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1. Uttaranchal HC in Bajaj Auto Ltd. v. Union of India [2010]

Facts : prospective effect of notification no. 1/2008 amending Notification No. 50/2003

Observations : 5. In order to provide a package of incentives to enable environment of

industrial development, improve availability of capital and increase market access to provide
a fillip to the private investment for the State of Uttarakhand and Himachal Pradesh, the
respondent no. 1 by Memorandum dated 7th January, 2003 published its Policy document. As
per the Policy document (annexure no. 2) the major fiscal incentives promised to new
industrial units and to existing units on their substantial expansion were 100%
outright excise duty exemption for a period of ten years from the date of commencement of
commercial production and 100% Income Tax exemption for initial period of five years and
thereafter 30% for companies and 25% for other than companies for a further period of five
years from the date of commencement of commercial production.

6. The respondent no. 2, in exercise of power conferred under Section 5A of the Act issued
a Notification No. 50/2003-CE dated 10.06.2003 thereby granting full exemption from duty
of excise levied under Schedule I and Schedule II of the Tariff Act, in respect of specified
excisable goods, subject to, amongst other, the fulfillment of condition that the excisable
goods are manufactured in a new industrial undertaking set up or substantial expansion of an
existing unit, located in specified area(s) of the State of Uttarakhand or Himachal Pradesh,
during the period of June 2003 upto 31st March, 2007. By the amended Notificationno.
38/2006 dated 2nd August, 2006 (annexure no. 3) the aforesaid time limit for setting
up/substantial expansion of units and start of commercial production for being eligible
for excise duty exemption, was extended from 31st March, 2007 to 31st March, 2010. the
respondents by virtue of amended Notification No. 1/2008-CE dated 18.01.2008
(annexure no. 15) inserted a new para-4 in the preceding Notification No. 50/2003-CE dated
10.06.2003 whereby it was sought to exclude from the scope of exemption certain peripheral
activities from the scope of the benefit of exemption

Held : in Kusumam Hotels v. Kerala State Electricity Board, reported in 2008 (13) SCC-
123 wherein the Apex Court has interalia unequivocal terms has confirmed that “it is now a
well settled principle of law that doctrine of promissory estoppel applies to the State”. I
agree with the argument of learned Senior Counsel for the petitioner that the Kasinka's
judgment (supra) is not sustainable any longer. The Hon'ble Supreme Court has time and
again distinguished the judgment given in the matter of Kasinka Trading Company (supra).
The Apex Court in U.P Power Corporation Ltd. v. Sant Steels and Alloys reported in 2007
(14) Scale-36 has held that:-

“In this background, in view of the various decisions notices above, it will appear that the
Court's approach in the matter of invoking the principle of promissory estoppel depends on
the facts of each case. But the general principle that emerges is that once a representation
has been made by one party and the other party acts on that representation and makes
investment and thereafter the other party resiles, such act cannot stated to be fair and
reasonable. When the State Government makes a representation and invites the
entrepreneurs by showing various benefits for encouraging to make investment by way of
industrial development of backward areas or the hill areas, and thereafter the
entrepreneurs on the representations so made bonafidely make investment and thereafter
if the State Government resiles from such benefits, then it certainly is an act of unfairness
and arbitrariness.”

The  amending NotificationNo. 1/2008-CE dated 18.01.2008 is held to be prospective as it

will affect those industrial units, involved in the manufacturing process of packing,
repacking, labelling, re-labelling etc. referred to therein, which came into operation on and
after the date of its issue. The petitioner unit which was established prior to this Notification,
is not covered by this Notification and same is entitled to the benefit of
earlier Notification dated 10.06.2003

2. In HC of Uttrakhand at nainital [CCE v. M/s. Tirupati LPG Industries Ltd.] [2017]

A. Applicability of Notification No. 50/2003

3. It is necessary to have a look at the Notifications. On

10.06.2003,  Notification   No . 50/2003-CE came to be issued. It reads as follows:

“In exercise of the powers conferred by sub-section (1) of section 5A of the

Central  Excise  Act, 1944 (1 of 1944) read with sub-section (3) of Section 3 of the
Additional Duties of  Excise  (Goods of Special Importance) Act, 1957 (58 of
1957) and sub-section (3) of section 3 of the Additional Duties of  Excise  (Textiles
and Textile Articles) Act, 1978 (40 of 1978), the Central Government, being
satisfied that it is necessary in the public interest so to do, hereby exempts the
goods specified in the First Schedule and the Second Schedule to the
Central  Excise  Tariff Act, 1985 (5 of 1986), other than the goods specified in
Annexure-I appended hereto, and cleared from a unit located in the Industrial
Growth Centre or Industrial Infrastructure Development Centre or Export
Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial
Estate or Scheme Area, as the case may be, specified in Annexure-II appended
hereto, from the whole of the duty of  excise  or additional duty of  excise , as the
case may be, leviable thereon under any of the said Acts.
Provided that the exemption contained in this  notification  shall apply subject to
the following conditions, namely:

