Customs, Excise and Gold Tribunal - Mumbai
Rohit Pulp & Paper Mills Ltd. vs Commissioner Of Customs & Central ... on 26 May, 2003
Equivalent citations: 2003(162)ELT516(TRI-MUMBAI)
ORDER G.N. Srinivasan, Member (J)
1. This is an appeal filed by the assessee against the decision of the Commissioner of Central Excise & Customs, Surat-II, made in Order-in-Original No. 3/MP/97 dated 28.10.1997 in and by which the Commissioner disallowed modvat credit amounting to Rs. 2,71,269/- and ordered recovery of the said sum in terms of Rule 571 of the Central Excise Rules. He also imposed a penalty of Rs. 2,71,269/- under Rule 173Q(1) of the Central Excise Rules read with Section 11AC of the Central Excise Act, 1944.
2. The assessee is engaged inter alia in the manufacture of unwrought refined lead ingots falling under sub-heading 7801.10 of the Schedule to the Central Excise Tariff Act. On 27.1.1992, the assessee wrote the following letter to the Assistant Commissioner of Central Excise, Daman.
"The Assistant Collector of Central Excise DAMAN Sub. MODVAT CREDIT Dear Sir, Kindly permit us to introduce ourselves as the manufacturers of the Lead and Lead Alloys which is falling under Chapter 78 of Central Excise Tariff. We commenced our production after getting the permission of Central Pollution Control Board on 15.10.92. As ours is a secondary lead plant, the basic raw materials are Lead Scrap and Lead Waste. They are procured both indegeniously as well as imported from various other countries. As far as imported raw material is concerned, we are paying countervailing duty of Rs. 2200/- per MT. Similarly in case of indegenious raw materials we are entitled to avail deemed credit of Rs. 2100 per MT as per Notification F. No. 342/1/88 dated 12.7.90.
At the time of commencement of the plant we had got in touch with the then Assistant Collector of Central Excise, Vapi under whom our Range was falling at that time and had informed him that we intend taking full MODVAT Credit of Rs. 2100 per MT on deemed basis on indegenious raw materials. The Assistant Collector allowed us provisional credit upto value of Rs. 2.5 lakhs vide his letter No. V/30-22/57H/MP/91 dated 18.11.1991. The Assistant Collector had informed us that for the time being we should restrict our Credit to 90% and on verification of the records we will be permitted to avail 100% Modvat Credit. As necessary verification has been done by the then Superintendent of Central Excise and as we have so far not got any instructions contrary to our request, we presume that there is no objection to availing 100% MODVAT Credit.
We are therefore, accordingly crediting our initial amount to full extent in our RG 23 Part II and in all other subsequent entries so as to enable us to take 100% MODVAT Credit. This is for your kind information.
Thanking you, Yours faithfully, for ROHIT PULP & PAPER MILLS LTD.
(M.D. SHAH) MARKETING MANAGER"
3. The assessee filed a declaration by its letter dated 18.10.1991 in terms of Rule 57G of the Central Excise Rules regarding unwrought lead ingots treating it as final product and inputs as old drained battery containing lead. This was followed by another letter dated 8th August, 1992. The assessee purchased the unwrought lead ingots from M/s. R.D. Metals Co. in August, September and October, 1992. In all the delivery challans, it has been written by the department as follows. "It is a manufacturing unit and no proof of duty paid. Hence credit availed is disallowed and to be reversed." This remark was made in January, 1993. The department initiated proceedings and in initiating the proceedings, the department also wrote a letter on 8.10.1992 as follows:-
"8.10.92 To M/s. Rohit Pulp & Paper Mills Ltd.
(Metal Division) Airport Road, Bhimpore Village, Nani-Daman.
Sirs, Sub: C.Ex. availing of deemed credit of modvat under Rule 57A on Lead Scrap - matter reg.
