Commissioner, Customs & Central ... vs M/S Eco Products (India) Pvt. Ltd.

Hon'ble Prakash Krishna, J.

(Delivered by Hon'ble Ashok Bhushan, J.) The Central Excise Appeal Defective No.402 of 2005 has been heard along with Central Excise Reference No.11 of 2004. Central Excise Reference No.11 of 2004 arose out of Central Excise Reference Application Defective No. 11 of 2001 which case was directed to be listed along with Central Excise Reference No.11 of 2004 by order dated 8th November, 2010. The above central excise appeal as well as central excise reference and central excise reference application are being decided by this common judgment.

We have heard Sri S.P. Kesarwani, learned counsel appearing for the department and Sri V.K. Upadhya, Senior Advocate, assisted by Sri Ritvik Upadhya for M/s Eco Products India Pvt. Ltd. (hereinafter referred to as the assessee).

There is delay of 99 days in filing the Central Excise Appeal Defective No.402 of 2005 for condonation of which Civil Misc. (Delay Condonation) Application No.249294 of 2005 has been filed by the appellant, which is supported by affidavit of D.S. Chaubey.

In the affidavit filed in support of the application for condonation of delay, it has been stated that on 24th May, 2005 the papers with the instruction for filing appeal has been received in the office of the Assistant Solicitor General of India. The summer vacation started thereafter, hence appeal could be prepared on 29th July, 2005 and two copies of the drafted appeal were sent to the appellant for effecting service on the respondent. On 9th August, 2005 the appeal was received after verification of the Notary but there was certain defect pertaining to signature and the same was again sent to rectify the mistakes. Thereafter the appeal could be received back on 4th September, 2005 and after verification it was revealed that in the affidavit although certain additions were made but the same were not initialed/verified by the Notary, hence it was sent again for removing the defect. The appeal was submitted on 30th November, 2005 for reporting and after reporting it was presented on 13th December, 2005. A counter affidavit to the delay condonation application has been filed by the assessee alleging that although instruction to file appeal was received well within time but the appeal was filed with deliberate delay which is due to gross negligence of the persons entrusted with the job.

The reasons given in the affidavit explaining the delay are bonafide and the delay was due to error and mistakes which took place in finalising the draft and it cannot be said that the appellant was negligent in filing the appeal. Sufficient grounds have been made out to condone the delay in filing the appeal. The delay in filing Central Excise Appeal Defective No.402 of 2005 is condoned. The delay condonation application is allowed.

The facts giving rise to central excise reference application, central excise reference and central excise appeal may now be noted in chronological order.

M/S Eco Products India Pvt. Ltd., the assessee, was engaged in the manufacture of water filter and part thereof falling under Chapter Heading No.8421.10 & 8421.90 of the Schedule to Central Excise Tariff Act, 1985. A show cause notice dated 30th May, 1997 was issued to the assessee alleging that the assessee had incorrectly availed the exemption under the Notification No.01/93 dated 28.2.1993 as amended and thereby short paid central excise duty amounting to Rs.1,05,455.60 on the goods cleared during November, 1996 to March, 1997. The assessee was alleged to have availed the benefit of concessional rate of duty in terms of the above notification in respect of clearance of excisable goods manufactured by them affixing with brand name "AQUARIUS" which appeared to be brand name owned by M/s Singer India Limited. The assessee had appointed M/s Singer India Limited as their exclusive distributor for product. The Assistant Commissioner, Central Excise adjudicated the show cause notice and passed an order on 28th November, 1997 confirming the demand. Aggrieved by the order of the adjudicating authority, an appeal was filed before the Commissioner (Appeals) which was dismissed on 13th November, 1998. Against the order of the Commissioner (Appeals) further appeal was filed before the Customs, Excise and Gold (Control) Appellate Tribunal being Appeal No.E/434/99-B by the assessee which appeal was allowed by the judgment and order dated 26th June, 2000. The Commissioner, Central Excise, Meerut submitted an application to the High Court under Section 35H(1) of the Central Excise Act, 1944 requiring the High Court to direct the appellate Tribunal to refer to the High Court following two questions of law:-

"1. Whether ''ACQUARIUS II' brand water purifier, manufactured by M/s Eco Products (India) Pvt. Ltd. out of moulds supplied by M/s Singer India Ltd. and when the owner ship of such moulds always remain with M/s Singer India Ltd. and water purifier manufactured were solely marketed by M/s Singer India Ltd., were branded goods or not?

2. Whether water purifier manufactured by M/s Eco Products (India) Pvt. Ltd. in the brand name of ''AQUARIUS II' which was owned by M/s Singer India Ltd., was not a branded goods in terms of clause 4 of the Notification 1/93-CE dated 28.02.93 and if it was so, whether exemption/concession to said goods was available under the said Notification?"

The said application was registered as Central Excise Reference Application Defective No.11 of 2001. A Division Bench of this Court vide judgment and order dated 26th July, 2004 allowed the said central excise reference application and directed the Tribunal to draw up a statement of case and refer the aforementioned two questions for opinion of the Court. In consequence to the order of the Division Bench dated 26th July, 2004, the Tribunal drew up the statement of case and referred the abovementioned two questions of law to the High Court for its opinion which was registered as Central Excise Reference No.11 of 2004. Against the Division Bench judgment dated 26th July, 2004, the assessee had filed S.L.P. (Civil) No.23290 of 2005 in which leave was granted and the appeal was disposed of by the judgment and order dated 27th February, 2006 setting aside the judgment of the Division Bench of this Court dated 26th July 2004 and remanding the matter to the High Court for disposal afresh. Consequent to the order of the Apex Court dated 27th February, 2006 the Central Excise Reference Application Defective No.11 of 2001 has revived rendering the Central Excise Reference No.11 of 2004 as infructuous.

Now the facts giving rise to Central Excise Appeal Defective No.402 of 2005 are to be noted. The officers of the Central Excise have visited the factory premises on 16th November, 1998 and found that 1216 number of water filters have been received back by the assessee after expiry of stipulated period of one year from the date of their initial clearances from the factory. It was revealed that ''D-3 Intimation' was filed in respect of 1087 number of water filters but no such intimation was filed in respect of remaining 129 number of water filters. It was further revealed that aforesaid 1216 number of water filters were cleared without payment of duty under Challan dated 15.8.1998 after expiry of stipulated period of six months from the date of their receipt. A show cause notice dated 12th February, 1999 was issued asking as to why central excise duty of Rs.3,03,109/- involved on 1216 water filters should not be demanded and also proposing penalty under Rule 173-Q of the Central Excise Rules, 1944. Another show cause notice dated 12th March, 1999 was issued asking the assessee as to why central excise duty of Rs.1,39,060/- should not be demanded on the goods cleared without payment and also proposing to confiscate the seized 1216 water filters. Thereafter orders were passed by the Additional Commissioner, Central Excise on 15th November, 1999 confirming the demand of Rs.1,39,060/- on the water filters removed without payment of duty. The order of confiscating 1216 water filers was also passed giving option to redeem the same on payment of redemption fine of Rs.6,08,000/-. The penalty of Rs.1,39,060/- was also imposed under Rule 173-Q read with Section 11-AC of the Act. By another order dated 13th December, 1999, the Additional Commissioner confirmed the demand of Rs.3,03,109/- and penalty of of equal amount. The assessee filed appeal against both the orders dated 15th November, 1999 and 13th December, 1999 which were disposed of by the Commissioner (Appeals) by order dated 4th August, 2003 and 12th August, 2003 respectively. Against the orders dated 4th August, 2003 and 12th August, 2003 appeals were filed before the Customs, Excise & Service Tax Appellate Tribunal by the assessee which appeals were dismissed by judgment and order dated 27th January, 2005. Appeals against the orders dated 4th August, 2003 and 12th August, 2003 were also filed by the revenue which were dismissed by the same order dated 27th January, 2005. The Central Excise Appeal Defective No.402 of 2005 has been filed by the revenue against the judgment and order dated 27th January, 2005. In the appeal filed by the revenue following questions of law have been framed:-

"1. Whether ''ACQUARIUS II' brand water purifier, manufactured by M/s Eco Products (India) Pvt. Ltd. out of moulds supplied by M/s Singer India Ltd. and when the owner ship of such moulds always remain with M/s Singer India Ltd. and water purifier manufactured were solely marketed by M/s Singer India Ltd., were branded goods or not?

