Customs, Excise and Gold Tribunal - Mumbai
Indofil Chemicals Ltd. vs Commissioner Of Central Excise, ... on 17 July, 2001
Equivalent citations: 2001(138)ELT1053(TRI-MUMBAI)
ORDER
Gowri Shankar, Member (Technical)
1. Appeal is taken up for disposal with the consent of both sides, after waiving deposit.
2. Indofil Chemicals Ltd., the appellant, is engaged in the manufacture of pesticides. it availed of the facility of modvat credit. Notice issued to it alleged that it did not utilise aluminium pouches and cardboard cartons, two of the inputs that it had declared, in its factory in the manufacture of pesticides. These two articles were used by its job worker to pack pesticides, which it sold to them.
3. In reply, the manufacturer disputed the position so far as pouches were concerned it said that it used these pouches in its factory to pack pesticides. It accepted that it did not use the cartons in its factory. it supplied the cartons to job worker who packed the pouches containing the pesticides received from the appellant's factory in these cartons as required by law.It therefore contended that both these items were inputs within the meaning of the rules. The Additional Commissioner, whose order has been confirmed by the Commissioner (Appeals), did not accept this contention. he cited a report of the jurisdictional Superintendent that the appellant had installed in its factory a machine for utilising aluminium pouches in packing of the pesticides only in 1997. He therefore concluded that it could not have utilised the pouches in its factory during April to September, 1995 the period covered by the notice. He did not accept the contention that goods used outside the factory would be entitled to credit. He therefore confirmed the proposal in the notice for duty and imposed a penalty of Rs. 4.00 lakhs.
4. The position is not clear with regard to pouches. The fact that the appellant might have installed a particular machine in its factory in 1997, referred to as a Rowena machine, does not necessarily lead to the conclusion that it id not utilise the pouches in its factory earlier. It had specifically contended in this reply that even earlier it had packed the pesticides in pouches. We find this claims reasonable. The counsel for the appellant undertakes to produce before the Additional Commissioner sufficient evidence to show that it did use the pouches We therefore set aside the finding with regard to the pouches and remand this issue back to the Additional Commissioner. he shall pass orders on this issue in accordance with law after considering the evidence that the appellant may produce within two months from the receipt of this order, and the material that the department may produce before him.
5. The fact of the use of the cartons were not used in the factory but by the job worker for packing the pesticides manufactured by the appellant is not denied. The contention here is that despite this fact, they continue to be inputs within the meaning of Rules 57A. it is the contention that the rules do not provide that inputs must be used in a factory, as long as they are used in or in relation to the manufacture of the finished product, which in this case was necessitated by the requirement of the Pesticides Act, 1968 and the Rules made thereunder, they would be inputs, duty paid on which would be available as credit. Rule 57A, or other rules do not, we agree, specifically say that the inputs must be used in a factory. What they did say is that they must be used in or in relation to the manufacture of finished excisable goods. They also say that credit cannot be taken on the duty paid on inputs which are used in the manufacture of finished goods on which duty is not paid. If the process undertaken by the job worker amounted to manufacture and the job worker paid duty on the goods that it manufactured, the cartons would doubtless be eligible inputs for the job worker. They would however not be inputs for the appellant. In point of fact, it is not denied by the counsel for the appellant that the job worker did not pay any duty or that his activities did not amount to manufacture. These cartons therefore would not be inputs. In this background, the contention that the cost of these cartons has been included in the assessable value of the pesticides cleared from the appellant's factory, which is entirely without substantiation, is irrelevant.
6. We are not able to accept that penalty was to imposable on the appellant because its mala fides have not been shown. Sub rule (bb) of Rule 173Q makes liable for penalty in person who takes modvat credit wrongly. it is not possible for us to accept that the appellant believed that despite the fact that it did not use the cartons in the manufacture of the final product, it was entitled to credit. The same position would hold true of the pouches if they were also not used in the appellant's factory. The penalty therefore was imposable. However, since the fat of use of the aluminium pouches in the factory is yet to be established and a single penalty has been imposed for the two acts, we set aside the penalty leaving it for quantification in the proceedings that we have ordered.