Customs, Excise and Gold Tribunal - Delhi
Siyaram Platex Pvt. Ltd. vs Commissioner Of Central Excise on 27 October, 1997
Equivalent citations: 1998(98)ELT764(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from the Order-in-Appeal dated 11-10-1996, passed by the Commissioner (Appeals), Central Excise, New Delhi. By this order, the Commissioner (Appeals) has confirmed the order of the Additional Commissioner, Jaipur. By the show cause notice dated 1-6-1993, the appellants were called upon to explain as to why the Modvat credit utilised by them to the extent of Rs. 2,56,530.90 should not be recovered for wrongly utilising the said credit for the period 18-11-1992 to 30-12-1992 in contravention of the provisions of Rule 57A, 57G and 57F(3) of the Central Excise Rules, 1944. A corrigendum dated 14-7-1993 was issued seeking correction of the amount of Rs. 1,72,019.50. Another show cause notice dated 24-12-1993 was issued under Section 11A on the same facts seeking a demand of Rs. 2,05,601.83. Both these amounts have been confirmed in the Order-in-Original.
2. The facts of the case are that the appellants are engaged in the manufacture of HDPE/PP tapes, woven fabrics and woven sacks falling under Section 39 of the Schedule to the Central Excise Tariff Act, 1985. They had filed a revised classification list on 16-11-1992 in terms of the Boards' Order No. 8/92, dated 20-4-1992 issued under Section 37B of the Central Excises & Salt Act, 1944 for their final products namely, HDPE/PP Tapes, Woven fabrics and Woven sacks claiming classification under sub-heading 3920.32, 3926.90 and 3923.90 respectively. In the classification list, they had claimed exemption on the said products under Notification No. 217/86-C.E., dated 1-3-1986 as amended, and the same were to be used captively for the manufacture of HDPE/PP fabrics and sacks. Similarly, they had filed revised declaration on 16-11-1992 under Rule 57C to avail Modvat credit under Rule 57A of the Central Excise Rules, 1944.
3. Prior to 16-11-1992, HDPE/PP tapes fabric and sacks were being classified under sub-heading 5406.90, 5408.00 and 6301.00, respectively. The assessee availed of Modvat credit on the inputs used in the manufacture of HDPE/PP tapes under Rule 57A and was paying Central Excise duty at the rate of 12/- per kg. on the tapes. On 16-11-1992, there was a balance of Rs. 4,12,562.55 in RG 23A Pt. II maintained by them in respect of HDPE/PP tapes.
4. During the period 18-11-1992 to 30-12-1992, the assessee cleared 17,943.00 kgs. of HDPE/PP woven sacks valued at Rs. 11,15,351.75. The assessee paid Central Excise duty amounting to Rs. 2,56,530.90 in terms of para l(a)(i) of Notification No. 175/86-C.E., dated 1-3-1986 as amended, from the accumulated credit lying unutilised on 16-11-1992 in their RG 23A Pt. II maintained for HDPE/PP tapes, as was evident from the RT 12 Return for the month of November, 1992 and the documents submitted therewith by the assessee.
5. The department alleged that in terms of Rule 57F(3)(i) read with Rule 57C the inputs in respect of which credit of duty has been allowed are required to be used in or in relation to the manufacture of final products, for which such inputs had been brought into the factory. Therefore, it was alleged that they had wrongly utilised the credit of the said amount which was not admissible to them. Hence they were required to pay through PLA. The amount was amounted by the corrigendum notice dated 14-3-1993 to the extent of Rs. 1,72,019.50. On similar ground, another show cause notice dated 24-12-1993 was issued demanding Rs. 2,05,601.83 in respect of clearances of final product during the period June, 1993 to Oct., 1993.
