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PETITIONER: ELSON MACHINES (P) LTD.

       Vs.

RESPONDENT: COLLECTOR OF CENTRAL EXCISE

DATE OF JUDGMENT15/11/1988

BENCH: PATHAK, R.S. (CJ) BENCH: PATHAK, R.S. (CJ) RANGNATHAN, S.

CITATION:  1989 AIR  617            1988 SCR  Supl. (3) 878  1989 SCC  Supl.  (1) 671 JT 1988 (4)   373  1988 SCALE  (2)1320  CITATOR INFO :  RF         1991 SC 999  (6)

ACT:     Central Excise Rules, 1944-R. 8(1)--Exemption from  duty granted under Notification No. 80/80/ C.E. dated 19-6-1980-- Whether  captive consumption of specified goods  within  the factory  for manufacture of specified goods falling under  a different  item  can  be  excluded  while  determining   the clearance value.

HEADNOTE:     As a measure of concession to small-scule manufacturers, Notification No. 80/80-C.E. dated 19-6-1980 issued under  r. 8(1)  of the Central Excise Rules, 1944 exempted  from  duty certain excisable goods and, paragraph 2 thereof  stipulated inter  alia that the concession would not be available to  a manufacturer  if  the aggregate value of clearances  of  the specified  goods  by  him for home  consumption  during  the preceding   financial   year  had  exceeded   Rs.15   lakhs. Explanation  V  thereto provided that  where  any  specified goods were used within the factory of production for further manufacture of any other specified goods and, where both the former  and  the latter categories of specified  goods  fell under  the  same item of the First Schedule to  the  Central Excises  and  Salt Act, 1944, the clearances of  the  former category of specified goods shall not be taken into  account for  calculating the aggregate value of clearance under  the notification.      The  appellant  which was engaged in  the  business  of manufacturing  and selling electric motors, availed  of  the aforesaid exemption for  the periods 1-4-1980 to  30-11-1980 and  1-4-198l  to 30-9-198l. The Excise Authority  issued  a demand for payment of duty on the ground that its  clearance exceeded the limit of Rs.15 lakhs. On appeal, the demand for the  period  1-4-1980 to 30-11-1980 was set  aside  but  the demand  for the Period 1-4-l98l to 30-9-1981 was  sustained. On further appeal, the Appellate Tribunal observed that  for the year 1980-81 the appellant had disclosed a clearance  of Rs.13,43,443.55  on  account  of electric  motors  for  home consumption and Rs.6,51,138.50 on account of electric motors "for  captive consumption" in the manufacture  of  monoblock

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pumps.  The  Tribunal held that while electric  motors  were mentioned  under  Tariff Item 30, power  driven  pumps  were specified  under  Tariff  Item  30-A,  and  therefore,   the electric   motors  captively  consumed  as  inputs  in   the                                                    PG NO 878                                                    PG NO 879 manufacture of power driven pumps could not be excluded. The further contention that the appellant had mistakenly  stated that  electric  motors  had been used  for  monoblock  pumps whereas   only  rotors  and  stators  which  were   integral components  of monoblock pumps had been used  and  therefore the  same  Tariff  Item was attracted entitling  it  to  the concession was also rejected by the Tribunal.      Dismissing the appeal,      HELD:  The contention that the goods in question  could not be said to have been cleared from the factory since they were  employed in the manufacture of monoblock pumps  within the factory itself has no force. As soon as the  manufacture of  the goods was completed they must be regarded  as  goods available  for  clearance  from the factory,  and  there  is nothing  to show that when fitted into monoblock pumps  they were  not  removed to another part of the factory  for  that purpose.  The  process  of manufacture  of  those  goods  is distinct, separate and complete in itself and at the end  of the manufacturing process, the goods in question represent a completed product. [882E-F] Whether  the goods in question were rotors and  stators  and whether they formed integral components of monoblock  motors is  a  question  of fact considered  and  concluded  by  the Tribunal and it cannot be entertained at this stage [882B]

