Customs, Excise and Gold Tribunal - Delhi
Chandrapur Magnet Wires (P) Ltd. vs Collector Of C. Ex. on 17 May, 1995
Equivalent citations: 1995(80)ELT134(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. This appeal is directed against the Order-in-Appeal, dated 27-9-1993 passed by Collector (Appeals), Indore, who had decided two appeals by a common order. This appeal is directed against only one appeal, by which the benefit of Notification No. 69/86-C.E., dated 10-2-1986 has been denied. The prayer made in this appeal is :
(i) to hold credit of Rs. 12,83,852.84 on account of MODVAT credit was rightly availed and recorded by them, in order to avail the concession under Notification No. 69/89.
(ii) to grant the benefit of Notification No. 69/89 as demanded in request of the subject clearances by holding that subsequent reversal of the credit taken but not utilised on the inputs as sufficient compliance of the condition mentioned in the Notification No. 69/89 as amended at S. No. 1(b).
(iii) to drop the demand raised in the show-cause notice, dated 3-5-1990 for Rs. 12,83,852.84, and
(iv) to grant benefit of the MODVAT credit taken on the inputs and subsequently reversed to the tune of Rs. 5,04,930.97 in order to avail the concession under Notification No. 69/86 as amended in respect of subject clearance.
2. The facts of the case are that the appellants are engaged in the manufacture of Enamelled Copper Winding Wire from duty-paid copper wire bars under Chapter 7403.12 of the CET Act, 1985. They send the copper wire bars for job work under Rule 57F(2) of the CE Rules, 1944 for converting them into copper wires above 6 mm diameter which is classifiable under Chapter Heading 7408.11. The job work is done after obtaining due permission from the authorities for operating under Rule 57F(2) as well as for the benefit of Notification No. 214/86-C.E. The appellants manufacture from the copper wires of above 6 mm various other final products of copper viz. copper wires falling under 7408.11 and 7408.19 and copper strips falling under 7409.90 which are liable to CED. They also manufacture enamelled copper winding wires which fall under the Chapter Heading 8544.00. They avail credit of duty paid on copper wires of above 6 mm received from the job workers. They either sell the same in the market on appropriate payment of duty or convert the copper wire of above 6 mm into wires of below 6 mm. They sell these on payment of appropriate rate of duty or captively consume them by transferring them to the enamelling section. The enamelled copper winding wires are either cleared at nil rate of duty or on payment of appropriate duty under Notification No. 69/86-C.E. as amended. At the stage when the copper wires of less than 6 mm are cleared internally, the appellant reverses the Modvat credit availed by it on the copper wire above 6 mm in its RG. 23, Part-II Register maintained for Chapter 74. After clearing the copper wire of less than 6 mm internally for enamelling, the appellant manufactures the enamelled copper winding wires which is either cleared at nil rate of duty or on payment of appropriate duty. The appellant while doing so takes the Modvat credit in its RG-23A, Part II Register maintained for Chapter 84 in so far as it pertains to the goods to be cleared at appropriate payment of duty. They submit that they do not take the credit of duty paid on the copper wire bars in its RG. 23A, Part n Register for Chapter 84 in so far as it pertains to goods to be cleared at nil rate of duty as of less than 6 mm [as] they are aware of the quantity of goods to be cleared at nil rate of duty. They submit that the enamelled copper winding wires which are to be cleared at nil rate are manufactured only on specific orders. They state that they clear enamelled copper winding wires either on payment of appropriate duty or at nil rate of duty under Notification No. 69/86-C.E., dated 10-2-1986 which at S. Nos. 1 & 2 lays down the condition for clearing the same either on payment of appropriate rate of duty or at nil rate. The Notification inter alia stipulates that if a manufacturer wishes to avail the exemption under the Notification, the modvat credit should not be taken in respect of the inputs used in the manufacture of final product to be cleared at nil rate of duty under the said notification, however, if the manufacturer uses the Modvat credit paid on the inputs in that case, on the same final products, the manufacturer has to pay duty at the rate of 15% ad valorem. They submit that at the stage of availling the modvat credit, they are not in a position to ascertain what would be the quantity of inputs in the manufacture of final products, which may be cleared at nil rate of duty. They have submitted that they had filed classification list and [had] followed all the procedures and maintained all the statutory registers.
