Customs, Excise and Gold Tribunal - Tamil Nadu
United Canning Company vs Collector Of Central Excise on 14 July, 1994
Equivalent citations: 1994ECR96(TRI.-CHENNAI), 1994(74)ELT463(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. This appeal is against the order of the Collector of Central Excise & Customs (Appeals), Hyderabad. The learned Collector (Appeals) has allowed the Departmental appeal filed under Section 35E(4) of the Central Excises and Salt Act, 1944, and denied the utilisation of the MODVAT credit taken in respect of metal containers for clearance of Mango pulp packed in Asceptic Pouches.
2. Taking into consideration the amount involved and also that the issue fell in a short compass, with the consent of parties, the appeal itself was taken up for disposal dispensing with the pre-deposit of the duty demanded in terms of the impugned order.
3. Brief facts of the case are that the appellants manufacture Mango pulp and sell the same either packed in tin containers or Asceptic pouches. The appellants utilised the MODVAT credit taken in respect of tin containers for payment of duty towards Mango pulp packed and cleared in Asceptic pouches. Proceedings were drawn against the appellants for reversal of this MODVAT credit under Rule 57-I and asking the appellants to pay the duty in respect of the Mango pulp cleared in Asceptic pouches out of the PLA or by cash. The learned original authority ruled in favour of the appellants as under :
"The point to be decided here is whether the assessees can utilise the modvat credit taken by him (after filing necessary declaration as required under law) on the metal containers for payment of duty on mango pulp cleared in pouches. Modvat Credit taken by the assessee can be utilised for payment of duty on mango pulp cleared either in metal containers or pouches and nowhere it is stated the modvat taken on metal containers should be utilised for payment of duty on mango pulp packed in metal containers only."
The concerned Collector filed appeal against this under Section 35E(4) of the Central Excises and Salt Act, 1944 before the Collector (Appeals), who has held as under :
" Rule 57F(3) of the Central Excise Rules, 1944 speaks of manner of utilisation of the inputs and the credit allowed in respect of duty paid thereon. The inputs in respect of which the credit of duty has been allowed under Rule 57A may be used in or in relation to the manufacture of final products for which such inputs have been brought into the factory. In the instant case the Respondents have brought duty paid metal containers for the purpose of utilising them in or in relation to the manufacture of Mango pulp. They have taken credit of the duty paid on the metal containers. As per the facts of the case, the metal containers were not used in the manufacture of Mango pulp, in as much as the Respondents have cleared the final product in pouches. It is evident that the credit of duty on the metal containers cannot be used for the purpose of payment of duty on the final product if the metal containers themselves have not been used in the manufacture of final products. The Assistant Collector's order is directly in conflict with the provisions of Rule 57F(1)."
4. The learned Consultant for the appellants pressed the instructions of the Central Board of Excise & Customs contained in letter F. No. 261/72/16/ 87-CX. 8, dated 8-8-1988 in his favour. He pleaded that in a case where same input was brought in for the manufacture of finished product from two sources i.e. one source from which the goods had been sent under Chapter X procedure without payment of duty and the other where the goods had been received on gate passes on payment of duty, the Board had clarified that the input credit taken in respect of the inputs received on duty payment could be utilised for the finished product which was manufactured out of the input which had been brought under Chapter X procedure. The relevant portion of the Board's instruction referred to by him is reproduced below for convenience of reference :
" The matter has been examined by the Board. It is observed that what Rule 57F(3) basically provides is that the credit of duty allowed in respect of any inputs may be utilised towards payment of duty on any of the final products in or in relation to the manufacture of which such inputs are intended to be used. This rule does not debar utilisation of excess (accumulated because of less duty on final products than on the inputs) for payment of duty on the same final products which are manufactured by non-duty paid inputs (whether procured under Chapter X procedure or otherwise exempt under any notification). Moreover, there is no one to one co-relation of inputs and final product under the MODVAT scheme for utilisation of credit. It has therefore been decided by the Board that the excess credit accumulated if any, can be utilised towards payment of duty on the same final products even if manufactured out of non-duty paid inputs."
5. We observe that in the present case it is not the same input which has been received from two different streams. The subject matter for decision before us is regarding two different inputs which were received for intended use in the manufacture of specified finished product. We observe that the MODVAT credit has been allowed to reduce the cascading effect of duty paid on inputs utilised for manufacture of specified finished products and in case those finished products are not used at all in or in relation to the final product the question of allowing MODVAT credit in respect of the same would not arise. The nexus has to be first established between the input and the final product and its use in relation to the final product cleared from the factory has to be established before the MODVAT credit can be utilised for the purpose. In the MODVAT Scheme where the same input is used for a particular finished product the utilisation of MODVAT credit, in the absence of one to one correlation, has been made more liberal and once the input credit has gone into a pool of credit, so long as the finished product is specified, the same can be utilised for the purpose of payment of duty towards that finished product cleared. In the present case the Mango pulp packed in pouches and in tin containers cannot be taken to be the same goods even though these may be assessed under the same Tariff heading. These can be considered as two separate categories of goods utilising separate inputs so far as the packing material is concerned. The learned lower appellate authority has rightly interpreted the scope of Rule 57A read with Rule 57F(3) as reproduced in the operative portion of the order above. Therefore, we find no merits in the appeal and we uphold the learned lower appellate authority's order and dismiss the appeal.