Customs, Excise and Gold Tribunal - Delhi
Hivelm Industries Ltd. vs Collector Of Central Excise on 10 September, 1986
Equivalent citations: 1986ECR539(TRI.-DELHI), 1987(27)ELT288(TRI-DEL)
ORDER M. Santhanam, Member (J)
1. This is a revision application filed by the Government of India which, on transfer to the Tribunal, is being treated as an appeal.
2. The appellants manufacture High Voltage Air Break Switches and Isolators which fall under Tariff Item No. 68. They were clearing the same on payment of duty. The inputs for these products also suffer excise duty under Tariff Item No. 68. On 10-12-1979, the appellants filed a claim for refund on the ground that as per Notification No. 178/77 they are entitled to refund of the duty of excise paid in excess for the period from 1-8-1978 to 20-5-1979. As the products manufactured in their factory varied from one another they could not avail the set off earlier as there was difficulty in filing a statement showing the input and output. The Assistant Collector, Central Excise, Madras passed orders on 15-12-1979 permitting the appellants to take proforma credit of duty paid on the inputs falling under Tariff Item No. 68. On 13-12-1980, the Collector issued a notice under Section 35A stating that the vital condition for determining the refund was filing of a statement of input-output ratio and in the absence of the statement and without any data as to how many inputs were used in the manufacture of every unit of the final product the refund of Rs. 92,680.61 could not be sustained. A show cause notice was issued to the appellants. In their reply, the appellants urged that there was no set ratio formula for unit output. The nature and number of outside manufactured duty-paid components varied depending on the feasibility of their own manufactured components and the comparative economics and the availability from outside. The appellants have also stated that the refund has been claimed to the extent of the duty paid on the inputs. They have furnished figures of the final output produced and the Tariff Item No. 68 inputs. The order-in-review was passed by the Collector setting aside the order of the Assistant Collector. In the order, the Collector has stated that the important requirement of the set off procedure was that the manufacturer should furnish in advance the formula indicating the input and output ratio for each of the unit of output. Hence the present revision.
3. Shri K.P. Jagdeesan, the learned counsel for the appellants, urged that the Notification No. 178/77-CE dated 18-6-1977 as amended by Notification No. 295/77-CE dated 28-9-1977 envisaged that the exemption would be available in respect of all excisable goods on which the duty of excise is leviable and in the manufacture of which any goods falling under Tariff Item No. 68 of the First Schedule have been used from so much of the duty of excise leviable therein as equivalent to the duty of excise already paid on the inputs. He laid exphasis on the word 'used' and stated that, only after the use, the appellants would be in a position to furnish the statement of the inputs. He urged that particulars of inputs received on payment of excise duty for utilisation in the manufacture of air break switches fall under Tariff Item No. 68 were enclosed to the refund application. The Department has actually verified the particulars and have granted the refund. The learned counsel, therefore, urged that the appellants were not manufacturing the standard products but were manufacturing products according to the specification of the Customer Department. He stated that the product is not a consumer product and that they were not of uniform size and shape. He urged that there was no fixed ratio in inputs because of the variety in the composition of the final product from item to item. A mention of the formula is only for laying down a method of verification of the inputs and outputs. Such a formula is possible only in case of products like chemical fertilizers, pesticides, non-pesticides, etc. Since the products manufactured by the appellants had no rigid formula because of the various factors the benefit of the notification could not be denied to them. He stated that the demand was actually issued on 26-3-1981 and hence barred by limitation.
4. Shri H.L. Verma, SDR stated that the appellants had to furnish the ratio of the input and the output so that the Department may be in a position to verify how much of the inputs was used. The Exemption Notification is based on the ratio of the input and output and in the absence of prior approval the claim cannot be supported. He urged that the rule was issued on 30-12-1980, within six months when the refund was actually paid and hence the proceeding would be in time. He placed reliance on 1985 (21) E.L.T. 620 (Tribunal) (Vikrant Tyres Limited v. Collector of Central Excise, Bangalore) where the Tribunal had considered the scope of Notification No. 178/77. In 1985 (22) E.L.T. 389 (Mad.) (Enfield India Limited v. Ministry of Finance, New Delhi and Anr.) the Madras High Court has held that unless the conditions of the notification are satisfied concessional rate of duty cannot be accorded. In 1986 (6) ECR 297 (Cegat) (Graucer & Well (India) Ltd. Vapi v. Collector of Central Excise, Baroda), the Tribunal has observed that for availing duty exemption the assessee has not merely to stake a claim for exemption but should have the claim accepted by the proper authorities.
