COLLECTOR OF CENTRAL EXCISE VADODRA versus M/S. DHIREN CHEMICAL INDUSTRIES

Citation: [2001] SUPP. 5 S.C.R. 607 · Decided: 12-12-2001 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Directions issued

Judgment (excerpt)

, 
. ' 
COLLECTOR OF CENTRAL EXCISE V ADODRA 
v. 
MIS. DHIREN CHEMICAL INDUSTRIES 
DECEMBER 12, 2001 
[S.P. BHARUCHA, CJ., SYED SHAH MOHAMMED QUADRI, 
UMESH C. BANERJEE, S.N. VARIAVA AND 
SHIVARAJ V. PATIL, JJ.] 
Central Excise Rules, 1944 : Rule 8(1 ). 
Excise duty-Exemption Notification-Phrase "on which the appropri-
ate amount of duty of excise had already been paid"-Interpretation of-Held, 
for getting exemption goods must be made.from raw materials on which excise 
duty has been paid at "Appropriate" rate-"Appropriate" means correct or 
specified rate of excise duty-Where raw material is not liable to duty or such 
duty is nil no excise duty is paid upon it-Notification is not applicable to goods 
made out o.f such ffzaterial. 
A Notification issued by Government of India granted exemption 
from excise duty to commodities produced from materials on which the 
appropriate amount of duty of excise had already been paid. The question 
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B 
c 
D 
iu this appeal relates to the correct interpretation to be placed upon the 
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phrase "on which the appropriate amount of duty of excise has already 
been paid". 
Answering the question, the Court 
HELD 1. An exemption Notification that llSes the phrase "on which 
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the appropriate amount of duty of excise has already been paid" applies to 
goods which have been made from duty paid material. In the said phrase, 
due emphasis must be given to the words "has'already been paid". For the 
purposes of getting the benefit of the exemption under the Notification, the 
goods must be made from raw material on which excise duty has, as a 
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matter of fact, been paid, and has been paid at the "appropriate" or 
correct rate. All that the word "appropriate" in the context means is the 
correct or the specified rate of excise duty. [610-G-H; 611-AJ 
2. Unless the manufacturer has paid the correct amount of excise 
duty, he is not entitled to the benefit of the exemption Notification. Where 
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607 
608 
SUPREME COURT REPORTS 
(2001] SUPP. 5 S.C.R. 
A 
the raw material is not liable to excise duty or such duty is nil, no excise 
duty is as a matter of fact, paid upon it To goods made out of such 
material the Notification will not apply. The Notification is intended to 
give relief against the cascading of excise duty - on the raw material and 
again on the goods made therefrom. There is no cascading effect when no 
B 
excise duty is payable upon the raw material and the hardship that the 
Notification seeks to alleviate does not arise. (611-A-C] 
3. Regardless of the interpretation that the Court has placed on the 
said phrase, if there are circulars which have been issued by the Central 
Board of Excise and Customs which place a different interpretation upon 
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the said phrase, that interpretation will be binding upon the revenue. 
(611-D] 
D 
Collector of Central Excise. Patna v. Usha Martin Industries, (1997] 7 
sec 47, overruled. 
Motiram Tolaram and Anr. v. Union of India and Anr.. (1999] 6 SCC 
375, affirmed. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7937 of 1995. 
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From the Judgment and Order dated 10.4.91 of the Customs, Excise and 
Gold (Control) Appellate Tribunal, New Delhi in E/A. No. 1859/87-C in F.O. 
No. 332 of 1991-C. 
WITH 
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C.A. Nos. 2496-2497 of 1992. 
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Soli J. Sorabjee, Attorney General, Dhruv Mehta and B. Krishna Prasad 
for the Appellant. 
Ramesh Singh, Ms. Bina Gupta, Ms. Vanita Bhargava and Ms. Rakhi 
Ray for the Respondent in C.A. No. 7937/95. 
Joseph Vellapally, Ms. Meenakshi Arora and Ms. Sujeeta Srivastava for 
the Respondent in C.A. No. 2496-97 /92. 
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The Judgment of the Court was delivered by 
... 
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C.C.E. v. DHIREN CHEMICAL INDUSTRIES [BHARUCHA, CJ.] 
609 
BHARUCHA, CJ. The case ofDhiren Chemical Industries (Civil Appeal 
No. 7937 of 1995) has been referred by a Bench of three learned Judges to the 
Constitution Bench because it appeared to the Bench that there was a conflict 
between the view taken in Collector of Central Excise, Patna v. Usha Martin 
Industries, [1997) 7 S.C.C. 47 and the view taken in Motiram Tolaram and Anr. 
v. Union of India and Anr., [1999) 6 S.C.C. 375, both being judgments of 
Benches of three learned Judges. Because of that reference, the other cases 
(Civil Appeal Nos. 2496-97) were also so referred. 
The only question that we are concerned with relates to the correct 
interpretation to be placed upon the phrase "on which the appropriate amount 
of duty of excise has already been paid". 
In the case of Usha 

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