Customs, Excise and Gold Tribunal - Mumbai
K.K. Gupta And Sons (J.V.) vs Cce on 14 November, 2000
Equivalent citations: 2001(96)ECR365(TRI.-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. The appellant was engaged in breaking up ships, and inter alia obtaining thereby, two excisable products, ferrous scrap and non-ferrous scrap. It took as modvat credit the additional duty of Customs paid on the ship, intending to utilise it for payment of duty on the scrap. The exact date of taking such credit is not known. However, subsequent to the taking of the credit, duty on ferrous scrap was exempted, by issue of notification on 1.3.1993. The appellant thereupon utilised the credit available to it towards payment of duty on the non-ferrous scrap, which continued to be liable to duty. The Asst. Collector issued notice to the appellant proposing disallowance of the credit taken to the extent of Rs. 16.70 lakhs on the ground that ferrous scrap was exempted from duty, and imposition of penalty. In due course, he confirmed the proposal in the notice. His order having been confirmed by the Collector (Appeals), the matter is before us.
2. The basis for the calculation of the duty in the show cause notice is unclear. The notice refers to scrap cleared in March and June 1993. The annexure to the notice indicates the quantity of the scrap cleared, and the basic and special duty payable. The scrap having been exempted from duty on 1.3.1993, what rate of duty has been applied to arrive at the duty stated to be payable is beyond our understanding We are also unable to see any logical basis for the demand. The provisions of Rule 57C, on which departmental representative relies, will not apply. It provides that credit shall not be allowed of the duty paid on inputs if the final product is exempted from duty. Now, the credit was taken at a time when neither of the two kinds of scrap was exempted from duty, even if we assume that the ferrous scrap was exempted from duty, the fact remains that non-ferrous scrap was not exempted from duty, and continued, throughout the period with which the appeal is concerned, to be liable to duty. There is nothing in the rules that prohibits the application of the duty paid on the inputs to any one of the final products. The rules are clear that the credit of duty can be utilised for payment of duty on any final product of the manufacturer. The appellant could therefore utilise the entire amount of the modvat credit towards payment of duty on the non-ferrous scrap.
3. The Asst. Collector tries to evade this position by disallowing the credit to the extent of the terrous content of the ship, which he determines, quite arbitrarily, to be 99%. This course of action is impermissible. The duty was paid, not on an assemblage of ferrous and non-ferrous metal, but on a specific identifiable commodity, a ship. Once the duty was paid on that ship, it is entirely irrelevant what proportion of the ship the finished product, on which the duty is payable, formed.
4. The modvat rules themselves contain a self adjusting mechanism in this regard. The appellant, during the period that the ferrous scrap was exempted could utilise a small portion of the duty paid on the ship for payment of duty on the non-ferrous scrap. The remaining portion would sit in his account unutilised. The department was therefore, protected by the rules to this extent.
5. The Collector (Appeals)'s reliance upon the decision of the larger bench of the Tribunal in Kirloskar Oil Engines v. CCE 1994 (73) ELT 835 : 1997 (72) ECR. 495 (T) is flawed. The ratio of that decision is that credit could not be taken on inputs used in the manufacture of a fully exempted final product. In the ease before us, neither of the two excisable final products was exempted when the credit was taken and one of them continued to be liable to duty.
6. Appeal allowed. Impugned order set aside. Consequential relief according to law.