(Per: HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. The petitioner, a public trust as well as a society registered under the Central Societies Registration Act, 1860, has filed the present petition under Articles 226 and 227 of the Constitution of India challenging the judgement and order dated 2nd September, 2003 passed by the Customs Excise and Service Tax Appellate Tribunal (hereinafter referred to as “the Tribunal”), whereby the appeal preferred by the petitioner against the order dated 22nd January, 1998 passed by the Commissioner, Central Excise, has been dismissed.
2. The facts of the case stated briefly are that the petitioner intended to set up a unit for the purpose of manufacturing detergent washing powder in the year 1992 and consequently, took steps for setting up a manufacturing plant at Chhatral in the name and style of “Kamdhenu Gramodyog Detergent Unit”. By a notification No.88/88CE dated 1st March, 1988 as amended from time to time, the Central Government in exercise of powers under subrule (1) of rule 8 of the Central Excise Rules, 1944 exempted goods of the description specified thereunder from the whole of the duty of excise leviable thereon provided that such goods are manufactured in rural areas by registered cooperative societies, or by women’s societies, or by institutions recognised by the Khadi and Village Industries Commission or the State Khadi and Village Industries Boards or by units run with the cash assistance from District Rural Development Agencies under the Integrated Rural Development Programme (IRDP). The goods specified thereunder, interalia, included laundry and carbolic soaps. The petitioner who claims to be recognized by the Khadi and Village Industries Commission (hereinafter referred to as “KVIC”) vide certificate N.WZIC/GUJ/56/9396 under the Khadi and Village Industries Commission Act, 1956, filed a declaration before the Assistant Collector of Central Excise Rural Area on 21st November, 1993 as required under Notification No.13CE(NT) dated 14.5.93 claiming exemption under Notification No.88/88 dated 1st March, 1988 as amended by Notification No.35/93 dated 28.2.93. It appears that the petitioner availed of cash assistance from Gujarat State Khadi Gramodhyog Board for the purpose of manufacturing synthetic detergent falling under heading 34.02 and was granted permission for starting factory at Chhatral. However, instead of starting the factory at Chhatral as approved by the Board, the petitioner started the manufacturing detergent powder at Iyava, Sanand, by taking the factory premises and machinery on lease.
3. Pursuant to information regarding evasion of Central Excise duty by the manufacturers of detergents and cake, on 21st January, 1994 the Central Excise Preventive officers visited the factory premises of the petitioner at Nilkant Industrial Estate, Chhatral manufacturing detergent washing powder and acid slurry and seized a specified quantity of detergent washing powder and acid slurry on the ground that the petitioner had cleared detergent powder illicitly without obtaining Central Excise Registration and without payment of duty leviable thereon. Subsequent thereto, a show cause notice dated 13th April, 1994 came to be issued to the petitioner calling upon it to show cause, interalia, as to why the detergent powder and acid slurry placed under seizure should not be confiscated and as to why central excise duty of Rs.22,09,785.90 should not be demanded under section 11A of the Central Excise Act, 1944 (hereinafter referred to as “the Act”) read with Rule 9(2) of the Rules along with under rule 173Q of the Rules. The show cause notice culminated into an order in original dated 22nd January, 1998 passed by the Commissioner, Central Excise confirming duty demand of Rs.22,09,785/ and ordering confiscation of the goods seized under rule 173Q of the Rules, redeemable on payment of a token fine of Rs.1000/. The Adjudicating Authority however, refrained from imposing any penalty on the unit. The petitioner carried the matter in appeal before the Tribunal but did not succeed.
4. Mr. P.A. Jadeja, learned counsel for the petitioner assailed the impugned order by submitting that for the purpose of getting the benefit of exemption from payment of Central Excise duty under Notification No.88/88 C.E. dated 1.3.1988 two things are required to be satisfied. Firstly, that the goods enumerated in the table under the said notification should be manufactured in a rural area having a population of less than ten thousand and secondly that same should be manufactured by a registered cooperative society or by a women's society or by an institution recognized by the Khadi and Village Industries Commission or the State Khadi and Village Industries Boards, etc. In the facts of the present case, both the aforesaid conditions were satisfied namely, that the goods were manufactured in a rural area and that petitioner institution was recognized by the Khadi and Village Industries Commission. Once both the aforesaid conditions were satisfied, the petitioner became entitled to the benefit of exemption under the said notification and that the fact that the goods were manufactured at Iyava and not and Chhatral and were sold with Hipoline labels in retail pack is immaterial as there is no such conditionality attached to the notification. The authorities below were, therefore, not justified in holding that the petitioner was not entitled to the benefit of notification as the unit had been approved for manufacturing the product in question at Chhatral and not at Iyava, Sanand. It was submitted that notification contemplates recognition of the institution and not of a particular unit of the institution and as such when the petitioner was an institution recognised by KVIC and was manufacturing specified goods in a rural area, the petitioner could not have been denied the benefit of the exemption on the ground that the unit established at Iyava, Sanand was not recognised by the Board. It was, accordingly, urged that the Tribunal having failed to appreciate the notification No.88/88 in proper perspective, the impugned order is required to be quashed and set aside.
