Customs, Excise and Gold Tribunal - Mumbai
Shilpa Rerollers Ltd., Hind Steel, ... vs Commissioner Of Central Excise on 8 April, 2003
ORDER
Shri C. Satapathy, Member (Technical)
1. Shri R. Nambirajan, learned advocate for the appellants states as follows:-
1) The appellants are engaged in the manufacture of non-alloy steel rerolled products, such as, flats, strips, bars, rods, angles, etc. falling under Chapter 72 of the Central Excise Tariff Act, 1985.
2) With effect from 14.5.1997, the provisions of Section 3A of the Central Excise Act providing for charging duty on the basis of annual production capacity was introduced. The goods manufactured by the appellants were covered by this scheme by a Notification dated 1.8.1997. The scheme came into effect on 1.9.1997 with certain modification.
3) Prior to 1.8.1997, duty was payable on these final products manufactured by the appellants in terms of Section 3 of the Act and the said final products manufactured by the appellants were specified as final products under Notification No. 5/94-CE(NT) dated 1.3.1994 issued under Rule 57A of the Central Excise Rules, 1944. The appellants were availing Modvat of the duty paid on the inputs used in the manufacture of the final product.
4) Consequent to the introduction of Section 3A, the final product manufactured by the appellants were specified under Section 3A of the Act, and were deleted from Notification No. 5/94-CE(NT) dated 1.3.1994 as amended by Notification No. 33/97-CE(NT) dated 1.8.1997. Further Rule 57F(17) was amended by the aforesaid Notification No. 33/97-CE(NT) dated 1.8.1997 by which the credit lying in balance as on 1.8.1997 in the RG23A Part II Account of the manufacturers of the products specified under Section 3A was lapsed and they were not allowed to utilize such credit for payment of duty on any excisable goods.
5) Accordingly, he closing of credit lying in the appellants' RG 23A Part II Account as on 31.7.1997/1.8.1997 lapsed and the appellants had not utilized the said credit.
6) Proceedings were initiated against the appellants by way of issue of show cause notice proposing to deny credit of duty paid on the inputs which were lying in stock as closing balance as on 31.7.1997 on the ground that these were not utilized by the appellants in the manufacture of specified final product under Rule 57A after 1.8.1997. The show cause notice was issued under Rule 57I for disallowing and recovering the said amount. The show cause notice also proposed to impose penalty.
7) The appellants submitted that the credit taken by them on the inputs was valid since at the material time the finished products and the inputs were specified under the notification and merely for the reason that with effect from 1.8.1997 the finished products are not specified it cannot be held that the credit was wrongly taken.
8) The Assistant Commissioner of Central Excise passed order-in-original dropping the proceedings initiated in the show cause notice on the ground that the circular dated 30.8.1997 issued by the Central Board of Excise & Customs had clarified that the annual production capacity scheme was made effective from 1.9.1997 and the assessee were allowed to clear the goods on payment of lump sum duty during the month of August 1997 and the lapsed Modvat credit as on 1.8.1997 shall not be allowed to be utilized for this purpose. The Assistant Commissioner held that the aforesaid circular of the Board did not require that the assessee should pay back the credit which was taken and utilized in respect of the input in stock.
9) The aforesaid order of the Assistant Commissioner was reviewed by the Commissioner under Section 35E(2) based on the grounds taken in the show cause notice that the order of the CEGAT relied upon by the Assistant Commissioner in the order-in-original was contested by the department by filing reference application and therefore such CEGAT order has not attained finality.
10) The Commissioner of Central Excise & Customs (Appeals) in the impugned order-in-appeal allowed the department's appeal and held that the appellants are liable to pay duty on the inputs lying in stock as on 31.7.1997 which were subsequently used in the manufacture of finished product not specified as final product under Rule 57A. The Commissioner (Appeals) accordingly held that the appellants should first pay duty on the inputs out of the Modvat credit available and the balance credit would lapse in terms or Rule 57F(17). He also ordered that in case sufficient balance is not available, the appellants should pay the amount from LPA or in cash. In other words, the Commissioner treated the subsequent use of the inputs, which are lying in stock as on 31.7.1997, in the manufacture of finished product as removal in terms of Rule 57F and demanded duty.