2.Whether water purifier manufactured by M/s Eco Products (India) Pvt. Ltd. in the brand name of ''AQUARIUS II' which was owned by M/s Singer India Ltd., was not a branded goods in terms of clause 4 of the Notification 1/93-CE dated 28.02.93 and if it was so, whether exemption/concession to said goods was available under the said Notification?

3.Any other points of law that this Hon'ble Court may deem fit and proper for order in relation to the issue under consideration."

The Central Excise Appeal Defective No.402 of 2005 is being treated as leading case.

At the very threshold of hearing Sri V.K. Upadhya, learned Senior Advocate, appearing for the assessee, raised a preliminary objection regarding maintainability of the appeal. Sri Upadhya submits that revenue has filed the appeal under Section 35-G of the Central Excise Act, 1944 (hereinafter referred to as the Act) against the order of CESTAT allowing SSI exemption to the goods manufactured by the respondents. In the appeal filed by the revenue ground has been taken that brand ''AQUARIOUS-II' was owned by M/s Singer India Limited and water purifiers manufactured by the respondent under the said brand name were not eligible for exemption/concession under the Notification No.1/93, dated 28th February, 1993. Sri Upadhya submits that the issue, which has been raised in the appeal by the revenue relates to determination of a question having relation to the rate of duty of excise for the purposes of assessment, hence the appeal could have been filed only under Section 35-L of the Act before the Apex Court and the appeal to the High Court is barred by virtue of sub-section (1) of Section 35-G. Sri Upadhya submits that Section 35-G, which is a provision providing for appeal to the High Court, clearly excludes two categories of appeal from the jurisdiction of the High Court, which are expressly mentioned in Section 35-G(1) in following words "not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment". Sri Upadhya submits that the question that the assessee is entitled for exemption under the notification dated 28th February, 1993 is a question relating to the rate of duty, hence the appeal under Section 35-G of the Act is excluded by statutory provision and the appeal cannot be entertained. He submits that proceeding for recovery of duty under Section 11-A of the Act in essence is a proceeding for assessment/re-assessment of duty and is clearly covered by exclusionary clause as contained in Section 35-G(1) of the Act. It is further submitted that provisions of Section 11-A of the Act are re-assessment provisions. The eligibility of the goods for exemption is in issue which question is directly and proximately related to the rate of duty for the purposes of assessment on excise duty payable by the assessee, hence the appeal could be filed only under Section 35-L of the Act.

Sri S.P. Kesarwani, learned counsel appearing for the department, refuting the submissions of learned counsel for the assessee, has contended that the appeal is fully maintainable under Section 35-G of the Act. He submits that in the instant case benefit of SSI exemption was held by the adjudicating authority to have been availed by the respondent suppressing the fact that brand name ''AQUARIOUS-II' under which the goods were manufactured, belong to another i.e. M/s Singer India Limited and thus the issue involved has no direct or proximate relationship with the rate of duty. It is submitted that appeal under Section 35-G of the Act shall not lie to the High Court only in such cases where the question of determination of rate of duty or value of goods for the purposes of assessment is involved. In other words, the aforesaid phrase shall apply only in cases where such questions are determined for the purposes of assessment i.e. matters arising from proceeding under Rule 7 of the 2002 Rules or under Rule 9B of the erstwhile Central Excise Rules, 1944. In other cases including the instant case where clandestine removal of goods is involved and the provisions of Section 11-A(1) is invoked, the appeal before the High Court under Section 35-G of the Act can not be barred. It is further submitted that right of appeal under Section 35-G of the Act being a statutory remedy and a substantive right, it should be interpreted liberally while that portion of this Section which excludes the right of appeal to the High Court, has to be construed strictly and in a restrictive sense. He submits that Section 11-A of the Act is recovery and penal provision and the proceeding under Section 11-A being a proceeding for recovery of duty and penalty, no question of assessment is involved and the exclusionary clause under Section 35-G(1) shall not be attracted. He further submits that present is not a case of provisional assessment or assessment.

Learned counsel for both the parties have relied on various judgments of the Apex Court, this Court and other High Courts which shall be referred to hereinafter while considering the submissions in detail.

Before we proceed to consider the questions, which have been framed in appeal as well as in the reference application, it is useful to refer to the relevant statutory provisions.

Chapter VI of the Central, Excises and Salt Act, 1944 contained a heading "Adjudication of Confiscations and Penalties", Section 35 of which contemplated appeal against an order of Central Excise Officer to the Central Board of Excise and Customs as constituted under the Central Boards of Revenue Act, 1963 or to any Central Excise Officer empowered in that behalf by the Central Government. Section 35-A of the said Act provided for revision to the Board or Collector. Section 36 provided for revision to the Central Government. A new Chapter-VIA was added by Finance (No.2) Act (44 of 1980) containing the heading "Appeals". Chapter-VIA replaced Sections 35, 35-A and 36 of the Act. Initially Section 35G provided for statement of case to the High Court whereas Section 35-H provided for statement of case to the Supreme Court and Section 35-L provided for appeal to the Supreme Court. Sections 35-G, 35-H and 35-L as inserted by Finance (No.2) Act (44 of 1980) were as under:-

"35G. Appeal to High Court. ‑ (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law.

35H. Application to High Court. ‑ (1) The Commissioner of Central Excise or the other party may, within one hundred and eighty days of the date upon which he is served with notice of an order under section 35C passed 2[before the 1st day of July, 2003[ (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment), by application in the prescribed form, accompanied, where the application is made by the other party, by a fee of two hundred rupees, apply to the High Court to direct the Appellate Tribunal to refer to the High Court any question of law arising from such order of the Tribunal.

(2) The Commissioner of Central Excise or the other party applying to the High Court under sub-section (1) shall clearly state the question of law which he seeks to be referred to the High Court and shall also specify the paragraph in the order of the Appellate Tribunal relevant to the question sought to be referred.

(3) On receipt of notice that an application has been made under sub-section (1), the person against whom such application has been made, may, notwithstanding that he may not have filed such application, file, within forty five days of the receipt of the notice, a memorandum of cross‑objections verified in the prescribed manner against any part of the order in relation to which an application for reference has been made and such memorandum shall be disposed of by the High Court as if it were an application presented within the time specified in sub‑section (1).

(4) If, on an application made under sub‑section (1), the High Court directs the Appellate Tribunal to refer the question of law raised in the application, the Appellate Tribunal shall, within one hundred and twenty days of the receipt of such direction, draw up a statement of the case and refer it to the High Court.] ...........

35L. Appeal to the Supreme Court.- An appeal shall lie to the Supreme Court from- (a) any judgment of the High Court delivered ‑ (i) in an appeal made under section 35G; or (ii) on a reference made under section 35G by the Appellate Tribunal before the 1st day of July, 2003; (iii) on a reference made under section 35H, in any case which, on its own motion or on an oral application made by or on behalf of the party aggrieved, immediately after passing of t1te judgment, the High Court certifies to be a fit one or appeal to the Supreme Court; or (b) any order passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment."

From the above provisions, two important features are decipherable. In Section 35-G which provided for statement of case to the High Court, the exclusionary clause i.e. "not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment" was very much there and secondly the appeal to the Supreme Court was directly contemplated against an order of the appellate Tribunal relating to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment. Section 35-G was further amended by Finance Act (32 of 2003) with effect from 14th May, 2003. Section 35-G as amended by Finance Act (32 of 2003) was as under:-

"35G. Appeal to High Court. - (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law.

(2) The Commissioner of Central Excise or the other party aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be -

(a) filed within one hundred and eighty days from the date on which the order appealed against is received by the Commissioner of Central Excise or the other party;

(b) accompanied by a fee of two hundred rupees where such appeal is filed by the other party;

(c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.

(2A) The High Court may admit an appeal after the expiry of the period of one hundred and eighty days referred to in clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.

(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.

(4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question:

Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.

(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

(6) The High Court may determine any issue which -

(a) has not been determined by the Appellate Tribunal; or

(b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1).

(7) When an appeal has been filed before the High Court, it shall be heard by a bench of not less than two Judges of the High Court, and shall be decided in accordance with the opinion of such Judges or of the majority, if any, of such Judges.

(8) Where there is no such majority, the Judges shall state the point of law upon which they differ and the case shall, then, be heard upon that point only by one or more of the other Judges of the High Court and such point shall be decided according to the opinion of the majority of the Judges who have heard the case including those who first heard it.