(i) The manufacturer who intends to avail of the exemption under

this  notification  shall exercise his option in writing before effecting the first
clearance and such option shall be effective from the date of exercise of the
option and shall not be withdrawn during the remaining part of the financial year;

(ii) The manufacturer shall, while exercising the option under condition (i), inform
in writing to the jurisdictional Deputy Commissioner of Central  Excise  or
Assistant Commissioner of Central  Excise , as the case may be, with a copy to
the Superintendent of Central  Excise giving the following particulars, namely:—

(a) name and address of the manufacturer;

(b) location/locations of factory/factories;

(c) description of inputs used in manufacture of specified goods;

(d) description of the specified goods produced;

(e) date on which option under this  notification  has been exercised;

(iii) The manufacturer may, for the current financial year, submit his option in
writing on or before the 30th day of November, 2003.
2. The exemption contained in this  notification  shall apply only to the following
kinds of units, namely:

(a) new industrial units which have commenced their commercial production on
or after the 7th day of January, 2003;

(b) industrial units existing before the 7th day of January, 2003, but which have
undertaken substantial expansion by way of increase in installed capacity by not
less than twenty five per cent, on or after the 7th day of January, 2003.
 3. The exemption contained in this  notification  shall apply to any of the said units
for a period not exceeding ten years from the date of publication of
this  notification  in the Official Gazette or from the date of commencement of
commercial production, whichever is later.”
4. Actually, in  Notification   No . 50/2003-CE dated 10.06.2003, the proviso was
not there. The proviso was inserted by  Notification   No . 76/2003-CE dated
05.11.2003

6. Still later, by Notification No. 27/2004-CE dated 09.07.2004, clause (2) was

substituted.

7. There is a further amendment vide Notification No. 27/2005-CE dated

19.05.2005 By the said amendment, a new paragraph 2 was substituted. It reads
as follows:

“2. The exemption contained in this notification shall apply only to the following kinds
of units, namely:

(a) new industrial units set up in areas mentioned in Annexure-II and Annexure-
III, which have commenced commercial production on or after the 7th day of
January, 2003, but not later than the 31st day of March, 2007;

(b) industrial units existing before the 7th day of January, 2003 in areas mentioned
in Annexure-II, but which have undertaken substantial expansion by way of
increase in installed capacity by not less than twenty-five per cent, on or after the
7th day of January, 2003, but have commenced commercial production from such
expanded capacity, not later than the 31st day of March, 2007.”

9. Lastly, by Notification issued in the year 2006, the words “not later than the
31st day of March, 2007”, occurring in both clauses (a) & (b) of paragraph 2, stand
substituted by the words “not later than the 31st day of March, 2010”.

11. In regard … “8.3 The word “new”, as per Chambers' 21sth Century Dictionary
means - “recently made, brought, built, ----, etc. recently discovered, never having
existed, before, just invented, - recently arrived, installed” and as per Little Oxford
Dictionary, 7th Edition, the word “new” means - “of recent origin or arrival; made,
discovered or acquired or experienced for the first time, unfamiliar -” In our view, in
the context of this notification, the work ‘new’ must be construed as not existing
earlier.

8.4 Now, the new industrial unit cannot be the one commencing commercial
production on or before after 10/6/03, the date of issue of exemption notification - as,
if this meaning is adopted, the condition of commencing commercial production on or
after 7/1/03 would become redundant. Therefore, the word “new” has to be
construed with regard to the reference date “7/1/03”. Since a new industrial unit
which has commenced production on 7/1/03, has to be set up i.e erected and
installed before 7/1/03, this notification would also cover these unit, which had been
set up before 7/1/03, but commenced commercial production on or after 7/1/03.
Therefore, “new industrial unit” would include not only those units set up on or after
7/1/03, but would also include those industrial units which have been set before
7/1/03. But the new industrial unit set up either on or after 7/1/03 or set up prior to
7/1/03, must, for being eligible for the exemption satisfy the condition of having
commenced their commercial production on or after 7/1/03. This condition becomes
important for the units set up before 7/1/03, as the units set up on or after7/1/03
would naturally have commenced their commercial production on or after 7/1/03 and
thereby would satisfy this condition. If an Industrial unit installed prior to 7/1/03 had
commenced its commercial production prior to 7/1/03, it would be out of the purview
of the notification. For this purpose, distinction has to be made between “Commercial
Production” and “Trial Production”. Though the term “commercial production” is not
defined in this notification, it should be construed in contradistinction with the term
“Trial Production” Trial Production is followed by commercial production

