Customs, Excise and Gold Tribunal - Delhi
Kundalia Industries vs Commissioner Of Central Excise on 17 September, 1999
Equivalent citations: 1999(114)ELT763(TRI-DEL)
ORDER
P.C. Jain, Vice President
1. Briefly stated facts of this case are as follows :-
1.1 The appellants herein are a 100% EOU. The appellants herein received their inputs from a 100% EOU. The duty paid by the 100% EOU is in accordance with the proviso to Section 3 read with Notification No. 97/91-C.E. 1.2 By virtue of the aforesaid provisions duty had been paid by the 100% EOU and the inputs received by the appellants herein to the extent of 50% of each of the duties as if the goods had been imported from abroad i.e. 50% of the customs duty plus 50% additional duty of customs and 50% of any other duty leviable on such had they been imported from abroad.
2. A question has arisen what would be the amount of Modvat credit which the appellants herein would be entitled to. For this purpose we have to look to Rule 57-A. The said rule provides, by proviso to that rule, that credit of duty specified in respect of any goods produced or manufactured by 100% EOU and used in the manufacture of final products in any place in India shall be "restricted to the extent of duty which is equal to the additional duty leviable on like goods Under Section 3 of the Customs Tariff Act, 1975 (51 to 1975) equivalent to the duty of excise specified under (i) to (iid) above paid on such inputs".
2.1 Contention for the appellants herein is that the entire duty paid by the input supplier i.e. 100% EOU in terms of proviso to Section 3 is entire excise duty normally could be taken credit in terms of the provisions of Rule 57-A. However, this credit has been restricted to the extent of duty equal to the additional duty of customs leviable under section of the Customs Tariff Act. Therefore, it is submitted that the credit should be restricted equal to the additional duty of Customs leviable on such goods. He submits that this proposition of law has been upheld by the Tribunal in the case of CCE v. Weston Electronics Ltd. reported in 1997 (95) E.L.T. 624. In this connection he draws attention to para 8 of the said Report which is reproduced below :-
"8. In the normal course, the amount of duty paid as Central Excise duty is available for Modvat credit under Rule 57A in its entirety. However, Notification No. 177/86 issued under Rule 57A places a restriction on the quantum of specified duty which will be eligible for credit under the Modvat scheme on the items. A careful reading of this Notification shows that the duty collected is central excise duty and out of this central excise duty, only that portion will be eligible for credit which is equal to the additional duty leviable on like goods Under Section 3 of the Customs Tariff Act, 1975. Now the issue which needs clarification is whether the credit amount should be arrived at after apportioning the quantum of duty to different component namely, basic customs duty, auxiliary duty and additional duty. We observe that the notification is very clear; that we will have to find out the component of additional excise duty presuming that the goods were imported. For determining this, we find that the illustration given by the ld. Counsel for the assessee is handy. He has correctly calculated the portion which is equal to additional duty. It is nowhere laid down that the additional duty should be paid or should have been paid. We have before us only the central excise duty so in that duty we have to find out as to what should be the quantum of presumed additional duty in the total quantity of central excise duty paid by a 100% EOU. Once it is known, we have to allow credit to the extent of additional duty leviable on the goods. The deptt. has mixed up the two issues. They have contended that as no additional duty of customs equivalent to duty has been paid by the manufacturer, the assessee will not be entitled to any Modvat credit. On careful reading of the two notifications referred to above and Section 3 of the Central Excise Act, 1944, we find that credit of additional duties of customs has been permitted only for the purpose of bringing in equity in the case where the inputs were imported on payment of additional duties of customs. In the instant case we do not see any connection between the actual payment of additional duty by a 100% EOU because what is paid by a 100% EOU is central excise duty. If any central excise duty has been paid by a 100% EOU while selling the goods is domestic tariff area, customer becomes entitled to take Modvat credit and the extent of Modvat credit is determined by Notification No. 177/86. So we have to read the Notification for measuring the quantum of credit that can be taken out of the total central excise duty paid on such goods".
