Section 294 CrPC reads as under: - “294. No formal proof of certain documents. – (1) Where any document is filed before any Court by the prosecution or the accused, the particulars of every such document shall be included in a list and the prosecution or the accused, as the case may be, or the pleader for the prosecution or the accused, if any, shall be called upon to admit or deny the genuineness of each such document. (2) The list of documents shall be in such form as may be prescribed by the State Government. (3) Where the genuineness of any document is not disputed, such document may be read in evidence in any inquiry, trial or other proceeding under this Code without proof of the signature of the person to whom it purports to be signed: Provided that the Court may, in its discretion, require such signature to be proved.” The object of Section 294 CrPC is to accelerate pace of trial by avoiding the time being wasted by the parties in recording the unnecessary evidence. Where genuineness of any document is admitted, or its formal proof is dispensed with, the same may be read in evidence. Word “document” is defined in Section 3 of the Indian Evidence Act, 1872, as under: - “ ‘Document’ means any matter expressed or described upon any substance by means of letters, figures or marks, or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matter. Illustration A writing is a document; Words printed, lithographed or photographed are documents; A map or plan is a document; An inscription on a metal plate or stone is a document; A caricature is a document.” In R.M. Malkani vs. State of Maharashtra[1], this Court has observed that tape recorded conversation is admissible provided first the conversation is relevant to the matters in issue; secondly, there is identification of the voice; and, thirdly, the accuracy of the tape recorded conversation is proved by eliminating the possibility of erasing the tape record.- In Ziyauddin Barhanuddin Bukhari vs. Brijmohan Ramdass Mehra and others[2], it was held by this Court that tape-records of speeches were “documents”, as defined by Section 3 of the Evidence Act, which stood on no different footing than photographs, and that they were admissible in evidence on satisfying the following conditions: “(a) The voice of the person alleged to be speaking must be duly identified by the maker of the record or by others who know it. (b) Accuracy of what was actually recorded had to be proved by the maker of the record and satisfactory evidence, direct or circumstantial, had to be there so as to rule out possibilities of tampering with the record. (c) The subject-matter recorded had to be shown to be relevant according to rules of relevancy found in the Evidence Act.” In view of the definition of ‘document’ in Evidence Act, and the law laid down by this Court, as discussed above, we hold that the compact disc is also a document. It is not necessary for the court to obtain admission or denial on a document under sub-section (1) to Section 294 CrPC personally from the accused or complainant or the witness. The endorsement of admission or denial made by the counsel for defence, on the document filed by the prosecution or on the application/report with which same is filed, is sufficient compliance of Section 294 CrPC. Similarly on a document filed by the defence, endorsement of admission or denial by the public prosecutor is sufficient and defence will have to prove the document if not admitted by the prosecution. In case it is admitted, it need not be formally proved, and can be read in evidence. In a complaint case such an endorsement can be made by the counsel for the complainant in respect of document filed by the defence.=We are not inclined to go into the truthfulness of the conversation sought to be proved by the defence but, in the facts and circumstances of the case, as discussed above, we are of the view that the courts below have erred in law in not allowing the application of the defence to get played the compact disc relating to conversation between father of the victim and son and wife of the appellant regarding alleged property dispute. In our opinion, the courts below have erred in law in rejecting the application to play the compact disc in question to enable the public prosecutor to admit or deny, and to get it sent to the Forensic Science Laboratory, by the defence. The appellant is in jail and there appears to be no intention on his part to unnecessarily linger the trial, particularly when the prosecution witnesses have been examined. Therefore, without expressing any opinion as to the final merits of the case, this appeal is allowed, and the orders passed by the courts below are set aside. The application dated 19.2.2015 shall stand allowed. However, in the facts and circumstances of the case, it is observed that the accused/appellant shall not be entitled to seek bail on the ground of delay of trial.

                        IN THE SUPREME COURT OF INDIA

                       CRIMINAL APPELLATE JURISDICTION

                      CRIMINAL APPEAL NO. 1525 OF 2015
               (Arising out of S.L.P. (Crl.) No. 9151 of 2015)


Shamsher Singh Verma                         … Appellant

                                   Versus

State of Haryana                             …Respondent








                               J U D G M E N T


Prafulla C. Pant, J.


      This appeal is directed against order dated 25.8.2015, passed  by  the
High Court of Punjab and Haryana  at  Chandigarh,  whereby  said  Court  has
affirmed the order dated 21.2.2015, passed by the  Special  Judge,  Kaithal,
in Sessions Case No. 33  of  2014,  and  rejected  the  application  of  the
accused for getting exhibited the compact disc, filed in defence and to  get
the same proved from Forensic Science Laboratory.

We have heard learned counsel for the parties  and  perused  the  papers  on
record.

Briefly stated, a report was  lodged  against  the  appellant  (accused)  on
25.10.2013 at Police Station, Civil Lines, Kaithal, registered  as  FIR  No.
232 in respect of offence punishable under Section 354 of the  Indian  Penal
Code (IPC) and one relating to Protection of Children from  Sexual  Offences
Act, 2015 (POCSO) in which complainant Munish Verma alleged that  his  minor
niece was molested by the appellant.  It appears that  after  investigation,
a charge sheet is filed  against  the  appellant,  on  the  basis  of  which
Sessions Case No. 33 of 2014 was registered.  Special Judge, Kaithal,  after
hearing the parties, on 28.3.2014  framed  charge  in  respect  of  offences
punishable under Sections 354A and 376 IPC and also in  respect  of  offence
punishable under Sections 4/12 of POCSO.  Admittedly  prosecution  witnesses
have been examined in said case, whereafter statement  of  the  accused  was
recorded under Section 313 of the Code  of  Criminal  Procedure,  1973  (for
short “CrPC”).  In defence the accused has examined four witnesses,  and  an
application purported to have  been  moved  under  Section  294  CrPC  filed
before the trial court with following prayer: -

“In view of the submissions made above it is therefore prayed that the  said
gadgets may be got operated initially in the court for preserving a copy  of
the  text  contained  therein  for  further  communication  to  F.S.L.   for
establishing their authenticity.  It is further prayed  that  the  voice  of
Sandeep Verma may kindly be ordered to be taken by the experts at FSL to  be
further got matched with the recorded voice above mentioned.”


In said application dated 19.2.2015, it is alleged that there  is  recording
of conversation between Sandeep Verma (father of  the  victim)  and  Saurabh
(son  of  the  accused)  and  Meena  Kumari  (wife  of  the  accused).   The
application appears to have been opposed by the prosecution.   Consequently,
the trial court rejected the same vide order dated 21.2.2015  and  the  same
was affirmed, vide impugned order passed by the High Court.
Learned counsel for the appellant argued before us that the  accused  has  a
right to adduce the evidence in defence and the courts below have  erred  in
law in denying the right of defence.

On the other hand, learned counsel for the complainant and  learned  counsel
for the State contended that it is a case of sexual abuse of a female  child
aged nine years by his uncle, and the accused/appellant is trying to  linger
the trial.


In reply to this, learned counsel for the appellant pointed out  that  since
the accused/appellant is in jail, as such, there is no question on his  part
to protract the trial.  It is further submitted on behalf of  the  appellant
that the appellant was initially detained on  24.10.2013  illegally  by  the
police at the instance of the complainant, to settle  the  property  dispute
with the complainant and his brother.  On this Writ Petition (Criminal)  No.
1888 of 2013 was filed before the High Court for issuance of writ of  habeas
corpus.  It is further pointed out that  the  High  Court,  vide  its  order
dated 25.10.2013, appointed Warrant Officer, and the appellant was  released
on 25.10.2013 at  10.25  p.m.  Immediately  thereafter  FIR  No.  232  dated
25.10.2013 was registered at 10.35 p.m.  regarding  alleged  molestation  on
the basis of which Sessions Case is proceeding.  On behalf of the  appellant
it is also submitted that appellant’s wife Meena is sister of  Munish  Verma
(complainant) and Sandeep  Verma  (father  of  the  victim),  and  there  is
property dispute between the parties due to which  the  appellant  has  been
falsely implicated.

Mrs.  Mahalakshmi  Pawani,  learned  senior  counsel  for  the   complainant
vehemently argued that the alleged conversation  among  the  father  of  the
victim and son and wife of the appellant is subsequent to  the  incident  of
molestation and rape with a nine year old child, as  such  the  trial  court
has rightly rejected the application dated 19.2.2015.


However, at this stage we are not inclined to express any opinion as to  the
merits of the prosecution case  or  defence  version.   The  only  point  of
relevance at present is  whether  the  accused  has  been  denied  right  of
defence or not.


Section 294 CrPC reads as under: -

“294. No formal proof of certain documents. –  (1)  Where  any  document  is
filed before any Court by the prosecution or the  accused,  the  particulars
of every such document shall be included in a list and  the  prosecution  or
the accused, as the case may be, or the pleader for the prosecution  or  the
accused, if any, shall be called upon to admit or deny  the  genuineness  of
each such document.

      (2) The list of documents shall be in such form as may  be  prescribed
by the State Government.

      (3) Where the genuineness  of  any  document  is  not  disputed,  such
document may be read in evidence in any inquiry, trial or  other  proceeding
under this Code without proof of the signature of  the  person  to  whom  it
purports to be signed:

       Provided  that  the  Court  may,  in  its  discretion,  require  such
signature to be proved.”


The object of Section 294 CrPC is to accelerate pace of  trial  by  avoiding
the time being wasted by the parties in recording the unnecessary  evidence.
 Where genuineness of any document is  admitted,  or  its  formal  proof  is
dispensed with, the same may  be  read  in  evidence.   Word  “document”  is
defined in Section 3 of the Indian Evidence Act, 1872, as under: -
“ ‘Document’ means any matter expressed or described upon any  substance  by
means of letters, figures or marks, or by more  than  one  of  those  means,
intended to be used, or which may be used,  for  the  purpose  of  recording
that matter.