On verification of documents submitted with your RT12 returns it is observed that you are receiving whole drained battery as well as battery scrap chura from various parties under delivery challans and you have availed the deemed credit @ Rs. 2100 per MT till July 92 and @ Rs. 2530/- per MT from Aug.'92 on the basis of gross weight as per delivery challans. You have also taken into account such gross weight in RG23A Part-I. It is observed that the said inputs i.e. whole drained battery and battery scrap chura containing lead as well as plastic materials but instead of availing deemed credit on actual weight i.e. net weight of lead you have availed credit on gross weight i.e. weight of plastic materials which is incorrect. your finished goods is refined lead and plastic materials are not input undergoing manufacturing or your finished goods and in no case the plastic materials are used in or in relation to the manufacture of finished goods nor a raw material/inputs as provided in Rule 57A of C. Ex. Rules, 1944. Therefore the credit availed on such gross weight in incorrect.
You are therefore requested to intimate the actual quantity of lead obtained consignment wise from beginning till end of Sept. 92 and weight of plastic materials obtained from such inputs and reverse credit equivalent at the rate of credit availed and report the payment particulars.
You are hereby requested that henceforth when you receive such inputs first you obtain lead from such scrap on such actual weight of lead deemed credit to be availed minus the weight of plastic materials.
In RG23A Part I also you should take credit on net weight of lead only and not along with plastic materials. No credit to be availed on gross weight containing plastic materials. Such repetition will be viewed seriously.
Yours faithfully, Sd/-
Supdt. Range VIII C.Ex. Range VIII, Divn. Daman"
4. A show cause notice dated 4.1.1997 has been issued inter alia mentioning as follows:-
"Whereas it appears that M/s. Daman Metals & Alloys Ltd., Daman, formerly known as M/s. Rohit Pulp & Paper Mills Ltd., Daman (Metal Division) ...........................
Whereas it also appears that on verification of the receipted delivery challans of unwrought lead ingots, it was noticed that the unwrought lead ingots received from the manufacturers under the cover of delivery challans and invoices and no Central Excise GP Is was received evidencing the payment of central excise duty on such ingots.
Whereas it further appears that a statement of Shri M.J. Patel, Personal & Administrative Manager of M/s. Rohit Pulp & Paper Mills Ltd. (Metal Division), Daman was recorded under Section 14 of the Central Excise and Salt Act, 1944 on 24.11.92 by the Assistant Collector, Central Excise, Div. Daman wherein he among other things, had stated that they are engaged in the manufacture of unwrought (refined lead) ingots falling under chapter subheading No. 7801.10. For manufacturing of these products, they are bringing:
01. Drained battery purchased from Traders
02. Lead scrap obtained from drained battery purchased from Traders, and
03. Unwrought Ingots of lead on which they availed deemed Mdvat credit apart from the other inputs and have filed Modvat declaration under Rule 57G of the Central Excise Rules, 1944 dated 18.10.92 and 8.8.92. He has further stated for inputs at Sr. No. 3 i.e. Unwrought Ingots of Lead, that the same was purchased directly from M/s. R.D. Metal Company, who are manufacturers of lead ingots and having their factory at Shed No. A-2/2303, GIDC, Sarigam, Dist. Valsad and the same was received by them only on invoice and delivery challan and no GP 1 was received for evidencing payment of central excise duty on such ingots by M/s. R.D. Metal Company, Sarigam. Regarding inputs at Sr. No. 1 & 2, he has clarified that such drained batteries are purchased by the traders from the Railways on tender basis. These traders sell such drained batteries purchased from Railways. As such, lead scrap or lead scrap obtained after cutting such batteries and also stated that they had full knowledge that the scrap or drained lead batteries are not the scrap generated in a factory and cleared after payment of duty on scrap itself. He further stated that details of such scrap will be submitted in a couple of days in this respect.
Whereas it also appears that a statement of Shri M.J. Patel, Personal & Administrative Manager of the assessee was recorded under Section 14 of the Central Excise and Salt Act, 1944 on 4.12.92 by the Superintendent of Central Excise, Division Daman, wherein he inter alia stated that as already stated in his earlier statement dated 1.11.92 there inputs viz.