12. It was found that production during the period prior to April, 2003 was only trial
production. Merit was found in the contention of the Company that commercial
production started in April, 2003 and, therefore, it became eligible for exemption from
July, 2003 when the necessary declaration was filed. Thereafter, the Tribunal
proceeded to deal with the cylinder unit and found merit in the contention that
capacity expansion need not be achieved in each section or part of the factory. A
factory manufacturing more commodities in different sections has to be treated as
consisting of more than one manufacturing unit. The capacity expansion of the entire
factory is not required.

B. Excisability & Taxability ; Section 35G and Section 35L

27.  Section 35L, itself, has undergone another amendment, which was inserted
by Act 25 of 2014, with the inclusion of the following sub-section (2):

“(2) For the purposes of this Chapter, the determination of any question having a
relation to the rate of duty shall include the determination of taxability or
excisability of goods for the purpose of assessment.”

28.  the line of decisions of the High Courts, which have purported to follow the
decision in Navin Chemical's case (supra) and taken the view that the question
whether the assessee is entitled to exemption notification, if it is decided by the
Tribunal, it will bar the jurisdiction of the High Court as an appeal would be
maintainable before the Supreme Court, have proceeded on the basis of the
explanation which was inserted under Section 35E of the Excise Act
corresponding to identical explanation in the Customs Act and the actual terms of
the explanation, namely, clause (c) thereof may not bear out this interpretation
insofar as what the legislature has provided by clause (c) was a question whether
the goods are or are not covered by an exemption notification or order providing
for exemption partially or absolutely. It is not intended to cover the question
whether the assessee is actually entitled to the benefit of the notification in a case
where there is no dispute about the goods being covered.

31. Turning to sub-section (2) of Section 35L, we may notice that these appeals
have been filed after the amendment in Section 35L. This is inserted w.e.f
06.08.2014 It purports to lay down that, for the purpose of deciding the
expression, the question “having a relation with the rate of duty” would include
the question relating to “taxability” and “excisability” of the goods.

42. In Navin Chemical's case (supra), the Apex Court has enunciated the

principle after interpreting the words “question having a relation with the rate of
duty” and held that, while the words “having relation with” are capable of wide
import, it must be read as meaning a direct and proximate relationship with the
rate of duty and to the value of goods for the purpose of assessment. In
paragraph 12 of the said judgment, the court has also articulated its opinion and
held “does the question that requires determination have a direct and proximate
relation, for the purpose of assessment, to the rate of duty applicable to the
goods or to the value of goods”. This we can and should accept as the principle
laid down by the Apex court. This principle, in our view, would also hold good
despite the fact that the Apex Court drew considerable support from the
explanation to Section 129D of the Customs Act, which, as we have already
noticed, is identical to Section 35E of the Excise Act. It would appear that, just as
explanation to Section 35E was never enforced, the explanation to Section 129D
of the Customs Act was also not enforced. But, we are confronted with the further
development, which is that, in December 2004, Parliament has omitted both the
explanations, i.e explanation to Section 129D of the Customs Act and also the
explanation to Section 35E of the Excise Act.

47. We notice that no substantial question of law is raised as to whether the

goods in question are or are not covered by the terms of the notification. The
specific question of law, which is raised, goes to the availability of
the notification having regard to the fact that the respondent Company has not
complied with the terms of the notification. In our humble view, the decisions of
the High Courts, which have purported to follow Navin Chemical's case, have
proceeded to overlook the actual words used in the explanation and virtually
substituted the words “goods” with “assessee”. In other words, instead of
confining the latter limb of clause (c) to a situation where a dispute arise as to
whether the goods are or are not covered by the notification, it has been
extended to situations where the question arose as to whether the assessee
fulfilled the conditions of the exemption notification, which we would think was not
warranted by the provisions in clause (c).