                                Illustration

A writing is a document;
Words printed, lithographed or photographed are documents;
A map or plan is a document;
An inscription on a metal plate or stone is a document;
A caricature is a document.”


In R.M. Malkani vs. State of Maharashtra[1], this Court  has  observed  that
tape recorded conversation is admissible provided first the conversation  is
relevant to the matters in issue; secondly, there is identification  of  the
voice; and, thirdly, the accuracy  of  the  tape  recorded  conversation  is
proved by eliminating the possibility of erasing the tape record.

In Ziyauddin Barhanuddin Bukhari vs. Brijmohan Ramdass Mehra and  others[2],
it was held by this Court that tape-records of  speeches  were  “documents”,
as defined by Section 3 of the Evidence Act, which  stood  on  no  different
footing than photographs, and that  they  were  admissible  in  evidence  on
satisfying the following conditions:
“(a)  The  voice  of  the  person  alleged  to  be  speaking  must  be  duly
identified by the maker of the record or by others who know it.

(b)   Accuracy of what was actually recorded had to be proved by  the  maker
of the record and satisfactory evidence, direct or  circumstantial,  had  to
be there so as to rule out possibilities of tampering with the record.

(c)   The subject-matter recorded had to be shown to be  relevant  according
to rules of relevancy found in the Evidence Act.”

In view of the definition of ‘document’ in Evidence Act, and  the  law  laid
down by this Court, as discussed above, we hold that  the  compact  disc  is
also a document.  It is not necessary for the court to obtain  admission  or
denial on a document under sub-section (1) to Section  294  CrPC  personally
from the  accused  or  complainant  or  the  witness.   The  endorsement  of
admission or denial made by the counsel for defence, on the  document  filed
by the prosecution or on the application/report with which  same  is  filed,
is sufficient compliance of Section  294  CrPC.   Similarly  on  a  document
filed by the defence, endorsement of  admission  or  denial  by  the  public
prosecutor is sufficient and defence will have to prove the document if  not
admitted by the prosecution.  In  case  it  is  admitted,  it  need  not  be
formally proved, and can be read in evidence. In a complaint  case  such  an
endorsement can be made by the counsel for the  complainant  in  respect  of
document filed by the defence.

On going through the order dated 21.2.2015, passed by the  trial  court,  we
find that all the prosecution witnesses, including  the  child  victim,  her
mother Harjinder Kaur, maternal grandmother Parajit Kaur  and  Munish  Verma
have been examined.  Sandeep Verma (father of the victim)  appears  to  have
been discharged by the prosecution, and the evidence was closed.   From  the
copy of the  statement  of  accused  Shamsher  Singh  Verma  recorded  under
Section 313 CrPC (annexed as Annexure P-11 to the petition), it  is  evident
that in reply to second last question, the accused has alleged that  he  has
been implicated due to property  dispute.   It  is  also  stated  that  some
conversation is in possession of his son.  From the record it also  reflects
that Dhir Singh, Registration Clerk, Vipin Taneja, Document Writer,  Praveen
Kumar, Clerk-cum-Cashier, State Bank of Patiala, and Saurabh Verma,  son  of
the appellant have been  examined  as  defence  witnesses  and  evidence  in
defence is in progress.

We are not inclined to go into the truthfulness of the  conversation  sought
to be proved by the defence but, in  the  facts  and  circumstances  of  the
case, as discussed above, we are of the view  that  the  courts  below  have
erred in law in not allowing the application of the defence  to  get  played
the compact disc relating to conversation between father of the  victim  and
son and wife of the appellant regarding alleged property  dispute.   In  our
opinion, the courts below have erred in law in rejecting the application  to
play the compact disc in question to enable the public prosecutor  to  admit
or deny, and to get it sent to  the  Forensic  Science  Laboratory,  by  the
defence.  The appellant is in jail and there appears to be no  intention  on
his  part  to  unnecessarily  linger  the  trial,  particularly   when   the
prosecution witnesses have been examined.

Therefore, without expressing any opinion as to  the  final  merits  of  the
case, this appeal is allowed, and the orders passed by the courts below  are
set aside.  The application dated 19.2.2015 shall stand  allowed.   However,
in the facts and  circumstances  of  the  case,  it  is  observed  that  the
accused/appellant shall not be entitled to seek bail on the ground of  delay
of trial.


                                                          ………………….....…………J.
                                                  [Dipak Misra]




                                                            .………………….……………J.
                                                          [Prafulla C. Pant]
New Delhi;
November 24, 2015.

-----------------------
[1]    (1973) 1 SCC 471 : 1973 (2) SCR 417
[2]    (1976) 2 SCC 17 : 1975 (Supp) SCR 281

Section 2(15) “goods” means all kinds of movable property, whether tangible or intangible, other than newspapers, money, actionable claims, stocks, shares and securities, and includes materials, articles and commodities used in any form in the execution of works contract, livestock and all other things attached to or forming part of the land which is agreed to be served before sale or under the contract of sale.”= the assessee- company is engaged in the business of manufacturing Asbestos Cement Pressure Pipe and Asbestos Cement Sheets and it had availed ITC on the purchase of raw material used in the manufacture of A.C. Sheets. The assessing authority issued notice to the assessee for the purpose of disallowing ITC on purchase of raw material used in manufacturing A.C. Sheets for the period mentioned hereinabove and pursuant to the show cause notice the assessee filed a detailed reply and eventually the assessing authority passed orders under Section 22 of the Act disallowing the ITC and charged interest. The said orders were assailed before the Appellate Authority which declined to interfere with the orders appealed against, compelling the assessee to file second appeals before the Board which placed reliance on ACTO v. M/s. Suncity Trade Agency[1] and dismissed the appeals. The Board while dismissing the appeals opined that the assessee- Company, a manufacturing unit, had not been charged on the sales of its product, as per the notification which squarely fall under the definition of exempted goods and hence, the final product was exempted, but it was not entitled to avail ITC as the notification clearly postulated that the units/institution was not exempted from the tax but the sales of its goods were exempted from tax as per the definition of “Exempted Goods”.=Single Judge held that:- “In view of express language of Section 18(1)(e) of the Act, notifications S.O. 371 and S.O. 372 read with S.O. 377, the petitioner who is a manufacturer of A.C. Sheets is entitled to avail ITC and the authorities below were not justified in denying Input Tax Credit to the petitioner based on interpretation put by them on inclusion of the petitioner in Schedule-II under Section 8(3A) and notification S.O. 377 dated 09.03.2007 issued under Section 8(3) of the Act.” The expression of the said view and the ultimate setting aside of the orders of the Court below, as stated earlier, is the subject matter of assail in these appeals.= where the appellant wanted to restrict the benefit of ITC when a particular dealer or transaction was exempted, it was so stipulated in the exemption notification issued under Sections 8(3) and 8(4) of the Act. Such notifications admittedly do exist and were issued by the appellant. They are also right in drawing support from the note sheets relating to Finance Bill 2007 as also the communications issued by Commissioner of Commercial Taxes. The note sheets and the communication of the Commissioner draw a clear distinction between exemptions when the goods were not taxable as they do fall under the First Schedule and when an exemption was granted under the Second Schedule, which relates to specified transaction of sale or exempted dealers even when the goods were taxable goods. In latter cases, subsequent dealers undertaking sale of goods would be liable to pay tax on sale of such products. There can be no shadow of doubt that subsequent dealers undertaking sale of goods manufactured and sold by the respondent company would be liable to pay tax on such products.

                                 Reportable

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 2806 OF 2015



Commercial Taxes Officer                     ...   Appellant

                                   Versus

A Infrastructure Ltd.                                ...    Respondent


                                    WITH
                        CIVIL APPEAL NO. 2807 OF 2015
                        CIVIL APPEAL NO. 2808 OF 2015
                        CIVIL APPEAL NO. 2809 OF 2015
                        CIVIL APPEAL NO. 2810 OF 2015


                               J U D G M E N T


Dipak Misra, J.


