Customs, Excise and Gold Tribunal - Mumbai
Patel Field Marshal Industries And ... vs Cce on 21 July, 2003
Equivalent citations: 2003(158)ELT483(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (J)
1. Since the issue involved in all these appeals is common, they are being disposed of by this common order.
2.a) M/s Patel Field Marshal Industries (hereinafter referred to as "PFMI") are engaged in the manufacture of, interalia, diesel engines. There are classified under hearing 84.08 of CETA.
b) Engines are cleared for home consumption on payment of excise duty. Diesel engines are also removed for captive consumption for the manufacture of centrifugal pumpsets commonly known as couple sets. Centrifugal pumpsets consists of diesel engine as well as centrifugal pumps. These two items are coupled together and mounted together on a common base plate. The resultant product is called as pumpset or couple-set.
c) The department too the view that diesel engine when cleared for captive consumption is not chargeable to duty in view of Notification No. 4/97-CE, Notification No. 5/98-CE (pg 7-14 of compilation) of similar notifications issued from time to time in each Financial year (hereinafter referred to as "the said notification") and therefore, since the final product, namely, diesel engine was both exempted as well as chargeable to duty, PFMI was required to pay 8% of the selling price under Rule 57 CC of the Central Excise Rules, 1944 (hereinafter referred to as "the said Rules") as all diesel engines were manufactured out of common inputs and no separate accounts were maintained by the assessee.
d) In view of the objections raised by the department vide letter dated 15.04.1997 PFMI informed that they would pay 8% as directed on all further clearances of diesel engines for captive consumption. Until then PFMI was removing diesel engines for captive consumption on payment of excise duty.
e) PFMI contended that diesel engines are not exempted under the said notifications. According to PFMI, what is exempted by the said notifications are parts used in the manufacture of centrifugal pumps and not parts of centrifugal pump sets. PFMI contends that centrifugal pump sets are different and distinct commodities and these two have different trade understanding. Accordingly, although PFMI was ready and willing to pay excise duty on diesel engines also removed for captive consumption, the department insisted on payment of 8% under Rule 57 CC.
f) The adjudicating authority held against PFMI while the Commissioner (Appeals) vide Order No. 721-724/98 dated 12.10.1998 held that diesel engines are not exempted under the said notifications and therefore Rule 57 CC is not applicable in the facts and circumstances of the present case. This order covers the period April 1997 to March 1998. Consequently, PFMI is entitled to refund of 8% paid by them under Rule 57 CC on the price of the diesel engines.
g) While the aforesaid issue was pending, the department at the same time raised another dispute to the effect that PFMI is required to reverse 8% on the selling price of the centrifugal pumpsets, and not on the price of diesel engine. Accordingly, the department raised a demand for the differential amount covering the period April 1997 to September 2000 being the amount of 8% on the price of the pumpsets.
h) The Commissioner (Appeals) vide three separate Orders-in-Appeal dated 31.5.2000, 7.11.2000 and 15.5.2002, took a contrary view to that of the Commissioner (Appeals) in the previous Order dated 12.10.1998 and rejected the appeals filed by PFMI holding that diesel engine was covered by the said Notification on account of the Circular No. 224/58/96 dated 26.06.1996 (pg 17 of the compilation) issued by the Central Board of Excise & Customs. It is submitted that the said circular merely deals with the issue of classification of the pumpsets. The said Circular accepts that the centrifugal pumps and centrifugal pumpsets are different commodities but by virtue of Note.3 to Section XVI of the Tariff and the Rules for Interpretation of the Tariff, centrifugal pumpsets would also merit classification under heading 84.13. The fact that both pumps and pumpsets are classifiable under the same heading 84.13 does not mean, that the two are one and the same item. There is, difference in the two products which is also accepted in the commercial parlance. Centrifugal pump is one of the components of the centrifugal pumpsets. Centrifugal pump with complete excisable and marketable commodity by itself and diesel engine is not a part thereof. Diesel engine is a part of the pumpsets and hence not covered by the said Notification which merely exempts parts of pumps and not pump sets. The said Circular does not deal with the exemption notification at all. After hearing both sides and considering the issue raised it is found.