(9) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section."

Section 35-L was also amended by Finance Act (32 of 2003) with effect from 14th May, 2003. Section 35-L as amended by Finance Act (32 of 2003) is as follows:-

"35L Appeal to the Supreme Court -- An appeal shall lie to the Supreme Court from --

(a) any judgment of the High Court delivered -

(i) in an appeal made under section 35G; or (ii) on a reference made under section 35G by the Appellate Tribunal before the 1st day of July, 2003; (iii) on a reference made under section 35H, in any case which, on its own motion or on an oral application made by or on behalf of the party aggrieved, immediately after passing of the judgment, the High Court certifies to be a fit one for appeal to the Supreme Court; or (b) any order passed before the establishment of the National Tax Tribunal by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment."

From the above, it is clear that when the application filed by the Commissioner of Central Excise on which Central Excise Reference Application Defective No.11 of 2001 was registered under Section 35-G of the Act which provided statement of case to the High Court, was existing. Section 35-H of the Act which was earlier substituted by Act 27 of 1999 provided for application to the High Court by the Commissioner of Central Excise to direct the appellate Tribunal to refer to the High Court any question of law arising from such order of the Tribunal. However, Section 35-H also contained the same exclusionary clause i.e. "not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment".

The two questions, which were sought to be referred to the High Court by central excise reference application and the questions which have been framed in the central excise appeal are same. Thus the same questions arising from the order of the Tribunal dated 26th June, 2000 were framed for referring to the High Court for its opinion and on the same two questions central excise appeal has been filed against the subsequent order of the Tribunal dated 27th January, 2005. Thus the central excise appeal as well as central excise reference application are on the same questions.

As noted above, central excise reference application was allowed by the Division Bench of this Court on 26th July, 2004 directing the appellate Tribunal to refer the aforesaid two questions to the High Court against which order special leave petition was filed by the assessee in the Apex Court where one of the arguments raised was that reference application was not maintainable at all. The Apex Court did not enter into the question as to whether reference was maintainable or not but set-aside the order of the High Court on the ground that it was allowed without notice to the assessee. It is useful to quote the order of the Apex Court dated 27th February, 2006 which is to the following effect:-

"Delay condoned.

Leave Granted.

The appellant's grievance is that the High Court passed an ex parte order allowing the reference application of the respondents without notice to the petitioner holding that questions of law referred by the respondents did arise out of the order of the Tribunal. The order of the High Court is set-aside on this short ground alone. According to the appellant the reference application was not maintainable at all. We do not go into this issue. It will be open to the appellant to raise all issues which might be open to it before the High Court. The matter is remanded back to the High Court for disposal after giving an opportunity of being heard to the appellant.

The appeal is disposed of. There shall be no order as to costs."

As noted above, at the relevant time when the reference application was made, the reference provisions also contained the same exclusionary clause. Thus the same questions regarding maintainability of appeal under Section 35-G and maintainability of reference to the High Court are to be considered and fate of both will be same.

We have heard learned counsel for the parties on the question of maintainability of appeal. Thus we proceed to consider the submissions of learned counsel for the parties regarding maintainability of central excise appeal under Section 35-G of the Act.

The appeal to the High Court under Section 35-G shall lie from every order passed on the appeal by the appellate Tribunal on or after 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment). The issue to be considered is as to whether the order of the appellate Tribunal against which central excise appeal has been filed is an order relating to the determination of any question having a relation to the rate of duty or to the value of goods for the purposes of assessment. Present is not a case where question of value of goods is under consideration. Thus, it is to be examined as to whether any question has been raised having a relation to the rate of duty of excise.

One of the questions on which central excise appeal has been filed is "Whether the water purifier manufactured by M/s Eco Products (India) Pvt. Ltd. in the brand name of ''AQUARIUS II' which was owned by M/s Singer India Ltd., was not a branded goods in terms of clause 4 of the Notification 1/93-CE dated 28.02.93 and if it was so, whether exemption/concession to said goods was available under the said Notification?". The question raised is as to whether the assessee was entitled for exemption/concession under the notification dated 28th February, 1993. Whether the question of entitlement of exemption/concession is a question relating to the rate of duty is the moot question in the present appeal. What is the import and extent of the words "rate of duty" as used in Section 35-G of the Act and under Section 35-L(b) is to be considered.

The rate of duty has not been defined in the definition clause of the Act. Chapter-II of the Act deals with levy and collection of duty. The words "duty and rate" have been mentioned in Section 3. Section 3 is the charging section of the Act which is quoted below:-

"3. Duties specified in First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 to be levied. -- (1) There shall be levied and collected in such manner as may be prescribed, -

(a) a duty of excise to be called the Central Value Added Tax (CENVAT)] on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);

(b) a special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods excluding goods produced or manufactured in special economic zones specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are produced or manufactured in India, as, and at the rates, set forth in the said Second Schedule.

Provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured, -

(i) Omitted.

(ii) by a hundred per cent export-oriented undertaking and brought to any other place in India, shall be an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 (52 of 1962) or any other law for the time being in force, on like goods produced or manufactured outside India if imported into India, and where the said duties of customs are chargeable by reference to their value; the value of such excisable goods shall, notwithstanding anything contained in any other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1962 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975)."

The words "rate of duty" under the Act was initially contained in the first schedule of the Central, Excises and Salt Act, 1944. After enforcement of the Central Excise Tariff Act, 1985, the words "first schedule to the Central Excise Tariff Act, 1985" has been inserted in Section 3 of the Act. The exemption from duty can be granted by the Central Government from time to time by notification in the official gazette as was provided in Rule 8 of the Central Excise Rules, 1944. Rule 8 of the Central Excise Rules, 1944 is as follows:-

"8.- Power to authorise exemption from duty in special cases.- (1) The Central Government may from time to time, by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such grounds:

Provided that, unless specifically provided in any notification issued under this sub-rule, any exemption therein shall not apply to excisable goods products or manufactured in a free trade zone and brought to any other place in India.

Provided further that, unless specifically provided in any notification issued under this sub-rule, any exemption therein shall not apply to excisable goods produced or manufactured in a hundred per cent export-oriented undertaking and allowed to be sold in India.

(2) The Central Board of Excise and Customs may by special order in each case exempt from the payment of duty, under circumstances of an exceptional nature, any excisable goods.

(3) An exemption under sub-rule (1) or sub-rule (2) in respect of any excisable goods from any part of the duty of excise leviable thereon (the duty of excise leviable thereon being hereinafter referred to as the statutory duty) may be granted by providing for the levy of a duty on such goods at a rate expressed in a form or method different from the form or method in which the statutory duty is leviable and any exemption granted in relation to any excisable goods in the manner provided in this sub-rule shall have effect subject to the condition that the duty of excise chargeable on such goods shall in no case exceed the statutory duty."

Subsequently Rule 8 was omitted with effect from 1st July, 1988 and the provisions for exemption have been inserted in the Act by inserting Section 5A of Act 29 of 1988 with effect from 1st July, 1988. Sub-Rule (3) of Rule 8 and sub-section (3) of Section 5A are to the same effect. The grant of exemption/concession has direct consequence to the rate of duty which can be levied on a manufacturer. Whether rate of duty as provided in schedule to the Central Excise Tariff Act, 1985 is levy or said levy is to be computed according to any exemption claimed by the assessee are questions reflecting on the rate of duty. The word "rate" has been defined in Words And Phrases Permanent Edition (Vol. 36). Some of the definitions of the word ''rate' as mentioned in Words And Phrases Permanent Edition (Vol. 36) are as follows:-

"A prescribed "rate" may consist of a variety of elements such as regulations accompanying the tariff, and all elements which produce rate must be taken into account. Great Northern Ry. Co. v. Armour & Co., D.C.III., 26 F.Supp. 964, 967.

"Rate" is a flexible term, of which many definitions are to be found; and what it means in a particular instance must depend upon the context and subject-matter. It may mean amount; degree; percentage; price; proportion; proportion or standard; ratio; sum; value. Also, the term may be employed as meaning a fixed measure of estimation; the measure of a thing by its ratio or relation to some fixed standard; a rule or measure of assessment; proportional estimation according to some standard. E.C. Miller Cedar Lumber Co. v. U. S., 86 F.2d 429, 435, 24 C.C.P.A., Customs, 272.