      This batch of appeals, by special leave, calls in question  the  legal
acceptability of the common order dated 19th December, 2013  passed  by  the
learned Single Judge of the High  Court  of  Judicature  for  Rajasthan,  at
Jodhpur in a batch of revision petitions filed  by  the  assessee-respondent
assailing the judgment dated 23.11.2011 passed by the Rajasthan  Tax  Board,
Ajmer (for short ‘the Board’) in Appeal No. 680 of 2009 and other  connected
appeals whereby it had affirmed the decision  rendered  in  appeals  by  the
Deputy Commissioner (Appeals) who had upheld the  assessment  orders  passed
by the Commercial Taxes Officer in respect of various quarters of the  years
2006-2007, 2007-2008 and  2008-2009  disallowing  the  claim  of  Input  Tax
Credit (ITC) and charging interest under Sections 18, 22 and  55(4)  of  the
Rajasthan Value Added Tax Act, 2003 (for brevity “the 2003Act”).
2.    The facts giving rise to this batch of appeals are that the  assessee-
company  is  engaged  in  the  business  of  manufacturing  Asbestos  Cement
Pressure Pipe and Asbestos Cement Sheets and  it  had  availed  ITC  on  the
purchase of raw material used  in  the  manufacture  of  A.C.  Sheets.   The
assessing authority issued  notice  to  the  assessee  for  the  purpose  of
disallowing ITC on purchase of  raw  material  used  in  manufacturing  A.C.
Sheets for the period mentioned hereinabove and pursuant to the  show  cause
notice the assessee filed a detailed  reply  and  eventually  the  assessing
authority passed orders under Section 22 of the Act disallowing the ITC  and
charged interest.  The  said  orders  were  assailed  before  the  Appellate
Authority which declined to interfere  with  the  orders  appealed  against,
compelling the assessee to  file  second  appeals  before  the  Board  which
placed reliance on ACTO v. M/s. Suncity Trade Agency[1]  and  dismissed  the
appeals. The Board while dismissing the appeals opined  that  the  assessee-
Company, a manufacturing unit, had not been charged  on  the  sales  of  its
product, as per the notification which squarely fall  under  the  definition
of exempted goods and hence, the final product was exempted, but it was  not
entitled to avail ITC  as  the  notification  clearly  postulated  that  the
units/institution was not exempted from the tax but the sales of  its  goods
were exempted from tax as per the definition of “Exempted Goods”.
3.    The grievance of  dismissal  constrained  the  assessee  to  file  the
revision petitions before the High Court, and seeking  interference  in  the
revision petition it was contended that the scheme of Section 8 of  the  Act
which deals with exemption of tax and  the  notification  issued  under  the
Rajasthan Sales Tax Act, 1994 (for short, ‘the 1994 Act’)  and  the  various
notifications issued under the said Act from time to  time  deal  with  A.C.
Sheets and in view of the postulates laid down  in  the  notification  dated
09.03.2007,  issued  under  sub-section  (3A)  of  Section  8  wherein   the
manufacturer of asbestos cement sheets and bricks have  been  exempted  and,
therefore, it could not  be  said  that  A.C.  Sheets  manufactured  by  the
assessee were exempted goods which is  the  pre-requisite  for  denying  ITC
under Section 18 of the Act.  Reliance was placed on the  judgment  of  ACTO
v. Abishek Granites Ltd.[2] to buttress the proposition  that  exemption  to
unit is different from the exemption to  the  transaction  of  sale  of  the
commodity.  It was also highlighted before the  High  Court  that  when  two
views are possible, the view in favour of the assessee  should  be  accepted
and for the  said  purpose  reliance  was  placed  on  CIT  v.  Kulu  Valley
Transport Co. (P) Ltd[3].  The  background  of  the  issue  of  notification
dated  09.03.2007  and  the  communication  issued  by   the   Commissioner,
Commercial Taxes, Rajasthan, Jodhpur were stressed upon to bolster the  plea
that assessee was exempted from tax and not the A.C. Sheets manufactured  by
it.
4.    The stand of the assessee was controverted by the revenue  contending,
inter alia, that vide notification S.O. 372, manufacturers of A.  C.  Sheets
and Bricks were included at S. No. 20 in  Schedule-II,  which  entitles  the
units  to  claim  exemption  on  the  sale  of  manufactured  goods  on  the
fulfillment of certain conditions and in view  of  the  specific  conditions
stipulated in Section 18(1)(A) of the Act, ITC was  not  allowed.   Reliance
was placed on notification S.O. 377, dated 09.03.2007 issued  under  Section
8(3) of the Act to harp that A.C. Sheets clearly fall  within  the  category
of exempted goods.  Reference  was  made  to  the  definition  of  ‘exempted
goods’ and ‘goods’ contained in Section 2(13) & (15) of  the  Act.   It  was
further submitted that irrespective of whether the notification  was  issued
under sub-Section (1) or (3) or (3A) or (4), the  goods  would  fall  within
the definition of exempted goods and consequently the assessee would not  be
entitled to ITC.  For the said purpose, reliance  was  placed  on  M/s.  Sun
City Trade Agency (supra).
5.    The High Court referred to the  dictionary  clause  as  enumerated  in
Section 2(13) which deals with “exempted goods”, Section 2(15) that  defines
the terms “goods”, Section 8 which  provides  for  “exemption  of  tax”  and
Section 18 which deals with “Input Tax Credit and  thereafter,  referred  to
the notification dated 16.03.2005 under the 1994 Act and  the  notifications
dated 01.06.2006, 05.07.2006,  09.03.2007  and  the  amendment  notification
issued on the same day  by  the  Finance  Department  (Tax  Division).   The
learned  Single  Judge  analysed  the  provisions  of  the   Act   and   the
notifications and took note of the fact that under the  1994  Act  exemption
granted  related  to  sale  of  A.C.  Sheets  and  Bricks,  subject  to  the
conditions indicated  therein.   The  High  Court  further  noted  that  the
notification dated 01.06.2006 which had been issued  in  exercise  of  power
under Section 8(2) and Schedule-I which was  amended  and  A.C.  Sheets  and
Bricks having contents of fly ash 25% more than by weight  was  inserted  as
entry 60A, and further adverted to the notification issued  under  the  same
provision, on 05.07.2006 vide which the Schedule-I  was  amended  and  entry
60A was substituted. After so stating, the learned Single Judge referred  to
the notifications issued on 09.03.2007 that deals with A.C. Sheets and  also
noted the fact that vide S.O. 371 issued under Section 8(2) of the Act,  the
existing entry 60A was deleted from  Schedule-I  and  further  by  S.O.  377
issued under Section 8(3A) of the Act which pertained to  “manufacturers  of
asbestos cement  sheets  and  bricks”  were  added  in  Schedule-II  and  it
provides the conditions for availing exemption for sale of A.C.  Sheets  and
Bricks manufactured in the state.
6.    On the aforesaid basis, the Court proceeded to  further  observe  that
by notification dated 16.03.2005 under the 1994 Act  and  the  notifications
dated 16.02.2006 and 05.07.2006  read  with  notification  dated  09.03.2007
A.C. Sheets and Bricks were exempted.  The goods, that is,  A.C. Sheets  and
Bricks were taken out by S.O. 371 and the manufacturers of A.C.  Sheets  and
Bricks were exempted by inclusion in Schedule-II by S.O. 372 and  conditions
for availing such exemption by the  manufacturers  were  indicated  by  S.O.
377. On the basis of the aforesaid analysis,  the  revisional  Court  opined
that it is significant that while S.O. 371 had  been  issued  under  Section
8(2) of the Act, S.O. 372 and 377 had been issued under  Section  8(3A)  and
(3) respectively, which provisions,  as  noticed  hereinbefore,  dealt  with
Schedule-I under Section 8(2) and Schedule-II under Sections 8(3) and  (3A),
which in turn related  to  exemption  of  goods  and  exemption  of  persons
respectively, therefore, it was apparent from the  notifications  issued  on
09.03.2007 that the intention of the State was to exempt  the  manufacturers
of A.C. Sheets and Bricks subject to fulfillment of conditions as  indicated
in S.O. 377 and to take away exemption available to A.C. Sheets  and  Bricks
as goods, as was available before the said date on account of its  inclusion
in Schedule-I.
7.    As the impugned order would show, the  High  Court  distinguished  the
judgment rendered in Sun City Trade Agency (supra), on the ground  that  the
said decision dealt with a  situation  wherein  the  exemption  notification
pertaining to stainless steel flats, ingots and billets were  exempted  from
tax on the conditions indicated in the notification and  it  had  been  held
therein that merely because the exemption is conditional  or  given  subject
to fulfillment of certain conditions it does not mean that such goods  would
fall outside the definition of exempted goods.
8.    The learned Single Judge  referred  to  the  definition  contained  in
Section 2(13) of the Act which  deals  with  exempted  goods  and  not  with
exemption of person or class as indicated in Section 8(3) of  the  Act,  and
observed that the intention of  the  legislature  in  incorporating  Section
18(1)(e) of the Act takes away the exempted goods from the  purview  of  the
ITC and not the person or class of persons exempted under Section  8(3)  and
the intention of the legislature was not to include exempted  goods  in  the
category of exempted persons as mentioned in Section 18(1)(e)  of  the  Act,
and hence, it was demonstrable  that  the  goods  and  dealers  are  treated
separately and the same was also evident from the provision of Section 5  of
the Act.
9.    As is evident, the High Court further  proceeded  to  opine  that  the
goods included in Schedule-II were entitled for ITC  inasmuch  as  the  said
conditions indicated for exemption related to  Self-Help  Groups  and  those
who had been registered with the Khadi and Village Industries Commission  or
Rajasthan Khadi and Village Industries Board by the notifications  S.O.  376
and S.O. 378 issued on 09.03.2007 wherein a specific  stipulation  had  been
made to the extent that no  input  tax  credit  shall  be  claimed  by  such
dealers in respect of purchase of raw  materials  used  for  manufacture  of
aforesaid goods.  Thereafter, the High Court proceeded to observe:-
“If the persons included in Schedule-II were  not  entitled  to  claim  ITC,
there was no reason to include the  said  conditions  for  the  above  noted
persons. Apparently, it is the sale of  goods  made  by  person  or  persons
included in Schedule-II, which is exempt and not the goods  manufactured  by
them, whereas, for  denying  ITC,  the  requirement  is  that  of  ‘exempted
goods’.”


10.   Being of this view the learned Single Judge held that:-
“In view of express language of Section 18(1)(e) of the  Act,  notifications
S.O. 371 and  S.O.  372  read  with  S.O.  377,  the  petitioner  who  is  a
manufacturer of A.C. Sheets is entitled to avail  ITC  and  the  authorities
below were not justified in denying  Input  Tax  Credit  to  the  petitioner
based on interpretation put by  them  on  inclusion  of  the  petitioner  in
Schedule-II under Section 8(3A) and notification S.O. 377  dated  09.03.2007
issued under Section 8(3) of the Act.”

11.   The expression of the said view and the ultimate setting aside of  the
orders of the Court below, as stated  earlier,  is  the  subject  matter  of
assail in these appeals.

12.  We have heard Mr. Shovan Mishra and Mr. Milind Kumar,  learned  counsel
for the appellant and Mr.  Paras  Kuhad,  learned  senior  counsel  for  the
respondent.

