MULTIMETALS LTD.versusASSISTANT COLLECTOR, CEN1RAL EXCISE, KOTA AND ORS.

A                             MULTIMETALS LTD.
                                          v.
     ASSISTANT COLLECTOR, CEN1RAL EXCISE, KOTA AND ORS.

                              DECEMBER 10, 1991

B           [K. JAGANNATHA SHETIY, V, RAMASWAMI AND
                           YOGESHWAR DAYAL, JJ.]

          Central Excises and Salt Act, 1944/Central Excise Rules, 1944, s.3, First
    Schedule-Item 26A/r.8(1) & Notification dated 28.12.1963-Copper, copper
    alloys and copper pipes .and tubes-Excise duty-Exemption on copper pipes
C   and tubes in reference to duty paid copper and copper alloys used in the
    manufacture-Extent of-Whether includes "manufacturing loss" also.

        Under s.3 of the Central Excises and Salt Act, 1944, excise duty is
  payable on copper and copper alloys in any crude form as also pipes and
  tubes made thereof, at the rates set forth in Item 26A of the First Schedule
D to the Act. The Central Government Notification dated 28.12.1963 ex-
  empted from duty, pipes and tubes of copper and copper alloys to the
  extent equivalent to the duty already paid on the copper and copper alloys
  used in crude form in their manufacture.
                  '
           The appellant-Company claimed exemption on the quantity of the
E   raw material used by it in the manufacture of pipes and tubes including
    the manufacturing loss contending that the Notification intended to give
    relief to the extent of the duty already paid on the copper and copper alloys
    in its crude form used in the manufacture. The Department was of the
    view that the exemption from excise duty was available on the weight of
F   rmished products and .not on the entire quantity of copper used in the
    manufacture of pipes and tubes.

        The Appellate· Aut~~rity-Collector of Central Excise-found that
  there was a manufacturing loss. However, the High Court held that the
  exemption was to be calcidated on the basis of the weight of the raw
G material actually used for the purpose of manufacture of pipes and tubes.
  Aggrieved, the appellant-manufacturer filed the appeal before this Court.

        On the questi~n: whether the duty referable to the portion of the
  copper and copper alloys used in crude form which is loSt in the manufac-
                               ~                                          .
  turing process also should'get rebate while assessing for excise duty on the
H pipes and tubes of copper and copper alloys,

                                        .292
                  MULTIMET ALS v. ASTT. COLLECTOR                         293

      Dismissing the appeal, this-Court,                                         A

     HELD: 1. Even the manufacturing loss will have to be taken into
account in determining the relief to be provided under the Notification
dated 28.12.1963. [p. 296 EF]

      The 'manufacturing loss' forms part of the raw material "used" in          B
the manufacture though not reflected in the final product. By the Notifi-
cation the relief to be given to the manufacturer was in respect of the duty
~lready paid on the raw material used in the manufacture of the final
product. 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. [p. 296 D-E]                                    C

      Mis Swadeshi Polytex Ltd. v. Collector of Central Excise, [1990] 2 SCC
358, relied on.

       2. 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        D
alloys in its crude form which was used as the raw material is permanently
lost. [p. 295G]                                ·

      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 paid on copper and copper alloys in its crude form, that is to say       E
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 found part of the finished product. [p. 296 BC]

      It is the duty paid on the input material that is relevant and not the
                                                                                 F
duty referable to the ultimate component of the final product. [p. 296 CD]

     3. It is for the manufacturer who claims the relief to prove the loss.
There are also scientific methods of arriving at the loss. [p. 296 FG]

      CIVIL APPELLA1E JURISDICTION: Civil Appeal No. 4918of1985.                 G
     From the Judgment and Order dated 27.2.1981 of the Rajasthan High
Court in D.B. Civil Writ Petition No. 1156 of 1971.

     Harish N. Salve, S.K. Jain, Vibhu Bakhru and S.D. Sharma for the
Appellant.                                                                       H
    294                SUPREME COURT REPORTS                    ' [1991]" SUPP. 3 S. C.R.