Word "rate" may mean measure, valuation, proportion, or percentage, but in constitutional provision relating to taxation, it is used in sense of both valuation and percentage. State ex rel. Mason County Logging Co. v. Wiley, 31 P.2d 539, 543, 177 Wash. 65.

The word "rate" where used as a noun means the measure of thing, or proportional or comparative amount or degree. Tanenbaum Co., Sprinkler Contracts, Sixth Avenue Twenty Third Street Corporation, 48 N.Y. S.2d 412, 417, 268 App.Div. 213."

As noted above, the word "rate" means the measure or thing, or proportional or comparative amount or degree. For the purposes of Central Excise Act, 1944 the word "rate" has been used as the "rate of duty" which is leviable according to the Act. The exemption from rate of duty as is leviable under the Act has a direct relation on the rate of duty.

Sri V.K. Upadhya, learned Senior Advocate, appearing for the assessee has submitted that exemption granted under Section 5A of the Act, either wholly or partially, exempts payment of excise duty on removal of excisable goods which, otherwise, would have been payable at the rate specified under the Tariff Act. Hence, removal of excisable goods in accordance with the provisions of the Act without payment of excise duty under a exemption notification is taken as duty paid under the Act. Therefore, the question relating to eligibility of goods for exemption from payment of excise duty under an exemption notification is always a question relating to rate of duty. The question relating to eligibility of goods for exemption from payment of excise duty under an exemption notification if arises in the proceedings for assessment or determination of duty not paid or short paid would be a question relating to rate of duty for the purposes of assessment of duty payable.

Sri S.P. Kesarwani, learned counsel for the appellant, refuting the above submissions, has submitted that in the present case no question pertaining to rate of duty has arisen so as to debar an appeal under Section 35-G of the Act. Sri Kesarwani submits that under the circumstances a demand-cum-show cause notice dated 12.2.1999 was issued demanding duty of Rs.3,03,109/- involved in clearance of 1216 number of water filters on 15th October, 1988. It is submitted that after further verification reports another demand-cum-show cause notice under Section 11A dated 12th March, 1999 was issued requiring the respondent to show cause as to why duty of Rs.1,39,060/- in respect of goods manufactured in the brand name of others and cleared without payment of duty be not recovered and goods of Rs.24,52,000/- be not confiscated under Rule 173Q. Sri Kesarwani has lastly contended proceedings under Section 11A being proceedings for recovery of duty, no question of assessment is involved therein, hence the orders passed under Section 11A of the Act for recovery of duty are not covered by exclusionary clause as contained in Section 35-G. He submits that orders passed under Section 11A of the Act cannot be termed as assessment order, hence appeal can very well be filed in this Court under Section 35-G challenging the order passed under Section 11A and the present appeal is fully maintainable.

As noted above, learned counsel for the parties have placed reliance on various judgments to support their submissions. Learned counsel for the assessee has placed much reliance on the judgment of the Apex Court in the case of Naveen Chemicals Mfg. and Trading Co. Ltd. Vs. Collector of Customs reported in (1993)4 SCC 320. The Apex Court in the said case was considering the expression "the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment" as contained in Section 130 of the Customs Act, 1962. The issue in the above case had arisen in context of an appellate order passed by the CEGAT sitting singly. The submission was raised that since the question relate to rate of duty of custom, the appeal ought to have been heard by the special Bench as provided by Section 129-C of the Customs Act, 1962. In above context, the Apex Court examined the above phrase. It is useful to quote paragraphs 10, 11 and 13 of the said judgment which are as under:-

"10. Section 129-D deals with the powers of the Central Board of Excise and Customs and the Collector of Customs to call for and examine the record of any proceedings before authorities subordinate thereto and examine the legality or propriety thereof and also to direct such authorities to file appeals. Sub-section 5 was added to Section 129-D by the Customs & Central Excise Laws Amendment Act, 1988 and it reads thus:

(5) The provisions of this section shall not apply to any decision or order in which the determination of any question having a relation to the rate of duty or to the value of goods for the purposes of assessment of any duty is in issue or is one of the points in issue.

Explanation - For the purposes of this sub-section, the determination of a rate of duty in relation to any goods or valuation of any goods or valuation of any goods for the purposes of assessment of duty includes the determination of a question.-

(a) relating to the rate of duty for the time being in force, whether under the Customs Tariff Act, 1975 (51 of 1975), or under any other Central Act providing for the levy and collection of any duty of customs, in relation to any goods on or after the 28th day of February, 1986; or

(b) relating to the value of goods for the purposes of assessment of any duty in cases where the assessment is made on or after the 28th day of February, 1986; or

(c) whether any goods fall under a particular heading or sub-heading of the First Schedule or the Second Schedule to the Customs Tariff Act, 1975 (51 of 1975), or that any goods are or not covered by a particular notification or order issued by the Central Government granting total or partial exemption from duty; or

(d) whether the value of any goods for the purposes of assessment of duty shall be enhanced or reduced by the addition or reduction of the amounts in respect of such matters as are specifically provided in this Act.

11. It will be seen that Sub-section 5 uses the said expression 'determination of any question having a relation to the rate of duty or to the value of goods for the purposes of assessment' and the Explanation thereto provides a definition of it 'for the purposes of this sub-section'. The Explanation says that the expression includes the determination of a question relating to the rate of duty; to the valuation of goods for purposes of assessment; to the classification of goods under the Tariff and whether or not they are covered by an exemption notification; and whether the value of goods for purposes/of assessment should be enhanced or reduced having regard to certain matters that the said Act provides for. Although this Explanation expressly confines the definition of the said expression to Sub-section 5 of Section 129-D, it is proper that the said expression used in the other parts of the said Act should be interpreted similarly. The statutory definition accords with the meaning we have, given to the said expression above. Questions relating to the rate of duty and to the value of goods for purposes of assessment are questions that squarely fall within the meaning of the said expression. A dispute as to the classification of goods and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment. Whether the value of goods for purposes of assessment is required to be increased or decreased is a question that relates directly and proximately to the value of goods for purposes of assessment. The statutory definition of the said expression indicates that it has to be read to limit its application to cases where, for the purposes of assessment, questions arise directly and proximately as to the rate of duty or the value of the goods.

12. ...........

13. The order of the Additional Collector under appeal before CEGAT in the present case did not have any direct or proximate relation, for the purposes of assessment, either to the rate of duty applicable to the said goods or to the value thereof. All that the Additional Collector's order did was to confiscate the said goods allowing to the appellant the option of redeeming them upon payment of fine of Rs. 10,000/-. That the appellant might avail of the option, pay the fine and clear the said goods, when questions as to the rate of duty and value for purposes of assessment might possibly arise, is far too remote a contingency to satisfy the test that is laid down."

The Apex Court in the said case laid down that a dispute as to the classification of goods and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment.

Sri S.P. Kesarwani, learned counsel for the respondent tried to distinguish the above case on the premise that in the said case the said dictum was laid down by the Apex Court relying on the provisions of Explanation to Section 129-D of the Customs Act, 1962.

In the above context, it is relevant to note that by the Customs and Central Excise Laws Amendment Act, 1988, both Custom Act, 1962 and the Central Excise Act, 1944 were amended. In sub-section (5) of Section 129-D of the Customs Act, 1962 the explanation was added by the same Amendment Act and same sub-section (5) with Explanation was added in Section 35-E of the Central Excise Act, 1944. Section 129-D of the Customs Act, 1962 is a provision regarding powers of Board and Collector of Customs to pass certain orders. Similarly, Section 35-E of the Central Excise Act provides for powers of Board or Commissioner of Central Excise to pass certain orders. Both the provisions contain similar power under the Customs Act, 1962 as well as the Central Excise Act, 1944 respectively. Sub-section (5) contains an exception to the aforesaid provision which provided that this section shall not apply to any decision or order in which the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment of any duty is in issue or is one of the points in issue. Explanation to the said section contains inclusive definition of the determination of a rate of duty in relation to any goods or valuation of any goods for the purposes of assessment of duty whereas Explanation (d) clearly indicates that whether any goods are covered by a particular notification or order of the Central Government granting total or partial exemption is included in the definition, all questions having relation to the rate of duty. Although Section 35-E sub-section (5), as inserted by the Customs and Central Excise Laws Amendment Act, 1988 has not been enforced but the provisions of Section 129-D sub-section (5) of the Customs Act as interpreted by the Apex Court in Naveen Chemicals' case (supra) throw considerable light on the scope and amit of words "question relating to rate of duty" and it cannot be said that judgment of the Apex Court in Naveen Chemicals' case (supra) is not relevant for finding out the meaning of words "question relating to rate of duty".