13.   To appreciate the controversy at hand, it is necessary  to  scrutinize
the various provisions of the Act  and  the  notifications  that  have  been
issued from time to time. Section 2(13) and 2(15)  define  “exempted  goods”
and “goods” respectively, and they are extracted below:-
“Section 2(13) “Exempted  goods”  means  any  goods  exempted  from  tax  in
accordance with the provisions of this Act;

      xxx        xxx         xxx
Section 2(15) “goods” means all kinds of movable property, whether  tangible
or intangible, other than  newspapers,  money,  actionable  claims,  stocks,
shares and securities, and  includes  materials,  articles  and  commodities
used in any form in the execution  of  works  contract,  livestock  and  all
other things attached to or forming part of the land which is agreed  to  be
served before sale or under the contract of sale.”

14.   Section 8 deals with exemption of tax and Section  18  lays  down  the
method, the manner and the conditions prescribed for availing the input  tax
credit. Section 8 and the relevant portion  of  Section  18  are  reproduced
below:-

“Section 8 – Exemption of tax –

(1)   The goods specified in  the  Schedule-I  shall  be  exempt  from  tax,
subject to such conditions as may be specified therein.

(2)   Subject to such conditions as it  may  impose,  the  State  Government
may, if it  considers  necessary  so  to  do  in  the  public  interest,  by
notification in the Official Gazette, add to  or  omit  from,  or  otherwise
amend or  modify  the  Schedule-I,  prospectively  or  retrospectively,  and
thereupon the Schedule shall be deemed to have been amended accordingly.

(3)   The State Government in the public interest, by  notification  in  the
Official Gazette, may exempt whether prospectively or  retrospectively  from
tax the sale or purchase by any person or class of persons as  mentioned  in
Schedule-II, without  any  condition  or  with  such  condition  as  may  be
specified in the notification.

(3A)  Subject to such conditions as it  may  impose,  the  State  Government
may, if it  considers  necessary  so  to  do  in  the  public  interest,  by
notification in the Official Gazette, add to  or  omit  from,  or  otherwise
amend or modify  the  Schedule-II,  prospectively  or  retrospectively,  and
thereupon the Schedule shall be deemed to have been amended accordingly.

(4)   The State Government may, if it  considers  necessary  in  the  public
interest so to do, notify grant of exemption from payment of  whole  of  tax
payable under this Act in respect of any class of  sales  or  purchases  for
the purpose of promoting the scheme of Special Economic Zones  or  promoting
exports,  subject  to  such  conditions  as  may  be  laid   down   in   the
notification.

(5)   Every notification issued under this section shall be  laid,  as  soon
as may be after it is so issued, before the House of the State  Legislature,
while it is in session for a period of not less  than  30  days,  which  may
comprised in one session or in two successive sessions  and  if  before  the
expiry of the sessions and if before the expiry of the sessions in which  it
is so laid or of the session immediately following the House  of  the  State
Legislature makes any modification in such  notification  or  resolves  that
any such notification should not be  issued,  such  notification  thereafter
have effect only in such modified form or be of no effect, as the  case  may
be, so however, that any such modification or  annulment  shall  be  without
prejudice to the validity of anything previously done thereunder.”

Section 18 – Input Tax Credit:-
(1)   Input tax credit shall be allowed, to registered dealers,  other  than
the dealers covered by sub-section  (2)  of  Section  3  or  Section  5,  in
respect  of purchase of any taxable goods  made  within  the  State  from  a
registered dealer to the extent and in such manner  as  may  be  prescribed,
for the purpose of :-

(a)   sale within the State of Rajasthan or;

(b)   sale in the course of Inter-State trade and commerce; or

(c)   sale in the course of export outside the territory of India; or

(d)   being used as packing material of goods, other  than  exempted  goods,
for sale; or

(e)   being used as raw material except those as  may  be  notified  by  the
State Government in the manufacture of goods other than exempted goods,  for
sale within the State or in the course of Inter-State trade or commerce; or

(f)   ........

(g)   ........”


15.   As has been stated earlier, the High Court  has  referred  to  various
notifications. The notification dated 16th  March,  2005  was  issued  under
Section 15 of the Rajasthan Sales Tax Act, 1994. It is as under:-
“Notification dated 16.03.2005 under the Act of 1994:-

S. No. 1874; F.4(78)FD/Tax/2004-168 dated 16.03.2005

      In exercise of the powers conferred by section  15  of  the  Rajasthan
Sales Tax Act 1994 (Rajasthan Act No. 22 of 1995)  and  in  supersession  of
this Department’s Notification No. F.4/(68)FD/Tax-Div/99-271  (S.No.  1147),
dated,  January  24,  2000  (as  amended  from  time  to  time),  the  State
Government being of the opinion that it is expedient in the public  interest
so to do, hereby exempts form tax the sale of  asbestos  cement  sheets  and
bricks, manufactured in the State by an industrial unit having  fly  ash  as
its main raw material on the following conditions, namely:-

that such fly ash shall constitute  twenty  five  percent  or  more  in  the
contents by weight of such asbestos cement sheets and bricks; and

that such unit commences commercial production by 31.12.2006.

This notification shall remain in force upto 23.1.2010.”

16.   The said notification as mentioned therein  was  to  remain  in  force
upto  23.1.2010.  When  the  said  notification   was   in   vogue   another
notification dated 1.6.2006 was issued under Section 8 of the 2003 Act.  The
said notification is as under:-
                       “Notification
                                                  Jaipur, Dated : 01.06.2006

In exercise of the powers conferred by sub-section (2) of Section 8  of  the
Rajasthan Value Added Tax Act, 2003 (Rajasthan  Act  No.  4  of  2003),  the
State Government being of the opinion that it is  expedient  in  the  public
interest so  to  do,  hereby  makes  the  following  further  amendments  is
SCHEDULE-I appended to the said Act; namely :-
                                 AMENDMENTS

After the existing S.No. 60 and before S.No. 61, the following  new  S.  No.
and entries thereto shall be inserted, namely :-

”





17.   On 05.07.2006 another notification  was  issued  in  exercise  of  the
powers conferred by sub-section (2)  of  Section  8  of  the  2003  Act.  On
09.03.2007, S.O. 371 was issued by the  Finance  Department  (Tax  Division)
vide which S. No. 68A from Schedule-I appended to the Act (2)  deleted.  May
it  be  noted  that  S.  No.  60A  was  substituted  by  notification  dated
05.07.2006 which has been referred to hereinbefore.

18.   The notification dated 09.03.2007, S.O. 372 was issued by the  Finance
Department (Tax Division)  and  the  said  department  also  issued  another
notification on the same day which is relevant. Both the  notifications  are
reproduced below:-

                  “Notification dated 09.03.2007 S.O. 372:-
                             FINANCE DEPARTMENT
                               (TAX DIVISION)

                       NOTIFICATION
                  Jaipur, March 9, 2007

S.O. 372 – In exercise of  the  powers  conferred  by  sub-section  (3A)  of
Section 8 of the Rajasthan Value Added Tax Act, 2003 (Rajasthan  Act  No.  4
of 2003), the State Government being of the opinion that it is expedient  in
the public interest so to do,  hereby  makes  the  following  amendments  is
Schedule-II appended to the said Act, namely :-

                                 AMENDMENTS

In Schedule-II appended to the said Act:-

(1)   ........
(2)   After the existing S.No.18  and  entries  thereto  the  following  new
S.Nos. and entries thereto shall be added; namely :-

|19  |Self Help Group                            |    |
|20  |Manufacturers of asbestos cement sheets and|    |
|    |bricks                                     |    |


                   Notification dated 09.03.2007, S.O. 377

                             “FINANCE DEPARTMENT
  (TAX DIVISION)

                                NOTIFICATION
                              Jaipur, March 9, 2007

S.O. 377 – In exercise  of  the  powers  conferred  by  sub-section  (3)  of
Section 8 of the Rajasthan Value Added Tax Act, 2003 (Rajasthan  Act  No.  4
of 2003), the State Government being of the opinion that it is expedient  in
the public interest so to do, hereby exempts from payment of tax,  the  sale
of asbestos cement sheets and  bricks  manufacturers  in  the  State  having
contents of fly ash  twenty  five  per  cent  or  more  by  weight,  on  the
following conditions, namely :-

(1)   that the goods shall be entered in  the  registration  certificate  of
the selling dealer;

(2)   that the exemption shall be for such goods manufactured by the  dealer
who commenced commercial production in the State by 31.12.2006; and

(3)   that the exemption shall be available up to 23.01.2010.”

19.   As we find the High Court in the impugned order has  referred  to  the
provisions of the Act and the notifications.   On a careful scrutiny of  the
order passed by the High Court, it is perceivable that it has  proceeded  on
the foundation that there is a distinction between the  exempted  units  and
exempted  sales,  and  finally  manufactured  sales  area,  or  to  put   it
differently, the final transactions of goods or a sale when it takes  place.
Thus, the distinction as laid down by the learned Single Judge is  based  on
exemption of unit and exemption on transaction or sale.
20.   On an analysis of the scheme of the Act, it is manifest that there  is
difference between exempted goods, i.e., goods on which no Value  Added  Tax
is payable  and  are,  therefore,  not  taxable  and  other  cases  where  a
particular transaction when it satisfies specific condition is not  taxable.
 In this regard reference to the authority in State of Tamil  Nadu  v.  M.K.
Kandaswami & others[4], would be seemly, for  this  Court  had  adverted  to
three distinct concepts; taxable persons, taxable goods and  taxable  events
and how they were distinguished.  It was observed in the said case  that  if
the said distinction  is  overlooked,  it  may  lead  to  serious  error  in
construction and application of a taxing provision  or  enactment.   In  the
case of taxable or non-taxable/exempted  goods,  the  focal  point  and  the
focus is  on  the  character  and  class  of  goods  in  relation  to  their
exigibility.  Referring to the provisions  of  Section  7-A  of  the  Madras
General Sales Tax, 1959, the expression in the Act “taxable goods”,  it  was
opined as regards the goods mentioned in the First Schedule of the Act  that
the sale and purchase was liable to  tax  at  the  rate  and  at  the  point
specified therein.  It was further held that the  goods  which  were  exempt
were not taxable goods and, therefore, could not be brought  to  charge  and
taxed.  However, notwithstanding the goods being taxable goods, there  could
be circumstances in a given case by reason of which  a  particular  sale  or
purchase would not attract sales tax.
21.   Be it noted, in the said decision, Section 7-A of the  Madras  General
Sales Tax Act, 1959, which reads as under, fell for consideration:-
“(1) Every dealer who in  the  course  of  his  business  purchases  from  a
registered dealer or from any other person, any goods (the sale or  purchase
of which is liable to tax under this Act) in circumstances in which  no  tax
is payable under Sections 3, 4 or 5, as the case may be, and either-

(a) consumes such goods in the  manufacture  of  other  goods  for  sale  or
otherwise; or

(b) disposes of such goods in any manner other than by way of  sale  in  the
State; or

(c) dispatches them to a place outside the State except as a  direct  result
of sale or purchase in the course of inter-State trade  or  commerce,  shall
pay tax on the turnover relating to  the  purchase  aforesaid  at  the  rate
mentioned in Sections 3, 4 or 5 as the case may be whatever be  the  quantum
of such turnover in a year:

Provided that a dealer (other than a  casual  trader  or  agent  of  a  non-
resident dealer) purchasing goods the sale of which is liable to  tax  under
sub-section (1) of Section 3 shall not be liable to pay tax under this  sub-
section, if his total turnover for a year is less than twenty-five  thousand
rupees.”