3. On the other hand, Revenue restricts the Modvat credit to 50% of the additional duty of Customs because this is what has been paid according to the Revenue in view of the provisions of Notification No. 97/91-C.E. For justification of this, we reproduce the reasoning of the learned lower authority in para 12 of the impugned order :-
"12. The provisions governing the admissibility of Modvat credit are included in Rule 57A of the Central Excise Rules, 1944 and Notification No. 177/86-C.E. dated 1-3-1986 as amended issued under Rule 57A. Rule 57A allows credit of any duty of excise of the additional duty Under Section 3 of the Customs Tariff Act, 1975. Notification No. 177/86 contains a proviso whereby credit of specified duty in respect of any input produced or manufactured in a 100% EOU used in the manufacture of final product in any place in India is restricted to the extent of duty leviable on like goods Under Section 3 of the Customs Tariff Act, paid on such inputs. The proviso amply clarifies that the credit is restricted to the amount of additional duty leviable Under Section 3 of Customs Tariff Act and paid. As such I do not find myself in agreement with the defence that the credit is available to the extent of additional duty leviable not withstanding the fact of its non-payment. There is no gainsaying the fact that the duties charged on the goods manufacturer or produced in 100% EOU and sold in India Under Section 3 of the Central Excise Act, 1944 is the excise duties. But the fact that the amount of this excise duty is equal to the aggregate duties of Customs leviable Under Section 12 of the Customs Act, 1962 on like goods produced or manufactured outside India if imported into India, the excise duty on the goods manufactured in 100% EOU Under Section 3 of the Central Excise Act, 1944 consists of component that are chargeable Under Section 12 of the Customs Act, 1962. Notification No. 177/86 clearly refers to the component of additional duty as chargeable Under Section 3 of the Central Excise Act, 1944 but charged as excise duty alongwith the component of Customs duty. By a legal fiction 100% EOU is a place which is not in India and the sale therefrom within India is akin to the import into India. Under the Modvat Rules the credit of duty on imported goods is available to the extent of countervailing duty paid thereon. To accept the construction of the provisions advanced by the defence will create a disharmony and is therefore not conducive to the harmonious construction of the provisions of the Act. This argument I find was not brought before the CEGAT in the case of CCE, Meerut/Weston Electronics Ltd. v. Weston Electronics Ltd./CCE, Meerut [1997 (21) RLT 549 (T)] and the party's own case cited by the defence in support of their argument, for consideration. From an earlier case of Weston Electronics v. CCE, Delhi [1995 (7) RLT 55 (T)], I find that a reference was made to Delhi High Court regarding the construction of the said proviso of the Notification No. 177/86. It appears therefrom that in an earlier case the Tribunal had interpreted the proviso to mean that the amount of credit of specified duty was required to be restricted to the amount of additional duty actually paid on the inputs and since no additional duty was paid the applicants were disentitled to Modvat credit. In the decision in the aforementioned two cases cited by the defence there is no mention of this reference to Delhi High Court. Since in the light of the reference the matter has not attained a legal finality I am of the humble view that the earlier construction of the Tribunal was correct. From the evidence adduced before me I find that M/s. I.G. Petrol Chemicals Ltd. have deposited the additional duty component of the duty chargeable in respect of the goods in question. It is only to the extent of this duty deposited by M/s. I.G. Petro Chemicals Ltd., the party is entitled to take the credit. The credit taken in excess of this duty deposited is recoverable from the party. Any opinion given by any officer of the department to the contrary does not give party a right to what he is not entitled."
4. After having carefully considered the pleas advanced from both sides. This Bench feels inclined to agree with the findings of the learned lower authority. However, since there is a contrary judgment of the Tribunal in the case of CCE v. Weston Electronics Ltd., supra, we feel that this question is required to be decided by a Larger Bench of this Tribunal. Therefore, we refer this issue regarding the quantum of Modvat credit available to the appellants in these cases to the Larger Bench of the Tribunal.