M/S. Amrit
Paper Vs. Commissioner of Central Excise, Ludhiana [2006] Insc 450 (25
July 2006)
Arijit
Pasayat & S.H. Kapadia Arijit Pasayat, J
Challenge
in this appeal filed under Section 35L of the Central Excise Act, 1944 (in
short the 'Act') is to the legality of judgment rendered by the Customs, Excise
and Service Tax Appellate Tribunal, New Delhi (in short the 'Tribunal').
The
controversy lies within a very narrow compass.
Appellant
is engaged in the manufacture of paper and paper board falling in Chapter 48 of
the Tariff. Notification No.6/2000-CE dated 1.3.2000 was issued whereby the
product manufactured by the appellant was exempted from payment of duty during
the month of March, 2000. Appellant availed credit as well as cleared goods
under the said exemption notification. Thereafter, it suo motu reversed the
credit of Rs.1,92,365/- to avail the exemption. It deposited the duty on
30.8.2000 for the month of March, 2000 and also applied for refund of the Modvat
credit of Rs.1,92,365/- which was already reversed by it. The claim of refund
was allowed by order dated 13.12.2001 passed by the Assistant Commissioner.
Thereafter, the appellant again suo motu reversed the Modvat credit and filed
the refund claim on 12.7.2001 in respect of the duty paid on 30.8.2000 for the
month of March, 2000, claiming benefit under the aforesaid notification
No.6/2000-CE. The claim for refund was rejected by the Assistant Commissioner.
An appeal was filed before the Commissioner (Appeals) who also dismissed the
appeal. An appeal was filed before the Tribunal, which was dismissed by the
Tribunal by the impugned judgment.
Contention
of the appellant before the Tribunal was that it had already reversed the
credit taken during the month of March, 2000 and, therefore, it is entitled for
the benefit of Notification and duty paid on 30.8.2000 by it was to be
refunded. Reliance was placed on a decision of this Court in Orissa Extrusions
v. Collector of Central Excise, Bhubaneswar (2000 (115) E.L.T. 30 (S.C.) where
this Court while interpreting the provisions of the Notification no.180-CE of
1988 observed that it cannot be held that exemption notification will be
inapplicable insofar as it is not in accordance with Rule 57C of the Central
Excise Rules, 1944 (in short the 'Rules').
The
contention of the Revenue was that the appellant during the month of March,
2000 availed the credit and also cleared the goods at nil rate of duty under
Notification No.6/2000-CE. As the appellant cleared the goods and availed the
credit therefor, it is not entitled for the benefit of exemption notification.
The contention of the Revenue was that thereafter the appellant reversed the
credit and subsequently paid the duty for the month of March 2000 and filed the
refund claim in respect of the credit reversed by it and the refund was
allowed. As the appellant availed the benefit of credit in respect of the
inputs for the month of March 2000, therefore, it is not entitled for benefit
of Notification.
The
Tribunal held that the decision relied upon by the appellant was not applicable
and in any event it having claimed refund and credit which was allowed it
cannot again ask for exemption from payment of duty and the claim for refund of
duty was rightly rejected.
In
support of the appeal, learned counsel for the appellant submitted that the
Tribunal was not justified in holding that the entitlement to exemption under
the Notification in question was dependent upon whether the assessee had
availed Modvat credit of input duty under Rule 57A of the Rules. It is pointed
out that the Notification which was issued in exercise of powers conferred by
sub-section (1) of Section 5A of the Act granted exemption in respect of
excisable goods of the description specified in Column (3) of the table read
with concerned list appended to the Notification.