      Section 7-A, it was observed, provided for such situations  where  the
goods were taxable goods in the hands of the purchasing dealer,  if  any  of
the conditions (a), (b) and (c)  of  sub-section  (1)  of  Section  7-A  was
satisfied.  In the facts of the case, it  was  noticed  that  the  goods  in
question were chargeable to tax as they were taxable  goods  under  Schedule
I, but exemption had been granted.   Reversing  the  decision  of  the  High
Court, reference was made to an earlier decision of  the  Supreme  Court  in
Ganesh Prasad Dixit Vs. Commissioner of  Sales  Tax[5]  and  a  decision  of
Kerala High Court in Malabar Fruit  Products  Co.  Vs.  Sales  Tax  Officer,
Palai[6] (1972) 30 STC 537 (Ker).
22.   With reference to the decision in Ganesh Prasad Dixit (supra) and  the
language in Madhya Pradesh General Tax Act, 1959, it was observed:
“29. The impugned Section 7-A is based on Section 7 of  the  Madhya  Pradesh
Act.  Although the language  of  these  two  provisions  is  not  completely
identical, yet their substance and object are  the  same.   Instead  of  the
longish phrase, “the goods, the sale or purchase of which is liable  to  tax
under this Act” employed in Section 7-A of the Madras Act, Section 7 of  the
Madhya Pradesh Act conveys the very connotation  by  using  the  convenient,
terse expression, “taxable goods”.  The ratio  decidendi  of  Ganesh  Prasad
(supra)  is  therefore,  an  apposite  guide  for  construing  Section  7-A.
Unfortunately, that decision, it seems, was not brought  to  the  notice  of
the learned Judges of the High Court.”

23.   With reference to Kerala General Sales Tax,  1963,  this  Court  noted
the following reasoning given by the Single Judge of the Kerala  High  Court
:-
“32.  Holding that  Section  5-A,  was  valid  and  intra  vires  the  State
Legislature, the learned Judge explained the scheme of the section, thus:-

      Though normally a sale by a registered dealer or by a dealer  attracts
tax, there may be circumstances under which the seller  may  not  be  liable
as, for example, when his turnover is below the specified minimum.  In  such
cases the “goods” are liable to be taxed,  but  the  sales  takes  place  in
circumstances in which no tax is payable  at  the  point  in  which  tax  is
levied under the Act.  If the goods are  not  available  in  the  State  for
subsequent  taxation  by  reason  of  one  or  other  of  the  circumstances
mentioned in clauses (a), (b) and (c) of Section 5A(1) of the Act  then  the
purchaser is sought to be made liable under Section 5A.

                                   *  *  *

      Another instance I can conceive of is  a  case  of  a  dealer  selling
agricultural or horticultural produce grown by him or grown in any  land  in
which he has interested, whether as owner,  usufructuary  mortgagee,  tenant
or otherwise.  From the definition of “turnover” in  Section  2  (xxvii)  of
the Act it is evident that the proceeds of such sale would be excluded  from
the turnover of a person who sells goods produced  by  him  by  manufacture,
agriculture, horticulture or otherwise,  though  merely  by  such  sales  he
satisfies the definition of ‘dealer’  in  the  Act.   Thus,  such  a  person
selling such produce is treated as a dealer within the meaning  of  the  Act
and the sales are of goods which are taxable  under  the  Act  but  when  he
sells these goods, it is not part of his turnover.  Therefore, it is a  case
of a dealer selling goods liable to tax under the Act  in  circumstances  in
which no tax is payable under the Act.  In such a  case,  the  purchaser  is
sought to be taxed under Section 5A provided the conditions  are  satisfied.
The case of growers selling  goods  to  persons  to  whom  Section  5A  thus
applies is covered by this example.”

24.   In CST v. Pine Chemicals Limited[7], this Court  posed  the  following
question:-
“7.   The simple question before us is whether the Bench which decided  Pine
Chemicals is right in holding that the benefit of the  said  sub-section  is
available even where the goods are exempted  with  reference  to  industrial
unit and for a specified period, viz., period of five years  from  the  date
the relevant unit goes into production.  In other  words,  the  question  is
whether an exemption of the nature granted under Government  Order  No.  159
dated 26-03-1971 is an exemption available “only in specified  circumstances
or under specified conditions” within the  meaning  of  the  Explanation  to
Section 8(2-A), as contended by the State or is it a case  where  the  goods
are exempt from the tax ‘generally’ within the meaning  of  Section  8(2-A),
as contended by the respondents/dealers? We are  of  the  opinion  that  the
respondents/dealers’ contention cannot be accepted in view of the clear  and
unambiguous language of the sub-section.”

25.   Thus, the Court drew a distinction  between  goods,  generally  exempt
from tax after noticing that Section 8(2A) of  the  Central  Sales  Tax  Act
specifically uses the expression “exempt from tax generally  or  subject  to
tax generally at a rate which is lower than 4%”,  and  accordingly  observed
that when the goods are exempt under certain specified circumstances  alone,
the  exemption  is  not  a  general,  but  a  conditional  one.    In   such
circumstances, it cannot  be  said  that  the  goods  are  exempt  from  tax
generally for the exemption may vary from unit  to  unit  and  would  depend
upon date of commencement of production of each unit.   Reference  was  made
to  earlier  decision  in  Indian  Aluminium  Cables  Limited  v.  State  of
Haryana[8], wherein it has been held that exemption from tax when  conferred
by conditions or in certain circumstances, there was no exemption  from  tax
generally.
26.   At this juncture, we are required to  understand  the  effect  of  the
principles spelt out in above decisions especially in  K.N.  Kandaswami  and
Others (supra) on the facts of the present case.  There is no doubt  that  a
distinction has to be drawn between exempted  goods,  which  means  complete
exemption for the specified goods, and when the  goods  are  taxable  goods,
but a transaction or a person is granted  exemption.   When  the  goods  are
exempt, there would be no taxable transactions or  exemption  to  a  taxable
person.  In other cases, goods might be  taxable,  but  exemption  could  be
given  in  respect  of  a  taxable  event,  i.e.,  exemption  to   specified
transactions from liability of tax or exemption to a taxable person,  though
the goods are taxable.  Such exemptions operate in circumscribed  boundaries
and not as expansive as in the  case  of  taxable  goods.   Exemptions  with
reference to taxable events or taxable persons would not  exempt  the  goods
as such, for a  subsequent  transaction  or  when  the  goods  are  sold  or
purchased by a non-specified  person,  the  subsequent  transaction  or  the
taxable person would be liable to pay tax.  It is, in this context,  it  has
been  highlighted  by  the  respondent  and,  in  our  opinion,   absolutely
correctly that Section 4 of the Act provides for levy of tax in a  situation
where the goods,  which  were  not  exempted  but  could  otherwise  not  be
subjected to tax on account of  exemption  granted  to  a  person  or  to  a
transaction.  The  goods  remain  taxable  goods  through  exemption  stands
granted to a particular individual or a specified transaction.   That  being
so, all subsequent transactions in those goods, which are  not  specifically
exempt and not undertaken by  an  exempted  person  could  be  subjected  to
taxation.  Therefore, the appellant though exempted  from  payment  of  tax,
subsequent transactions of sale of asbestos cement sheets would be  taxable.
The transaction of sale by the manufacturer/dealer covered by the  exemption
notifications issued under Section 8(3) of the Act would be protected or  an
exempted transaction, but the  goods  not  being  exempted  goods  would  be
taxable and could be taxed on the happening of a taxable or charging  event.
 It is simply because the goods are not exempt from tax or  exempted  goods,
but are taxable.  As a logical corollary it follows  that  the  Value  Added
Tax would have to be paid on the taxable goods in a  subsequent  transaction
by the purchasing dealer.
27.   As a sequitur, we are obliged to observe that  if  the  contention  of
the appellant is to be accepted, the respondent though covered by  exemption
notification under Section 8(3) of  the  Act  could  be  at  a  disadvantage
because finally when the subsequent sale is made by  a  non-exempted  dealer
or tax stands paid on the non-exempted transfer, the goods,  i.e.,  asbestos
cement sheet, would suffer the tax on the entire sale  consideration.   This
would place an exempted manufacturer-dealer at  a  disadvantageous  position
and make his products uncompetitive inspite of the  exemption  notifications
under Section 8(3) of the Act.
28.   In the context of the issue in question, the respondents have  rightly
highlighted that where the appellant wanted to restrict the benefit  of  ITC
when a particular dealer or transaction was exempted, it was  so  stipulated
in the exemption notification issued under Sections 8(3)  and  8(4)  of  the
Act.  Such  notifications  admittedly  do  exist  and  were  issued  by  the
appellant.  They are also right in drawing  support  from  the  note  sheets
relating  to  Finance  Bill  2007  as  also  the  communications  issued  by
Commissioner of Commercial Taxes.  The note sheets and the communication  of
the Commissioner draw a clear distinction between exemptions when the  goods
were not taxable as they do fall  under  the  First  Schedule  and  when  an
exemption was granted under the Second Schedule, which relates to  specified
transaction of sale or exempted dealers even when  the  goods  were  taxable
goods.  In latter cases, subsequent dealers undertaking sale of goods  would
be liable to pay tax on sale of such products.  There can be  no  shadow  of
doubt that subsequent dealers undertaking sale  of  goods  manufactured  and
sold by the respondent company would be liable to pay tax on such products.
29.   In view of the aforesaid premised reasons, we do not  find  any  merit
in these appeals and accordingly they stand dismissed.  There  shall  be  no
order as to costs.