The judgement of the Bombay High Court in the case of Sterlite Optical Technologies Ltd. vs. Commissioner of Central Excise, Aurangabad reported in 2007(213) E.L.T. 658 has been relied by the learned counsel for the assessee. The question of maintainability of appeal under Section 35-G and 35L was gone into in the said case. The objection was also raised in the said case that appeal is maintainable under Section 35-L of the Act before the Apex Court. Paragraphs 12, 13, 19 and 23, which are relevant for the purpose, are quoted as under:-

"12. Mr Sethna contends that the Parliament in it's wisdom having provided an appeal to the Highest Court of the land by incorporating Section 35L in the Central Excise Act, the appellant, therefore, has a right of appeal to the Supreme Court and not to this Court as the issues raised in the appeal relate to the rate of duty and valuation of goods. He submits that as far as the valuation aspect is concerned, dispute between the parties relates to the assessable value based on the transaction value/valuation concept as contended by the Revenue; as against this; the value of contemporaneous import is the contention of the appellant. In his submission, there is also a dispute regarding valuation of intermediate product viz. principally; deperform.

13. Mr Sethna, while taking us through the order of the Tribunal tried to impress upon us, that the dispute between the parties relates to the valuation of both the optical fibre i.e. finished goods and that of the intermediate products; i.e. the deperforms. In his submission, the actual issue for determination as contended by the appellant is: whether applicable rate of duty would be under Section 3, or under proviso to Section 3(1) of the Central Excise Act. He submits that to determine the issue in question on the touchstone of theory of relate back; the various compliances of the requirements, as stipulated under various notifications; and benefits thereof which the appellants are claiming, will have to be examined. Thus, in his submission, the issue also relates to the question of exemption.

19. Having heard rival parties on the preliminary objection referred hereinabove,it is not in dispute that the appellant was E.O.U. The impugned order has been passed demanding duty and imposing penalty on them on the ground that the goods were cleared to the Domestic Tarrif Area (D.T.A.) contrary to the provisions of the Act. The issues raised and catalogued by the appellants themselves in their written submission are reproduced hereinbelow to consider the strength of the preliminary objection raised by the Revenue:

1. Whether the appellant can be asked to pay excise duty at a higher rate as applicable for the alleged DTA clearances from an EOU under the proviso to Section 3 of the Excise Act?

2.Whether or not demand of both customs duty and additional excise duty beyond the 16% already paid is inconsistent and incorrect and whether it should have been set aside by the Tribunal?

3. Whether the debonding of E.O.U. unit has to relate back to the date of import or the application for debonding i.e. to 6.10.2001?

4. Whether or not the proviso to Section 3 can be applied to the production anterior to the date of commencement of the commercial production?

5. Whether or not the demand of duty prior to March, 2002 is legal and valid?

23. Considered on the above backdrops, the question of determination of status of the subject Unit will be one of the steps in the process of assessment. This exercise would be an exercise; which can be said to be part of the assessment. In this view of the matter, in our view, the dispute involved in the appeal and the substance thereof is: what should be rate of duty on the goods cleared to the Domestic Tarrif Area (D.T.A.). We have, thus, no hesitation to hold that the direct and proximate issues involved in the appeal for the purposes of assessment relate to the rate of duty applicable to the goods and the value thereof and the issue requiring determination of the status of the subject Unit would be one of the incidental issues. The contentions raised by the appellants, catalogued in para (19) supra, also revolve around the rate of duty and valuation of goods for the purposes of assessment."

The judgment of the Punjab and Haryana High Court in the case of Commissioner of Central Excise, Panchkula vs. Special Machine reported in 2009(242) E.L.T. 330 was also a case considering similar issue. In the said case also question of grant of exemption under the same Notification No.1/93-C.E., dated 28.2.1993 was under consideration. The Tribunal decided the appeal in favour of the assessee against which revenue had filed the appeal. In the appeal filed by the revenue one of the questions raised was noticed in paragraph 7(a) of the judgment, which is as under:-

"7(a) Whether the clearance made by various units, is clubbable for the purpose of deciding eligibility for exemption under Notification No.175/86-C.E. as amended vide Notification No.1/93-C.E. dated 28.2.1993?"

In the said case, the objection regarding maintainability of appeal under Section 35-G of the Act was raised which objection was sustained. Following was laid down in paragraphs 10 and 11 of the said judgment, which are as under:-

"10. Having heard learned counsel for the parties and perusing the paper book with their able assistance we are of the CEA No. 48 of 2005 (O&M) 8 considered view that there is merit in the preliminary objections raised by the assessee-respondent regarding maintainability of the appeal. A similar controversy whether an assessee is covered by an exemption notification relating to rate of duty or not came up for consideration before a Division Bench of this Court in the matter of Commissioner of Central Excise, Ludhiana v. A.S.T. Paper Mills Ltd., 2008 (227) E.L.T. 189 (P&H). The Division Bench after discussing the matter in detail, especially in the light of judgment of Hon'ble the Supreme Court rendered in the case of Navin Chemicals Manufacturing and Trading Company Limited v. Collector of Customs, 1993 (68) E.L.T. 3, has held that since the question of law raised in that appeal was relating to determination of a question having relation to the rate of duty of excise, therefore, for determination of such question the appeal does not lie to this Court and the same has to be filed before Hon'ble the Supreme Court under Section 35L of the Act. Hon'ble the Supreme Court in the case of Navin Chemicals (supra) has categorically held that the expression 'determination of any question having a relation to the rate of duty or to the value of goods for the purposes of assessment' used in the other part should be interpreted similarly. A dispute as to whether or not the assessee is covered by an exemption notification, relates directly and proximately to the rate of duty applicable thereto for the purpose of assessment. The Division Bench also placed reliance upon another judgment of this Court rendered in the case of Commissioner of Central Excise, Chandigarh-I v. Suraj Udyog Ltd., 2003 (158) CEA No. 48 of 2005 (O&M) 9 E.L.T. 684 (P&H).

11. The question of law formulated by the revenue-appellant in the instant appeals also refers to exemption under notification No. 175/86-CE as amended vide notification No. 1/93-CE, dated 28.2.1993 in CEA No. 48 of 2005 & notification Nos. 8/2001-CE, dated 1.3.2001 and notification No. 8/2002-CE, dated 1.3.2001 in CEA No. 120 of 2005, relating to the rate of duty of excise. The notification No. 1/93-CE, dated 28.2.1993 was subject of consideration of a Division Bench of Bombay High Court (At Goa) in the case of Commissioner of Customs and Central Excise, Goa v. Primella Sanitary Products (P) Ltd., 2002 (145) E.L.T. 515 (Bom.). The Division Bench has relied upon the judgment of Hon'ble the Supreme Court in Navin Chemicals case (supra)."

The judgment of the Gujarat High Court in the case of Commissioner of Central Excise Custom and Service Tax, Daman vs. Gandhi Fibers reported in 2011(268) E.L.T. 354 again similar issue was considered. Relying on the judgment of the Apex Court in Naveen Chemicals' case (supra), the Gujarat High Court held that classification dispute relates directly and proximately to the rate of duty and the appeal was not maintainable under Section 35-G of the Act. Following was laid down in paragraph 12 of the said judgment:-

"12. Examining the facts of the present case in the light of the aforesaid decision of the Supreme Court, a bare reading of the proposed questions clearly indicates that the main controversy which arises for determination is in the nature of a classification dispute, which relates directly and proximately to the rate of duty applicable for the purposes of assessment. Section 35G of the Act lays down that an appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, not being an order relating, amongst other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment. In the circumstances, in the light of the decision of the apex court in the case of Navin Chemicals Mfg. & Trading Co. Ltd. v. Collector of Customs (supra), the classification dispute having a direct nexus to the determination of the rate of duty, the present appeal which relates to a classification dispute would not be maintainable under section 35G of the Act to the High Court."