01. Drained battery purchased from Traders,
02. lead scrap obtained from drained battery purchased from Traders, and
03. unwrought ingots of lead and further stated that they are also availing deemed Modvat credit on lead cable sheeting, and given detailed worksheet of the receipt No. RPPM:MD:92:121 dated 30.11.92. Accordingly, they have taken the deemed Modvat credit as detailed below:
Period Deemed credit availed (Rs.)
01.
Whole drain battery (containing lead) Dec.
91 to Oct. 92 4,79,715.00
02. Lead scrap Dec.
91 to Oct. 92 12,93,321.00
03. Unwrought lead
-
do -
2,71,269.00
04. Lead cable sheating
-
do -
1,10,054.00 21,54,359.00 and submitted a set of Xerox copies of the delivery challan/invoices for receipt of the above said inputs/goods. He further stated that Shri M.D. Shah, Marketing Manager of the assessee, C/o. Rohit Chambers, Janmabhoomi Road, Mumbai, who can give any more information/details in this matter.
Whereas it appears that the unit has filed declaration dated 17.10.91, wherein they mentioned inputs viz. (i) whole drained batteries contained lead, (ii) metal scrap (lead cable sheating), (iii) lead dross, (iv) caustic soda flacks, (v) soda ash and (vi) lead battery plates scrap rails.
Whereas it further appears that in respect of input i.e. unwrought lead ingots received by them and the deemed Modvat credit on such inputs have been taken and availed, the deemed Modvat credit is admissible on such inputs provided the input is duty paid and if the input is clearly recognized as non-duty paid material, then the deemed Modvat credit is not admissible on such input.
The unit has availed the deemed Modvat credit on unwrought lead ingot and on the inputs as discussed above deliberately wit an intend to avail the benefit of inadmissible Modvat credit of excise duty. They suppressed the fact that unwrought lead ingot was received by them from manufacture on which the central excise duty has not been paid on account of availing the exemption by that manufacturer. The unit has misdeclared the facts to avail credit. In the same way they have availed deemed Modvat credit on the inputs i.e. drain battery, lead scraps, etc. as mentioned above without producing the duty paid documents.
Whereas it further appears that on the basis of details furnished by the assessee vide letter no. RPPM:MD:92:121 dated 30.11.92, it was also noticed that they were receiving input viz. unwrought lead from M/s. simplex India of Vasai, Dist. Thane, 2) M/s. Mayura Metal Printers, (Alloys Division), 253, GIDC, Ankleshwar, 3) M/s. Shirin Metals (P) Ltd., Plot No. 3622, GIDC, Vapi and 4) M/s. R.D. Metal Company, Saringam, Dist. Valsad.
Whereas it also appears that a statement of Shri B.S. Duggad, Partner of M/s. R.D. Metal Company, Sarigam was recorded under Section 14 of the Central Excise and Salt Act, 1944, by the Superintendent of Central Excise, Daman on 3.12.92, wherein he stated that they are the manufacturers of lead ingots having their factory situated at A-2/2303, GIDC, Sarigam. They are purchasing raw materials like lead furnace ash and lead ash by imports as well as by local purchase and after doing the manufacturing activities. He further stated that they are availing the benefit of exemption from payment of central excise duty as per Notification No. 37/81 dated 8.3.81............
5. The assessee resisted the claim, stating that in January 1992 they have already informed the department and also the department, when they raised their objection in October 1992, had not specifically raised its objection regarding unwrought lead and therefore the recovery of modvat credit, alleging that they have wrongly availed, is wrong in law. It is also pointed out by the assessee that the claim is barred by limitation since the entire transaction by the assessee is known to the department. RT12 returns for the respective months have been filed in due time and they have been assessed. The delivery challans were also enclosed. The adjudicating authority, after hearing the parties, disallowed the modvat credit, ordered its recovery and imposed penalty. Hence the present appeal.