3. However, the Asstt. Collector issued three show-cause notices demanding the sums as indicated supra on the ground that the goods have been cleared at nil rate of duty by wrongfully availing the benefit under the said notification, as the same had been manufactured out of duty-paid copper rods/wire exceeding 6 mm on which Modvat credit was taken by them and which had been subsequently reversed, which procedure is not permissible by the said notification. The appellant had submitted their explanation, however, both the authorities rejected their pleas and held that the availment of modvat and then its reversal of credit for taking the benefit of the notification, "cannot be done only to avail the exemption under Notification 69/86, since, there is no authority under Notification 69/86 to reverse the credit taken, unlike Notifications 172/84 & 182/84 which specifically authorise such reversal of the credit if taken earlier. The party's contention that 'credit taken' is to be construed as 'credit utilised' is not supported by any court ruling. On the contrary, it is settled law that there is no room for intendment in interpretation of the Notification vide Hon'ble Supreme Court's decision in the case of Hemraj Gordhan Das -1978 (2) E.L.T. (J 350) (SC). The Asstt. Collector's order to disallow the credit is thus correct and has to be upheld."
3. We have heard Shri A.N. Haksar, Sr. Advocate for the appellant and Shri Somesh Arora, ld. JDR for the Revenue.
4. Ld. Sr. Advocate submitted that a pragmatic approach has to be adopted while interpreting the notification, otherwise the notification would become nugatory. He submitted that if the benefit is denied then the appellant have to set up another factory to claim the benefit. In this context, he relied on the ruling of the Hon'ble Supreme Court rendered in the case of C.C.E v. Park Exports (P) Ltd. as reported in 1988 (38) E.L.T. 741, Para 12. He submitted that the aim and context of the notification is that duty should have been paid on input and that double benefit should not be availed simultaneously. Therefore, the assessee by reversing the credit satisfied the terms of the Notification, that the duty on input should have been paid and Modvat credit should not have been availed. He submitted that the term "taken" is not occurring in Rule 57A, and hence, its interpretation has to be liberally done. He submitted that at best, it could be a procedural lapse, for which benefit of notification cannot be denied, as there is no revenue loss either. He pointed out that the duty has also not been properly quantified.
5. Ld. DR submitted that the word "credit taken" & "credit utilised" are synonymous and it requires to be strictly construed. He pointed out that Modvat Rules do not provide for reversing the credit taken and when such an action had been done by the assessee suo motu, then the department is justified [in] recovering the duty amount. He submitted that there is no room for intendment while interpretating a notification and it is required to be strictly construed as rightly held by ld. Collector. In this regard, the ld. DR relied on the ruling of Hon'ble Supreme Court rendered in the case of Novopan India Ltd., Hyderabad v. C.C.E. & Customs as reported in 1994 (4) R.L.T. 323. He also submitted that when a term has not been defined in a notification, then the term as defined and understood in a statute is required to be looked into. In this regard, the ld. DR relied on the ruling rendered by Hon'ble Delhi High Court as in the case of Good Year India Ltd. v. Collector of Customs -1990 (49) E.L.T. 39 and that of Hon'ble Supreme Court in the case of Prestige Engineering (India) Ltd. v. C.C.E. as reported in 1994 (4) R.L.T. 333. Arguing further, ld. DR submitted that Modvat credit is like a pool and it requires that so much of duty utilised is from such input only, thereby, there is emphasis of utilising the credit of duty paid on such input for the final product. By adopting this procedure of reversal of credit by the appellant, the very rules of Modvat are violated and is against its spirit. He placed before us the ruling of the Gujarat High Court in the case of Navsari Oil Products Ltd. v. Asstt. Collector of Central Excise, 1992 (60) E.L.T. 550 (Guj.) wherein it has been held that, if separate accounts are maintained then there is no question of credit being available, as such credit was not available at all. There has been no separate maintaining of account, and there is no one to one correlation and such reversal of duty is not of such input vised for manufacture of final product and therefore, the view taken by the Revenue is required to be confirmed. In this regard, ld. DR also relied on Board's letter dated 8-8-1988 (Circular No. 38/88), which support has been taken by lower authorities.
