Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Maruti Udyog Ltd. on 30 December, 1994
Equivalent citations: 1995(78)ELT27(TRI-DEL)
ORDER
1. Collector of Central Excise, New Delhi has filed this Reference Application under Section 35G stating that the following questions of law have arisen from the Tribunal's Order No. A/465/94-NRB, dated 11-5-1994 which should be referred to the High Court for their opinion:-
(i) Whether in the matter of adjustment of Modvat Credit Rule 57E is to be interpreted independently of the provisions of Rule 57A shall have an over-riding effect on the provisions of Rule 57E.
(ii) Whether the credit of differential duty in respect of inputs on account of escalation of value could be allowed in terms of Rule 57E as it existed prior to amendment by Notification No. 117/87-C.E., dated 15-4-1987.
(iii) Whether the Appellate Tribunal is empowered under the Central Excises & Salt Act to give a relief which is not provided under the law especially when the matter is still pending final decision before a larger bench as referred by the Hon'ble West Regional Bench of CEGAT with case of Hindustan Lever Ltd. v. Collector of Central Excise, reported in 1994 (70) E.L.T. 788 (T).
2. The facts of the case which have been considered by the Tribunal in reading the decision are as follows :-
M/s. Maruti Udyog who are respondents herein are manufacturers of cars, jeeps and vans falling under Chapter 87 of the CETA 1985 and they had been availing modvat credit in terms of Rule 57A read with Rule 57G of the Central Excise Rules, 1944 after due observance of formalities prescribed. In cases where credit of duty had been taken already, the respondents were taking differential credits subsequently, based upon certificates issued by suppliers who had originally supplied the goods on payment of duty, but the same had been varied due to some reason or the other, and such certificates were duly certified by the Jurisdictional Central Excise Officer at the supplier's end. On 7th and 13th February 1987, the officers of Preventive Unit, Faridabad visited the factory of the respondents for scrutiny of modvat records and observed that the respondents had taken credit wrongly to the tune of Rs. 64,58,282.64 upto the period of 5-2-1987 in their RG 23A Part II account towards additional duty paid by the manufacturer of the inputs due to increase in assessable value or due to prior clearance of inputs under GP-II without payment of duty and subsequently duty paid, or duty short paid at the time of clearance of inputs. The Assistant Collector held that the above credit was not admissible either under 57A or 57E and disallowed the same and the respondents were directed to adjust the amount in their credit account or current account or by cash within a certain period of receipt of demand under Rule 57-I. The lower appellate authority set aside the Assistant Collector's order following the judgments of the Tribunal in the case of Indo National Ltd. v. Collector of Central Excise reported in 1989 (41) E.L.T. 422 and Guest Keen William v. Collector of Central Excise reported in 1990 (47) E.L.T. 141 and directed the Assistant Collector to allow the credit under Rule 57A if otherwise eligible. Hence this appeal by the Revenue.
The appeal was decided by the Tribunal against Revenue upholding the order-in-appeal passed by Collector of Central Excise (Appeals). The contentions raised in support of the department's appeal were that Rule 57E of the Central Excise Rules as it was worded during the relevant period i.e. prior to 1-3-1987 allowed variation of modvat credit only due to payment of refund sanctioned and in no other situation, Rule 57A could not be the fountain head of relief as Rule 57E is a self contained code. The latter Rule did not provide for variation on account of additional duty paid on the inputs. These were rejected in favour of the contention raised on behalf of the respondents relying upon earlier decisions of the Tribunal in Collector of Central Excise v. SAIL - 1990 (47) E.L.T. 389 and Collector of Central Excise v. Union Carbide reported in 1991 (54) E.L.T. 342. The order of the Collector (Appeals), holding that the case of the appellants before him (respondent herein), would be squarely covered under Rule 57A if their claim that the entire extra payment of duty arose not due to variation in the rate of duty was correct. He did not agree with the view taken by the Assistant Collector that subsequent payment of extra duty was not covered by Rule 57A. The relevant observations from the earlier Tribunal decisions referred to above were extracted in the Tribunal order presently under reference proceedings and these decisions were followed, rejecting the contention of the Department that Rule 57A is merely a preamble to the Modvat scheme and cannot be the source of power for granting relief in such cases. The present Reference Application is a sequel.
3. In the Reference Application where the questions extracted earlier have been proposed for reference to the High Court, it has been urged in support of the proposal that adjustment of duty credit is governed by specific Rule 57E and no other rule can have an overriding effect thereon. The said Rule, as it stood at the relevant time, provided that adjustment of duty credit was possible only in case of downward revision of duty and there was no scope of variation of modvat credit where the duty paid initially was revised upward. It was a self-contained rule and did not require any reference to any of the rule including Rule 57A for its interpretation. The Collector has relied upon the decision of the West Regional Bench of the Tribunal in Mahindra and Mahindra v. Collector of Central Excise -1990 (50) E.L.T. 55 wherein it was held as follows :-
" It is clearly evident from a reading of Rule 57E as it stood prior to its amendment that during the relevant period where the inputs were received and credit of duty was taken on these inputs there was no enabling provision in the Modvat Scheme permitting taking more credit consequent on payment of additional duty on the same inputs because of the demand of other contingency. When it is not legally provided for in the Rules, the question of taking any credit of the additional amount cannot be said to have the requisite legal backing."