48. We have to pass on to the next development presented in the matter, namely,
the omission of the explanation itself by Parliament in the year 2004. That is to
say, the legislative basis partially for rendering the judgment in Navin Chemical's
case and for the High Courts relying on the explanation was, itself, taken away in
the year 2004, as the explanation stood omitted in December, 2004. Therefore,
we must also simultaneously notice the inclusion of sub-section (2) in Section
35L. We have to decide on the basis of the provision in Section 35G read with
Section 35L, as it stands insofar as the appeals have been filed after the
amendment in sub-section (2) of Section 35L also. Section 35G provides for an
appeal against the order of the Tribunal to the High Court. The appeal lies except
when a question has been decided by the Tribunal having a relation with the rate
of duty or the value of goods. In case, the decision relates to a question, which
has a relation with the rate of duty or valuation, appeal is provided directly to the
Supreme Court under Section 35L. The further statutory provision, we must bear
in mind, is only the provision of sub-section (2) of Section 35L, which provides
that, for the purpose of this chapter, the determination of any question having a
relation to the rate of duty shall include the determination of taxability or
excisability of goods for the purpose of assessment. If an appeal is maintainable
before the Supreme Court, quite obviously, an appeal would not be maintainable
before the High Court.

The effect of sub-section (2) of Section 35L of the Act:

49. The Legislature must be treated as being aware of the judgment rendered by

the Apex Court in Navin Chemical's case (supra) interpreting explanation to
Section 129D of the Customs Act, as also the interpretation placed by various
High Courts in decisions in question, which arose under the Central Excise Act.
We must also be conscious of the fact that it had omitted the explanation in the
year 2004. What then is the purport and object of including sub-section (2) to
Section 35L? By virtue of sub-section (2), the Legislature has declared that the
question relating to taxability or excisability shall be included within the meaning
of the expression “question in relation to rate of duty”. In regard to a clause in a
section, which uses the word “include”, it is intended to give an extended
meaning to the main provision, which the definition clause intends to define. We
cannot possibly proceed on the basis that, after the inclusion of sub-section (2),
whatever else may be included within the expression “decision in relation to rate
of duty” would not be embraced within its scope.

50. Coming to the expressions “taxability” or “excisability”, there are two ways of

looking at it. Since two expressions are used, they bear two different meanings.
Ordinarily, the courts would not attribute to the legislature an intention to waste
words in a statute. An interpretation would be placed, which would avoid
 superfluity or deprive the word of all meaning. Words in a statute cannot be
afflicted with the vice of surplusage. Or, is it such a case?

Excisability, what it comprehends:

 the Apex Court in Moti Laminates Pvt. Ltd. v. Collector of Central Excise,

Ahmedabad, reported in (1995) 3 SCC 23. There, the court also was dealing with
a case, where the goods were captively consumed. The court held as follows:

“8. The duty of excise is leviable under Entry 84 of List I of the VIIth Schedule on
goods manufactured or produced. That is why the charge under Section 3 of the Act
is on all, ‘excisable goods’, ‘produced or manufactured’. The expression ‘excisable
goods’ has pl64 been defined by clause (d) of Section 2 to mean, ‘goods’ specified in
the Schedule. The scheme in the Schedule is to divide the goods in two broad
categories - one, for which rates are mentioned under different entry and other the
residuary. By this method all goods are excisable either under the specific or the
residuary entry. The word ‘goods’ has not been defined in the Act. But it has to be
understood in the sense it has been used in Entry 84 of the Schedule. That is why
Section 3 levies duty on all excisable goods mentioned in the Schedule provided
they are produced and manufactured. Therefore, where the goods are specified in
the Schedule they are excisable goods but whether such goods can be subjected to
duty would depend on whether they were produced or manufactured by the person
on whom duty is proposed to be levied. The expression ‘produced or manufactured’
has further been explained by this Court to mean that the goods so produced must
satisfy the test of marketability. Consequently it is always open to an assessee to
prove that even though the goods in which he was carrying on business were
excisable goods being mentioned in the Schedule but they could not be subjected to
duty as they were not goods either because they were not produced or
manufactured by it or if they had been produced or manufactured they were not
marketed or capable of being marketed.

9. The duty of excise being on production and manufacture which means bringing

out a new commodity, it is implicit that such goods must be usable, moveable,
saleable and marketable. The duty is on manufacture or production but the
production or manufacture is carried on for taking such goods to the market for sale.
The obvious rationale for levying exciseduty linking it with production or manufacture
is that the goods so produced must be a distinct commodity known as such in
common parlance or to the commercial community for purposes of buying and
selling. Since the solution that was produced could not be used as such without any
further processing or application of heat or pressure, it could not be considered as
goods on which any excise duty could be levied.

