H.M.M. LTD. versus COLLECTOR OF CENTRAL EXCISE, NEW DELHI

Citation: [1996] SUPP. 7 S.C.R. 535 · Decided: 11-10-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed

Judgment (excerpt)

H.M.M. LTD. 
v. 
COLLECTOR OF CENTRAL EXCISE, NEW DELHI 
OCTOBER 11, 1996 
[B.P. JEEVAN REDDY AND S.C. SEN, JJ.) 
Central Excises and Salt Act 1944-Central Excise Rules, 1944--ltem 
No. 68, Rule 56-A-Notification No. 201 of 1979-Raw mate1ials-Duty paid 
thereon-Assessee claiming credit for the entire duty paid Oil inputs received 
into its Rajahmundry fact01y as against the duty payable Oil the goods (Hor-
licks) cleared at Rajahmundry on payment of duty-Tribunal Rejecting the 
claim-On appeal, held assessee entitled to take credit of the entire duty as 
claimed by it-Tlibwzal's order set-Aside. 
A 
B 
c 
The appellant-assessee has been engaged in the manufacture, inter 
alia, of 'Horlicks'. For the purpose of manufacturing Horlicks, the appel-
D 
lant purchases 'barley malt' which is a dutiable item. 
The assessee has a factory at Rajahmundry for manufacturing it. 
The entire stock of Horlicks manufactured at Rajahmundry is, however, 
not cleared after paying the Excise duty at Rajahmundry. Only a portion E 
of the production is cleared at Rajahmundry after paying the Excise duty 
while the bulk of the production is sent to the appellant's factories situated 
at different places in India in bulk containers. There it is repacked in 
Unit-containers and cleared after paying the duty. 
The Central Government issued a notification exempting all ex-
F 
cisable goods on which the duty of Excise is leviable and in the manufac-
ture of which any goods falling under Item No. 68 of the First Schedule to 
the Central Excises and Salt Act, 1944 have been used as raw-materials or 
component parts from so much of the duty of excise leviable thereon as is 
equivalent to the duty of excise already paid on the inputs. 
G 
Controversy arose with respect to the application, of the said 
notification. The appellant claimed that it was entitled to take credit of the 
entire duty paid on barley-malt against the duty payable on the Horlicks 
cleared at Rajahmundry, even though the entire quantity of Horlicks 
manufactured out of the said barley - malt is not cleared at Rajahmundry H 
535 
• 
536 
SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R. 
A by paying the duty. 
On the other hand, the Revenue claimed th~t the appellant is entitled 
to take credit at Rajahmundry, only of that portion of duty paid on barley 
malt as is proportionate to the Horlicks cleared on paying the duty 
vis-a-vis the total quantity of Horlicks manufactured out of the said barley 
B malt, and that the appellant was not entitled to transfer the credit to its 
other factories from where the goods are cleared on payment of duty. 
Unable to succeed before the Tribunal, the assessee preferred the present . 
appeal. 
C 
Revenue contended that only the duty paid on inputs. which have been 
used for manufacturing the goods cleared from the factory (where the 
inputs were received) can be given credit. 
The appellant contended that the words in the body of the notification 
should be read along with the procedural rules mentioned in the Appendix 
. D and relied upon the instructions issued by the Central Board of Excise and 
Customs on 18.6.1979 in this connection. 
Allowing the appeal, this Court 
HELD : 1. The appellant is entitled to take credit of the entire duty 
E paid on inputs (barley malt) received into its Rajahmundry factory as 
against the duty payable on the goods cleared at Rajahmundry on payment 
of duty. [546-H, 547-A] 
2.1. It is significant to note that the language employed in the main 
body of the notification is schematically different from the unamended 
F clause (vi) of Rule 56-A(3) of the Central Excise Rules as would be evident 
from a reading together of the two provisions, whereas the language 
employed in clause (9) of the Appendix to the notification is in pari materia 
with the amended clause (vi). [545-F-G] 
2.2. Upon reading the entire notification including Rules 9 and 10 of 
G the Appendix, the contention of the appellant commends itself as the only 
correct understanding. Not only Rule 9, even Rule 10 indicates, the absence 
of a correlation between the inputs and the finished goods. The instructions 
of the Board do explain the background to Notification no. 201. 
[545-H, 546-A] 
H 
2.3. The change in the language and content of clause (vi) of Sub-rule 
H.MM.LID.v.COLLECTOROFCENIRALBXCISE(B.P.JEEVANREDDY,J.] 537 
(3) of Rule 56-A made in 1973 is equally relevant in this behalf. It explains A 
why the concept of correlation - or the rule of s

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