                                             .............................J.
                                                               [Dipak Misra]



                                             ..........................., J.
                                                          [Prafulla C. Pant]
New Delhi
November 24, 2015
-----------------------
[1]    (2006) 147 STC 405
[2]    23 Tax-world 285
[3]    (1970) 2 SCC 192
[4]    (1975) 4 SCC 745
[5]     (1969) 1 SCC 492
[6]     (1972) 30 STC 537 (Ker)
[7]    (1995) 1 SCC 58
[8]    (1976) 4 SCC 27

-----------------------
|“60A.   |Asbestos cement     |Subject to the condition|
|        |sheets and bricks   |of entry in Registration|
|        |having contents of  |Certificate of the      |
|        |fly ash 25% or more |selling dealer.”        |
|        |by weight.          |                        |





-----------------------
28

first object of the three charities mentioned in the Will, is of private Trust and the rest are of public Trust and therefore, the respondent no.1 and 2 therein, have power under Section 64 of the Tamil Nadu Hindu Religious and Charitable Endowment Act, 1959, to frame a scheme, in so far as, the public Trust is concerned.=Supply of food on Chitra Pournami day every year has to be done when God Kallalagar is taken in procession through the Vaigai river on way to Vandiur, is the second charity mentioned in the Will. It is necessary to refer at this stage to some of the relevant provisions of the Act. “Religious institution” has been defined in Section 6(18) as meaning a math, temple or specific endowment. “Specific endowment” in Section 6(19) reads thus: “any property or money endowed for the performance of any specific service or charity in a math or temple or for the performance of any other religious charity but does not include an inam of the nature described in Explanation (1) to Clause (17)”. “Religious charity” is defined in Section 6(16) as meaning a public charity associated with a Hindu festival or observance of a religious character, whether it be connected with a math or temple or not. “Religious endowment” or “endowment” has been defined in Section 6(17) to mean all property belonging to or given or endowed for the support of maths or temples, or given or endowed for the performance of any service or charity of a public nature connected therewith or of any other religious charity, and includes the institution concerned and also the premises thereof but does not include gifts or property made as personal gifts to the Archaka, Service holder or other employee of a religious institution.=The charities of offering Neivedyam to Swami during Punguni Uthiaram festival and the feeding by way of Pundhi Bojanam on the occasion of God Kallalagar passing through Vaigai river to Vandiyur on Chitra Pournami day are religious charities and constitute a service to the Deity in the temple and in our view, the High Court is right in concluding that the framing of a scheme in respect of these matters is within the ambit of powers vested under Section 64 of the Act.

                                 REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL NO. 2401 OF 2003


K.S. Soundararajan and Ors.       ..         Appellants

                                   versus

Commissioner of H.R. & C.E.
and Ors.                                ..         Respondents




                               J U D G M E N T



C. NAGAPPAN, J.



1.    This appeal  is  preferred  against  the  judgment  and  decree  dated
13.12.2000 passed by the High Court  of  Judicature  at  Madras  in  Letters
Patent Appeal No.183 of 1994, wherein  the  Division  Bench  held  that  the
first object of the three charities mentioned in the  Will,  is  of  private
Trust and the rest are of public Trust and therefore,  the  respondent  no.1
and 2 therein,  have  power  under  Section  64  of  the  Tamil  Nadu  Hindu
Religious and Charitable Endowment Act, 1959, to frame a scheme, in  so  far
as, the public Trust is concerned.





2.    Briefly the facts are summarized as follows :  One  Sundararaja  Naidu
had no male issues, except two daughters and his brother’s son is  Kondasamy
Naidu  and  he  executed  a  registered  Will  dated  7.12.1949  bequeathing
properties mentioned in Item nos.1, 2 and 3 absolutely  in  favour  of  them
and directed Kondasamy Naidu to be in possession of Item  no.4  and  perform
the charities mentioned in the Will from out  of  the  income  of  the  said
properties and prohibited the alienation of the said item  of  land.   Later
Kondasamy Naidu alienated a portion of land in Item no.4  in  the  Will  and
claimed to have purchased  some  other  properties  from  out  of  the  sale
proceeds.





3.    Five persons claiming to belong  to  the  community  of  the  testator
filed application before the Deputy Commissioner  for  Hindu  Religious  and
Charitable Endowments under Section 64 of H.R. &  C.E.  Act  for  setting  a
scheme in respect of the charities mentioned  in  the  Will  of  Sundararaja
Naidu.  The Deputy Commissioner held that the Trust is a private  Trust  and
no scheme could be framed.  On  appeal  his  order  was  set  aside  by  the
Commissioner, who held that the  Trust  is  a  public  Trust  and  charities
required to be performed are religious charities and the  beneficiaries  are
the members of the public and a scheme could be framed and in fact  required
to be framed.  Meanwhile Kondasamy Naidu died and his legal  representatives
instituted a statutory suit for setting aside the order of the  Commissioner
referred to supra.  The trial court dismissed  the  suit  and  judgment  was
affirmed by a single Judge of the High  Court  and  in  the  Letters  Patent
Appeal preferred, the Division Bench modified the order of the  Commissioner
to the extent that the  scheme  to  be  framed  shall  be  confined  to  the
specific endowments attached to the temple,  namely,  performance  of  Pooja
and Neivedyam to Subramania Swami on the occasion of Panguni Uthiram and  by
feeding by way of Pundhi Bojanam on the occasion of God  Kallalagar  passing
through Vaigai river on the Chitra Pournami day  to  Vandiyur.   Challenging
the same the plaintiffs have preferred the present Civil Appeal.



4.    Mr.  R.  Venkataramani,  learned  senior  counsel  appearing  for  the
appellants contended that the pious acts to be  performed  under  the  Will,
have no relationship whatsoever to the Deities mentioned  and  there  is  no
charitable  activity  of  public   character  and  the  pious  acts  do  not
constitute public Trust and the High Court  misconstrued  Section  64(1)  of
the Act by misreading the Will and  by  holding  that  the  term  ‘attached’
occurring in the explanation  under  Section  64(1)  has  to  be  understood
broadly. Per contra  the  learned  counsel  appearing  for  the  respondents
contended that  the  High  Court  has  rightly  held  that  the  pious  acts
mentioned  in the Will are religious charities and the framing of scheme  in
respect of it, is within the ambit of power conferred under  Section  64  of
the Act.





5.    Provision  is made in  the  Will  for  the  performance  of  following
charities:

“1)   During Panguni festival at Thirupparankundram  every  year   according
to income supplying of food to the people of our own  caste  and  performing
poojas and neivadhiyam to Swami without fail.



2)    Also every year on  Chitra  Pournami  when  Kallalagar  entering  into
Vaigai River and going to Vandiur, supplying of food called Arasa.”





6.          The Presiding Deity  of  the  temple  at  Thirupparankundram  is
Subramaniaswami and the performance of  Neivedyam  and  Pooja  to  the  said
Swami during festival mentioned as first charity is clearly a service to  be
rendered to the Deity in the Temple.  Supply of  food  on   Chitra  Pournami
day every year has to be done when God Kallalagar  is  taken  in  procession
through the Vaigai river on way to Vandiur, is the second charity  mentioned
in the Will.  It is necessary  to  refer  at  this  stage  to  some  of  the
relevant provisions of the Act.  “Religious institution”  has  been  defined
in Section 6(18) as meaning a math, temple or specific endowment.  “Specific
endowment” in Section 6(19) reads thus: “any property or money  endowed  for
the performance of any specific service or charity in a math  or  temple  or
for the performance of any other religious charity but does not  include  an
inam  of  the  nature  described  in  Explanation  (1)  to   Clause   (17)”.
“Religious charity” is defined in Section 6(16) as meaning a public  charity
associated with a Hindu festival or observance of  a   religious  character,
whether it  be  connected  with  a  math  or  temple  or  not.    “Religious
endowment” or “endowment” has been defined in  Section  6(17)  to  mean  all
property belonging to or given or  endowed  for  the  support  of  maths  or
temples, or given or endowed for the performance of any service  or  charity
of a public nature connected therewith or of any  other  religious  charity,
and includes the institution concerned and also  the  premises  thereof  but
does not include gifts or property made as personal gifts  to  the  Archaka,
Service holder  or other employee of a religious institution.





7.    The Constitution Bench of this Court in the  decision  in  Mahant  Ram
Saroop Dasji Vs. S.P. Sahi and Ors. [1959 Supp.(2) SCR 583]  has  succinctly
stated the distinction in Hindu Law between religious endowments  which  are
public and those which are private, as under:



“To put it briefly, the essential distinction is that in a public trust  the
beneficial interest is vested  in  an  uncertain  and  fluctuating  body  of
persons, either the public at large  or  some  considerable  portion  of  it
answering a particular description; in a  private  trust  the  beneficiaries
are definite and ascertained individuals or who within  a definite time  can
be definitely ascertained.  The fact  that  the  uncertain  and  fluctuating
body of persons is a section of the public following a particular  religious
faith or is only a sect of persons of a certain religious persuasion   would
not make any difference in the  matter  and  would  not  make  the  trust  a
private trust.”