6. It was contended by the assessee that they were receiving duty paid inputs namely, Kovelene PP classifiable under sub-heading 3902.10, which was used in the manufacture of tapes. The tapes were further used captively in the manufacture of fabrics and sacks within their factory. As they .were paying Central Excise duty leviable on tapes even though the same were used captively and they had filed a declaration under Rule 57C specifying therein polymers as input and tape as final product. They filed a classification list effective from 16-11-1992 in which they claimed duty on tape under Notification No. 217/86-C.E., dated 2-4-1986. Since such tapes were intermediary product for the manufacture of fabrics and sacks, they also revised declaration under Rule 57G, wherein fabrics and sacks were declared as final product instead of tapes even though the inputs were same. Inter alia, they contended that inputs used in the manufacture of fabrics and sacks which were ultimate final products manufactured by them in a continuous process. After 16-11-1992, when they claimed exemption on tapes in view of the said Notification a revised declaration specifying therein fabrics and sacks as final products was filed. There had been no material change in the context of Modvat scheme prescribed under Rule 57A as the inputs falling under sub-heading 3902.10 continued to be used in the manufacture of fabrics/sacks as earlier to 16-11-1992. Therefore/ the utilisation of Modvat credit was correct. They also pointed out that as per Rule 57D, Modvat credit is not to be denied if during the course of manufacture of final products of intermediate comes into existence which is exempted from duty. The tapes were intermediate products which were exempted under the said Notification and the dutiable final products were sacks and fabrics. It was contended that upto 16-11-1992, they were availing Modvat credit of duty paid on inputs used in the manufacture of tapes which were cleared on payment of duty even though the same were used captively in the manufacture of fabrics and sacks. Tapes earlier being classified under sub-heading 5406.90 were not specified under Column 2 of the Table of the said Notification and as such even though used captively, were issued on payment of duty. With the change of classification of HDPE/PP tapes from sub-heading 5406.90 to sub-heading 3920.32, the same being used captively exemption under the said Notification was applicable. Therefore, the credit lying in balance on 16-11-1992 was earned on inputs which were ultimately used in manufacture of fabrics and sacks which could not be manufactured when manufacturing tapes. In this regard, they submitted that the issue was covered by number of judgments and in this regard cites the judgment in the case of H.M. Bags v. Collector of Central Excise, as reported in 1995 (75) E.L.T. 171 (Tribunal), wherein it was held that the benefit of Modvat credit in respect of duty paid on raw materials, which would have been admissible to the appellants had their goods been classified under sub-heading 3923.90 instead of 6311.00 should be allowed. They further relied on the judgment rendered in the case of Mahindra & Mahindra v. Collector of Central Excise as reported in 1994 (74) E.L.T. 916, wherein it was laid down that Modvat credit should not be denied for non-observation of technical requirements. Further reliance was also made on the basis of Tribunal's decision in the case of Machmeizer Aromatics (I) Ltd. v. Collector of Central Excise, as reported in 1990 (46) E.L.T. 395 and MRF Ltd. v. Collector of Central Excise, as reported in 1990 (50) E.L.T. 546 and Mangalore Chemicals & Fertilizers v. Deputy Commissioner as reported in 1991 (55) E.L.T. 437
7. The learned Additional Collector did not examined the judgments on this point covering the issue. On the basis of his understanding, he held that the final product declared were HOPE tapes only and that the other final products HDPE fabrics and sacks had been declared after 16-11-1992 and that the credit earned on inputs prior to 16-11-1992 was to be utilised for discharging duty liability on HDPE tapes being final product declared in the declaration filed under Rule 57G. He has held that it is a fact that due to changes made in the classification of HDPE tapes, fabrics and sacks under order issued under Section 37B, the assessee was entitled to claim exemption on HDPE tapes which are an intermediate product for manufacturing fabrics and sacks. He has held that the proper course for the assessee would have been to file a declaration under Rule 57H for claiming credit of duty on inputs lying in stock and inputs contained in the final products as on 16-11-1992 when they declared final products namely, HDPE bags and sacks. He has held that in any event, the assessee was not entitled to use the credit earned on inputs to be used in the manufacture of final products HDPE tapes for discharging duty liability on fabrics and sacks. He has held that the other proper course of the assessee would have been to file a declaration on 16-11-1992 to declare HDPE tapes as input and fabrics and sacks as final product also. The assessee should have discharged duty on tapes from credit lying as on 16-11-1992. The duty paid on HDPE tapes could be taken as credit for discharging duty liability on fabrics and sacks. Therefore, he has held that such course has not been adopted by the assessee and therefore, the credit earned on inputs cannot be utilised for final products not declared under declaration filed under Rule 57C, clearances of HDPE fabrics and sacks are to be treated as without payment of duty and hence, the duty is recoverable under Section 11A of the Act. He has held that as the mistake had taken place due to change in, classification of the goods, it cannot be held that the assessee had any intention to evade duty of excise so as to attract the penal provisions of Rule 173Q.
