Customs, Excise and Gold Tribunal - Delhi
N.M. Nagpal (P) Ltd. vs C.C.E. on 9 August, 2006
Equivalent citations: 2006(112)ECC323, 2006ECR323(TRI.-DELHI)
ORDER C.N.B. Nair, Member (T)
1. These appeals are before us on remand by the Hon'ble Supreme ourt vide judgment dated 03.5.2006 in Civil Appeal Nos. 7785/2001 & 1702/2002. We may read the remand order:
Aggrieved against the order passed by the authority-in-original, respondent filed the appeal before the Tribunal which has been accepted by passing the impugned order. The order-in-original has been set aside. Tribunal has held that the assessee was entitled to the exemption from payment of duty under notification No.5/98-CE.
2. Exemption under the notification is available subject to the conditions specified at Sl. No. 10 of the annexure to the notification. A perusal of condition No. 10 shows that exemption under the notification is available subject to the condition that the manufacturer does not avail of credit of duty (i) on the products mentioned in column 2 of Sl. No.69 of the notification or (ii) on other products manufactured in the same factory. There is no dispute on the point that respondent had not availed of the credit of duty paid on the products mentioned in column 2 i.e. products falling under heading 39.23, 39.24 and 39.26. Exemption has been denied to the respondent on the ground that it was availing of MOD VAT credit on the inputs under Rule 57-A or 57-B, which were used in or in relation to the manufacture of other final products manufactured by the respondent. This is evidence from the allegation made in the show cause notice as well as the finding recorded by the authority-in-original. Tribunal accepted the appeal by observing:
...As it is not the case of department that the appellants (respondent herein) have availed of credit of duty paid on any other product manufactured in the same factory, the benefit of notification No.5/1998 (Sl.No. 68) cannot be denied to the impugned goods....
3. Counsel for the revenue contended that the above-mentioned finding given by the Tribunal is contrary to the record and the case put forth before the Tribunal. Mr. V. Lakshmikumarn, learned advocate appearing for the respondent submits that the credit taken by the respondent under Rule 57-A and 57-B on "any other products manufactured in the same factory" has been off-set by payment of the applicable/full duty on the finished goods. No such clear-cut finding has been recorded by the Tribunal.
4. Since the Tribunal has not recorded any clear cut finding on this point, we accept these appeals; set aside the orders passed by the Tribunal and remit the cases back to the respective Tribunal for a fresh decision in accordance with law. All contentions except the finding recorded by the Tribunal on the question of limitation shall be open to the parties.
5. The appeals are allowed in the above terms. Parties shall bear their own costs.
6. We have perused the record and heard both sides.
7. The dispute is whether the appellant is eligible for exemption under Notification No.5/98-CE dated 2.6.98 in respect of goods produced by it which are classifiable under heading 39.23.90. Relevant entrees in the Notification may be read:
S. Chapter or Description of goods Rate Conditions
No. heading No.
or Sub- heading
No.
(1) (2) (3) (4) (5)
1 1 to 68 10
69. 39.23, All goods other than-
(i) Goods of polyurethanes;
(ii) insulated ware; and
(iii) bags or sacks made out of fabrics(whether or
not coated, covered or laminated with any other
material) woven from strips or tapes of plastics;
fabrics for making such bags or sacks,-
(a) on aggregate value of clearances upto Rs. 85 Nil
lakhs, calculated from 2nd June, 1998 in the
financial year 1998-99;
(b) on aggregate value of clearances exceeding 5%
Rs.85 lakhs, calculated from 2nd Jun, 1998 in
the financial year 1998-99;
(c) on aggregate value of clearances upto Rs.100 Nil
lakhs, in any other financial year;
(d) on aggregate value of clearances exceeding 5%
Rs.100 lakhs, in any other financial year.
Explanation: Any clearances for exports or any clearances of goods exempted from duty or chargeable to Nil rate of duty shall not be included in computing the aggregate value of clearances.
As the exemption is subject to Condition No.10 of the Notification, that condition is reproduced below ;
10. The manufacturer does not avail of credit of duty paid under rule 57-A or 57-B on the products mentioned in column (2) or on any other products manufactured in the same factory (emphasis added) The dispute between the parties is as to what is the effect of the bar on the availing of credit placed under the second clause ("or on any other products manufactured in the same factory") of the above condition. The contention of the assessee is that the bar on taking input credit is only in regard to "the products mentioned in Column (2)" of the notification and does not extend to "other products manufactured in the same factory". As against this, revenue contends that the bar extends to all goods (mentioned in column (2) and any other products) produced in the same factory.