6. Learned counsel for the assessee contends that the contentions raised by the assessee before the adjudicating authority had not been properly understood by the adjudicating authority. The learned counsel strains himself to state that in terms of Order No. 342/1/88-TRU dated 12.7.1990, the government itself has ordered that the credit should be allowed without production of documents evidencing payment of duty. When that is the state of affairs, how the department could insist on evidence of payment of duty? He says that at the time when the assessment order was made, there was a confusion in the mind of the assessee that nil rate of duty could be considered as payment or duty or not and this was only answered later on by the judgment of the Tribunal in Machine Builders v. CCE 1996 (83) ELT 576. In the event, it is argued strenuously by the learned counsel that larger period of limitation could not have been enforced in the case inasmuch as RT12 returns were filed in due time and they had been assessed. Therefore the issuance of show cause notice in 1997 for the violations made in 1992 is wrong in law. He also reiterated the above grounds made by the assessee before the adjudicating authority. In reply, learned SDR, Dr. Hitesh Shah, would counter the argument of the learned counsel by stating that the letter dated 27.1.1992 referred to earlier in the order has been filed prior to filing of 57G declaration which has been filed in this case in August, 1992. Even when delivery challans were brought at the time itself, the department has denied the taking of credit. The further letter dated 8.10.1992 referred to in the earlier portion of the order, it is vehemently argued by the learned SDR, does not refer to the item in question viz. unwrought lead. As far as the nature of the duty paying effect on the product is concerned, he cites the judgment of the Supreme Court in CCE v. Dhiren Chemical Industries 2002 (139) ELT 3, where under similar circumstances, the court held that duty paid means it should be actually paid not nil rate of duty. It completely answers the argument made by the learned counsel. It is also submitted by the learned SDR that the decision of the larger bench in the case of Nizam Sugar Factory v. CCE, Hyderabad 1999 (114) ELT 429 answers the invocation of the larger period. As far as reference to the order dated 12.7.1990 is concerned, it is submitted by the learned SDR that production of documents regarding evidence of payment of duty was only waived and it does not mean that where no duty has been paid in fact a person could not take the deemed credit. He asked the question that the credit of whatever duty, namely zero could be taken. Without payment of duty, there cannot be any credit taken.
7. I have considered the interesting arguments made by both sides. When I go through the document i.e. the letters dated 27.1.1992 and 8.10.1992, I am inclined to agree with the argument made by the learned SDR. The party has miserably failed to prove the payment of duty at input stage. It is no doubt true that when one normally purchases the goods from the market, it is assumed that duty would have been paid. It is assumed that all persons including the manufacturers would abide by law in paying the duty regularly. But when the fact remains that in this case, a specific order has been made on the delivery challans by the proper authority, nothing prevented the party from filing an appeal against the same, as it amounts to an order which is prejudicial to the interest of the assessee. The said order states that modvat should be reversed. If this is not prejudicial, what is prejudicial? The judgment of the Supreme Court in CCE v. Dhiren Chemical Industries 202 (139) ELT 3 squarely applies to the facts of this case, i.e. duty paid means duty should be actually paid. When a judgment is made by the Supreme Court which is a declaration of law on the subject, then unless it is specifically stated, it is applied retrospectively as well. If the judgment is intended to be prospective in nature, it should be stated to be so by the learned Judges who rendered the judgment. They would have specifically stated so in the said judgment itself. The judgment in Dhiren Chemicals Industries does not state that it would be applicable prospectively. Hence the argument made by the counsel for the assessee has to be rejected.
8. Learned counsel submits the judgment of the Supreme Court in Jaiprakash Industries Ltd. v. CCE 2002 (146) ELT 481 in support of the appellant's case. In my view, the said judgment cannot be applicable to the facts of this case because in that case there was an existence of divergent views of the High Courts. Here I am only dealing with the judgment of the constitution bench in the case of Dhiren Chemical Industries. Credit can be taken only if somebody earns it. Without payment of duty, nobody can earn modvat credit and it will amount to unjust enrichment. It is also to be observed here if credit of duty is claimed on final product without payment of duty on inputs, it will amount to the assessee making a wrongful gain himself and inflicting wrongful loss to the Government.
9. In the impugned order, a penalty of equal amount has been imposed. In the facts and circumstances of the case, a token penalty will suffice and therefore I reduce it to Rs. 1,000/-.
10. With this modification, the appeal is otherwise dismissed.