11. Although the duty of excise is on manufacture or production of the goods, but the
entire concept of bringing out new commodity etc. is linked with marketability. An
article does not become goods in the common parlance unless by production or
manufacture something new and different is brought out which can be bought and
sold. In Union of India v. Delhi Cloth & General Mill Co. Ltd., AIR 1963 SC 791, a
Constitution Bench of this Court while construing the word ‘goods’ held as
under:“These definitions make it clear that to become “goods” an article must be
something which can ordinarliy come to the market to be bought and sold”.
 Therefore, any good to attract excise duty must satisfy the test of marketability.
The tariff schedule by placing the goods in specific and general category does
not alter the basic character of leviability. The duty is attracted not because an
article is covered in any of the items or it falls in residuary category but it must
further have been produced or manufactured and it is capable of being bought
and sold. In South Bihar Sugar Mills Ltd. v. Union of India, AIR 1968 SC 922 it
was held by this Court:

“The Act charges duty on manufacture of goods. The word ‘manufacture’ implies
a change but every change in the raw material is not manufacture. There must be
such a transformation that a new and different article must emerge having a
distinctive name, character or use. The duty is levied on goods. As the Act does
not define goods, the legislature must be taken to have used that word in its
ordinary, dictionary meaning. The dictionary meaning is that to become goods it
must be something which can ordinarily come to the market to be bought and
sold and Is known to the market. That it would be such an article which would
attract the Act was brought out in Union of India v. Delhi Cloth and General Mills
Ltd., 1963 Supp. (1) SCR 586 = AIR 1963 SC…..”

13. Having traced the development of law that any goods produced or manufactured
ipso facto do not attract duty unless they are marketable or capable of being
marketed, we may now examine the dutiability of goods captively consumed. Prior to
1979 no duty was levied on such goods. But, as stated earlier, after amendment of
rules 9 and 49 captively consumed goods become exigible to duty. The rationale for
not treating such goods as excisable was same that since such goods were not
brought to the market for buying and selling they could not be subjected to duty. But
when the Rules were amended a fiction was created that any article produced or
manufactured if captively consumed was statutorily presumed to satisfy the test of
marketability. But this presumption can be rebutted if it is established that the article
produced and captively consumed was neither goods nor marketable nor capable of
being marketed. The duty is attracted not by captive consumption of any article but it
must be a good within the meaning of the Act which apart from having a distinctive
name and known as such must be marketable or capable of being marketed…”

52. It is also necessary that before the goods are visited with a levy, there is a
manufacture of goods. See Union of India v. Ahmedabad Electricity Co. Ltd.,
reported in (2003) 11 SCC 129, wherein also the court reiterated that the goods
must be manufactured or produced and it is not sufficient that the goods are
excisable goods and, in that, the goods figure in the Schedule.

53. The other aspect immediately flowing from this dimension is that disputes
may arise as to the exact entry of the Tariff Act in which particular goods fall.
Both the issues have a direct connection with the rate of duty. This is one
interpretation of the word “excisability”. The other way to look at the word
“excisability” is the inquiry as to whether the goods are excisable goods, meaning
thereby, they fall in the Tariff Act and, further, even finding out the exact entry in
which the goods fall, and the same would only be one of the questions to be
answered before the levy actually can be successfully imposed and collected. It
is settled law that the mere mention of the goods in one of the entries would not
render the goods exigible to excise duty. There is a whole gamut of issues, which
 must be posed and considered before that stage is reached. To begin
with, excise duty is traceable to Entry 84 of List I of the Seventh Schedule to the
Constitution. The same reads as follows:

“84. Duties of excise on tobacco and other goods manufactured or produced in India
except—

(a) alcoholic liquors for human consumption.

(b) opium, Indian hemp and other narcotic drugs and narcotics,

but including medicinal and toilet preparations containing alcohol or any

substance included in sub-paragraph (b) of this entry.”

54. The Constitution vide the said entry enables levy of excise duty on goods,
which are produced or manufactured in India. The courts have consistently taken
the view that, in order that the goods are exigible to exciseduty, they must
possess the attribute of being movable (excise duty cannot be imposed on
immovable property). Further, they must possess the quality of being bought and
sold. They must have an identity as a distinct product. They must be capable of
being bought and sold. It is not necessary that there should be large number of
purchasers or any number of purchases; even a single purchaser would suffice. It
also does not matter that, in a particular case, the goods are actually not sold, as
what is necessary is the quality that the goods can be bought and sold. The
goods must be usable and have a separate identity. All this would not bring the
inquiry to an end. The further question, which must be answered in a case, where
it is raised, is whether the goods in question are brought into being by
manufacture as is defined in the Act. See in this regard, Union of
India v. Ahmedabad Electricity Co. Ltd., reported in (2003) 11 SCC 129.