The
exemption was subject to relevant conditions specified in the Annexure to the
Notification and referred to in the corresponding entry in Column (6) of the
table. It is further pointed out that so far as the item manufactured by the
appellant is concerned, the condition applicable was condition No.15 which
reads as follows:
-
-
"This exemption shall apply
only to the paper and paperboard cleared for home consumption from a factory-
-
during the
period from Ist March 2000 to 31st March 2000,
upto first clearances of an aggregate quantity not exceeding 210 Metric Tonnes;
and
-
on or after the Ist
day of April, 2000, in any subsequent financial year, upto first clearances of
an aggregate quantity not exceeding 2500 Metric Tonnes;
-
The exemption
shall not be applicable to a manufacturer of the said goods who avails of the
exemption under the notification of the Government of India in the Ministry of
Finance (Department of Revenue) No.8/99-Central Excise, dated the 28th
February, 1999 published in the Gazette vide number G.S.R. 170(E) dated the
28th February, 1999, 9/99- Central Excise, dated the 28th February, 1999
published in the Gazette vide Number G.S.R. 171(E), dated the 28th February,
1999, published in the Gazette vide 8/2000-Central Excise, dated the Ist March,
2000 and 9/2000- Central Excise, dated the Ist March, 2000".
It is
again pointed out that in certain other cases, for example, condition No.27 the
entry reads as follows:
-
"If no
credit of duty paid, has been taken under Rule 57A or Rule 57B or Rule 57Q of
the Central Excise Rules, 1944." Therefore, even if no credit of duty paid
had been taken under Rule 57A, 57B or 57Q of the Rules, the exemption was
available. Reliance is placed on a decision of this Court in Orissa Extrusions's
case (supra). It was held in the said case as follows:
"Learned
counsel for the Revenue drew our attention to Rule 57C, which states that no
credit shall be allowed for duty paid on inputs used in the manufacture of
final products which are exempt from the whole of the excise duty leviable
thereon or are chargeable to nil rate of duty. It would appear that it is for
this reason that the said proviso was included in the notification so that the
provisions of Rule 57C would not apply in respect of goods not covered by the
items specifically mentioned therein. The exemption notification must be
assumed to have been consciously so worded and due effect must be given to the assessee
thereunder. It cannot be held that the exemption notification will be inapplicable
insofar as it is not in accordance with Rule 57C.
Therefore,
it is submitted that exemption notification is applicable.
In
response, Mr. A. Subba Rao, learned counsel for the respondent submitted that
the decision referred to above is not applicable to the facts of the case. In
any event, Rule 57C cannot be given a go by while interpreting the
Notification.
Otherwise
the said provision will become redundant.
In
order to appreciate the rival submissions, it would be appropriate to take note
of the observations made by a three- Judge Bench of this Court in Ichalkaranji
Machine Centre Pvt. Ltd. v. Collector of Central Excise, Pune (2004 (174)
E.L.T. 417 (S.C.). It was, inter alia, held as follows:
-
"Modvat is
basically a duty-collecting procedure, which aims at allowing relief to a
manufacturer on the duty element borne by him in respect of the inputs used by
him. It was introduced w.e.f. 1.3.1986. The said scheme was regulated under
rules 57A to 57J of Central Excise Rules, 1944. Rule 57A entitled a
manufacturer to take instant credit of the central excise duty paid on the
inputs used by him in the manufacture of the finished product, provided that
the input and the finished product were excisable commodities and fell under
any of the specified chapters in the tariff schedule. Under rule 57G, every
manufacturer was required to file a declaration before the jurisdictional
Assistant Collector, declaring his intention to take Modvat credit after paying
duty on the inputs. The object behind rule 57A read with rule 57G and rule 57-I
was utilization of credit allowed towards payment of duty on any of the final
products in relation to manufacture of which such inputs were intended to be
used in accordance with the declaration under Rule 57G. Rule 57-I referred to
consequences of taking credit wrongly.