5. Opposing the petition, Mr. Darshan Parikh, learned senior standing counsel appearing on behalf of the respondent invited attention to the contents of the show cause notice and more particularly to para.11 thereof, to submit that the petitioner by adopting a colorable device had under the pretext of starting a factory recognized by Khadi and Village Industries Commission, actually been using the shed and the machineries belonging to M/s. Navdeep Chemicals and M/s. Novex Chemicals without any consideration till inquiries were initiated by the department. According to the learned counsel, the factory appears to be a unit created by the manufacturers and the brand name holder of 'Hipolene' to evade payment of duty by filing wrong declaration to the Central Excise Department and wrongly availing the exemption under the notification in question. Drawing the attention of the court to the order passed by the adjudicating authority as well as by the Tribunal it was pointed out that both the authorities below have recorded concurrent findings of the fact to the effect that in terms of the recognition given by KVIC, not only the institution which manufactures the goods has to be recognized but the unit manufacturing such goods is also required to be recognized by it. The basis for arriving at such a conclusion is the KVIC, Bombay's certificate dated 12th April, 1993 produced by the petitioner in its defence which gives recognition to the petitioner with the condition of location of units or manufacturing centres for such village industry’s goods, such as detergent powder, etc. Thus, the recognition granted to the petitioner was conditional and was in respect of the units specified thereunder. It was submitted that village Ivaya, Sanand, had not been included in the said list and as such the factory set up by the petitioner at Iyava, Sanand was not recognized by KVIC and as such both the authorities below were justified in holding that the petitioner was not entitled to exemption under the notification in question and was liable to pay excise duty on the goods manufactured by the said unit.
6. Before adverting to the merits of the case, the findings recorded by the adjudicating authority and the Tribunal may be adverted to. The adjudicating authority while dealing with the contention that there was no stipulation in the notification No.88/88 that the individual manufacturing unit should be recognised separately by the KVIC or state KVIB has observed that the KVIC, Bombay’s certificate dated 12.4.93 produced by the petitioner in its defence, shows that the petitioner has been given recognition with condition of location of units or manufacturing centres, for such village industries goods, such as detergent powder etc. The certificate provides a list of 27 manufacturing centres including Bavla, Dadriyana, Dhandhuka, Aniyali, Bhimji and Alampur in District Ahmedabad but village Iyava, Sanand has not been included in the said list. The adjudicating authority was, accordingly, of the view that in the face of such condition given by the Certification Committee for the purpose of recognition of the institution, it cannot be said that the recognition could be given in a blanket manner without manufacturing centres or individual unit’s location having been approved; and that since the Iyava (Sanand) unit of the petitioner had not been recognised by the KVIC, Bombay, the petitioner cannot be granted the benefit of notification No.88/88 dated 1.3.88. Holding that the petitioner was not a recognised institution insofar as the manufacturing centre at Iyava, Sanand is concerned, the adjudicating authority confirmed the duty demand under rule 9(2) of the Rules read with section 11A of the Act, and ordered confiscation of the goods under rule 173Q of the Rules redeemable upon payment of a token fine of Rs.1000/ but refrained from imposing any penalty.
7. The Tribunal in the impugned order has concurred with the findings recorded by the adjudicating authority and has observed thus:
“2. The certificate dated 12.4.1993 issued by Khadi & Village Industries Commissioner, Bombay to the Gujarat Khadi Pratishtan indicates in column 3 that previous units of the Pratishtan specified production centre. This showed various categories such as Khadi on own account, Khadi on job worker. In every one of these categories except category two, Khadi on job work, there is an against the entry in column 2. A reference is made to attached list. The attached list indicates 26 production centres and the appellant's unit did not one of them. It is therefore reasonable to conclude that the certificate issued by Khadi and Village Industries Commission did not accord recognition to this unit. The contention of the representative of the appellant that the notification does not require recognition to specific unit but only to the institutions is not doubt true, but it is clear from the format of the certificate that the method of recognition by the Khadi & Village Industries Commission was for specific units. It would have been a different matter if the certificate of the Commission merely indicated Gujarat Khadi Pratishtan (of which the appellant is a unit) without making any reference to its constituted unit. It that case it could perhaps be argued that the appellant's unit was part of the Pratishtan and would be entitled to the exemption. But however in a situation where the Commission itself found it necessary to mention each unit separately and indicated the nature of activity in that unit, it would be incorrect to conclude that, despite appellant's unit for not figuring in the list, 'recognition had been accorded to it.”