Before the Karnataka High Court in the case of Commissioner of Central Excise, Mangalore vs. Mangalore Refineries & Petrochemicals Ltd. reported in 2011(270) E.L.T. 49 the expression "question relating to the rate of duty and to the value of goods for the purposes of assessment" came for consideration. In the said case the assessee filed classification declaration for claiming exemption from payment of duty under Notification No.67/95 C.X., dated 16.3.1995. A show cause notice was issued demanding duty on the proportionate quantity of LSHS used in the generation of electricity, which in turn was not used in or in relation to the manufacture of final products. Adjudication order was passed confirming demand of duty and the penalty. The demand was confirmed in appeal. The Tribunal allowed the appeal of assessee against which revenue filed appeal in the High Court under Section 35-G of the Act. A preliminary objection was raised regarding maintainability of the appeal. While considering the meaning of words "rate and duty", following was laid down in paragraphs 26, 27 and 41 of the said judgment which are as under:-

"26. It is in this background we have to interpret the word rate of duty.

The question is, what is the meaning attached to the 'rate of duty' as mentioned under these provisions. In order to understand the word 'rate of duty' and the dispute relating to that, it is useful to refer to the meaning assigned to the said word by the Parliament by way of an explanation to Sub-section (5) by amendment Act 29/1988. The said amendment was intended to be brought into force from the date to be notified. However, it was not brought into force at all. Notwithstanding the same, in order to understand the meaning assigned to the word 'rate of duty' by the Parliament as per the aforesaid intended amendment, the same could be looked into in order to appreciate the phrase 'rate of duty' used in Sections 35Gand 35Lof the Act which reads as under:

Explanation: For the purposes of this Sub-section, the determination of a rate of duty in relation to any goods or valuation of any goods for the purposes of assessment of duty includes the determination of a question-

a) relating to the rate of duty of excise for the being in force, whether under the Central Excise Tariff Act, 1985 or under any other Central Act providing for the levy and collection of any duty of excise, in relation to any goods on or after the 28th day of February. 1986; or

b) relating to the value of goods for the purposes of assessment of any duty in cases where the assessment is made on or after the 28th day of February, 1986. or

c)whether any goods are excisable goods or whether the rate of duty of excise on any goods is nil: or

d)whether any goods fall under a particular heading or sub-heading of the Schedule to the Central Excise Tariff Act. 1985, or the Additional Duties of Excise (Goods of Special Importance) Act, 1957 or the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, or that any goods are or not covered by a particular notification or order issued by the Central Government or the Board, as the case may be, granting total or partial exemption from duty; or

e) whether the value of any goods for the purposes of assessment of duty of excise shall be enhanced or reduced by the addition or reduction of the amounts in respect of such matters as are specifically provided in this Act."

A perusal of the explanation makes it clear that determination of the rate of duty means whether any goods are excisable goods and whether the rate of duty of excise on any goods is nil, whether the said goods are or are not covered under a particular notification or order issued by the Central Government or the Board, as the case may be, granting total or partial exemption from duty and whether the value of any goods for the purpose of assessment of duty of excise shall be enhanced or reduced by addition or reduction of the amounts in respect of such matters as are specifically provided under the Act. Though the determination of the word duty may not include all those questions, the explanation makes it clear the aforesaid expanded meaning is to be attributed to the aforesaid phrase for the purpose of this section only. It is because the said explanation is added to Section 35Ewhich deals with the power of revision of Board or Commissioner of Central Excise in certain case. In other words what is sought to be conveyed by the explanation is that the authorities while exercising the revisional jurisdiction shall not go into those questions. That in no way comes in the way of understanding the meaning of the phrases 'rate of duty'. On the contrary it clearly sets out the intention of the legislature in so far as the meaning to be attributed to the said phrase. Therefore, the said meaning could be read into the phrase wherever it is used in the other parts of the statute, as held by the Apex Court in Navin Chemicals case. It also would be in conformity with the interpretation placed on the said phrase by the Apex Court as well as the High Court, as is clear from the following decisions.

27. The Supreme Court had an occasion to consider the meaning of the word 'rate' in Sundaram And Company (Private) Limited v. Commissioner Of Income Tax, Madras [1967 Vol. 66 ITR 604] where it was held as under:

"The assumption that the expression "rate" has been used in Section 34(1) as meaning a fraction of total income is, in our judgment not warranted. By the use of the expression "rate" in the context in which it occurs, undoubtedly a relation between the taxable income and the tax charged is intended, but the relation need not be of the nature of proportion of fraction. The expression "rate" is often used in the sense of a standard or measure. Provided the tax is computable by the application of a prescribed standard or measure, though not directly related to taxable income, it may be called tax computed at a certain rate. We agree with the High Court that the rebate of tax and the reduction of such rebate are essentially matters of measure or standards of rate."

41. Therefore, the expression 'rate' is often used in the sense of a standard or measure. 'Rate' generally is an impost, usually for current or recurrent expenditure, spread over a district or other local area and is distinct from an amount payable for work done upon or in respect of particular premises. 'Rate' is defined by Webster to be the price or amount staled or fixed for anything. The word 'rate' includes any toll, due, rent, rate or charge. It means the scale or amount of any other charges. The word "rate' is used with reference both to a percentage or proportion of taxes, and to a valuation of property. 'Rate' is used in an Act declaring that the Legislative Assembly shall provide by law for a uniform and equal rate of taxation and assessment, applies to the percentage of fixation, as used in connection with 'taxation' and to the valuation of the property, as used in connection with assessment'. It is a valuation of every man's estate or setting down how every one shall pay, or be charged with, to any tax. By the use of the expression 'rate' a relation between the taxable income and the tax charged is intended, but the relation need not be of the nature of proportion of fraction. The Explanation to Sub-section (5) of Section 35E of the Central Excise Act, the expression includes the determination of a question relating to the rate of duty, to the value of goods for the purposes of assessment; to the classification of goods under the Tariff and whether or not they are covered by an exemption notification; and whether the value of goods for the purposes of assessment should be enhanced or reduced having regard to certain matters that the said Act provides for. Questions relating to the rate of duty and to the value of goods for purposes of assessment are questions that squarely fall within the meaning of the said expression. A dispute as to the classification of goods and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment. Whether the value of goods for purposes of assessment is required to be increased or decreased is a question that relates directly and proximately to the value of goods for purposes of assessment. Determination of rate of duty in relation to any goods include determination of a question whether any goods or not, whether the process if any undertaken in the service centre amounts to manufacture or not, and if the goods produced during that process are excisable goods or not would fall within the meaning of the expression 'determination of the rate of duty of excise or the value of the goods for the purposes of assessment of duty' used in Section 35G(1) and Section 35L(b) of the Act. Therefore, the phrase 'rate of tax' does not mean fraction of tax payable because what is the tax payable i.e., fraction payable is decided by the legislature. Once that is prescribed by the legislature in the Act, the Court cannot sit in judgment and alter or modify the said rate of tax. The Court has no jurisdiction to go into the correctness or otherwise of the rate of tax payable in the sense the rate prescribed by the legislature. Therefore, the argument that the rate of tax means only the rate at which tax is payable or a fraction is unsustainable."

A Division Bench of Himachal Pradesh High Court in the case of Commissioner of Central Excise, Chandigarh vs. Chhabra Tube Products (P) Ltd. reported in 2010(252) E.L.T. 63, laid down that the phrase determination of a rate of duty has been deemed to include the question whether any goods are covered or not covered by a particular notification issued by the Central Government granting total or partial exemption from duty. Similar view has been taken by the Karnataka High Court in the case of Commissioner of Central Excise, Bangalore-I vs. MTR Foods Ltd. reported in 2011(267) E.L.T. 608. Again the Gujarat High Court in the case of Commissioner of Central Excise vs. JBF Industries Ltd. reported in 2011(264) E.L.T. 162, taken the similar view in which following was laid down in paragraph 10, which is quoted below:-

"10. In the light of the aforesaid judicial pronouncements, it is apparent that the question as to the applicability of a notification or a circular which has a bearing on the determination of the rate of duty is a question which has a direct and proximate relationship to the rate of duty and to the value of goods for purposes of assessment. In the circumstances, the present appeal which relates to the applicability of the above referred circular, relates directly to the determination of rate of duty for the purpose of assessment and as such, in the light of the provisions of section 35G read with section 35L of the Act, this Court has no jurisdiction to entertain the appeal."