8.          This  Court  in  the  decision  in  Commissioner,  Madras  Hindu
Religious and Charitable Endowments  Vs. Narayana Ayyangar  and  Ors.  [1965
(3) SCR 168],  while  considering  the  charity  to  feed  Brahmins  on  the
occasion of Rathotsavam  festival  of  Sri  Prasanna  Venkatachalapathiswami
Temple in Gunaseelam, when feeding is not done in the  Temple  premises  but
at a separate place, held that it is a public charity by observing thus :



“On the facts found, it is clear that on the  occasion  of  the  Rathotsavam
festival of Sri Prasanna Venkatachalapathiswami shrine, pilgrims  from  many
places attend the festival  and  the  object  of  the  charity  is  to  feed
Brahmins attending the shrine on the occasion of this festival.  It  is  not
disputed that setting up a Fund for feeding Brahmins is  a  public  charity.
The primary purpose of the charity is to  feed  Brahmin  pilgrims  attending
the Rathotsavam.  This public charity has therefore a real  connection  with
the Rathotsavam which is a Hindu festival  of  a  religious  character,  and
therefore, it is a religious charity within the meaning of Section 6(13)  of
Madras Act 19 of 1951.”



The object of the second charity herein is to feed on the occasion  of   God
Kallalagar being taken  out  in   procession   on  Chitra  Pournami  day  by
entering into Vaigai river and going to Vandiyur, and  therefore,  it  is  a
religious charity and such a service should be regarded  as  one  meant  for
the Deity.    Specific endowment is  a  religious  institution  as  per  the
definition stated supra.  For the purpose of Section 64 of the Act,  as  per
explanation  provided,  the  institution  means  a  temple  or  a   specific
endowment  attached  to  a  temple.   The  expression  ‘attached’   in   the
explanation to Section 64(1) has  to  be  construed  having  regard  to  the
history of the legislation and the scheme and objects  of  the  Act  and  as
rightly held by the High Court it is required to be  understood  broadly  in
that sense  of providing for the performance of any service  or  charity  in
or connected with temple.



9.    The charities of offering Neivedyam to Swami during  Punguni  Uthiaram
festival and the feeding by way of Pundhi Bojanam on  the  occasion  of  God
Kallalagar passing through Vaigai river to Vandiyur on Chitra  Pournami  day
are religious charities and constitute a service to the Deity in the  temple
and in our view, the  High  Court     is  right  in    concluding  that  the
framing of a  scheme in respect of these matters  is  within  the  ambit  of
powers vested under Section 64 of the Act.





10.   There are no merits in the appeal  and  the  same  is  dismissed.   No
costs.


                                                                  ………………….J.
                                                                (M.Y. Eqbal)


                                                                  .…………………J.
                                                               (C. Nagappan)


New  Delhi;
November  24, 2015.

The “settled law” spoken of would refer to a CBEC circular No.268/85-CX.8 dated 29.9.1994 which deals with valuation of goods manufactured by units working under the 100% EOU scheme. The said circular refers to Rule 8 of the Customs Valuation Rules and not the Central Excise Valuation Rules. The four factors laid down in the said circular have relevance only qua goods that are cleared in the DTA and how their valuation is to be arrived at. We have already seen that the manner of valuation of such goods would not be relevant for the simple reason that what has to be determined in the facts of the present case is the valuation of the duty of excise leviable under Section 3 of the Central Excise Act on like goods produced or manufactured in India by undertakings other than 100% EOUs. The application of this circular and consequently any FOB export price would be wholly irrelevant for the purpose of this case and as has been held above, is only for arriving at the duty of excise leviable under Section 3(1) Proviso (ii) of the Central Excise Act. On the facts of the present case, it is clear that the said duty of excise arrived at based on Section 3(1) Proviso (ii) is more than the duty determinable for like goods produced or manufactured in India in other than 100% EOUs. Since the notification exempts anything that is in excess of what is determined as excise duty on such like goods, and considering that for the entire period under question the duty arrived at under Section 3(1) proviso (ii) is in excess of the duty arrived at on like goods manufactured in India by non 100% EOUs, it is clear that the whole basis of the show cause notice is indeed flawed. Further, the show cause notice is based on one solitary circumstance – the fact that goods captively consumed by the two sister units of the unit in question are not “sold”. We are afraid this approach flies in the face of the language of the notification dated 1.3.1997. The test to be applied under the said notification is whether the goods in question are “allowed to be sold” in India. The aforesaid expression is obviously different from the expression “sold” and does not require any actual sale for the notification to be attracted. In fact revenue’s case is also that even though the said notification is attracted, yet because there is no sale somehow the FOB export price of like goods alone is to be looked at. If this were to be so, not only would the object of the notification not be sub-served but even its plain language would be violated. It is clear that the said notification has been framed by the Central Government, in its wisdom, to levy only what is levied by way of excise duty on similar goods manufactured in India, on goods produced and sold by 100% EOUs in the domestic tariff area if they are produced from indigenous raw materials. If the revenue were right, logically they ought to have contended that the notification does not apply, in which event the test laid down under Section 3(1) proviso (ii) would then apply. This not being the case, we are of the view that the Tribunal’s judgment is correct and requires no interference. The appeal is, accordingly, dismissed.

                                 REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                         CIVIL APPEAL NO.951 of 2008


COMMISSIONER OF CENTRAL EXCISE    …APPELLANT

                             VERSUS

M/S NESTLE INDIA LIMITED                …RESPONDENT




                           J  U  D  G  M  E  N  T



R.F. Nariman, J.



The respondent herein is a 100% EOU engaged in the  manufacture  of  instant
tea falling under Chapter 2101.20 of schedule to the Central  Excise  Tariff
Act, 1985.  The present   appeal  is  concerned  with  clearances  of  their
product to two sister units on payment of  duty  in  terms  of  Notification
No.8/97 - CE dated 1.3.1997 and Notification No.23/2003 CE dated  31.3.2003.
 The first notification would cover the period 1.11.2000  to  30.3.2003  and
the second notification would  cover  the  period  31.3.2003  to  31.5.2005.
Inasmuch as the instant tea was manufactured wholly out  of  indigenous  raw
materials, the notifications aforesaid applied and whatever  was  in  excess
of what is chargeable by way of excise duty on the said tea is exempted.  It
is not in dispute that the said notifications applied in the  facts  of  the
instant case.



A show cause notice dated 23.9.2005 was issued  by  the  Department  stating
that ordinarily Rule 8 of the Central  Excise  Valuation  (Determination  of
Price of Excisable Goods) Rules, 2000 would apply and  that  the  tea  being
captively consumed and not sold should be valued at  115%  of  the  cost  of
production or manufacture of such goods.  However,  the  show  cause  notice
then goes on to say that as the said tea is transferred only to  two  sister
concerns and no sale is  involved,  the  assessable  value  of  instant  tea
removed to the respondent’s own units would be determined on  the  basis  of
the export price of similar goods and not 115% of the cost of production.



The order in original dated 31.5.2006 passed by the Additional  Commissioner
upheld the show cause notice and confirmed the duty  amount,  interest,  and
penalty as follows:-

                                   “ORDER

 I confirm the duty amount of  Rs.  42,86,079/-  (Rupees  Forty  two  lakhs,
eighty six thousand and seventy  nine  only)  (Centvat:  Rs.42,62,545/-  and
Education Cess Rs.23,534/-) under Section 11A  (1)  of  the  Central  Excise
Act, 1944.

I demand appropriate interest on the above amount  confirmed  under  Section
11AB(1) of the Central Excise Act, 1944.

I impose a penalty of Rs.42,86,079/- (Rupees Forty  two  lakhs,  eighty  six
thousand and seventy nine only) under Section 11A (1) of the Central  Excise
Act, 1944.

As I have imposed penalty on them under Section 11AC of Central Excise  Act,
1944, I do not  impose  a  separate  penalty  under  Rule  173Q  or  209  of
erstwhile Central Excise Rules 1944 and Rule 25 of erstwhile Central  Excise
(No2) Rules, 2001 read with Section 38A of  Central  Excise  Act,  1944  and
Rule 25 of Central Excise Rules, 2002.”



4.    The appeal by the assessee  was  also  dismissed  by  an  order  dated
26.9.2006 passed by the Commissioner  (Appeals)  upholding  the  show  cause
notice and stating that Section 3 (1) Proviso (ii)  of  the  Central  Excise
Act would apply to the facts of the case and that  being  so,  it  is  clear
that the basis for valuation had to  be  on  the  FOB  value  of  export  of
similar goods and not on the basis of cost of production  under  Rule  8  of
the Central Excise Rules.

5.    By the  impugned  judgment  dated  16.5.2007,  CESTAT  set  aside  the
judgment  of  the  Commissioner  (Appeals)  by  reasoning  that  since   the
exemption notifications would apply and since  what  has  to  be  determined
under the said notifications is excise duty  payable  in  India,  such  duty
could only be arrived at by applying Rule 8 in cases of captive  consumption
and that therefore the basis of the show cause notice and the  decisions  by
the original and appellate authorities was incorrect.   It  accordingly  set
aside the order of the Commissioner (Appeals).

6.    Shri A.K. Sanghi, argued before us that since the case was covered  by
Section 3 (1) Proviso (ii) of the Central Excise Act, the Customs Act  alone
was to be looked at and if the Customs Act was so looked at, the test as  to
value of goods would be the test of similar goods of a like value  that  are
exported.   Hence,  according  to  him,  the  original  authority  and   the
appellate authority were correct  in  applying  the  said  Section  and  the
Tribunal was wrong in ignoring  the  said  Section  and  applying  exemption
notifications to the facts of the case instead.