55. The decision in Moti Laminates Pvt. Ltd. v. Collector of Central Excise,

Ahmedabad, reported in (1995) 3 SCC 23 has been followed in Commissioner of
Central Excise-I, New Delhi v. S.R Tissues (P) Ltd., reported in (2005) 6 SCC
310 and Escorts Limited v. Commissioner of Central Excise, Faridabad, reported
in (2015) 9 SCC 109. In Escorts Limited (supra), the Apex Court has inter alia
held as follows:

“For excise duty to be chargeable under the constitutional entry read with Section 3

of the Central Excise and Salt Act, two pre-requisites are necessary. First, there
must be “manufacture” which is understood to mean the bringing into existence of a
new substance. And secondly, the word “goods” necessarily means that such
manufacture must bring into existence a new substance known to the market as
such which brings in the concept of marketability in addition to manufacture.
Marketability is thus essentially a question of fact to be decided in the facts of each
case. There can be no generalization. The fact that the goods are not, in fact,
marketed is of no relevance. So long the goods arc marketable, they are goods for
the purpose of Section 3 of the Central Excise Act. It is not necessary that the goods
should be generally available in the market. Even if the goods are available from only
one source or from a specified market, it makes no difference so long as they are
available for purchasers. The marketability of articles does not depend upon the
number of purchasers nor is the market confined to the territorial limits of this
country.

To become ‘goods’ an article must be something which can ordinarily come to the
market to be bought and sold. ‘Marketability’ is a decisive test for dutiability. It only
means ‘saleable’, or “suitable for sale”. It need not be in fact ‘marketed’. The article
should be capable of being sold or being sold, to consumers in the market, as it is —
without anything more.

An article does not become goods in common parlance unless by production or

manufacture something new and different is brought out which can be bought and
sold. to become ‘goods’ an article must be something which can ordinarily come to
the market to be bought and sold. Therefore, any goods to attract excise duty must
satisfy the test of marketability. The Tariff Schedule by placing the goods in specific
and general category does not alter the basic character of leviability. The duty is
attracted not because an article is covered in any of the items or it falls in residuary
category but it must further have been produced or manufactured and it is capable of
being bought and sold.

It is difficult to lay down a precise test to determine marketability of articles.

Marketability of goods has certain attributes. The essence of marketability is neither
in the form nor in the shape or condition in which the manufactured articles are to be
found, it is the commercial identity of the articles known to the market for being
bought and sold. The fact that the product in question is generally not being bought
and sold or has nodemand in the market would be irrelevant.

The product should not be known in the market with any commercial name. The
moment a product is commercially known in the sense of fulfilling the practical test of
being known to persons in the market who buy and sell, the test is satisfied. The fact
that the product is generally not bought or sold or has no demand in the market is
irrelevant.”

56. Lastly, the goods must be produced or manufactured in India. It is only if all

these conditions are satisfied that the levy of excise duty, meaning thereby the
imposition of excise duty under the Act, becomes available against the
manufacturer or producer of the goods. If the word “excisability” is understood in
this sense, then, virtually, excisability would be a question, which would be far
more comprehensive. If all these questions are answered against the assessee in
a given case or, in other words, if the goods are found to be excisable goods, the
exact entry under the Tariff Act is located, if the goods are also found to be
movable, marketable, manufactured or produced in India; then, on the event of
manufacture, excise duty, which is a tax on the manufacture or production of
goods, becomes payable. If this is the sense in which the word “excisability” is
used, a question may arise what was the need to also use the word “taxability”. Is
it a case of mere surplusage? Ordinarily, the Legislature is not presumed to
waste words. One thing is certain that the Legislature has, in one sense, widened
the scope of the expression “question having a relation with the rate of duty”.
Therefore, now the Apex Court is, after the amendment, the exclusive appellate
forum created against the order passed by the Tribunal to deal with all these
issues when they are raised and decided by the Tribunal. As far as exempted
goods are concerned, we must notice that exempted goods do not become
nonexcisable by issuance of a notification or order under Section 5A of the
Central Excise Act. The goods would remain excisable.

71. Parliament has chosen to use the words “taxability” and “excisability”. We

hold that the word “excisability” is better understood in the context as meaning
not only a situation, where the goods in question are excisable goods as defined
in Section 2(d) of the Excise Act, but also they answer the description of the
goods as understood in law and a long line of decisions. This means that the
products in question must be goods as understood in law being movable and
marketable. It must have an identity in the market as a distinct new product. It
must possess the attribute of marketability, which means it is capable of being
bought and sold. This is besides also fulfilling the requirement that the goods
must be manufactured or produced and, further, that the manufacture or
production of the goods must be in India. It is when all these questions are
answered in a case, where they are raised, that even if the goods are excisable
goods, they become excisable.