"The scheme provides for variation in the credit already taken by a separate Rule, which can be identified only as Rule 57E. When that Rule does not during the material period, provide for cotingency of this nature, namely, varying credit to the exact of differential duty paid later consequent upon the demand on the input manufacture one is only to conclude that the policy matters did not provide for such contingencies for reasons best known to them."
The Collector has then stated that the West Regional Bench has subsequently reiterated their above cited observations in the subsequent case of Hindustan Lever Ltd. v. Collector of Central Excise reported in 1994 (70) E.L.T. 788 and referred the matter to a larger Bench of the Tribunal for resolving the difference of views held by the different Benches.
4. When the Reference Application came up for hearing, Shri K.K. Dutta, learned Departmental Representative appeared for the Collector. He reiterated the submissions contained in the Reference Application and pleaded that the questions raised may be referred to the High Court.
5. Shri V. Sridharan, learned advocate who appeared for the respondents opposed the contentions in the application and supported the Tribunal decision which he submitted was correct in law following earlier Tribunal decisions which were based on a correct appreciation of the legal position. There was an apparent conflict between Rules 57 A and 57E of the Central Excise Rules. The former Rule is the authority for allowing credit of duty paid on the inputs while the latter provided for variations of the credit of duty taken originally. Simply because that Rule did not, till the amendment in March and April 1987, specifically provide for upward variations of credit consequent to variation of duty paid, but only covered cases where duty paid was varied subsequently resulting in payment of refund on such inputs, it did not mean that the duty paid subsequently could not be taken as credit. Rule 57A is the substantive provision for grant of credit and Rule 57E is the procedural one for varying of credit consequent to variation of duty paid. Any deficiency in the procedural provision cannot negate the substantial provision and deny the facility of credit corresponding to the duty paid. He pleaded in conclusion that the Reference Application be dismissed.
6. We have considered the submissions. The order of the Tribunal in this case followed, as pointed out above, certain earlier decisions of the East Regional Bench of the Tribunal, Collector of Central Excise v. SAIL - 1990 (47) E.L.T. 389 and Collector of Central Excise v. Union Carbide India Ltd. -1991 (54) E.L.T. 342 and the South Regional Bench decision in Larsen & Toubro Ltd. v. Collector of Central Excise reported in 1990 (50) E.L.T. 312. The detailed reasoning spelt out in the Union Carbide case, as reflected in Para 7 of the said order had been extracted in the order under Reference proceedings. The main thrust therein was that while Rule 57E relating to adjustment of credit as it stood at the material time did not specifically provide for upward variation of credit consequent to variation of duty paid subsequently, it did not provide either that such upward variation of credit in such a case should not be allowed. As Modvat credit is available to the extent of duty paid on the inputs used in the manufacture of final products in terms of Rule 57A, the upward revision of credit cannot be denied on the ground that it is limited to the duty originally paid and documented. As long as the subsequent payment of duty is properly documented and identified as duty, the same is admissible as credit. It was also observed in the order that the amendment of Rule 57E to provide for the variation of credit consequent to subsequent payment of duty was clarificatory in nature, to remove a deficiency therein and to made it consistent with the substantive Rule 57A and hence it was retrospective in nature going back to 1-3-1986 when the entire Modvat Scheme including both these Rules 57A and 57E came into effect. It was also noted therein that there has been retrospective applicability of amendment of Modvat provisions which had been recognised by the Government; such an amendment related to Rule 57A. Initially on 1-3-1986 the expression "inputs" in Rule 57A - Explanation only included "paints and packaging materials". Only from 14-3-1986 was the scope thereof amended to include inputs manufactured and used within the factory of production. On the same analogy, the amendment of Rule 57E to cover upward revision of credit linking it with the subsequent recovery of additional amounts of duty was also held by the Tribunal in the order under Reference as retrospective in nature as it was clarificatory to make that rule consistent with Rule 57A which is the authority for taking of credit of duty paid on the inputs. As, however, another Bench of the Tribunal has leaned in favour of the other view pressed by the department that Rule 57E at the material time provided for only downward adjustment of credit consequent to variation of duty paid by payment of refund and that the amendment of Rule 57E to provide for upward variation of credit also was only prospective in effect and not retrospective and did not cover cases relating to the period prior thereto. We agree that a question of law has arisen which needs to be clarified by the Honourable High Court.
6. We have, therefore, formulated the following questions of law : -
1. Whether Modvat Credit could be varied upwards corresponding to the subsequent recovery of more duty on the inputs used in the manufacture of final products when rule 57E at the material time only provided for variation of credit consequent to payment of refund on the inputs.
2. Whether such upward variation of credit could be allowed as Rule 57A being the authority for taking Modvat Credit could override the provisions of Rule 57E.
3. Whether the notifications amending Rule 57E on 1-3-1987 and on 15-4-1987 were clarificatory in nature and could be given retrospective effect from 1-3-1986 onwards.
The questions have been placed before both the sides when they agreed that these questions may be referred to the Honourable High Court. We accordingly refer the above mentioned questions of law to the Honourable High Court of Delhi for their valued opinion in terms of Section 35G of Central Excises and Salt Act, 1944.
Registry is accordingly directed to send a copy of this with the required enclosures.