Customs, Excise and Gold Tribunal - Delhi
Mark Auto Industries Ltd., Maruti Udyog ... vs Commissioner Of Central Excise on 11 February, 2004
Equivalent citations: 2004(96)ECC36
JUDGMENT V.K. Agrawal, Member (T)
1. These are six appeals filed by M/s. Krishna Maruti Ltd. and others, arising out of a common Order-in-Original No. 37 to 41 /2002 dated 18.12.2003 passed by the Commissioner Central Excise, confirming the demand of Cenvat Credit and imposing penalties.
2. Shri V. Lakshmikumaran, learned Advocate, mentioned that M/s. Maruti Udyog Ltd. imported the components from abroad for their new model vehicles Wagon-R and Balcno; that the components for the vehicles imported by M/s. Maruti Udyog Ltd. (MUL in short) were assessed to Customs duty and Additional duty under Heading 87.03 of the First Schedule to the Customs Tariff Act as complete vehicle applying Rule 2(a) of the Interpretative Rules and Public Notice issued by Ministry of Commerce; that MUL took Cenvat Credit of the Additional Customs duty paid on the components after receipt into their factory; that the imported components were thereafter sent to the various vendors, who are Appellants in the present proceedings, for manufacture, assembly of further components like seats, fuel tanks, etc.; that at the time of sending of these imported components, MUL reversed the entire Cenvat credit taken on the components at the rate of 40% and paid the duty accordingly; that based on these invoices the vendors took the Cenvat Credit of the duty paid on the components; that the Commissioner, under the impugned order, has disallowed the Cenvat Credit to the vendors on the ground that the components sent by MUL to vendors are classifiable under Heading 87.08 of the Tariff as components of vehicles or under Heading No. 94.01 and not as vehicles under Heading No. 87.03 and, therefore, the excise duty ought to have been paid by MUL @ 16% and not @ 40% relying upon the Second Explanation to Rule 57AB of the Central Excise Rules, 1944 according to which when the inputs on which Cenvat Credit has been taken are removed outside the factory, appropriate duty has to be paid on the same as if such inputs have been manufactured in the said factory.
3.1 The learned Advocate submitted that an identical controversy arose in the context of the erstwhile Modvat provisions relating to Rule 57 F (1) (ii) of the Central Excise Rules, 1944; that the Larger Bench of the Appellate Tribunal in CCE v. American Auto Services, 1996 (81) ELT 71 (T) has held that when the inputs are removed as such, the credit originally taken on the inputs is required to be reversed in its entirety; that the Larger Bench of 5 Members of the Tribunal again in Asia Brown Boveri v. CCE, 2000 (39) RLT 575 (T-LB), has affirmed the decision in American Auto Service and has held that where the inputs are removed as such, outside the factory, the credit taken on the inputs is to be reversed; that the Larger Bench has observed as under:
"The legal fiction of treating the inputs as having been manufactured by the recipients of the inputs was only to see that the manufacturer restores the original position by debiting the same rate of duty at which he had taken the credit."
3.2 The learned Advocate mentioned that the said decision of the Larger Bench has been followed by the Tribunal in the context of Second Explanation Rule 57AB itself in Maruti Udyog Ltd. v. CCE, Final Order No. 443/2002-A dated 9.9.2002; that the decision dated 9.9.2002 specifically covers the present matters. He also contended that the amendment made in Rule 57AB with effect from 1.3.2001 by Notification No. 6/2001-CE (NT), cannot be applied retrospectively; that as the entire period involved in the present appeals is before the amendment, the amended provisions are not applicable.
4. The learned Advocate, further, submitted that in any case, the payment of duty @ 40% by Maruti on the components under Heading 87.03 and the classification of components cannot be questioned at the vendor's end; that the assessment of the components and its correct classification has attained finality at MUL's hands; that once that has attained finality, the same cannot be re-opened at the recipients' end and accordingly the credit taken by the vendors based on the documents issued by MUL cannot be denied. He relied upon the following decisions wherein it has been held that the assessment of the inputs at the suppliers' end cannot be reopened at the recipients' end and credit cannot be denied on account of any such re-assessment.