8. The appellant manufactured other items also in the same factory where exempted goods are produced. In regard to the other goods, the appellant availed itself of MODVAT credit under Rule 57 (1) equivalent to the excise duty paid on the inputs purchased. The submission of the appellant is that taking of input credit on "other products" is not a violation of the condition. The contention is that the bar is on the taking of input credit upon utilization of the 'other products' for further manufacture of yet other goods. According to the appellant this is the plain meaning of the words used in the notification. As against the above contention of the appellant, learned SDR would point out that the restriction on the availing of input credit applies to both exempted goods (column) and other goods produced in the factory. The contention of the learned SDR is that the reference in the Condition No. 10 to" credit of duty? under Rule 57A or 57B" applies equally to the exempted products covered by the first clause as well as to any other products covered by the second clause. It is being pointed out that in the instant case since the appellant is availing of Rule 57A credit in regard to other products, it would not be eligible for the exemption under notification No.5/98.
9. The learned Counsel also has a contention that since credit in relation to "other products" is not germane to MODVAT credit on the exempted goods, interpretation which treats inputs credit on other goods in the same way as input credit on exempted goods, would be contrary to the basic Scheme of MODVAT; It is being pointed out that MODVAT credit rules specifically provided for a situation where asassessee is manufacturing both exempted and dutiable goods. (Rule 57CC) etc.... The learned Counsel also would contend that the condition relating to "other goods" relates solely to excluded items falling under heading 39.24.
10. It is well settled that an exemption notification must be given effect to according to its own terms. Particularly, when there is no ambiguity in the meaning of the language used. Therefore, the first requirement is to see the plain meaning of the words used. The prohibition "does not avail of credit of duty paid under Rule 57A or 57B" applies to both the clauses in the condition, the one relating to goods specified in column (2) and other products. The credits contemplated under these rules (57A & 57 B) are in regard to inputs used in manufacture, whether those inputs are procured from outside or are manufactured in house. The reference to the goods covered in both the clauses is also in the same terms- "on the products mentioned in column (2) or on any other products". Thus, the plain meaning of condition is that no input credit should be availed of on the goods mentioned in column (2) or other goods. Since scope of the notification is clear from the language used in notification | itself, there is no requirement for considering the assessee's claim in terms of general provisions under the MODVAT rules. It is not in dispute that the appellant is manufacturing other goods after availing of MODVAT credit on inputs. Therefore, its claim for exemption is hit by the second clause of the condition. In the result, the exemption was not available to the appellant.
11. The appellant has also clamed that if the exemption is not available to it, it should be allowed the benefit of MODVAT credit in relation to inputs. This claim is in terms of the MODVAT Rules inasmuch as the appellants' products as well as inputs going into their production remain notified for the purpose of MODVAT. Therefore, authorities should work out the duty payable by the appellant after allowing eligible MODVAT credit. The quantity of credit available, it goes without saying, is to be established by production of relevant records. The jurisdictional authority is, therefore, directed to re-compute the duty liability after allowing the eligible MODVAT credit.
12. The next claim of the appellant is that the sale price of the goods should be treated as cum-duty price for the purpose of valuation and determination of duty amount.
The law on this issue remains settled by the judgment of the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Delhi v. Maruti Udyog Ltd. Therefore, the original authority is directed to re-compute the duty on this base.
13. Yet another submission of the learned Counsel of the appellant is that there is no warrant for imposition of any penalty in the present case, inasmuch as it remains settled that this is not a case involving any suppression of facts or mis-declaration of facts so as to attracted duty demand during the extended period under Section 11A as well as penalty. It is also being pointed out that dispute is purely legal in character. There is merit in this contention. The Hon'ble Supreme Court has upheld this Tribunal's earlier order in relation to limitation in the remand order. Also, the dispute is purely legal. In these circumstances, penalty clearly is not warranted. Accordingly, penalty under both the impugned orders is set aside.
14. Both appeals are ordered in the above terms.