V. RAMASWAMI, J.
1. Under Section 3 of the Central Excises and Salt Act, 1944 excise duty is payable on all excisable goods produced or manufactured in India at the rates set forth in the Schedule to the Central Excise Tariff Act. Item 26-A of the Schedule to the Tariff Act reads as follows:
1. Under Section 3 of the Central Excises and Salt Act, 1944 excise duty is payable on all excisable goods produced or manufactured in India at the rates set forth in the Schedule to the Central Excise Tariff Act. Item 26-A of the Schedule to the Tariff Act reads as follows:
"26-A. Copper and Copper Alloys containing not less than Fifty per cent by Weight of Copper
(1) In any crude form including ingots, bars, blocks, slabs billets, shots and pellets. Rs. 1500 per metric tonne
(2) Manufactures, the following namely, plates, sheets, circles, strips and foils in any form or size. Rs. 2000 per metric tonne
(3) Pipes and tubes 10 per cent ad valorem."
As per this entry both copper and copper alloys in any crude form as also pipes and tubes of copper and copper alloys are excisable. By a Notification dated December 28, 1963, the government granted certain exemption from excise duty equivalent to the duty that was paid on the copper and tubes of copper and copper alloys. Since an interpretation of this notification arises for consideration in this case that may usefully be quoted here:
"GSR 1957. In excise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts pipes and tubes of copper and copper alloys, falling under sub-item (3) of Item No. 26-A of the First Schedule to Central Excises and Salt Act, 1944 (1 of 1944), in the manufacture of which duty-paid copper or copper alloys in any crude form or manufactures thereof are uses, form so much of the duty of excise leviable thereon, as is equivalent to the duty already paid under sub-item (1) and/or (2) of the said item of copper or copper alloys in any crude form or manufactures thereof."
2. While it is the case of the appellant that it was entitled to exemption from excise duty under this notification on the quantity of the raw material used by it in the manufacture of pipes and tubes including the manufacturing loss the department contended that the exemption from excise duty was available only on the quantity of copper contents available in the weight of finished products and not on the entire quantity of copper used in the manufacture of pipes and tubes. Though there was some dispute at an initial stage as to whether in the manufacture of pipes and tubes any quantity of raw material is lost or as a result of the said loss during the process of manufacture the weight of the final finished product did not respect the weight of the metal used as raw material in view of the fact that the appellate authority, namely, the Collector of Central Excise has found that there was a manufacturing loss and that the claim of the appellant that the lost quantity was 6.97 per cent appears to be genuine, we proceed on the basis that there was certain manufacturing loss. The High Court was of the view that the notification granted exemption
"only on pipes and tubes, which means that the exemption has to be calculated on the basis of the weight of the raw material actually used for the purpose of manufacture of pipes and tubes."
3. Mr. Harish Salve, learned counsel for the appellant contended that the notification intended to and on plain reading it did, exempt copper and copper alloys used in the manufacture of pipes and tubes of copper and copper alloys and that the intention was to give relief to the extent of the duty already paid on the copper or copper alloys in its crude form which were used in the manufacture. If this is kept in mind according to the learned counsel the entire material that was used for the manufacture of pipes and tubes including the manufacturing loss will have to be taken into account and to the extent of the duty paid thereon the relief will have to be given. On the other hand Mr. Gouri Shanker Murthy, the learned senior counsel appearing for the Revenue strenuously contended that rebate of duty of what we may call manufacturing loss is non envisaged at all under the notification and that only that quantity which actually forms part of the pipes or tubes alone has to be taken into account for the purpose of rebate on duty.