5. The refund has been granted by the Assistant Collector on the basis of Notification No. 178/77-CE as amended by Notification No. 295/77-CE. Notification No. 178/77-CE reads as follows :
"In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts all excisable goods (hereinafter referred to as the "said goods") on which the duty of excise is leviable and in the manufacture of which any goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) (hereinafter referred to as the inputs) have been used, from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs.
Provided that where the duty of excise leviable on the said goods is less than the amount of duty of excise paid on the inputs the extent of exemption shall be restricted to the duty of excise leviable on the said goods."
In the amendment, the words "subject to the condition that the manufacturer furnishes to the proper officer a statement showing the quantity of the inputs used in the manufacture of every unit of the said goods" has been included. The appellants have stated in their application for refund that they have the necessary central excise documents like gate passes, invoices, etc. to prove that they are entitled to the exemption. In the review show cause notice filed by the Collector, it is stated that the appellants have not filed a statement of the input and output ratio. It is further alleged that they have not furnished data as to how many inputs were used in the manufacture of every unit of the final product. Regarding the first objection, it must be stated that the Notification itself does not set out a pre-condition that a statement of input and output ratio should be filed. In the Order-in-Review, it is stated that the manufacture should furnish in advance the formula indicating the input and output ratio for each unit of the output. This observation is also beyond the scope of the notification. In the order-in-review, the Collector has referred to certain representations by the manufacturers of tyres, chemicals, electrical manufacturers, etc. who had complained of difficulties in complying with the requirements of Notification No. 178/77-CE. The Collector has observed that the new procedure under Notification No. 201/79-CE did away with the requirements of set off procedure under Notification No. 178/77-CE consequent to the refund. It must be mentioned that the Collector has drawn his conclusion more from the Exemption Notification No. 201/79-CE dated 4-6-1979. That notification contain an appendix which prescribed certain detailed procedure in respect of the claim for set off. The present proceedings are in regard to payment between 1-8-1978 and 20-5-1979 prior to the amendment. The two notifications, i.e. No. 178/77-CE as amended by 295/77-CE do not prescribe any condition that the formula indicating input and output ratio should be filed in advance.
6. As rightly pointed out by the learned counsel, the matter has to be considered in respect of each industry. The appellants have been stating that they do not manufacture any standard products in which case they could have furnished the ratio well in advance. There is no set ratio formula in their case and they manufacture the components according to the requirement of their customers. The inputs itself vary in each final product. Under these circumstances, the appellants rightly urged that they would be entitled to the abatement of input duty provided they accounted for the input that have gone into the manufacture of the final product during the relevant period. We also notice in the decision of Vikrant Tyres cited supra that the Tribunal modified the orders to the extent that proforma credit shall be disallowed only to the extent of the inputs calculated as having been used in the manufacture of goods which were exempted from the whole of the excise duty or were chargeable to nil rate of duty. The appellants therein were permitted, within a period of two months from the date of communication of this order, to furnish to the proper officer the allocation of raw materials and duty thereon necessary for the purposes of the above calculation. The proper officer shall, in his best judgment, and after taking into account the calculations, if any, furnished by the appellants, determine the quantum of credit to be disallowed in terms of this order, and shall allow the balance of the proforma credit which is allocable to dutiable goods. Following the ratio there is no error in granting the refund in favour of the appellants herein.
7. The learned counsel raised a question of time bar. He stated that the demand has been made only in the Order-in-review dated 26-3-1981. But we find that there was an earlier show cause notice on 13-12-1980. That notice has been issued within six months from the date when the amount was actually refunded to the applicant. The Assistant Collector has verified the particulars and has granted the refund after satisfying himself about the particulars furnished. The learned counsel also urged that Section 11A has not been mentioned in the order and hence the order-in-review is vitiated. We are not impressed with this plea because the review show cause notice has been issued within a period of six months from the date of refund. In view of our findings on the merits the appeal is allowed and the impugned order is set aside.