Custom, Excise & Service Tax Tribunal
M/S Global Sugar Ltd vs Commissioner Of Central Excise, Kanpur on 15 January, 2010
IN THE High Court of Judicature at ALLAHABAD D.B. Central Excise Reference Petition No. 494/2000 In the Matter of M/s Global Sugar Ltd. Appellant (now M/s Kityply Industries Ltd.) Vs. Commissioner of Central Excise, Kanpur Respondent
STATEMENT OF CASE Honble Allahabad High Court, vide order dated 23/1/08, readwith order dated 30/10/09, passed in Central Excise Reference Application No. 494/2000 filed by the Appellant under Section 35H of the Central Excise Act, 1944, directed the Tribunal to submit Statement of case arising out of order-in-appeal No. A/180-181/2000-NB dated 1/3/2000 passed by the Tribunal in respect of an appeal No. E/1323/97 filed by the Appellant against order-in-Original No. 7/Commr/Divn/97 dated 26/2/97 passed by the Commissioner of Central Excise & Customs, Kanpur and refer the following question of law for the opinion of the Honble Court Whether the interpretation of Rule 57T (3) and its proviso given by the Tribunal in the Judgment dated 1/3/2000 is correct.
2. In compliance of the Honble High Courts order, the statement of case is prepared after hearing both the sides. 2.1 The appellant setup a sugar unit during the year 1994-1995 at Rupapur, Distt. Hardoi (UP). They obtained a Central Excise Registration No. 65/Sugar/ STP-2/94 for manufacture of cane sugar and molasses falling under chapter 17 of Central Excise Tariff. They entered into a contract with M/s Krupp Industries India Ltd., Pune for erection and installation of sugar mills machinery in their factory. Therefore, invoices of capital goods were in the name of M/s Krupp. In some cases, in addition to the name of Krupp, consigned to Global Sugar Ltd. was also mentioned. 2.2 The appellant availed Modvat credit on capital goods under Rule 57Q of the Central Excise rules. A Show Cause notice dt. 02-04-1996 from C.No. V(30)36/ Dem/Mod/96-1145-46 was issued to the appellants proposing to disallow Modvat credit of Rs. 3558464. It included credit of Rs. 2525876.75 on the goods purchased by their job workers and in respect of this amount it was alleged that the appellant had not obtained permission as provided under Rule 57-T (3) of Central Excise Rules, 1944. 2.3 At the relevant time, Rule 57-T (1) provided for filing a declaration for availing Cenvat credit and Rule 57-T (2) provided for filing the intimation of receipt of capital goods. Rule 57-T (3) prescribed that the credit can be taken only if the capital goods are received under cover of duty paying documents. It reads as under:-
No credit of specified duty shall be taken unless such capital goods are received in factory premises of the manufacturer under the cover of invoice or a bill of entry or any other documents, as may be specified under rule 57-G evidencing the payment of duty on such capital goods. Provided that, the Assistant Commissioner, may allow, on sufficient cause being shown, allow the manufacturer to take credit of the specified duty on capital goods, paid by a contractor or job worker who undertakes the job of initial setting up, renovation, modernisation or expansion of the plant on behalf of the manufacturer of final products, subject to such procedure and conditions as the Commissioner, Central Excise or Central Board of Excise and Customs may prescribe. 2.4 The Commissioner, Central Excise, Kanpur vide his order No. 07/Commr/Divn./07 dt. 26-02-1997 disallowed the Modvat credit Rs. 35,68,434/-, which included Rs. 25,25,876/-, on the capital goods purchased by the job workers. It was observed that:-
In this connection proviso to sub rule 57-T (3) specifies that credit of the specified duty on capital goods paid by a contractor or job worker who undertakes the job of initial setting up, renovation, modernization or expansion of the plant on behalf of the manufacturer of final products, can be allowed after having obtained a proper permission from the Assistant commissioner. In this regard likewise, proviso to sub-rule 57-T(1) also specifies condonation of delay by the Assistant commissioner where a manufacturer was not in a position to make the declaration under sub-Rule(1) and makes the declaration subsequently. In the instant case, as per the available records, I find no such permission required under the provisions of Rule 57T (3)/57 T(1) ibid has been granted to the party by the Assistant Commissioner, hence the credit amounting to Rs. 25,25,876/- has been availed in an irregular manner and is liable to be disallowed. 2.5 The appellant filed appeals No. E/1323/97 before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) against the above mentioned order of the Commissioner which was disposed off vide final order no. A/180-181/2000 NB dt. 1-3-2000, alongwith another appeal No. E/1230/97 filed by the Appellant against order-in-original No. 03/Commr/Dem/97 dated 30/1/97.
