Customs, Excise and Gold Tribunal - Delhi
Upper India Steel Mfg. And Engineering ... vs C.C.E. on 20 July, 1994
Equivalent citations: 1994(74)ELT590(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. M/s. Upper India Steel Mfg. and Engg. Co. Ltd. have filed this appeal against the order in original passed by the Addl. Collector. The Addl. Collector in his order had held :-
"I have seen the case paper carefully and the parry's submission and also submission made at the time of personal hearing. The short point before me for determination is whether in respect of ship breaking material the modvat credit is restricted to Rs. 500/- per MT or more. In terms of Notification No. 177/86-C.E. dated 1-3-1986 as amended the modvat credit on goods obtained from breaking up of ship, boats and other floating structure is restricted to Rs. 5000/- per MT or the actual duty paid whichever is less. Heading No. 72.30 and 73.27 of the Central Excise Tariff Act, 1985 (5 of 1986) covers the goods and material obtained by breaking up of ships, boats and other floating structures. I find the party was entitled to take credit of Rs. 500/- per MT or actual duty paid whichever is less. But in the instant case the party has taken credit for the entire amount i.e. BED and SED even exceeding Rs. 500/- per MT which is not admissible to the noticee party in terms of Notification No. 177/86-C.E. dated 1-3-1986 as amended. Sh. Gian Inder Sharma, authorised signatory of the firm, in his statement dated 14-11-1990 has admitted the above facts. Advocate's contention that restriction of Rs. 500/- per MT is only applicable to the scrap manufactured by breaking of ships manufactured in India is not acceptable as restriction is for all ship breaking scrap produced in India. In view of the above discussion, I hold charges in the show cause notice dated 22-11-1990 which proved. Accordingly, I pass the following order :-
(i) The excess modvat credit taken by the party during 26-6-1990 to 30-10-1990 amounting to Rs. 64,849/- BED plus Rs. 1130.85 SED (Total Rs. 65,979.85) is recoverable under Rule 57-I of the Central Excise Rules, 1944 which should be paid through PLA or by Cash.
(ii) I impose personal penalty of Rs. 15,000/- (Rupees Fifteen Thousand only) on the noticee party under Rule 173-Q of Central Excises Rules, 1944."
2. Briefly stated the facts of the case are that M/s. Upper India Steel Mfg. & Engg. Co. is a manufacturer of Iron and Steel products and was availing Modvat credit on the inputs. On 14-11-1990 when Central Excise Officers visited their factory and checked their accounts, they found that the appellant was availing Modvat credit on the inputs which was more than Rs. 500 per MT. The Department was of the view that the appellant was entitled to Modvat Credit under Notification No. 177/86-C.E., dated 1-3-1986 as amended. As the said Notification was purported to cover the inputs obtained by the appellant. As the appellant could not satisfactorily explain the excess modvat credit taken, therefore a show cause notice was issued to the appellant as to why the excess amount of Modvat credit availed by them during the period 26-6-1990 to 30-10-1990 should not be recovered from them under Rule 57-I and why a penalty should not be imposed on them.
3. Appearing for the appellant, Shri P.S. Bedi, the ld. Consultant submitted that the Adjudicating Authority had not rebutted all the pleas submitted by them; that the Modvat credit of duty was taken on the basis of Gate Passes; that as per proviso (3) of Notification No. 177/86 as amended from time to time if credit cannot be availed over and above Rs. 500/- per MT in respect of the inputs then no credit of CVD or Special Excise Duty will be available; that the word used in the subject Notification is 'specified duty' not 'duties'.
Therefore, each type of duty has a separate limit; that Clause (3) of the notification is applicable only to materials obtained from breaking of ships, boats and other floating structures as are manufactured in India and that this restriction shall not be applicable to materials obtained by breaking of foreign origin ships; that the appellant has been getting the material from breaking up of foreign ships and therefore the restriction under Proviso (3) of Notification No. 177/86 cannot be imposed on them. It was also argued by the ld. Consultant that no demand can be raised or confirmed under Rule 57-I.
4. Shri B.D. Bhagat, the ld. JDR appearing for the respondent submitted that the case of the appellant squarely falls under proviso (3) of Notification No. 177/86 as amended and, therefore, the lower authorities have correctly held that Modvat credit of inputs amounting to more than Rs. 500/- per MT shall not be available. Reiterating the findings of the lower authorities, the ld. JDR submitted that Modvat credit in excess of Rs. 500/- per MT has rightly been denied.
5. Heard the submissions of both sides and considered them. The main emphasis in the arguments of the appellant was on Proviso (3) of Notification No. 177/86 dated 1-3-1986. Proviso (3) of the Notification is reproduced below for the sake of convenience :-
"(3) The credit of specified duty paid in respect of inputs, namely, the goods falling under 72.15 and 73.09 and obtained from breaking up of such ships, boats and other floating structures, as are manufactured in India (other than the goods manufactured in a free trade zone or by a hundered percent export-oriented undertaking) and used in the manufacture of final products in any case in India shall be restricted to the extent of Rs. 500 per tone or the actual duty paid whichever is less."
6. The appellant has been contesting that the material received by them was from the breaking up of ships of foreign origin. This contention of the appellant has not been rebutted or controverted by the department. I find that the restriction of Rs. 500 per MT imposed by the third proviso reproduced (supra) pertains to materials obtained from breaking up of ships of Indian origin and, therefore this restriction shall not be applicable to material obtained by breaking up of ships, boats and other floating structures of foreign origin. The department has not brought any evidence on record to show that the restrictions under proviso (3) of the Notification No. 177/86 as amended shall be applicable to materials obtained by breaking up of ships of foreign origin. In this view of the matter, I hold that restrictions under proviso (3) of Notification No. 177/86-C.E. dated 1-3-1986 shall not be applicable to the materials obtained by the appellant. In this view of the matter, I hold that modvat credit of duty on inputs actually paid by the appellant and supported by the Gate Passes either endorsed to them or directly in their name shall be admissible. In view of the finding that Modvat credit as claimed by the appellant was admissible to them the question of imposition of penalty does not arise. I, therefore, hold that imposition of penalty is not sustainable in law.
7. In view of the above findings the contention of the appellant that no demand can be raised or conformed under Rule 57-I of Central Excise Rules is of academic interest and is, therefore, not being discussed. Consequential relief if any, shall be admissible in accordance with law.
8. In view of the above findings the impugned order is set aside and the appeal is allowed.