood at the relevant time reads as under:-

     "56.A.   Special  procedure for movement of  duty-paid materials  or component parts for use in the manufacture  of finished excisable goods---

     (1)  Notwithstanding anything contained in these rules the  Central Government may, by notification in the Official Gazette, specify the excisable goods in respect of which the procedure laid down in sub-rule (2) shall apply.

     (2)  The  Collector may, on application made  in  this behalf  and subject to the conditions mentioned in  sub-rule (3)  and  such other conditions as may from time to time  be prescribed  by the Central Government, permit a manufacturer of  any  excisable  goods specified under  sub-rule  (1)  to receive,  material  or component parts or  finished  product (like  asbestos cement), on which the duty of excise or  the additional  duty under Section 2A of the Indian Tariff  Act, 1934  (32  of  1934),  (hereinafter   referred  to  as  ‘the countervailing  duty), has been paid, in his factory for the manufacture  of  these  goods  or for  the  more  convenient distribution  of finished product and allow a credit of  the duty  already  paid on such material or component  parts  or finished product, as the case may be;

     Provided  that  no credit of duty shall be allowed  in respect  of  any  material or component parts  used  in  the manufacture of finished excisable goods-

     (i)  if such finished excisable goods produced by  the manufacturer  are  exempted  from the whole of the  duty  of excise  leviable  thereon or are chargeable to nil  rate  of duty, and

     (ii) unless---

     (a)  duty has been paid for such material or component parts  under  the  same  item or sub-item  as  the  finished excisable goods;  or

     (b)  remission  or  adjustment of duty paid  for  such material or component parts has been specifically sanctioned by the Central Government;

     Provided  further  that  if  the  duty  paid  on  such material  or  component  parts  (of which  credit  has  been allowed  under this sub-rule) be varied subsequently due  to any  reason, resulting in payment of refund to, or  recovery of more duty from, the manufacturer or importer, as the case may  be,  of  such material or component parts,  the  credit allowed  shall  be varied accordingly by adjustment  in  the credit  account  maintained  under sub-rule (3)  or  in  the

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account-current  maintained under sub-rule (3) or Rule 9  or Rule  178(1) or, if such adjustment be not possible for  any reason, by cash recovery from or, as the case may be, refund to  the manufacturer availing of the procedure contained  in this rule."

     Subsequently  with  effect from 1.8.1983 the rule  has undergone  further  changes which are not relevant  for  our purpose.

     A  bare  reading  of the rule shows that  the  Central Government  has been empowered by sub-rule (1) to specify by notification in the official gazette such excisable goods in respect  of which the benefit of proforma credit as provided by  sub-rule (2) can be taken.  The excisable goods referred to in sub-rule (1) are finished products.  In order to claim the  benefit of the rule the conditions to be satisfied are: (i)  the finished product should be specified by the Central Government  by  notification in the official gazette as  the excisable  goods in respect of which the procedure laid down in  sub-rule  (2) shall apply;  (ii) an application must  be made by the assessee to the Collector in this behalf;  (iii) the material, component parts or finished products, the duty or  additional  duty  paid whereon may be  availed  for  the purpose  of taking proforma credit, must not be used in  the manufacture  of such finished excisable goods as are  exempt from the whole of the duty of excise leviable thereon or are chargeable  to  nil rate of duty;  and (iv) (a) the duty  as has been paid for such material or component parts must have been so paid under the same item or sub item as the finished excisable  goods,  or (b) if the raw material  or  component parts  are not excisable under the same item or sub-item  as the  finished  excisable  goods, or in other words  if  such material  or component parts are excisable under an item  or sub-item  other than the one under which the finished  goods are  excisable  then  the  Central  Government  should  have specifically sanctioned remission or adjustment of duty paid for such material or component parts.

     The  controversy centres around the interpretation and scope of proviso (ii) (b) of Rule 56A.  The appellants’ plea is  that  once  the  Central  Government  has  notified  the excisable  goods under sub-rule (1) the benefit of  proforma credit  shall be available to the appellants without  regard to the fact whether or not the raw material or the component parts  are  excisable  under the same item  or  sub-item  of Tariff.   The effect of benefit extended by the main part of the  Rule  cannot be nullified or taken away by  a  proviso, submitted  the learned counsel for the appellants.  The plea so  raised has not appealed to the High Court.  We also find no  merit  in  the  plea   though  it  has  been  forcefully reiterated before us.

     The language of the rule is plain and simple.  It does not  admit of any doubt in interpretation.  Proviso (i)  and (ii)  are  separated by the use of conjunction ‘and’.   They have  to  be read conjointly.  The requirement of  both  the provisos  has to be satisfied to avail the benefit.  Clauses (a)  and (b) of proviso (ii) are separated by the use of  an ‘or’and   there  the  availability  of   one  of   the   two alternatives would suffice.  Inasmuch as cement and asbestos fibre  used  by the appellants in the manufacture  of  their finished  excisable goods are liable to duty under different tariff  items,  the benefit of proforma credit  extended  by Rule 56A cannot be availed of by the appellants and has been

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rightly denied by the authorities of the Department.

     We  are  in  no  doubt that to avail  the  benefit  of proforma  credit  under  Rule  56A the inputs  which  go  to manufacture  the specified finished excisable goods must  be exigible  to  payment of duty under the same tariff item  or sub item;  or else, if such inputs are exigible to tax under different  tariff  items  or  sub-items then  they  must  be covered  by the specific sanction of the Central  Government granting  remission or adjustment of duty on those inputs as provided  by proviso (ii) (b).  Admittedly there is no  such specific  sanction.   The  raw   materials  consumed   being excisable  under  Tariff items different from the one  under which  the  finished products are excisable  the  appellants have been rightly denied benefit of proforma credit.

     We  find ourselves in agreement with the view taken by the  High Court.  The appeal is devoid of any merit.  It  is dismissed  though  without any order as to the costs.   C.A. No.9159/96, C.A.  Nos.2779-80/97 and SLP(C) No.13520/87.

     For  the same reasons these appeals and special  leave petition  are also dismissed though without any order as  to the costs.