3. After hearing both sides and considering the issues raised, it is found:
a) When Board has clarified that amounts reversed under Rule 57 CC are not duty the same cannot be covered by the stipulations of Section 11B of the Cental Excise Act 1944 and the theories of unjust enrichment. The order of the lower authorities to that effect can not be sustained.
b) IC engines are separate excisable entities mentioned in the tariff and by application of the rules of classification for parts as parts under CETA 1985 they cannot be termed and or classified as parts of centrifugal pumps or couple sets as is being contended by Revenue.
c) Once IC engines come into existence in the appellant factory, as a separate excisable entity, on removal of the same duty is to be discharged. Even if that removal is within the same premises for coupling it with certain other items procured from other manufacturers which may result in the emergence of a new excisable commodity. If this new excisable commodity is exempt from duty, the Modvat chain for availing credit on IC Engine parts would break at the stage of IC engines removed after payment of duty for captive consumption. Credit on inputs on IC engines would be eligible, up to and for discharge of duty on such engines.
d) Such engines cannot be removed without discharging duty thereon, since they are not been found to be exempt under the notifications as is being contended by Revenue in this case. Therefore, these was no case or cause to effect the reversals of 8% of an amount under Rule 57 CC as was directed by Revenue and made in protest by the appellants. Once such a reversal is not found to be permissible under law the same is to be rectified by suitable adjustments in the credit registers where the ineligible debts were effected. The amounts are required to be credited in above terms.
e) A reading of Rule 57CC(1) which provides as under:
"Where a manufacturer is engaged in the manufacture of any final product which is chargeable to duty as well as in any other (final product which is exempt from the whole of the duty of excise leviable there on or is chargeable to nil rate of duty) and the manufacturer takes credit of the specified duty on any inputs (other than inputs used as fuel) which is sued or ordinarily used in or in relation to the manufacture of both the aforesaid categories of final products, whether directly or indirectly and whether contained in the said final products or not, the manufacturer shall, unless the provisions of Sub-rule (9) are complied with, pay an amount equal to eight per cent of the price (excluding sales tax and other taxes, if any, payable on such goods) of the second category of final products charged by the manufacturer for the sale of such goods at the time of their clearance from the factory."
Would indicate that the pumps and value there of cannot be sought to be reversed since the amounts which are required to be reversed, should be of products sold. In these cases what is being sold are Diesel Engines for home consumption and pumpsets of Home Consumption. For the pumpsets they are not claiming any Modvat credit of the inputs which go into manufacturing of such pumpsets. Modvat credit is claimed only on inputs which go into manufacturing of the Engines. Such engines which are cleared for home consumption are cleared on payment of duty and no amount is required as reversal as per Rule 57 CC. As regard the Diesel Engines for which the Modvat credit claimed inputs have been used and which in turn are recovered for captive consumption, such engines are not sold, but what is sold is the pumpsets which emerges after such engines are coupled with the centrifugal and other bought out parts. Since what is sold is a product different from the product for which the Modvat declarations and credits were claimed, the value of only Diesel Engine sets could be taken into consideration and not the value of the centrifugal pumps, if a reversal is to be upheld.
f) We find that there is no case for reversal of 57 CC credit, the Modvat chain being available and input credits taken on Diesel Engines to have been correctly availed, since duty is to be discharged on IC engines which are captively used for manufacture of Pumpsets or cleared for home consumption. As far as Modvat credit on Diesel Engines is concerned, there are no two categories of final products i.e. one dutiable and one exempt. Therefore Rule 57 CC will not be applicable, for credits taken on pats which go to manufacture of Diesel Engines.
g) In view of our findings, the debits of 8% made under protest are required to be reversed, there being no bar of Section 11 B, No demands in this case as made out and confirmed, as regards the 'amounts' under Rule 57 CC could be upheld and orders there to are required to be set aside.
4. All these appeals PFMI are allowed in the above terms.
5. The issue in the appeal No. E/2014/02, E/2015/02, E/2343/01, E/319/01/Mum filed by M/s Swati Enterprises against CCE Rajkot being the same, these appeals are also disposed of with the same findings and with the same directions.
6. Appeal No. E/78, 79/99 & E/81 to 83/99 are filed by the Revenue against the Commissioner (Appeals) ordering the refund of amounts paid under Rule 57 CC on the same facts. The grounds taken by Revenue in these appeal are:--
i) The Board's clarification should be applied to hold that no duty was required to be paid on Diesel Engines.
ii) The Appellate authority had erred in relying upon the judgments in the case of Trading Engineers International Pvt Ltd., (1997 (91) ELT 74 (T)) because centrifugal pumps and pumpsets were classifiable under the same Chapter sub-heading while generator and generating sets are having different tariff headings.
iii) The order of refund with interest under Section 11 BB of the Central Excise Act is bad since Board has clarified that amount reversed under Rule 57 CC is not by way of payment of Excise duty.
7. Since the issues involved are the very same issues as in the cases herein above, these appeals are also disposed of (SIC) on the same findings and with the same directions.
8. All these appeals are disposed of in above directions.
(Pronounced in open Court on .....)