A Division Bench of Karnataka High Court in the case of Commissioner of Customs, Bangalore vs. Motorola India Ltd. reported in 2012(275) E.L.T. 53 again to the same effect laid down following in paragraph 40, which is quoted below:-

"40. Therefore, the expression 'rate' is often used in the sense of a standard or measure. Rate' generally is an impost, usually for current or recurrent expenditure, spread over a district or other local area and is distinct from an amount payable for work done upon or in respect of particular premises. 'Rate' is defined by Webster to be the price or amount stated or fixed for anything. The word 'rate' includes any toll, due, rent, rate or charge. It means the scale or amount of any other charges. The word 'rate' is used with reference both to a percentage or proportion of taxes, and to a valuation of property. 'Rate' is used in an Act declaring that the Legislative Assembly shall provide by law for a uniform and equal rate of taxation and assessment, applies to the percentage of fixation, as used in connection with 'taxation' and to the valuation of the property, as used in connection with 'assessment'. It is a valuation of every man's estate or setting down how every one shall pay, or be charged with, to any tax. By the use of the expression 'rate' a relation between the taxable income and the tax charged is intended, but the relation need not be of the nature of proportion of fraction. The Explanation to Sub-section (5) of Section 129D of the Customs Act 1962, the expression includes the determination of a question relating to the rate of duty, to the value of goods for the purposes of assessment; to the classification of goods under the Tariff and whether or not they are covered by an exemption notification; and whether the value of goods for the purposes of assessment should be enhanced or reduced having regard to certain matters that the said Act provides for. Questions relating to the rate of duty and to the value of goods for purposes of assessment are questions that squarely fall within the meaning of the said expression. A dispute as to the classification of goods and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment. Whether the value of goods for purposes of assessment is required to be increased or decreased is a question that relates directly and proximately to the value of goods for purposes of assessment. Determination of rate of duty in relation to any goods include determination of a question whether any goods or not, whether there is an import or not the process if any undertaken In the service centre amounts to manufacture or not, whether there is an "export" or not and if the goods imported or exported during are dutiable goods or not would fall within the meaning of the expression 'determination of the rate of duty of Customs or the value of the goods for the purposes of assessment of duty' used in Section 130 and Section 130E of the Act. Therefore, the phrase 'rate of tax' does not mean fraction of tax payable because what is the tax payable i.e., fraction payable is decided by the legislature. Once that is prescribed by the legislature in the Act, the Court cannot sit in judgment and alter or modify the said rate of tax. The Court has no jurisdiction to go into the correctness or otherwise of the rate of tax payable in the sense the rate prescribed by the legislature. Therefore, the argument that the rate of tax means only the rate at which tax is payable or a fraction is unsustainable.

The above cases do support the submission raised by learned counsel for the assessee.

Now the submission of Sri S.P. Kesarwani that in orders passed under Section 11-A of the Act no question relating to assessment can be said to be involved since proceeding under Section 11-A is a proceeding for recovery is to be considered.

Section 11-A has been inserted in the Act by Act No.25 of 1978 with effect from 1st August, 1978. Section 11-A(i) is as follows:-

"11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.--(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or 2[erroneously refunded, whether or not such non-levy or non-payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder], a Central Excise Officer may, within 3[one year] from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:

Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, 4[as if 5[***]] for the words 6["one year"], the words "five years" were substituted:

(1A) When any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty, by such person or his agent, to whom a notice is served under the proviso to sub-section (1) by the Central Excise Officer, may pay duty in full or in part as may be accepted by him, and the interest payable thereon under section 11AB and penalty equal to twenty-five per cent. of the duty specified in the notice or the duty so accepted by such person within thirty days of the receipt of the notice.

(2) Central Excise Officer shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined:

Provided that if such person has paid the duty in full together with, interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notice is served under sub-section (1) shall, without prejudice to the provisions of sections 9, 9A and 9AA, be deemed to be conclusive as to the matters stated therein:

Provided further that, if such person has paid duty in part, interest and penalty under sub-section (1A), the Central Excise Officer, shall determine the amount of duty or interest not being in excess of the amount partly due from such person.] (2A) Where any notice has been served on a person under sub-section (1), the Central Excise Officer,--

(a) in case any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, where it is possible to do so, shall determine the amount of such duty, within a period of one year; and

(b) in any other case, where it is possible to do so, shall determine the amount of duty of excise which has not been levied or paid or has been short-levied or short-paid or erroneously refunded, within a period of six months, from the date of service of the notice on the person under sub-section (1).

(2B) Where any duty or excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty 12[on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer] before service of notice on him under sub-section (1) in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the duty so paid:

Provided that the Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of "one year" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.

(2C) The provisions of sub-section (2B) shall not apply to any case where the duty had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President.

(3) For the purposes of this section--

(i) "refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(ii) "relevant date" means,--

(a) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid--

(A) where under the rules made under this Act a periodical return, showing particulars of the duty paid on the excisable goods removed during the period to which the said return relates, is to be filed by a manufacturer or a producer or a licensee of a warehouse, as the case may be, the date on which such return is so filed;

(B) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;

(C) in any other case, the date on which the duty is to be paid under this Act or the rules made thereunder;

(b) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;

(c) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund."

Prior to insertion of Section 11-A, the same provision was contained in Rule-10 of the Central Excise Rules, 1944. Sub-section (1) of Section 11-A provides that when any duty of excise has not been levied or paid or has been short levied or short paid, a show cause notice is to be issued to him as to why he should not pay the amount as specified in the notice.

The judgment of the Apex Court while considering Rule 10, also considered the words "levy" and "assessment" in the case of Assistant Collector of Central Excise, Calcutta vs. National Tobacco Company of India Ltd. reported in A.I.R. 1972 SC 2563. The Apex Court in the said case held that term "levy" is wider than the term "assessment" and the term "levy" may include imposition of tax as well as assessment. It was further held that it is process of assessment that really determines whether the levy is short or complete. Following was laid down in paragraphs 19, 20 and 21 of the said judgment:-

19. ..... The Division Bench appears to have regarded this procedure of an almost mechanical levy as equivalent to a complete assessment followed by the payment of the tax which constituted a valid "levy". Hence, it concluded that, there being a legally recognised levy, the only procedure open to the Collector for questioning its correctness was one contemplated by Rule 10 so that a demand for a short levy had to be made within 3 months of the final "settlement of accounts" as provided specifically by Rule 10. The Division Bench considered this procedure to be an alternative to an assessment under Rule 52 at the proper time and also: to a provisional assessment in accordance with the procedure laid down in Rule 10-B. But, to regard the procedure under Rule 10 as an alternative to an assessment would be to overlook that it presupposes an assessment which could be reopened on specified grounds only within the period given there.

20. The term "levy" appears to us to be wider in its import than the term "assessment". It may include both "imposition" of a tax as well as assessment. The term "imposition" is gene- rally used for the, levy of a tax or duty by legislative provision indicating the subject matter of the tax and the rates at which it has to be taxed. The term "assessment", on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate "levy" with an "assessment" as well as with the collection of a tax when it. held that "when the payment of tax is enforced, there is a levy". We think that, although the connotation of the term "levy" seems wider than that of "assessment", which it includes, yet, it does not seem to us to extend to "collection".....

21. ...... Moreover, it is the process of assessment that really determines whether the levy is short or complete. It is not a factual or presumed levy which could, in a disputed case, prove an "assessment". This has to be done by proof of the actual steps taken which constitute "assessment"."

Section 11-A employs the word "determination". Section 11-A may in a particular case involve the question of re-assessment when in an earlier assessment excise duty has not been levied or has been short levied. There cannot be any dispute that re-assessment is also an assessment. There may be a situation when under any earlier assessment duty was short levied then Section 11-A empowers to issue a show cause notice within the time frame as provided and to determine the short levy. Thus the submission of Sri Kesarwani that Section 11-A is only a recovery proceeding which does not involve any question of assessment cannot be accepted. The proceedings under Section 11-A are proceedings for determination of a liability after show cause notice by which a duty not levied or short levied is determined. A Division Bench of this Court in the case of Shahnaz Ayurvedics vs. Commissioner of Central Excise, NOIDA reported in 2004 (173) E.L.T. 337, has also referred to proceedings under Section 11-A as proceeding for reopening of an assessment.