8. From the facts as emerging on record, it appears that the petitioner has been recognized by KVIC, Bombay for establishing units for manufacturing goods as described in the exemption Notification No.88/88 dated 1st March 1988 as amended from time to time, with the condition of location of units or manufacturing centres for such village industries goods. Under the certificate given by KVIC, the petitioner appears to have been given recognition for manufacturing detergent etc. in respect of 27 manufacturing centres enumerated in the list appended thereto. However, village Ivaya, Sanand does not find place in the said list. The petitioner had initially availed cash assistance from Gujarat State Khadi Gramodhyog Board for the purpose of starting its factory at Chhatral which appears to be one of the locations enumerated in the said list. However, instead of starting the factory at Chhatral, the petitioner set up a unit at Ivaya, Sanand. It may be pertinent to note that it is not the case of the petitioner that Iyava, Sanand is one of the centres listed in the recognition certificate. According to the petitioner recognition is qua the institution and not the location or unit and as such the petitioner could not have been denied the benefit of the notification on the ground that the factory was set up at Iyava and not at Chhatral.
9. A perusal of the exemption notification No.88/88 C.E. dated 1.3.1988 shows that the Central Government in exercise of powers conferred under subrule (1)of rule 8 of the Rules has exempted goods of the description specified in column (3) of the table thereto from the whole of the duty excise liability thereon. However, for the purpose of obtaining the benefit of such exemption, such goods are required to be manufactured in rural areas by registered cooperative societies or by women's societies or by institutions recognized by the Khadi and Village Industries Commission or the State Khadi and Village Industries Boards or by units run with the cash assistance from District Rural Development Agencies under the Integrated Rural Development Programme. On a plain reading of the said notification, it is apparent that for the purpose of obtaining the benefit of exemption thereunder two conditions precedent are required to be satisfied, firstly, that the goods specified in the notification should be manufactured in rural areas and secondly, that such goods should be manufactured by registered cooperative societies, institutions recognized by KVIC etc. In the present case, there does not appear to be any dispute as regards the fulfilment of the first condition namely, that the requirement that the goods should be manufactured in a rural area. Insofar as second condition is concerned, it is the case of the petitioner that it is an institution recognized by KVIC. Since the certificate of registration has not been produced on the record of this court, for the purpose of examining the contents thereof, it would be necessary to rely upon the order passed by the adjudicating authority which makes reference to the contents thereof. As noted hereinabove, the adjudicating authority in its order dated 22nd January, 1998 has observed that under KVIC Bombay's certificate dated 12th April 1993, the petitioner Gujarat Khadi Pratishthan has been granted recognition with the condition of location of units or manufacturing centres for such village industries goods such as detergent powder, etc. The certificate provides a list of 27 manufacturing centres including Bavla, Dadriyana, Dhandhuka, Aniyali, Bhimji and Alampur in District Ahmedabad, but village Ivaya, Sanand has not been included in the list. The Tribunal in the impugned order has concurred with the aforesaid finding of fact recorded by the adjudicating authority. On behalf of the petitioner the learned counsel is not in a position to show any material to the contrary to dislodge the aforesaid findings of fact recorded by the authorities below nor is he in a position to point out any material to the contrary. From the concurrent findings of fact recorded by the Tribunal, evidently that the petitioner as an institution, per se, has not been granted recognition by the KVIC, but it has been granted recognition conditionally, namely in respect of location of units or manufacturing centres for village industry goods as specified thereunder. Thus, when the recognition granted to the petitioner is conditional, in respect of any other manufacturing unit except those specified in the certificate of recognition, the petitioner would be an unrecognized institution. Under the circumstances, the contention that second requirement namely, that the institution was recognized by KVIC is apparently not satisfied in the facts of the present case. The petitioner having not satisfied the conditions precedent for availing the benefit of exemption under notification No.88/88 dated 1.3.88 as amended from time to time, is therefore, not entitled to the benefit of exemption thereunder. The impugned order passed by the Tribunal, therefore, cannot be said to suffer from any legal infirmity so as to warrant interference.
10. For the foregoing reasons, the petition fails and is, accordingly, dismissed. Rule is discharged with no order as to costs.
(Akil Kureshi, J.) (Harsha Devani, J.) (raghu)