(i) Garg Ispat Udyog Ltd. v. CCE, 2001 (136) ELT 918 (T)
(ii) Prem Cables P. Ltd. v. CCE, 1999 (109) ELT 727 (T)
(iii) Hero Cycles Ltd. v. CCE, 2003 (86) ECC 341 (T) : 2003 (54) RLT 764 (T) 4.2 He also mentioned that in respect of M/s. Brakes India Ltd., there is double duty demand; that the inputs after receipt by Plant I of M/s. Brakes India Ltd. were as such removed to their Plant II and at that time, the entire credit taken was reversed; that the impugned Order confirms the duty demand both on Plant I and Plant II in respect of same inputs which is incorrect. He finally mentioned that penalty cannot be imposed as none of the provisions of Rule 173 Q of the Central Excise Rules, 1944 is attracted as the vendors -- Appellants have taken credit of only that much amount which was indicated in the duty paying document; that M/s. Maruti Udyog Ltd. had intimated the Department about their understanding of provisions of Rule 57 AB and procedure being followed by them; that since the Department did not specifically object to the procedure followed by M/s. MUL at any point of time, no penal provisions can be invoked against them.
5. Countering the arguments, Shri D.N. Choudhary, learned Senior Departmental Representative, submitted that the clearance of inputs by M/s. Maruti Udyog Ltd. has to be in accordance with the provisions of Rule 57 AB(1)(b) of the Central Excise Rules, 1944 only; that the provisions of Rule 57F(1) which were interpreted by the Larger Bench of the Tribunal were different from the provisions of Rule 57AB(1)(b); that the Proviso in Rule 57F(1) which provided that the appropriate duty on inputs removed as such would not fall short of the amount of credit already availed, did not exist in Rule 57AB (1) (b) under which the inputs were cleared by M/s. Maruti Udyog Ltd.; that thus the decisions of the Larger Bench in American Auto Service and Asia Brown Boveri are not applicable. He, further, contended that Rule 57AB (1) (b) mandates that when inputs are removed from the factory, the manufacturer shall "pay" the appropriate duty of excise leviable thereon as if such inputs have been manufactured in the said factory; that the word "paid" means "ought to have been paid". He relied upon the decision in No (sic). Sanjana, Asstt. Collector of Central Excise v. The Elphinstone Spinning and Weaving Mills Co. Ltd., 1978 ELT J 399 (SC) and Gursahai Saigal v. Commissioner of I.T. Punjab, AIR 1963 (SC) 1062. He mentioned that as the inputs removed by MUL were falling under Heading 94.01 and 87.08 of the Central Excise Tariff, M/s. MUL were legally required to clear the same on payment of appropriate duty @ 16% Adv. and payment of duty @ 40% was legally wrong; that as the duty ought to have been paid was only 16%, the vendors were eligible to take the credit of the said duty which was leviable on the inputs and not more; that in the case of M/s. Kalyani Brakes Ltd., it is apparent that they had received brake parts falling under Heading 87.08 on which payment of duty was made at the rate of 16% whereas the brake parts received by them from MUL during the same period were received on payment of duty @ 40% and they had consulted M/s. MUL in this regard; that this goes to show clearly their collusion with MUL in wrongly availing of higher amount of Modvat Credit. The learned Senior Departmental Representative relied upon the decision in the case of Kerala State Electronics Corporation (CEGAT-SRB) v. CCE, Kochi, 1996 (14) RLT 129 (T). Finally, he submitted that the provisions of Rule 57AB (1)(b) are similar in substance prior to and after 1.3.2001.
