Full Judgment Text
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CASE NO.:
Appeal (civil) 4891 of 2005
PETITIONER:
M/s. Amrit Paper
RESPONDENT:
Commissioner of Central Excise, Ludhiana
DATE OF JUDGMENT: 25/07/2006
BENCH:
ARIJIT PASAYAT & S.H. KAPADIA
JUDGMENT:
J U D G M E N T
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
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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:
"15. (1) This exemption shall apply only to the
paper and paperboard cleared for home
consumption from a factory-
(a) during the period from Ist
March 2000 to 31st March 2000,
upto first clearances of an aggregate
quantity not exceeding 210 Metric
Tonnes; and
(b) 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;
(2) 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".
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It is again pointed out that in certain other cases, for
example, condition No.27 the entry reads as follows:
"27. 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:
"9. 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,
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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
13. 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.
14. 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).
15. 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
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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:
"57C. 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.
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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.