Y.V. Anjaneyulu, J.@mdashM/s Hyderabad Asbestos Cement Products Limited, hereinafter referred to as "the assessee" is petitioner No.1 herein. Petitioner No. 2 is a shareholder in the above assessee-Company. They seek a writ of Certiorari to quash the order dated 30-9-1983 of the Assistant Collector, Central Excise, Hyderabad IV Division, Hyderabad, respondent No. 3 herein. They also seek directions to respondents Nos. 1 to 3 to grant the assessee the benefit of Proforma Credit Procedure under Rule 56A of the Central Excise Rules, 1944, hereinafter referred to as "The Rules" in respect of the Excise Duty/Countervailing duty paid on cement and fiber used in the manufacture by the assessee of asbestos cement products at its factories at Sanatnagar, Ballabhgarh and Jasidh.
2. The assessee Manufactures and sells asbestos cement products, such as sheets (corrugated or plain), pressure pipes and couplings etc. The Principal raw a materials used for the manufacture of the asbestos cement products are cement and asbestos fiber. In respect of these raw materials or components used in the manufacture, the assessee pays excise duty. Tariff duty is paid under Tariff Item 22F on asbestos fiber and under Tariff Item 23 of cement. In respect of imported asbestos fiber additional duty, i.e. countervailing duty, equal to Excise Duty, is paid.
3. The products manufactured by the assessee are notified by the Central Government under Rule 56A(i) of the Rules as one of the specified excisable goods in respect of which the proforma Credit Procedure under Rule 56A(i) is applicable. The asbestos cement products are listed as Serial No. 11 of the list of Such Specified goods (Vide Notification No. 223/62, dated 29-12-1962).
4. The assessee made an application dated 13-5-1983 to respondents No. 3 herein. In the said application the assessee requested that if may be permitted to avail the procedure under Rule 56A in respect of the aforesaid two duty paid materials and components received in its factory and used in the manufacture of asbestos and cement products. Respondent No.3 rejected assessee''s application and refused to grant the assessee the Proforma of Credit Procedure under Rule 56A in relation to the specified manufactured goods to the extent of the excise duty/countervailing duty paid on cement and asbestos fiber. Respondent No.3 held that the Rule 56A(2) of the Rules envisages that no credit of duty shall be allowed in respect of any material or component parts used in the manufacture of excisable goods, unless duty has been for each material or component parts under the same Tariff Item as per finished excisable goods. In other words, according to respondent No.3, if the inputs and the finished goods fall under different Tariff Items, the benefit of Proforma Credit Procedure is not available. It was pointed out that asbestos fiber and cement, which are the raw materials used by the assessee in the manufacture of finished excisable goods, fell under Tariff Item Nos. 22F and 23 respectively for the purpose of payment of duty whereas duty is payable on the finished goods under Tariff Item No. 23C. In the above view, respondent No.3 held that permission could not be granted to the assessee to avail credit of duty paid on the inputs, namely, asbestos fiber and cement used in the manufacture of cement products under Rule 56A of the Rules. The application filed by the assessee was accordingly rejected. The correctness of this order is challenged by the assessee in this writ petition.
5. We have heard the learned counsel for the assessee, Sri K. Srinivasa Murthy, and Sri V. Jaggayya Sarma, learned Counsel for the respondents. Before referring to the contentions of the learned counsel for both sides, we may briefly trace the legislative history of Rule 56A of the Rules.
6. Rule 56A of the Rules was introduced on 8-12-1962. It deals with the special procedure for movements of duty paid or countervailing duty paid materials or component parts for use in the manufacture of finished excisable products. The rule, as originally introduced, is in the following terms :-
"56A. Special procedure for movement of duty paid or countervailing duty paid materials or components parts for use in the manufacture of finished excisable products :-
(1) Notwithstanding anything contained in these rules, the Central Government may, be notification in the Official Gazette, specify the excisable goods in respect of which the procedure lad down in sub-rule (2) shall apply.