6. We have considered the submissions of both the sides. It has not been disputed by the Revenue that M/s. Maruti Udyog Ltd. had imported components of the Motor vehicles from abroad which were classified as Motor vehicles classifiable under Heading 87.03 of the Tariff on account of Rule 2(a) of the Interpretative Rules. Rule 2 (a) of the Rules for the Interpretation of the Schedule provide that incomplete or unfinished goods having the essential character of the complete or finished goods shall be deemed to be the complete or finished goods. Thus on account of the said Rule, the components of Motor -- vehicles imported by M/s. MUL were deemed to be Motor Vehicles as such and were classified by the Revenue under Heading 87.03 applicable to Motor cars and not under Heading 87.08 (Parts and Accessories of Motor Vehicles) and 94.03 (Other Furniture and Farts thereof). After receiving these components and taking the Cenvat Credit of the Additional Customs duty paid thereon @ 40%, M/s. Maruti Udyog Ltd. removed the same as such to their vendors (other Appellants herein) for further processing after reversing the entire Cenvat Credit already availed by them @ 40 under the provisions of Rule 57 AB (1) (b) of the Central Excise Rules. It is not the case of the Department that some components other than the components so imported by MUL were removed. In fact it is mentioned in the impugned order that the "inputs cleared by MUL, in these cases, were the components of the car kits which imported by MUL and against which credit of CVD was availed of". Thus what was being removed by the components which were classified under Heading 87.03 by the Customs Department and as such their classification cannot now be amended by the Excise Department when these are sent to vendors as such. Accordingly, there has been no wrong payment of duty by MUL and consequenlty no wrong availment of Cenvat Credit by the other Appellants.
7. The learned Advocate for the Appellants has contended that the decisions of the Larger Bench of the Tribunal in the case of American Auto Service and Asia Brown Boveri would apply in the present matters; that these decisions have already been applied by the Tribunal in the case of Maruti Udyog Ltd., Final Order No. 443/2002-A dated 9.9.2002. We observe that in the said decision also the contention of the Revenue was that the provisions of Rule 57 AB were not similar to the provisions of Rule 57 F which were interpreted by the Larger Bench in the case of Asia Brown Boveri Ltd. The similar plea has been taken by the learned Senior Departmental Representative before us in the present Appeals. The Tribunal in the said Maruti Udyog case (Final Order dated 9.9.2002) did not accept the contention of the Revenue and has held as under:
"Explanation to Rule 57 AB of the Central Excise Rules, 1944 before its amendment w.e.f. 1.3.2001 reads as under:
"Explanation -- When the inputs or capital goods are removed from the factory, the manufacturer of the final product shall pay the appropriate duty of excise leviable thereon as if such inputs or capital goods have been manufactured in the said factory, and such removal shall be made under the cover of an invoice prescribed under Rule 52A."
Rule 57F(1) which was interpreted by the Larger Bench of the Tribunal in the case of Asia Brown Boveri Ltd, reads as under:
"Inputs in respect of which Credit of duty has been allowed under Rule 57A may (i) ..............
(ii) shall be removed after intimating the Asstt. Commissioner of Central Excise having jurisdiction over the factory and obtaining dated acknowledgement of the same from the factory for consumption or for export under bond as if such inputs have been manufactured in the said factory".
8. The Larger Bench of the Tribunal held that "the requirement of Rule 57 F (1) (ii) is for payment of duty on the inputs received for home consumption where the inputs have not been used by the manufacturer. The legal fiction of treating the inputs as having been manufactured by the recipient of the inputs was only to see that the manufacturer restores the original position by debiting the same rate of duty at which he had taken the credit. The proviso to Rule 57 F (1) clearly explains the rational for creating the legal fiction by providing the duty of excise payable at the time of removal for home consumption shall not be less than the amount of credit that has been allowed in respect of inputs under Rule 57 A." We agree with the learned Advocate that the said Larger Bench decision is applicable for the period before the amendment of Rule 57 AB. We do not find any reason in absence of any specific mention in the notification which substituted Rule 57 AB that it has retrospective effect. Accordingly, the demand of duty for the period from 20.1.2001 to 28.2.2001 is not maintainable."
9. Following the decision in Maruti Udyog Ltd., we set aside the impugned order and allow all the appeals.