JUDGMENT:     CIVIL.  APPELLATE JURISDlCTlON: Civil Appeal No. 603  of 1985.     From  the  Judgment and Order dated   27.8.1984  of  the Customs  Excise  and Gold (Control) Appellate  Tribunal  New Delhi in Appeal No. 1711/83-B in Order  No. 643/84-B.     Dushyant Dave, R. Karanjawala and Mrs. Manik Karanjawala for the Appellant.     G.  Ramaswami,  Additional Solicitor General,  N.S.  Das Bahl and Ms. S. Relan for the Respondent.     The Judgment of the Court was delivered by     PATHAK, CJ. This appeal is directed against the judgment and order of the Customs, Excise and Gold Control  Appellate                                                    PG NO 880 Tribunal   on   the  question  whether  the   appellant   is disentitled  to the concession granted by  Notification  No. 80/80-C.E.  dated 19 June 1980 to small scale  manufacturers in the matter of Central Excise duty.     The  appellant is a private limited company. It has  its registered office and factory in the State of Gujarat. It is engaged  in  the  business  of  manufacturing  and   selling electric motors.      In exercise of the powers conferred by sub-rule (1)  of rule  8  of  the Central Excise  Rules,  1944,  the  Central Government issued Notification No. 80/80-C.E. dated 19  June 1980,  which,  as  it  stood  during  the  relevant  period, exempted  from  duty excisable goods falling  under  certain Item  Numbers of the First Schedule to the  Central  Excises and Salt Act, 1944 as specified in the Table annexed to  the Notification and of the particular description set forth  in that Table. But paragraph 2 of the Notification declared:      "Nothing contained in this notification shall apply  to

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a  manufacturer,--      (i)  if  the  aggregate  value  of  clearances  of  all excisable   goods  by  him  or  on  his  behalf,  for   home consumption,   from  one  or  more  factories,  during   the preceding financial year, had exceeded rupees twenty lakhs."      (ii)  if  the  aggregate value  of  clearances  of  the specified   goods  by  him  or  on  his  behalf,  for   home consumption,   from  one  or  more  factories,  during   the preceding  financial  year.  had  exceeded  rupees   fifteen lakhs."     The   appellant   availed   of   exemption   under   the Notification  for  the periods 1 April 1980 to  30  November 1980 and 1 April 1981 to 30     September 1981 claiming that the  clearances during the preceding years were confined  to the  stipulated limit. The Excise Authority, in  the  belief that  the appellant had wrongly availed of exemption as  its clearances exceeded the limit of 15 lakhs, issued notice  to the  appellant  to show cause against an assessment  of  the differential duty for those periods. The appellant attempted to show cause, but the Assistant Collector of Excise did not accept  the  case set up by the appellant  and  imposed  the demand. On appeal the Collector of Central Excise  (Appeals) set  aside  the  demand for the period 1 April  1980  to  30 November  1980,  but he upheld the demand for the  period  1 April  1981  to  3V September 1981. In  the  further  appeal before  the  Customs,  Excise  and  Gold  Control  Appellate                                                    PG NO 881 Tribunal  the entire question was whether the appellant  had exceeded the limit of Rs.15 lakhs when effecting  clearances during the financial year 1980- 1981 and was, therefore, not entitled  to  exemption for the period 1 April  1981  to  30 September 1981.     For the financial year 1 April 1980 to 31 March 1981 the appellant had disclosed a clearance value of Rs.13,43,443.55 on  account  of electric motors for home consumption  and  a clearance  value  of Rs.6,51,138.50 on account  of  electric motors  "for  captive  consumption" in  the  manufacture  of monoblock pumps. It was contended by the appellant that  the electric motors used for making monoblock pumps could not be taken  into  consideration when calculating  the  clearances eligible under the Notification. According to the  appellant the  captive  consumption did not amount to  clearance.  The claim  was  disputed  by the  Department,  which  relied  on Explanation  V to the aforesaid Notification dated  19  June 1980. The Explanation declared:     "Explanation  V--Where any specified goods  (hereinafter referred  to as inputs) are used for further manufacture  of specified goods (hereinafter referred to as finished  goods) within  the factory of production of inputs and  where  such inputs  and finished goods fall under the same item  of  the said First Schedule to the said Act, the clearances of  such inputs for such use shall not be taken into account for  the purposes  of calculating the aggregate value  of  clearances under this notification."     The  Appellate  Tribunal observed that in terms  of  the Explanation the clearances of inputs could not be taken into account  for calculating the aggregate value  of  clearances only  when the inputs and finished products fall  under  the same  item of the First Schedule to the Act. It pointed  out that while electric motors were mentioned under Tariff  Item 30, power driven pumps were specified under Tarrif Item  30- A.  It said that consequently the electric motors  captively consumed as inputs in the manufacture of power driven  pumps could  not  be  excluded when  determining  the  appellant’s clearances.  The  appellant  urged that  the  appellant  had