(2) The Collector may, on application made in this behalf and subject to the condition mentioned in sub-rule (3) and such other condition as my from time to time, be prescribed by the Central Government, permit a manufacturer of any excisable goods specified under sub-rule (1) to receive duty paid material or component parts in his factory for the manufacture of these goods and allow a credit of the duty already paid on such material or components parts, under proforma credit account as in Form No.23".
Quickly thereafter, on 8-1-1963, a proviso was asked after sub-rule (2). The proviso was in the following terms:-
" Provided that no credit of duty shall be allowed in respect of any material or component part used in the manufacture of finished excisable goods unless :-
(a) Duty has been paid for such material or component part under the same items or sub-items and at the same rate as is appropriate to the finished excisable goods; or
(b) remission or adjustment of duty paid for such material or component part has been specifically sanctioned by Central Government".
Thereafter, on 26-10-1963, some more changes were made in Rule 56A(1) and (2) and Clauses (a) and (b) of the proviso. It is not necessary to refer to the changes made on 26-10-1963 as a new Rule 56 A was substituted within the effect from 20-12-1968 by Notification No. 203/68. The newly substituted rule reads as under to the extent it is relevant for our present purpose :-
"56.A. Special procedure for movement of duty paid materials or components parts for use in the manufacture if finished excisable goods
(1) Notwithstanding anything contained in these rules the Central Government may 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 of finished product (like asbestos cement), on which the duty of excise or the additional duty u/s 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 manufactured 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 payments 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 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 procedures contained in this rule".
7. With effect from 1-8-1983 Rule 56A underwent further changes. But these, changes do not affect the proposition of law under consideration in the present case. It is, therefore, enough if Rule 56A, as was substituted with effect from 20-12-1968 by Notification No. 203/68, is considered. There is no difficulty in appreciating the scope of sub- rules (1) and (2) of Rule 56A. It is clear that credit of duty shall be allowed in respect of any raw materials or component parts in the manufacture of finished excisable goods subject, however to the condition that the Central Government notifies, under sub-rule (1), the finished excisable goods in respect of which the procedure laid down in sub-rule (2) is that the person claiming credit of duty should satisfy the authorities that duty is paid on the raw materials and component parts used in the manufacture of the notified finished excisable goods or that additional duty, namely, countervailing duty, is paid in manufacture of finished excisable goods. The question for consideration is what is the scope of the proviso added on 8-1-1963 and further amended later with effect from 26-10-1963? In its apparent effect the proviso stipulators certain conditions to be satisfied for allowances of the credit of duty. Unless these conditions are satisfied the credit of duty, which is otherwise allowable pursuant to sub-rules (1) and (2) of Rule 56A falls to be denied. These conditions are specified in Clauses (i) and (ii) of the proviso. In other words, does the proviso carve out an exception to the provisions contained in the sub-rules (1) and (2). That is the real controversy in the present case. The authorities contend that unless the conditions specified in the proviso are satisfied, credit of duty cannot be allowed even if the ingredients of sub-rules (1) and(2) are satisfied. it is urged that the proviso denies the credit of duty which may be, otherwise due to a person unless the conditions specified in the proviso are satisfied. The authorities point out that according clause (ii) of the proviso to sub-rule (2) of the Rule 56A the conditions specified in the proviso are satisfied is that excise duty must be payable on the finished excisable goods as well as raw materials or component parts under the same Tariff Item. If the duty is not so payable under the same Tariff Item, then clause (ii) of the proviso to sub-rule (2) of Rule 56A is not satisfied and therefore, no credit of duty paid in respect of the materials or component parts can be allowed. As already observed, it is pointed out in the case of the assessees that excise duty is payable on asbestos fiber and cement under the Tariff Item 22F and 23 while duty is payable on the finished excisable goods under Tariff Item 23C. It is, therefore, stated that clause (ii) of the proviso to sub-rule (2) of Rule 56A is not satisfied and the assessee will not be entitled to credit of duty paid in respect of asbestos fiber and cement used in the manufacture of asbestos cement products. This position is re-iterated in the sub-missions made by Sri. Jaggayya Sarma learned Counsel for the respondents.