74. Therefore, we would proceed on the basis that when the Tribunal answers
a question relating to excisability, it is equivalent to saying that it finds that
the goods are dutiable and can be visited with the levy of excise duty.

79. As we have noticed, ordinarily, when different words are used in the same
Section, there is a presumption that they are not used in the same sense. Here,
we are concerned with the employment of the words “taxability” and “excisability”.
We have found that the word “excisability” is intended to cover all issues, namely,
whether the goods are excisable and, where a question is raised, whether they
are goods being movable, marketable and further, if there is a dispute, relating to
whether it is manufactured or produced in India, the same must also be
considered and answered. When all these questions are answered, we have also
found that the goods are liable to be visited with duty. Legislature has, however,
chosen to use the word “taxability”. Here, we must pose the following questions,
which are, in our view, enough to unravel the intention of Parliament. In a case,
where the goods are found to be excisable as in the sense we have understood,
there may be an exemption notification, which is in force. No doubt, it could be
argued that, if the word “excisability” is understood in the same sense as
“taxability”, the question relating to the availability of the exemption notification is
outside the scope of both “excisability” and “taxability”; in that, it could be said
that it only means that the goods, which are excisable or taxable, are outside the
net of taxation by virtue of the exemption notification. But, we would think that the
better view and the right view could be that, in a case, where the goods are found
 excisable, Parliament intended in a case, where the Assessing Officer presses
for payment, the assessee responds by pointing out that, though the goods are
excisable, there is an exemption notification available, which protects him from
actual taxation. If we understand the expression “taxability” in the said context,
we would be acting in terms of the normal presumption, which is available when
two different words are employed in the same statute and we would give life to
both the words. Thus, the word “taxability” would cover a situation, where,
though the goods are found dutiable otherwise, they are found to be non-
taxable by virtue of the availability of an exemption notification. If a
question arises as to the availability of the notification, then it goes to
taxability.
82. In such circumstances, we are of the view that the appeals are not maintainable for the
reason that the appeals are maintainable only before the Supreme Court under Section 35L of
the Excise Act in the context of the interpretation we have placed on the words “taxability”
and “excisability”. We need not, therefore, further explore the question whether de hors sub-
section (2), the case would fall under sub-section (1) of Section 35G or Section 35L, as the
case may be.

83. Accordingly, the appeals will stand dismissed as not maintainable. Needless to say, the
appellants will be at liberty to pursue the matter before the competent forum, if advised.
There will be no order as to costs.

3. CESTAT Delhi in Surya Polypack Pvt. Ltd. v. CCE, Meerut [2014]

10. As such, it can be safely concluded that specific conditions of the notification are location
of the manufacturing unit being a new establishment and the nature of goods to be
manufactured by the unit. Undisputedly both the said conditions stand fulfilled by the
appellant. The condition of reducing option in writing by way of filing declaration was
introduced subsequently in the said notification with effect from 5.11.03 Inasmuch as
the notification in question applies to the newly established units as also to the old units,
which carry out 25% expansion of the installed capacity, we are of the view that said filing of
declaration introduced subsequently was only mechanism for the department to assess which
duty paying units would now be entitled to enjoy the benefit of exemption i.e as to which unit
has substantially undertaken expansion to the extent of 25% of the installed capacity or more.
Otherwise, all newly established units in that area are entitled to the benefit of notification.
Infact it may not be incorrect to observe here that assessee establish new units in the areas
covered by said exemption only with an intent to avail the offered exemption. As such, filing
of declaration is a formality to put the Revenue on notice as also to enable them to find out as
to whether any assessee is manufacturing the excluded items as detailed in annexure I of
the notification and still availing the exemption.

 11. With these observations, we proceed to refer to various decisions. In the case

of Packaging India Pvt. Ltd. v. CCE, Meerut [2013 (294) ELT 246 (Tri-Del)] it was observed
in para 10 as under:

“10.? We agree with the above contentions of learned Advocate. The requirement of filing a
declaration is a procedural condition. The benefit of the notification is not based upon the
said procedural requirement of filing a declaration. In any case, declaration stands filed by the
appellant. The fact that Notification No. 49/2003-C.E. was mentioned instead
of Notification No. 50/2003-C.E., cannot be considered to be a mistake fatal to the appellant's
claim of benefit. It is well settled law that the substantive benefit if otherwise available
should not be disallowed on the basis of minor procedural irregularities. In the present case,
we find that even such irregularity of non-filing of declaration was not there.”

