The notification No. 67/95 dated 16-3-1995 grants exemption to intermediate goods coming into existence during the process of manufacture provided the final product emerging out of such process is dutiable. In the case of M/s Aurobindo Pharma Ltd. vs. Cce a point had arisen for consideration that whether the benefit of exemption Notification No. 67/95 dated 16-3-1995 is available to an intermediate product captively consumed when the final product which has been exempted is cleared on payment of an amount of 8% of the sale price in terms of Rule 57CC of the Central Excise Rules, 1944.

In this case, the benefit of the Notification No. 67/95 was being claimed on the intermediate product ‘Parazine Mono Carboxylic Acid’ (PMCA). The final product ‘Pyrazynamide’ was exempted under Notification No. 6/2000 dated 1-3-2000 and the assessee was clearing the same on payment of 8% of the sale price in terms of Rule 57CC of Central Excise Rules since the assessee had taken the credit of inputs used in the manufacture of the final product.

The appellants argued that 8% amount paid is duty and therefore, the benefit of exemption Notification No. 67/95 should be available to an intermediate product when the final product which has been exempted is cleared on 8% of the sale price in terms of Rule 57CC. The reason for payment of an amount of 8% on the sale value is due to fact that the common inputs were used in the manufacture of exempted and dutiable products.

The Revenue proceeded against the appellants and held that the amount of 8% paid on the final product is not duty and therefore PMCA captively consumed is not eligible for exemption under Notification No. 67/95-CE dated 1-3-1995 in terms of proviso to the Notification.

The Hon’ble Tribunal noted that the Notification No. 67/95 exempts all capital goods and inputs captively consumed within the factory of production provided the final products are not exempted from the whole of excise duty or are not chargeable to Nil rate of duty. In the present case, the input captively consumed is PMCA. It is not disputed that the final product ‘Pyrazynamide’ has been exempted vide Notification No. 6/2000 as amended. Hence the condition of Notification No. 67/95 is not satisfied. The payment of 8% on the sale value of the final product is not a duty on the final product.

What was paid as 8% is in terms of Rule 57CC. In other words, when common inputs are used in the manufacture of exempted and dutiable products and if no separate account of inputs is maintained, an assessee is required to pay an amount of 8% on the sale value of the exempted products. This Rule has been framed because no CENVAT credit is admissible to an input used in the manufacture of a final product which is exempted. Even if the 8% amount is in the nature of Central Excise duty, it is not a duty on the final product, because the final product is exempted.

Hence the demand was confirmed and the appeal of the assessee was dismissed.

It is important to note that the Notification No. 31/2001 – CE dated 1-6-2001 has amended the Notification No. 67/95 to provide that in case the manufacturer has discharged his obligation under Rule 57AD (earlier Rule 57CC) i.e., payment of 8% of sale price on sale of exempted goods, then the benefit of Notification No. 67/95 will be available to the intermediate goods consumed captively in the manufacture of exempted final product.

Mode of service of copy of the order

Even the mode of service of copy of the Order -in-original can lead to litigation. Here is the case of M/s Hindustan Lever Ltd vs. Cce dealing with the issue of correct mode of service of the orders passed in pursuance to the show cause notice.

The appellants, M/s Hindustan Lever Ltd., inter alia, engaged in the manufacture of various cosmetics and toilet preparations had filed classification declarations in respect of the various products manufactured by them.

The Assistant Commissioner of Central Excise issued Show Cause Notices in respect of the products seeking to classify them differently than the classification declaration submitted by the appellants. After filing reply and hearing, the Assistant Commissioner passed orders in respect of two products.

The appellants received the copies of Order-in-Original dated 30-4-2002 in respect of the said products. However, the appellants did not hear or received any order in respect of classification of other products. Later on 8-7-2002 during oral discussion, the Superintendent attached to the Office of the Asst. Commissioner informed the appellants that an adjudication order was also passed in respect of above mentioned two products.

The appellants paid the copying charges and obtained the copy of the said order which was issued on 11-4-2002 but received by the appellants on 11-7-2002.

It was later brought out that the order issued on 11-4-2002 was sent by ordinary post and received by the appellants in May 2002.

Aggrieved by the said order dated 11-4-2002 passed by the Asst. Commissioner, the appellants preferred an appeal before the Commissioner of Central Excise (Appeals), Chennai on 9-9-2002. The appellants argued that the provisions of section 37C of the Central Excise Act, 1944, prescribes the mode of service of copy of the order. The service of the order by post is not the means prescribed therein and hence cannot be taken as service of the copy of the order.

The Commissioner (Appeals) dismissed the appeal as time barred. The appeal filed by the appellants before the Tribunal was remanded back with a direction to hear the appeal on time bar and decide the appeal in accordance with law. The Commissioner (Appeals) again rejected the appeal as time barred.

The issue before the Hon’ble Tribunal was whether provisions of section 37C of the Central Excise Act, 1944, which prescribes the mode of service are mandatory in nature and whether Department is justified in contending that even when mandate of section 37C has not been followed, the appellants have no right to make submissions on merits.

Section 37C of the Central Excise Act deals with three modes of service of any decision of Order passed or any summons or notices issued under this Act or Rules made therein under, (shall be served) –

1. by tendering the decision or order personally on the person for whom it is intended or his authorized agent or by sending it by registered post with acknowledgement due.
    

2. By way of affixture at the place of factory or warehouse or usual place of business or residence in case the same cannot be served in the manner provided under clause (a).
    

3. Where it cannot be served in the manner provided under clauses (a) and (b) by affixing the same on the notice board of the office or authority which passed such decision or issued summons.

Sub-section (2) of section 37C of the Act is a deeming provision for service of every decision or order on the date when it is tendered or delivered by post or affixed with manner provided in sub-section (1).

The Hon’ble Tribunal held that the words used in sub-section 2 as "Delivery by post" shall mean sending the copy of decision or order by registered post with acknowledgement due as referred in sub-section (1) of section 37C of the Act. No other mode is recognized for effecting service than what is prescribed in clause (a) sub-section (1); i.e., tendering the decision or order in person or sending it by registered post with acknowledgment due. This section is mandatory in nature, as such an order or decision shall be served either by tending it personally or by registered post with acknowledgement due or by way of affixture as provided in clauses (b) and (c) of sub-section 1 of section 37C of the Act. The Learned Commissioner cannot rely upon any other mode of service even if it is effected and compute period of limitation.

Thus, it was held that the appellant was not served with a copy of impugned decision as per the law provided under section 37C of the Act. After coming to know of the passing of the impugned order, the appellants have obtained the copy on 11-7-2002 and filed the appeal. Therefore, the appeal is within the period of limitation.

The matter was thus remanded back to the Commissioner (Appeals) for decision on merits.