8. Sri. K. Srinivasa Murthy, learned Counsel for the assessee submits that the aforesaid interpretation sought to be placed by the respondents is wholly untenable. It is urged that though the proviso was first added on 8-1-1963,the Central Government has been issuing notifications regularly thereafter notifying a variety of finished goods for the purpose of of proforma credit under Rule 56A(1). Learned Counsel points out that these notification are spread over the period 1963-85 and is most of the cases of finished goods notified under sub- rule (i) duty is not paid under the same Tariff Item, in as much as duty is not paid under different Tariff items in respect of raw materials and components parts used in the manufacture of such notified finished goods. Learned Counsel claims that if the intention is that proforma credit shall not be allowed unless duty is paid under the same Tariff Item in respect of the finished products as well as raw materials and components parts used in the manufacture of finished products, no purpose is served by the notification issued under sub- rule (1). Learned Counsel invites attention to the list of principal raw materials used in the manufacture of excisable goods mentioned in R.K. Jain''s "Central Excise Law Guide", Fifth Edition, Volume 1, pages 812-824. With Reference to the particulars specified therein learned Counsel points out that in most of the cases the duty is paid under different Tariff Items, in respect of raw materials and component parts. It is submitted that if the real effect of the proviso to sub- rule (2) of Rule 56A is to deny that the benefit of proforma credit unless duty is paid under the same Tariff Item, then the notifications issued under Sub-rule (1) are superfluous and otiose. It is urged that the proviso relates to item which are not entitled to proforma credit under Rule 56A(1) the proviso cannot be permitted to defeat the basic intention expressed in the statutory provision. A provision can stand independently and be given effect to without reference to the provisions contained in the main provision. Learned Counsel relied on
9. We have given careful consideration to the rival submissions. The argument advanced by Sri. K. Srinivasa Murthy are undoubtedly attractive and no clear explanation is forthcoming as to why Notifications featured for entitlement of the procedure laid down in Rule 96A (2) if the intention of the legislature is that the said procedure should be made in respect of the finished excisable goods on the one hand and the raw materials and component parts used in the captive consumption on the other. Even so, we cannot ignore the real effects of the proviso to Rule 56A. In our opinion, the terms contained in the proviso admit of no doubt whatsoever. We are unable to escape the contention of the Learned Counsel for the petitioner that the proviso works in a direction different from the main provisions contained in Rule 56A (2). The language employed in the proviso is categorical to the effect that the duty which may be otherwise, allowed credit under Rule 56A (2) shall not be allowed unless the condition specified in the proviso are satisfied.
10. It would be relevant to refer to the proviso to clause (ii) of the proviso to the main sub-rules 56A (2). It provides that even in cases where specified goods are manufactured out of the material or components parts which may not be dutiable under the same Tariff Item, even then if the Central Government has Specifically sanctioned remissions or adjustments of duty paid on them the manufacturer of such specified goods can claim benefit of the procedure of proforma credit as per Rule 56A (2). If the main proviso to sub-rule (2) of Rule 56A is read conjointly clauses (i) and (ii) and the proviso to the clause (ii), the intention of the rule-making authority is clear that all excisable goods are liable to get the benefit of proforma credit procedure provided the raw materials and component parts used in the manufacture of finished products have borne the excise duty under the same Tariff Item under which the finished excisable goods are dutible and alternatively if such raw materials and component parts are conferred with the benefit of remission or adjustment of duty paid on under them sanction by the Central Government. In both types of cases main provisions contained Rule 56A (1) and (2) will operate without any limitation. If, however,any of the two situation above referred does not exist, then the duty paid on the raw materials and component parts will not get the benefit of proforma credit procedure. It is not, therefore, possible to accept the contention of Sri. Srinivasa Murthy that the proviso to sub-rule (2) 0f Rule 56A cannot be held to be an exception to the main provision.
11. We find that an identical question has come up for consideration before the Gujarat High Court in
12. In the circumstances, we dismiss this writ petition, but in the circumstances without costs.