11) Aggrieved by the aforesaid order, the appellants have preferred this appeal.
2. The learned advocate submits in this regard that the impugned order is entirely on new ground which was neither canvassed nor taken up in the show cause notice. He also states that following decisions of CEGAT on the issue are in favour of the appellants:-
1) Savtri Concast Pvt. Ltd. v. CCE.,-2001 (138) ELT 296.
2) Nakoda Steels P. Ltd. v. CCE, Jaipur-2002 (51) RLT 1059 (CEGAT-Del.)
3) Spiderman's Business (Pvt.) Ltd. v. CCE, Mumbai-20902 (53) RLT 64 (CEGAT-Del.)
4) CCE v. Re-rolling Mills-2002 (104) ECR 167
5) Tripty Drinks (P) Ltd. v. CCE-1993 (63) ELT 101
6) Pearl Drinks (P) Ltd. v. CCE-1993 (68) ELT 209
7) Associated Beverages Pvt. Ltd. v. CCE-1998 (102) ELT 51
8) CCE v. Black Diamond Beverage (P) Ltd.-1998 (101) ELT 48
9) CCE v. Ludhiana Bottling Co.-1998 (99) ELT 671
3. He further states that the decisions of the Larger Bench of CEGAT in Khanbhai Esoofbhai v. Collector - 1997 (107) 557 (Tribunal LB) and the Allahabad High Court's decision in the case of Super Cassettes Industries v. UOI - 1997 (94) ELT 302 are not applicable to the present case in view of the decision of the Larger Bench in the case of CCE, Rajkot v. Ashok Iron & Steel Fabricators - 2002 (140) ELT 277.
4. The learned Jt. C.D.R. appearing for the department states that the balance of credit which has lapsed is only nominal but the duty on inputs lying in stock as on 1.8.1997 was huge. He supports the impugned order and cites the decision of the Tribunal in the case of Cool Home Co. (P) Ltd. v. CCE, Calcutta I-2001 (138) ELT 587 (Tri.-Calcutta). He states that since the final product has been de-notified with effect from 1.8.1997, the duty on the inputs lying in stock has to be paid by the appellants. He further relies on the decision of Larger Bench of the Tribunal in the case of Raghuvar (India) Ltd. v. CCE, Delhi - 2002 (140) ELT 280 (Tri.-LB) which has been delivered on the same day as the decision in the case of Ashok Iron & Steel Fabricators - 2002 (140) ELT 277 and states that these two decisions are contradictory.
5. The learned advocate for the appellants states that there is no conflict between the two decisions and there is no legal provisions to pay duty in this regard. He relies on the decision in the case of the Tripty Drinks (P) Ltd. cited above.
6. After hearing rival submissions and perusal of case records, we find that when the scheme of charging duty on the basis of annual production was introduced and consequently the impugned finished goods and inputs were taken out of the modvat scheme, a specific amendment was made in the modvat rules for the credit lying in balance on 1.8.1997 to lapse. However, no specific provision was made in the rules requiring payment of duty on inputs lying in stock in respect of which credit was taken. It should have been envisaged by the rule making authority that different manufacturers would have different amounts of unutilized credits and different quantities of unutilized inputs in stock on the date the charge-over was made. Some manufactures might have utilized more of the credit and some others might have utilized more of the inputs. Equity considerations required providing for payment of duty on the unutilized inputs on which credit was taken and utilized. However, when the rule makers have not provided for a specific provision in regard to payment of duty on such unutilized inputs, the authorities below can not demand duty as if such a provision has been made. No doubt, manufacturers who have taken credit of the input duties and utilized the same for payment of duty on finished goods made earlier but have a large stock of inputs lying in stock would obtain an unintended monitory advantage. But in the absence of a specific rule made to address such a situation arising at the time of change over, we have no option but to hold that the duty on such inputs can not be demanded. The decisions cited by the learned Jt. C.D.R. are of no help as they deal with instances where final products became exempt which is not the case here.
7. Accordingly, the impugned orders are set aside and appeals are allowed.
(Pronounced in Court)