xxx xxx
xxx
-
The above
notification envisaged total and partial exemption; it also categorized the
clearances into first clearances and subsequent clearances; it also categorized
manufacturers: into those who took Modvat credit and those who did not. Those
who took Modvat credit were entitled to only concessional exemption, while
whose who did not avail of Modvat credit were entitled to total exemption up to
a specified limit. While individual ceiling limits on clearances were
prescribed, there was an aggregate ceiling limit of Rs.75 lacs, beyond which
normal duty was payable. Therefore, if a manufacturer effected first clearances
of specified goods up to Rs.30 lacs, he could avail the concession on such
clearances, but in respect of subsequent clearances, he will get the concession
only up to Rs.45 lacs. The basic point is that those who avail of Modvat credit
were entitled to concessional exemption only, while those who did not avail
such credit could get total exemption up to a specified limit of Rs.15 lacs (as
it stood at the relevant time). Under para (a)(i) of the notification,
concession was not admissible where Modvat credit was not availed/admissible.
-
In the present
case, as found by the Adjudicating Authority and the Tribunal, Modvat credit
was not availed/admissible. In respect of cast iron and castings, Modvat credit
was inadmissible as both these inputs were exempted, whereas in case of steel
bars, the manufacturer did not avail of Modvat credit. Therefore, the
appellants were not entitled to clear the final products at concessional rate
of duty. Lastly, without reversing the credit, the appellants cleared the final
products at the concessional rate of duty, in breach of the above notification,
in favour of their sister concern and consequently, the said sister concern was
not entitled to the benefit of higher credit which was admissible to
manufacturers who bought goods as their inputs from small scale industrial
units (appellants herein).
-
It was argued on
behalf of the appellants that they had availed of the Modvat credit as they had
not withdrawn the declaration filed by them with the department. That, there
was no willful suppression as the department was aware, on the basis of their
accounts, about the appellants not availing the Modvat credit and, therefore,
the department had erred in invoking the proviso to Section 11A in relation to
the extended period for demanding excise duty. We do not find merit in the
above arguments. The appellants never opted out of the Modvat scheme. They
partly cleared the final products by paying duty at concessional rate without
utilizing the credit in the payment of duty on final product and partly on the
basis of credit which was not admissible. It is important to note that the
underlying object behind the notification was to utilize the credit against
payment of duty on the final product.
In the
circumstances, the demand for differential duty, penalty and confiscation
subject to payment of redemption fine is valid and justified." (underlined
for emphasis) As rightly submitted by learned counsel for the respondent the
provisions of Rule 57C would be rendered nugatory and redundant if the
interpretation as suggested by learned counsel for the appellant is accepted.
It would mean that primacy has to be given to the Notification over the
statutory provisions contained in Rule 57C.
Rule
57C reads as follows:
57.C
"Credit of duty
not to be allowed if final products are exempt. - No credit of the specified
duty paid on the inputs used in the manufacture of a final product (other than
those cleared either to a unit in a Free Trade Zone or to a hundred per cent
Export-Oriented Unit) shall be allowed if the final product is exempt from the
whole of the duty of excise leviable thereon or is chargeable to nil rate of
duty." It provides in mandatory and categorical terms that no credit of the
specified duty paid on the inputs used in the manufacture of a final product (of
the enumerated categories) shall be allowed if the final product is exempt from
the whole of the duty of excise leviable thereon or is chargeable to nil rate of
duty. Moreover on the facts of the case it is found that the manufacturer had
availed of the credit at the time of the clearance of the goods and had suo moto
reversed it to avail the exemption later on almost after 11 months when it
claimed refund of modvat-credit, hence it was not entitled to exemption.
Undisputedly factual position is so.
Moreover,
on the facts of the case, it is found that the manufacturer had availed of the
credit at the time of the clearance of the goods and had suo motu reversed it
to avail the exemption later on almost after 15 months when it claimed refund
of Modvat credit, hence it was not entitled to exemption.
Though
the decision in Orissa Extrusions's case (supra) supports the stand taken by
the appellant, but in view of what has been stated by a three-Judge Bench in Ichalkaranji's
case (supra) the decision does not lay down the correct position in law. In
that view of the matter, the present appeal is sans merit and is dismissed. No
costs.
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