13. As already observed by Hon'ble Supreme Court in the case of Mangalore Chemicals and
Fertilisers Ltd.v. Deputy Commissioner [1991 (55) ELT 437 (SC)], there may be number of
conditions and some may be substantive, some mandatory and some belong to area of
procedure. It will be erroneous to attach equal importance to the non-observance of all the
conditions irrespective of purpose, they were intended to serve. The conditions of
the notification as regards the location of the units and the nature of goods to be
manufactured by them are admittedly eligibilitycondition, based upon the fulfillment of
which, the assessee can avail the exemption. Further, by starting to avail the benefit
of notification, the assessee can be deemed to have exercised his option to avail the benefit
of notification. Only lapse on his part is to put in writing and to submit the same to the
jurisdictional Central Excise authorities, for which the appellant cannot be penalized to the
extent of confirming the demand for the entire period prior to filing of declaration, when he is
otherwise entitled to benefit of notification which admittedly stand extended to him
subsequent to filing of declaration. As such, we are of the view that confirmation of duty
against the appellant is not justified.

BUT THIS CASE WAS ULTIMATELY DECIDED NOT ON ISSUE OF DECLARATION

BUT DEMAND OF DUTY BARRED BY LIMITATION :

13. As already observed by Hon'ble Supreme Court in the case of Mangalore Chemicals and
Fertilisers Ltd.v. Deputy Commissioner [1991 (55) ELT 437 (SC)], there may be number of
conditions and some may be substantive, some mandatory and some belong to area of
procedure. It will be erroneous to attach equal importance to the non-observance of all the
conditions irrespective of purpose, they were intended to serve. The conditions of
the notification as regards the location of the units and the nature of goods to be
manufactured by them are admittedly eligibilitycondition, based upon the fulfillment of
which, the assessee can avail the exemption. Further, by starting to avail the benefit
of notification, the assessee can be deemed to have exercised his option to avail the benefit
of notification. Only lapse on his part is to put in writing and to submit the same to the
jurisdictional Central Excise authorities, for which the appellant cannot be penalized to the
extent of confirming the demand for the entire period prior to filing of declaration, when he is
otherwise entitled to benefit of notification which admittedly stand extended to him
subsequent to filing of declaration. As such, we are of the view that confirmation of duty
against the appellant is not justified.

18. In my view the condition regarding filing of declaration in the prescribed format as
prescribed in the first para of the Exemption Notification has been prescribed to prevent the
mis-use this exemption and to enable the Jurisdictional Central Excise Officers to detect well
in time if an assessee is wrongly availing of the exemption whether deliberately or otherwise.
Therefore, I do not agree with the view of my learned sister that the condition prescribed in
first para of the Exemption Notification regarding filing of declaration in the prescribed fraud
format is merely a procedural condition, non observance of which can be condoned.
Therefore the Appellant Company is not eligible for exemption for the period prior to
14.03.08 Moreover when the notification itself provide that the option for exemption shall
courts cannot extend the benefit of this exemption for the period prior to the date of opting
for the exemption, therefore, on merits, the case is in the Department's favour.
[DIFFERENCE OF OPINION ON QUESTION OF DECLARATION BUT APPEALS
ALLOWED W/ CONSENSUS ON GROUND OF LIMITATION.

4. CESTAT Delhi in CCE, Chandigarh v. Nalagarh Steel Rolling Mills Pvt. Ltd. [2013]

7.  The whole ideal of filing a declaration and choosing an option under intimation to the
department is that the Revenue is put to notice. This intention having been fulfilled by the
appellant in the months of July and August, 2003 (though the respondent claimed to have
filed the same subsequently also, would not result in denial of the benefit of Notifications No.
49/2003 and 50/2003, when the respondent fulfilled all the basics, essential and
requisite conditions of the notifications as regards the location of the factory being in
Himachal Pradesh. Such procedural contravention, if any, cannot result in denial of the
substantive benefit of the notifications, if the same is otherwise available. As such, we
find no infirmity in the views of the Commissioner and reject the Revenue's appeal.

5. Himachal Ppradesh HC in Satya Metals v. union of India 2012

 7. From the perusal of the above exemption  notification , it appears that 

   Page: 518

100% Central  Excise  exemption is available if the following  conditions  are

satisfied:—

(a) The goods are cleared from a unit located in the Industrial Growth Centre or
Industrial Infrastructure Development Centre or Export Promotion Industrial Park
or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area.

(b) Such industrial units if new, have to be set up in the specified areas and
should have commenced commercial production on or after 7-1-2003. If they are
existing industrial units then they should have undertaken substantial expansion
by way of increase in installed capacity by not less than twenty five per cent, on
or after the 7-1-2003.
(c) The manufacturer who intends to avail of the said exemption shall exercise his
option in writing before effecting the first clearance.

6. sgs