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mistakenly  stated  that electric motors had been  used  for monoblock  pumps whereas only rotors and stators which  were integral  components of monoblock pumps had been  used,  and that,  therefore, the same Tariff Item was  attracted,  thus entitling  the appellant to the concession.  The  submission was  rejected  by the Appellate  Tribunal.  Accordingly,  it found  that the appellant had exceeded the limit  stipulated                                                    PG NO 882 by  Notification  No. 80/80-C.E.  dated 19 June,  1980,  and was, therefore, disentitled to the concession.     It  is contended before us that the  Appellate  Tribunal erred in rejecting the submission of the appellant that  the goods  manufactured by the appellant did not entitle  it  to the  benefit  of Explanation V of the  Notification.  lt  is urged  that the goods in question were rotors  and  stators, that  they were integral components of monoblock motors  and could  not  be considered as components of  general  purpose Motors  and  therefore fell within the same Tariff  Item  as monoblock  pumps.  The question has been considered  by  the Appellate  Tribunal. It is a question of fact and we do  not propose to entertain it at this stage. It  is  then  urged  that  stators  and  rotors  should   be considered under Tariff Item 68, which is a residuary  item. The Appellate Tribunal has proceeded on the basis that  what was  manufactured by the appellant were electric motors.  It is only in the alternative that it considered the submission of the appellant that the goods should be regarded as rotors and stators. In the circumstances recourse cannot be had  to Tariff Item 68 by the appellant.     The next contention is that the goods in question cannot be said to have been cleared from the factory and  therefore could  not  be included within the value of  the  clearances from  the  factory. The submission is that  the  goods  were employed  in the manufacture of monoblock pumps  within  the factory itself. We are not impressed by this contention.  As soon as the manufacture of the goods was completed they must be  regarded  as  goods available  for  clearance  from  the factory, and there is nothing to show that when fitted  into monoblock pumps they were not removed to another part of the factory  for  that purpose. The process  of  manufacture  of those goods is distinct, separate and complete in itself and at  the  end  of the manufacturing  process,  the  goods  in question represent a completed product.     The  next submission on behalf of the appellant is  that the  Classification Lists had been approved earlier and  the Excise Authority was estopped from taking a different  view. Plainly there can be no estoppel against the law. The  claim raised  before us is a claim based on the legal effect of  a provision  of  law and, therefore, this contention  must  be rejected.     Finally  it is pointed out by counsel for the  appellant that  no  recovery has been made by the appellant  from  its constituents and therefore, it is said, the demand should be                                                    PG NO 883 set  aside.  Reference is made to Collector of  Customs  and Central  Excise  and Anr. v.  Oriental  Timber  Industries., [1985] 20 E.L.T. 202 (SC). We have perused the facts of that case and we find that the order made by the court there,  so far as this aspect is concerned, was made on a concession of counsel  for the Union of India and on the footing that  the Union  of  India was not  concerned with the  collection  of additional  duty for earlier years but was merely  concerned with  the question of law involved in the case. We are  also not  satisfied that the facts upon which relief was  granted in that case arise before us in this case.

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   In the result the appeal is dismissed with costs. H.L.C.                                      Appeal dismissed