8. The appellants raised all the points on the technical breach and violation and that the substantive provision of the Modvat credit cannot be denied to them and also cited all the judgments before the Commissioner (Appeals). However, the Commissioner (Appeals) in a very brief order, without due consideration of all the points has upheld the Additional Collectors' order, hence this appeal.
9. The learned Counsel submits that the issue is no longer res Integra and the matter has been decided in the case of H.M. Bags v. Collector of Central Excise, as reported in 1995 (75) E.L.T. 171 (Tribunal). He also brought to the notice the Trade Notice No. 8/92, dated 24-11-1992 and also relevant instructions issued by the Board under Section 37B for reclassification of the goods. He pointed out that the finding of the Tribunal that the benefit of Modvat in respect of duty paid raw materials, which would have been admissible to the appellants, had the goods been classified under Chapter subheading 3923.90 instead of sub-heading 6301.00, should have been allowed to them and the demand of duty should be re-calculated taking into account this aspect. He also submitted that there was only technical breach and for such technical breach the substantive rate of Modvat credit cannot be denied. In this case, he relied on the citations referred to before the lower authorities which are already noted above.
10. The learned DR reiterated the submissions.
11. On a careful consideration of the submissions made, I am satisfied that the issue in the present case lies within the ambit of procedural irregularities and that the lower authorities have not looked into the citations and appreciated the point in the correct perspective. The fact remains that the appellants had been availing Modvat credit in respect of tapes however prior to 16-11-1992 pursuant to the Board's Order No. 8/92, dated 24-11-1992 issued by the CBEC under the provisions of Section 37B. The products were reclassified under various sub-headings of Chapter 39 of the Schedule. Accordingly, they filed a declaration on 16-11-1992 classifying the product under various sub-headings of Chapter 39. They also claimed total exemption from payment of duty on the product namely, HDPE under the said Notification, as the said product was used captively in the factory for manufacture of final product namely, HDPE fabrics and sacks. The appellants were using the inputs for manufacture of tapes before 16-11-1992 and also after 16-11-1992. The tapes arise as an intermediate product in the manufacture of fabrics and sacks, which was declared as final product with effect from 16-11-1992. Therefore, the inputs used in the manufacture of tapes are deemed to be the same inputs, which are used in the manufacture of various fabrics and sacks. Therefore, utilisation/use of inputs lying in stock as on 16-11-1992, its use has been in accordance with Rule 57F(1) of the C.E. Rules and there is no contravention in the present case. The appellants have satisfied the provisions of the Rule as prescribed for utilisation of inputs at the material time. The appellants have filed a revised classification list on 16-11-1992, wherein they declared the final product HDPE fabrics and sacks classifiable under sub-heading 3926.90 and 3923.90 respectively and they have utilised the credit only after filing the declaration, and hence there is no mis-utilisation of credit. In the present case the aspect of the matter lies within the ambit of the judgments cited by the appellants and in view of the law laid down, the lower authorities finding that there has been wrong utilisation of Modvat credit is not sustainable.
12. In that view of the matter, respectfully following the judgments, the impugned orders are set aside and the appeal allowed.