6. We have carefully considered the submissions made by both the sides and have perused the citations and the record before us. The question that arises for consideration is as to whether the appellants can reverse credit already utilised in respect of copper wire above 6 mm at the time of clearance of enamelled copper winding wires manufactured therefrom, for the purpose of availing the benefit of the concessional rate of duty under the Notification No. 69/86?
7. The appellants contend that they either sell the various products manufactured from copper wires of above 6 mm received from job workers, on appropriate payment of duty or convert the copper wire of above 6 mm into wires of below 6 mm. These again are either sold as such on payment of appropriate duty or captively consumed by transferring them to the enamelling section. The enamelled copper winding wires are either cleared at nil rate of duty or on payment of appropriate payment of duty under Notification No. 69/86-C.E. as amended. At the stage when the copper wires of less than 6 mm are cleared internally the appellant reverses the Modvat credit availed by it on the copper wire above 6 mm in its RG. 23, Part-II Register maintained for Chapter 74. After cleaning the copper wires of less than 6 mm internally for enamelling, the appellant manufacturers the enamelled copper winding wires, which they are clearing at nil rate of duty or on payment of appropriate duty under Notification No. 69/86-C.E., dated 10-2-1986 by reversing the Modvat credit in respect of the inputs used in the manufacture of the final products. The S. Nos. 1 & 2 of the notification lays down the condition for clearing the same on either payment of appropriate rate of duty or at nil rate. The notification inter alia stipulates that if a manufacturer wishes to avail the exemption under the notification, the Modvat credit should not be taken in respect of inputs used in the manufacture of final product to be cleared at nil rate of duty under the notification, however, if the manufacturer uses the Modvat credit paid on the inputs, in that case, on the same final products, the manufacturer has to pay duty at the rate of 15% ad valorem. The terms of the said Notification 69/86 are extracted hereinbelow:
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8. The Revenue's stand is that such reversal of credit to utilise the benefit of concessional rate of duty is not permissible. This is contested by the assessee on the ground urged by ld. Senior Advocate. We are unable to agree with the ld. Sr. Advocate. The argument of ld. DR has lot of force and it requires to be accepted. The modvat credit utilised cannot be reversed to avail the benefit of the notification, as there is no provision in Modvat Rules. The Tribunal has held so, in the case of Universal Radiators Ltd. v. C.C.E., Coimbatore as reported in 1994 (54) E.C.R. 215 in Para (7), which is reproduced herein below:
"7. At the outset I would like to observe that in a number of decisions the Tribunal has held that where the inputs are used in a factory for production of specified finished product and the part of the same is cleared without payment of duty under any Notification, the Modvat Rules do not provide for reversal of the Modvat Credit as such. If this is be (sic) the legal position as settled, the question of reversal of any Modvat credit in respect of the waste generated would not arise".
(emphasis supplied).
In view of this legal position as stated in the above ruling, we confirm the findings of the lower authorities. The E.R.B. in East India Pharmaceuticals Ltd. v. C.C.E. - 1991 (54) E.L.T. 355 has taken a view that credit of duty from a certain quantity or lot of inputs can be utilised only for payment of duty for the final products manufactured from that lot and not for those manufactured from different lots, say previous lots. This has been held to bring the Modvat Scheme on a par with the set off procedure with its strict correlation between input and final product. It has also been held that Rule 57C lays down that no credit of duty will be permissible if the inputs are used in the manufacture of wholly exempted goods. It has been further held that, if a manufacturer has got unutilised inputs and also unutilised credits, the latter has to be disallowed if the final products become exempt. It has been held that there is no escape from that, in terms of Rule 57C. This view has been accepted by WRB in the case of Kirloskar Oil Engines Ltd. v. C.C.E. - 1993 (67) E.L.T. 412. But in view of contrary judgment in the case of C.C.E., Bangalore v. Wipro Information Technology -1988 (33) E.L.T. 172 (Tribunal) and that of C.C.E., Cochin v. Premier Tyres Ltd. - 1992 (62) E.L.T. 104 (Tribunal), the matter had been referred to Larger Bench and the Larger Bench has already concluded the matter as reported in 1994 (73) E.L.T. 835. The relevant Paras 17.1, 17.2 and Para 18 are extracted herein below :
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9. The above ratio supports the view taken by us. Therefore, respectfully [following] up the ratio thereof, we dismiss this appeal.