4. We have considered the rival contentions of the parties. It is seen from the facts as appear from the pleadings and the others that due to cutting the copper wire, melting in electric furnaces and re-melting in the process of manufacture a portion of the copper and copper alloys in its crude form which was used as the raw material is permanently lost. We are not concerned as to the exact quantity of loss in this case but with a question of interpretation as to whether the duty referable to that portion which is lost also should get rebate while assessing for excise duty on the pipes and tubes of copper and copper alloys. The emphasis of the learned counsel for the Revenue was that the levy of excise duty was on pipes and tubes and the rebate related to that of copper and copper alloys content thereof and, therefore, only that quantity that was found forming the pipe or tube could get relief and not the entire quantity which was put in the process of manufacture. This argument does not give full weight to the words "in the manufacture of which duty-paid copper or copper alloys in any crude form are used, from so much of duty of excise leviable thereon as is equivalent to the duty already paid under sub-item (1) and/or (2) of the said item of copper and copper alloys in any crude form or manufacture thereof". Duty-paid copper and copper alloys in crude form are used in the manufacture of pipes and tubes. Rebate is to be equivalent to the duty already on copper and copper alloys in its crude form, that is to say on the input. The idea seems to be that to the extent of the duty paid on the raw material used exemption has to be given and that has no reference to what ultimately formed part of the finished product. It is the duty paid on the input material that is relevant and not the duty referable to the ultimate component of the final product. So far as the manufacture is concerned he has used copper and tubes. The manufacturing loss forms part of the raw material "used" in the manufacture though not reflected in the final product. The relief, as we understand the notification, that has to be given to the manufacturer was in respect of the duty already paid on the raw material used in the manufacture of the final product. That is the relief has to be given to the extent of the duty paid on the input material and not with reference to the quantity which ultimately forms part of the final product. This is also the ratio of the judgment in Swadeshi Polytex Ltd. v. Collector of Central Excise. ( 1990 (2) SCC 358 [LQ/SC/1989/593] : 1990 SCC(Tax) 292) So understood we have no doubt that even the manufacturing loss will have to be taken into account in determining the relief to be provided under the said notification. We are also unable to understand the argument of the Revenue based on the difficulty in arriving at the manufacturing loss. If there is any difficulty it is for the manufacturer who claims the relief to prove the loss. There are also scientific methods of arriving at the loss.
5. Accordingly, we allow the appeal, set aside the order of the High Court and the Revenue authorities and direct the respondents to give the benefit of exemption of duty in respect of loss in the process of manufacture. However there will be no order as to costs.
6. Appeal allowed.
4. We have considered the rival contentions of the parties. It is seen from the facts as appear from the pleadings and the others that due to cutting the copper wire, melting in electric furnaces and re-melting in the process of manufacture a portion of the copper and copper alloys in its crude form which was used as the raw material is permanently lost. We are not concerned as to the exact quantity of loss in this case but with a question of interpretation as to whether the duty referable to that portion which is lost also should get rebate while assessing for excise duty on the pipes and tubes of copper and copper alloys. The emphasis of the learned counsel for the Revenue was that the levy of excise duty was on pipes and tubes and the rebate related to that of copper and copper alloys content thereof and, therefore, only that quantity that was found forming the pipe or tube could get relief and not the entire quantity which was put in the process of manufacture. This argument does not give full weight to the words "in the manufacture of which duty-paid copper or copper alloys in any crude form are used, from so much of duty of excise leviable thereon as is equivalent to the duty already paid under sub-item (1) and/or (2) of the said item of copper and copper alloys in any crude form or manufacture thereof". Duty-paid copper and copper alloys in crude form are used in the manufacture of pipes and tubes. Rebate is to be equivalent to the duty already on copper and copper alloys in its crude form, that is to say on the input. The idea seems to be that to the extent of the duty paid on the raw material used exemption has to be given and that has no reference to what ultimately formed part of the finished product. It is the duty paid on the input material that is relevant and not the duty referable to the ultimate component of the final product. So far as the manufacture is concerned he has used copper and tubes. The manufacturing loss forms part of the raw material "used" in the manufacture though not reflected in the final product. The relief, as we understand the notification, that has to be given to the manufacturer was in respect of the duty already paid on the raw material used in the manufacture of the final product. That is the relief has to be given to the extent of the duty paid on the input material and not with reference to the quantity which ultimately forms part of the final product. This is also the ratio of the judgment in Swadeshi Polytex Ltd. v. Collector of Central Excise. ( 1990 (2) SCC 358 [LQ/SC/1989/593] : 1990 SCC(Tax) 292) So understood we have no doubt that even the manufacturing loss will have to be taken into account in determining the relief to be provided under the said notification. We are also unable to understand the argument of the Revenue based on the difficulty in arriving at the manufacturing loss. If there is any difficulty it is for the manufacturer who claims the relief to prove the loss. There are also scientific methods of arriving at the loss.
5. Accordingly, we allow the appeal, set aside the order of the High Court and the Revenue authorities and direct the respondents to give the benefit of exemption of duty in respect of loss in the process of manufacture. However there will be no order as to costs.
6. Appeal allowed.