7.    Ms. L. Charnaya, learned counsel appearing on behalf of  the  assessee
on the other hand, supported the decision of the tribunal and read to us  in
some detail not only  the  Central  Excise  Valuation  Rules  but  also  the
notifications aforementioned.  It is her case that  the  show  cause  notice
itself was flawed in that the basis of the said  notice  is  that  since  no
sale had taken place on the facts of the present  case,  the  FOB  value  of
export of similar goods has to  be  taken  into  account.   She  laid  great
stress on the fact that in the  notification  dated  1.3.1997  the  language
used is not “sold” but “allowed to be sold” and that if this  were  kept  in
mind it is clear that  the  very  basis  of  the  show  cause  notice  being
incorrect would lead to incorrect orders that were passed  by  the  original
and first appellate authority.



8.    Having heard learned counsel for the parties we think it is  necessary
to first extract the relevant statutory  provisions  and  the  notifications
insofar as they have a bearing on the facts of the present case.



9.    Section 3(1) proviso as it stood at the  relevant  time  is  extracted
hereinbelow:-



“SECTION 3.  Duties specified in First Schedule and the Second  Schedule  to
the Central Excise Tariff Act, 1985 to be levied.



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

 In a free trade zone or a special economic zone and brought  to  any  other
place in India; or

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,
1963 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975).”



10.   Section 5A being the Section under which the two notifications in  the
present case were issued is also of some relevance and reads as follows:-

“SECTION 5A.     Power to grant exemption from duty of excise. -

(1)   If the Central Government is satisfied that it  is  necessary  in  the
public interest so to do, it may, by notification in  the  Official  Gazette
exempt generally either absolutely or subject  to  such  conditions  (to  be
fulfilled before or after removal) as may be specified in the  notification,
excisable goods of any specified description from the whole or any  part  of
the duty of excise leviable thereon :

      Provided that, unless specifically provided in such  notification,  no
exemption therein shall apply to  excisable  goods  which  are  produced  or
manufactured-

In a free trade zone or a special economic zone and  brought  to  any  other
place in India; or

By a hundred per cent export-oriented undertakings and brought to any  place
in India.”



11.   Rule 8 of the Central Excise Rules, 2000 as it stood at  the  relevant
time reads as follows:-

“RULE 8.    Where the excisable goods are not sold by the assessee  but  are
used for  consumption  by  him  or  on  his  behalf  in  the  production  or
manufacture of other articles, the value shall be one  hundred  and  fifteen
per cent of the cost of production or manufacture of such goods.”



12.   Inasmuch as a great deal turns on the two notifications  that  we  are
concerned with on the facts of the present case, it is  necessary  to  quote
in full the first of the two notifications.



“Notification:  8/97-CE dated 01-Mar-1997

Exemption to finished products, rejects and waste or  scrap  produced  in  a
100% EOU or FTZ In exercise of the powers conferred by  sub-section  (1)  of
section 5A of the  Central  Excise  Act,  1944  (1  of  1944),  the  Central
Government, being satisfied that it is necessary in the public  interest  so
to do, hereby exempts the finished products,  rejects  and  waste  or  scrap
specified in the Schedule to the Central  Excise  Tariff  Act,  1985  (5  of
1986) and produced or manufactured, in a hundred  per  cent  export-oriented
undertaking or a free trade zone wholly from the raw materials  produced  or
manufactured in India, and  allowed  to  be  sold  in  India  under  and  in
accordance with the provisions of paragraphs 102 and 114 of the  Export  and
Import Policy 1 April 1992 – 31 March 1997, from so  much  of  the  duty  of
excise leviable thereon under section 3 of the Central Excise Act,  1944  (1
of 1944), as is in excess of an amount equal to the duty of excise  leviable
under the said section 3 of the Central Excise Act, on like goods,  produced
or manufactured in India other than in a hundred  per  cent  export-oriented
undertaking or a free trade zone, if sold in India.”



13.   To similar effect for the subsequent period is the notification  No.23
of 2003 dated 31.3.2003.





14.   The first thing to be noticed is  that  Section  5A  under  which  the
exemption notifications are issued states in the proviso that  no  exemption
shall apply to excisable goods which are produced or manufactured by a  100%
Export Oriented Undertaking  and  brought  to  any  place  in  India  unless
specifically provided in such exemption notification.  When we turn  to  the
notification dated 1.3.1997, we find that there is  specific  provision  for
exemption of certain goods produced in a 100% EOU wholly from raw  materials
produced or manufactured in India.  It is not disputed by the  revenue  that
the instant tea manufactured by the respondent  would  be  covered  being  a
finished product specified in the schedule  to  the  Central  Excise  Tariff
Act.  Further, the notification goes on to state that the  said  tea  should
be “allowed to be sold” in India  in  accordance  with  the  relevant   EXIM
policy.  It further goes on to state that the exemption from payment of  the
duty of excise that is leviable  thereunder  under  Section  3  is  what  is
payable in  excess of an amount equal to the  duty  of  excise  leviable  on
like goods produced or manufactured in  India  produced  in  an  undertaking
other than in a 100% Export Oriented Undertaking, if sold in India.





15.   It is clear that the object of the notification is that so far as  the
product in question is concerned, so long as it is manufactured  by  a  100%
EOU out of wholly indigenous raw materials and so long as it is  allowed  to
be sold in India, the duty payable should only be the duty  of  excise  that
is payable on like goods manufactured or  produced  and  sold  in  India  by
undertakings which are not 100% EOUs.





16.   There is no doubt whatsoever that the duty of  excise  leviable  under
Section 3 would be on the basis of the  value  of  like  goods  produced  or
manufactured  outside  India  as  determinable  in   accordance   with   the
provisions of the Customs Act,  1962  and  the  Customs  Tariff  act,  1975.
However, the notification states that duty  calculated  on  the  said  basis
would only be payable to the extent of like goods manufactured in  India  by
persons other than 100% EOUs.  This being the case, it is clear that in  the
absence of actual sales in the wholesale market, when  goods  are  captively
consumed and not sold, Rule 8 of the Central Excise Rules would have  to  be
followed to determine what would be the amount equal to the duty  of  excise
leviable on like goods.  This being so, it is  clear  that  learned  counsel
for the assessee is right in her contention  that  the  basis  of  the  show
cause notice is itself flawed. The show cause notice in  the  present  case,
as has been  noticed  above,  refers  to  Rule  8  of  the   Central  Excise
Valuation (Determination of Price of Excisable Goods) Rules, 2000, but  then
goes on to state that:



“It is settled law that the value shall be determined keeping  in  view  the
following factors:

sale price of goods under assessment

sale price of other consignments of identical/ similar goods

export price of identical/similar goods

nature of sale transactions etc.”







The “settled law” spoken of would refer to a  CBEC  circular  No.268/85-CX.8
dated 29.9.1994 which deals with valuation of goods  manufactured  by  units
working under the 100% EOU scheme.  The said circular refers to  Rule  8  of
the Customs Valuation Rules and not  the  Central  Excise  Valuation  Rules.
The four factors laid down in the said  circular  have  relevance  only  qua
goods that are cleared in the DTA and how their valuation is to  be  arrived
at.  We have already seen that the manner of valuation of such  goods  would
not be relevant for the simple reason that what has to be determined in  the
facts of the present case is the valuation of the duty  of  excise  leviable
under Section 3 of  the  Central  Excise  Act  on  like  goods  produced  or
manufactured  in  India  by  undertakings  other  than   100%   EOUs.    The
application of this circular and consequently any FOB export price would  be
wholly irrelevant for the purpose of this case and as has been  held  above,
is only for arriving at the duty  of  excise  leviable  under  Section  3(1)
Proviso (ii) of the Central Excise Act.  On the facts of the  present  case,
it is clear that the said duty of excise arrived at based  on  Section  3(1)
Proviso (ii) is more than the duty determinable for like goods  produced  or
manufactured in India in other  than  100%  EOUs.   Since  the  notification
exempts anything that is in excess of what is determined as excise  duty  on
such like goods, and considering that for the entire period  under  question
the duty arrived at under Section 3(1) proviso (ii)  is  in  excess  of  the
duty arrived at on like goods manufactured in India by non 100% EOUs, it  is
clear that the whole basis of  the  show  cause  notice  is  indeed  flawed.
Further, the show cause notice is based on one solitary circumstance  –  the
fact that goods captively consumed by the two sister units of  the  unit  in
question are not “sold”.  We are afraid this approach flies in the  face  of
the language of the notification dated 1.3.1997.  The  test  to  be  applied
under the said notification is whether the goods in  question  are  “allowed
to be sold” in India. The aforesaid expression is obviously  different  from
the expression  “sold”  and  does  not  require  any  actual  sale  for  the
notification to be attracted.  In fact revenue’s  case  is  also  that  even
though the said notification is attracted, yet  because  there  is  no  sale
somehow the FOB export price of like goods alone is  to  be  looked  at.  If
this were to be so, not only would the object of  the  notification  not  be
sub-served but even its plain language would be violated.  It is clear  that
the said notification has been framed by  the  Central  Government,  in  its
wisdom, to levy only what is levied by way of excise duty on  similar  goods
manufactured in India, on goods produced  and  sold  by  100%  EOUs  in  the
domestic tariff area if they are produced from indigenous raw materials.  If
the revenue were right, logically they ought  to  have  contended  that  the
notification does not apply,  in  which  event  the  test  laid  down  under
Section 3(1) proviso (ii) would then apply.  This not  being  the  case,  we
are of the view that the Tribunal’s judgment  is  correct  and  requires  no
interference.  The appeal is, accordingly, dismissed.





                                        ……………………J.

                                        (A.K. Sikri)





                                        ……………………J.

New Delhi;                              (R.F. Nariman)

November 24, 2015.