Sri S.P. Kesarwani referring to paragraph 20 and 22 of the judgment of the Apex Court in Assistant Collector of Central Excise, Calcutta's case (supra) has submitted that the Apex Court has laid down that the term "levy" may include assessment yet it does not extent to collection. There cannot be any dispute to the proposition as laid down by the Apex Court in the aforesaid case. Following was laid down by the Apex Court in paragraph 22 of the said judgment:-

"22. Undoubtedly, a mechanical adjustment and ostensible settlement of accounts, by making debit entries, was gone through in the case before us. But, we could not equate such an adjustment with an assessment, a quasi-judicial process which involves due application of mind to the facts as well as to the requirements of law, unless we were bound by law to give an unusual interpretation to the term "assessment". Here, we do not find any such definition of assessment or any compelling reason to bold that what could at most be a mechanical provisional collection, which would become a "levy" in the eve of law only after an "assessment", was itself a levy or an assessment."

The provisions of Section 11-A cannot be only termed to be a provision for collection of duty. The collection of duty presupposes determination of liability. Thus the submission of Sri Kesarwani cannot be accepted that in Section 11-A no assessment or re-assessment is involved.

Sri Kesarwani has also placed reliance on the judgment of the Apex Court in the case of Collector of Central Excise, Baroda vs. Cotspun Limited reported in 1999(113) E.L.T. 353. In paragraph 12 of the judgment it was held that Rule 10 is a provision for recovery of duty. The issue which was considered in the said case was as to whether tariff duty can be recovered on the basis of approved classification. The said case does not help the appellant in the present case.

The case of J.K. Cotton Spg. & Wvg. Mills Co. Ltd. vs. Collector of Central Excise reported in 1998(99) E.L.T. 8 (SC) as relied by Sri Kesarwani, was again a case where the moot point for consideration was as to whether period of six months envisaged in Section 11-A for issuing show cause notice so as to enable the revenue to scale over the hurdle of limitation. The Apex Court in the said judgment laid down following in paragraph 9 which is as under:-

"9. We agree with the learned counsel for the Revenue that the question sought to be determined in this appeal has neither any relationship to the rate of duty of excise or to the value of the goods for purpose of assessment. It may be that the appeal could not have been filed under the aforesaid Section on the facts of this case."

There being no question relating to the rate of duty of excise or to the value of the goods for purpose of assessment, the appeal was held not maintainable before the Apex Court. The said judgment does not help the appellant in the present case.

Sri Kesarwani has also placed reliance on I.T.C. Ltd. vs. Collector of Central Excise, Patna reported in 1997(94) E.L.T. 456 (SC) where the appeal was filed under Section 35-L of the Act against the order of the appellate Tribunal. Following was laid down in paragraph 3 of the said judgment:-

"3. A perusal of the said clause shows that an appeal lies to this Court against an order passed by the Tribunal relating to the determination of any question relating to the rate of duty of excise or to the value of goods for the purposes of assessment. Shri Ravinder Narain has submitted that the impugned order passed by the Tribunal relates to the value of goods. The said question relating to value of goods has, however, arisen on the claims for refund of excise duty submitted by the appellant before the Assistant Collector. In our opinion, the question of valuation of goods in the context of a claim for refund cannot be regarded as a question having relation to the value of goods for the purposes of assessment. The assessment had been completed in the present case and assessment orders had already been passed. It is only when the goods were returned, the question of refund arose. We are, therefore, unable to accept the contention of Shri Ravinder Narain that the appeals are maintainable under Clause (b) of the Section 35L of the Act and the appeals are liable to be dismissed."

The above judgment also does not help the appellant in the present case since the question of value of the goods arose on the claim for refund of excise duty submitted by the appellant which was held not to be a question relating to value of goods for the purposes of assessment.

Mr. Kesarwani has also placed reliance on the judgment of the Apex Court in the case of ITW Signode India Ltd. vs. Collector of Central Excise reported in 2003(158) E.L.T. 403, in which the Apex Court observed that provisions of Section 11-A of the Act is a recovery provision. In the said case the issue which has arisen for consideration in the present case was not under consideration. The observation that Section 11-A is recovery proceedings as regards non-levy, non-payment, short-levy or short-payment was made in different context and does not help the appellant in the present case.

Reliance has also been placed by Mr. Kesarwani on the judgment of the Apex Court in the case of M/s Kushal Fertilizers Pvt. Ltd. vs. Commissioner of Customs & Central Excise, Meerut reported in JT 2009 (13) SC 293. In the said case the question considered by the Apex Court was as to whether reference under Section 35-H was maintainable or appeal was maintainable. The Apex Court held that appeal was maintainable since Tribunal has passed the order on 3rd March, 2005. The question which has arisen for consideration in the present appeal was not under consideration in the said case.

Now the submission of Sri Kesarwani that right of appeal under Section 35-G of the Act being statutory remedy and a substantive right, should be interpreted liberally while that portion of this section which excludes the right of appeal to the High Court has to be construed strictly and in a restrictive sense is to be considered.

There is no dispute that right of appeal is a statutory right given under Sections 35-G and 35-L of the Act. The scheme of the Act as delineated by Sections 35-G and 35-L indicates that subject matter of appeal before the High Court and the Apex Court have been clearly demarcated. The right of appeal has been granted to the assessee or revenue before the High Court and the Apex Court on different grounds. There is no question of giving any restrictive interpretation to the exclusionary clause under Section 35-G since the category which was excluded from the appeal before the High Court under Section 35-G of the Act is expressly included under Section 35-L of the Act. The demarcation of the subject matter of appeal before this Court and the Apex Court was with some object and purpose and when the words in sections are plain and unambiguous, the plain and literal interpretation has to be adopted. It is useful to refer to paragraph 44 of the judgment of the Karnataka High Court in the case of Commissioner of Central Excise, Mangalore vs. Mangalore Refineries & Petrochemicals Ltd. (supra) where the Karnataka High Court has noticed the intention behind the bifurcation of jurisdiction between the Apex Court and the High Court. Following was laid down by the Karnataka High Court in paragraph 44, which is as under:-

"44. The intention behind this bifurcation of jurisdiction between the Apex Court and the High Court seems to be that more often than not, any decision on these aforesaid aspects not only affects the interest of the manufacturers who are parties thereto, but also to the manufacturers of those products throughout the country. In a country governed by Parliamentary legislation because of the territorial bifurcation in forming states and because of the divergent opinion which is possible, the excise duty payable would vary from place to place. In order to bring uniformity in the levy of excise duty throughout the country and consequently to see that the country's finance is not affected, the Parliament has vested the jurisdiction to decide the disputes with the Apex Court. Therefore, we see a duty policy underlining this bifurcation of the jurisdiction between the Apex Court and the High Courts. All other matters other than what is set out above, which relates to the individual manufacturers and all disputes based on assessment orders which have attained finality, such as the benefits to which they are entitled to, refunds, duty drawbacks, rebates, etc., which relate to a particular manufacturer falls within the jurisdiction of the High Courts."

In view of the foregoing discussions, we are of the view that since the question raised in the appeal relates to eligibility of the goods manufactured by the assessee for exemption under Notification No.1/93-C.E. dated 28.2.1993 and goods were manufactured without payment of duty and no assessment had taken place, the proceedings initiated under Section 11-A were for determination of duty liability in which the eligibility of the said goods for exemption was disputed. The question of exemption is directly and proximately related to the rate of duty for the purposes of assessment of excise duty payable by the respondent. The appeal on the said question is clearly excluded under Section 35-G and can be filed by the revenue before the Apex Court under Section 35-L of the Act. Thus the preliminary objection of the respondent regarding maintainability of appeal is upheld and Central Excise Appeal Defective No.- 402 of 2005 is held not maintainable under Section 35-G of the Act.

As observed above, in view of the order of the Apex Court dated 27th February, 2006, the Central Excise Reference Application No. - 11 of 2004 has become infructuous. The Central Excise Reference Application Defective No. - 11 of 2001 is also rejected since no reference under Section 35-H of the Act could have been made by the Commissioner of Central Excise as the question raised was relating to rate of duty of excise for the purposes of assessment.

In result, the Central Excise Appeal Defective No.- 402 of 2005 is dismissed as not maintainable under Section 35-G of the Act, the Central Excise Reference No. - 11 of 2004 is dismissed as infructuous and Central Excise Reference Application Defective No. - 11 of 2001 is rejected.

Parties shall bear their own costs.

Order Date :- 6.7.2012 Rakesh