A        M. Gaurishankar Murthy, A.K. Srivastava, P.Parmeshwaran(NP) and
    C.V. Subba Rao(NP) for the ,Respondents.

           The Judgment of the Court was delivered by

          V. RAMASWAMI, J. Under section 3 of the Central Excises and Salt
B   Act, 1944 excise duty is payable on all excisable goods producted or manufac-
    tured in India at the rates set f<,>rth in the Schedule to the Central Excise Tariff
    Act Item 26A of the Schedule to the Tariff Act reads as follows:

                 ''26A. COPPER AND COPPER ALLOYS CONTAINING NOT
                 LESS THAN FIFfY PER CENT BY WEIGHT OR COPPER.
c
                 (1)    In any crude form including                   Rs. 1,500 per
                        ingots, bars blocks, slabs, billets,          metric tonne.
                        shote and pellets.

                 (2)    Manufactures, the following                   Rs. 2,000 per
D                       namely, plates, sheets, circles,              metric tonne
                        strips and foils in any form or size.

                 (3)    Pipes and tubes                               10 per cent
                                                                      ad valorem."
E         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 28th December, 1963, the Government granted certain exemption from
    excise duty equivalent to the duty that was paid on the copper and copper alloys
    in any crude form in respect of pipes and tubes of copper and copper alloys.
F _ Since an inte~retation of this Notification arises for consideration in this case
    that may use1ully be quoted here.

                 "GSR. In exercise of the powers conferred by sub-rule (i) of Rule
                 8 of the Central Excise Rules, 1944, the Central Government
                 hereby exempts pipes and tubes of copper and copper alloys,
G                falling under sub-item (3) of item No. 26A of the First Schedule to
                 Central Excises and Salt Act, 1944 (1of1944) in the manufacture
                 of which duty paid copper or copper alloy in any crude form or
                 manufacture thereof, are used, from so much of th_e 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
H                in any crude form or manufacture thereof."
            MULTIMETALS v. ASTT. COLLECTOR [RAMASWAMI. l]                      295

        While it is the case of the appellant that it was entitled tG exemption from   A
 excise duty under this Notification on the quantity of the raw materialused 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         B
 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 lhe final
 finished product did not represent 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 Joss and that the claim
 of the appeUant that the Jost quantity was 6.97% appears to be genuine, we            C
 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 mw material actually used for the purpose of manufacture _of
 pipes and tubes."
                                                                                       D
       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 '1Sed in the manu-
  facture. If this is kept in mind according to the leame9 counsel the entire          E
_ material that was used for the manufacture of pipes and tubes including the
  manufacturing loss will have to be taken into accoum and to the exterit 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 not envisaged at all under the Notification and that only that quantity       F
  actually forms part of the pipes or tubes alone has to be taken into account for
  the purpose of rebate on duty.

       We have considered the rival contentions of the parties. It is seen from
 the facts as appear from the pleadings and the orders that due to cutting the         G
 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 cast 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           H
     296             SUPREME COURT REPORTS                   [1991] SUPP. 3 S. C. R.

A 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
B 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
-cof pipes and tubes. Rebate is to be equivalent to the duty already paid 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 found part of the
  finished product It is the duty paid on the input material that is relevant and
D not the duty referable to the ultimate component of the final product So far
  as the manufacturer is concerned he has used copper and copper alloys of a
  particular quantity in the manufacture of pipes 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
E 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 Mis Swadeshi Polytex Ltd. v. Collector of
F Central Excise, [1990) 2 SCC 358. 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 manufacture who
G claims the relief to prove the loss. There are also scientific methods of arriv-
  ing at the loss.

           Accordingly, we allow the appeal set aside the order of the High Court

H
          MULTIMETALS v. ASTI. COLLECTOR [RAMASWAMI. J.]                 297

and the Revenue Authorities and direct the respondents to give the benefit of   A
exemption of duty in respect of loss in the~ of manufacture. However,
there will be no order as to costs.


R.P.                                                      Appeal dismissed.