2.5.1 In the final order, the Honble Tribunal in respect of Appeal No. E/1323/97, upheld the disallowance of credit Rs. 25,25,876.75 after observing as under in para 7 of the order:-
We have perused and carefully considered the arguments of both sides. In regard to indirect purchases, as indicated in annexure B to the show cause notice, we note that the goods listed therein were purchased by the job worker/contractor. We note that in regard to these types of goods, for the purpose of Modvat credit, permission under rule 57-T was required. In the instant case, the duty paid character and use of goods in the plant and machinery as components was necessary. In the absence of any letter seeking permission, this important type of work could not be undertaken. Thus, permission becomes important for allowing the Modvat credit in respect of this type of goods. The admitted position is that permission was neither sought nor obtained. Seeking permission of the Assistant Commissioner in the case was mandatory and cannot be considered as procedural matter. In these circumstances, we hold that the authorities below have rightly denied them the Modvat credit on the goods purchases by the contractor/job worker.
2.6 The appellant filed a reference application no. 494/2000 before Honble Allahabad High Court under Section 35H (1) of the Central Excise Act, 1944 against the Tribunals order dt. 01-03-2000 2.6.1 That following questions of law were raised before the Honble High Court:-
(1) Whether the appellant can be considered to have violated the provisions of Rule 57-T(3) of the Central Excise Rules and therefore the Modvat is disallowable particularly when receipt of capital goods in the factory, its installation, availability of duty paying documents and duty paid character have not been challenged by the Central Excise Department.
(2) Whether the appellant can be denied Modvat credit of Rs. 25,25,876.75 for violation of Rule 57-T (3) particularly when substantive procedures have been complied with in as much as declaration under Rule 57-T (1) and 57-T(2) had been filed?
(3) Whether the duty having been admittedly paid on the capital goods, which were received in the factory premises of the appellant and the fact regarding payment of duty was duty established by the invoices specified under Rule 57G in respect of such capital goods, the Tribunal was not justified in invoking the Proviso to Rule 57-T (3) of the Rules?
(4) Whether the Tribunal was not justified in holding that the procedure prescribed under Rule 57-T (3) was mandatory even though the jurisdictional Commissioner had not provided for any procedure to be followed under the Proviso to Rule 57-T(3), as held by the Tribunal in the earlier Order dated 30.9.1997?
(5) Whether, no procedure as required under the Proviso to Rule 57-T(3) being in existence, the genuine claim of Modvat credit could not be legally denied for non-observance of such a non-existent procedure. 2.7 The Honble High Court was pleased to allow the reference Application and vide order dated 23.01.2008 directed the Tribunal under Section 35H of the Central Excise Act, 1944 to refer the following question of law with a statement of the case.
Whether the interpretation of Rule 57 D (3) and its proviso given by the Tribunal in the Judgment dated 01.03.2000 is correct. 2.8 Since there appeared to be a typographical error in the question of law to be referred in Honble High Courts order, as the dispute was with regard to the applicability of Rule 57 T (3),not Rule 57 D (3) of the Central Excise rules, a miscellaneous petition was filed by the Appellant before Honble High Court praying that in the order dated 23.1.08 in the question of law, Rule 57T(3) be mentioned in place of rule 57D (3). 2.8.1 Honble High Court, vide order dated 30/10/09, allowed the miscellaneous petition.
3. Accordingly, under the provisions of Section 35H (4) of the Central Excise Act, 1944 and in pursuance of the order dated 23/1/08 readwith order dated 30/10/09 of the Honble Allahabad High Court, the following question of law arising out of the Tribunals Final order No. A/180-181/2000 NB dated 1/3/2000 is referred to Honble High Court for its decision. Whether the interpretation of Rule 57T (3) and its proviso given by the Tribunal in the judgment dated 1/3/2000 is correct.
4. The Registry of the Tribunal is directed to send the Statement of the case to the Registrar of the Honble Allahabad High Court for consideration of the Honble Court.
5. The relevant documents are enclosed.
(Justice R.M.S. Khandeparkar) President (Rakesh Kumar) Member (Technical) PK LIST OF DOCUMENTS (Photocopies only) Sl. Description Pages No. From To 1. Show Cause Notice No. 1 7 Dt. 2/4/96 issued from C. No. VI (30)36-Dem/mod/96/1145-46 Dt. 2/4/96 2 (1A). Photocopy of Rule 57Q to Rule 57V of the Central Excise Rules, 1944 during the period of Dispute
3. Order in Original No. 07/Commr/divn/97 dated 26/2/97
4. Tribunals order No. A/180-181/2000-NB Dated 1/3/2000
5. Order dated 23/1/2008 of Honble Allahabad High Court in respect of reference application No. 494/2000 filed by the Appellant before Honble High Court under Section 35H of the Central Excise Act, 1944.
6. Miscellaneous Application No. dated filed Appellant in Honble High Court praying that in the order dated 23/1/2008, in the question of law Rule 57T (3) be mentioned in place of Rule 57D (3)
7. Honble Allahabad High Court under order dated 30/10/09 allowing the Misc. Petition.