Customs, Excise and Gold Tribunal - Mumbai
Godrej Soaps Ltd. vs Commissioner Of Central Excise And ... on 28 July, 2000
Equivalent citations: 2000(71)ECC578
ORDER J.N. Srinivasa Murthy, Member (J)
1. It is with consent of both sides, appeal is heard on merits.
This is the appeal by party against the above captioned impugned order dated 15.3.99 praying for setting aside the same and to declare that appellant has utilised, availed money credit in accordance with Act and Rules, and for such other deemed relief.
2. The brief facts of the case are that the appellant manufactures soaps falling under Chapter heading No. 3401.10 of Tariff Act. The appellant had taken and utilised, money credit on specified minor oils i.e., Rice Bran Oil, Neem Oil, used in the manufacture of soaps without following proper procedure as laid down in Notification No. 461/89-NT (CE) Dated 11.10.89 as amended. For grant of money credit under Rule 57-K of Central Excise Rules, on verification of credit account for July 94 and August 94, it was noticed that the credit taken to-the extent of Rs. 2,19,763 for reversal of excess credit availed on rice bran oil (rice bran oil). The reversal was because the rice bran oil was used in fatty acid and such fatty acid was sold for use other than soaps. The money credit of Rs. 2,19,763 availed irregularly also contain an amount of Rs. 51,352 which was the credit taken in July 94 on neem oil and the same was utilized in the same calendar month for adjustment of excess credit availed on rice bran oil. Non-fulfillment of conditions of Notification No. 46/89 (NT) CE dated 11.10.89 resulted in irregular availment of money credit of Rs. 2,19,763. Show cause notice was issued to appellant on 4.1.95 asking as to why it should not be disallowed and recovered from the appellant under Rule 57P read with RULE 57I, and penalty should not be imposed under Rule 173Q of Central Excise Rules. The appellant replied it on 11.8.95. Personal hearing was held on 11.12.95. Written submissions were filed by the appellant. Appellant was heard. Additional Commissioner, after going through all the material available on record, passed the Order-in-Original on 25.5.96, dropping the proceedings, on the department's appeal, Commissioner of Central Excise and Customs (Appeals) Mumbai passed the impugned order, allowing the appeal. Hence this appeal.
3. In support of the appeal, Learned Counsel Shri R. Ravindran has argued that proviso to Rule 57P supports the appellant. RG 23 Part 1 is the inputs account and Part II is the consolidated account. Rice bran oil and neem oil are the inputs under Trade Notice No. 16/82 dated-8.7.97, the reversal of credit separately does not arise, as there is common account. Impugned order is very vague. There is no discussion as to why Order-in-Original is set aside. It is an exparte one. The learned JDR Shri K.L. Ramteke for Respondent has argued that appellant has contravened the Notification No. 46/89, Clauses (iv) and (v) separate account is necessary for final products. The notification referred by appellant in page 38 is different, and not applies. In the reply arguments, it is clarified that separate account is maintained for soap in RG 23B page 472-73. Proviso to Rule 57P is exercised Order-in-Original is not disputed in Impugned order. Renewal is not required. It is not questioned.
4. Point to be considered is whether there are sufficient and satisfactory grounds to set aside the impugned order? My finding thereon is in the affirmative.
5. Perused the show cause notice, reply, order of lower authorities, and appeal memorandum, written submissions and correspondence between the appellant and department. Notification No. 46/89 dated 10.10.89 & 45/89 dated 11.10.89, Departmental clarification No. CBE & C Circular 14/98-CX8/8.11.98 and Bombay I Collectorate Trade Notice No. 67/89 dated 8.9.87 and Rules 57K, 57N, and 57P of Central Excise Rules. Impugned order is very cryptic in 3 sentence conclusion that--"I observe that M/s. Godrej Soaps Ltd. utilized the credit for other purpose, which is contrary to Notification No. 46/89 dated 11.10.89"--which is based on the departments appeals against the Order-in-Original contending that--"the same has to be set aside on the ground that as per Clause IV of Notification No. 46/89, dated 11.10.89 credit taken on neem oil was to be utilized for final product i.e., soaps, in the succeeding month, however M/s. Godrej Soaps Ltd. utilized for reversal of excess credit availed on rice bran oil in the same month".
6. As per show cause notice and annexure "A" to it, under Notification No. 46/89 dated 11.10.89, money credit is available subject to fulfilment of conditions that (a) credit available in RG 23A register may be utilized for payment of duty on any soap manufactured by the manufacturer and no amount of excess credit, if any available in the credit account shall be refunded to the manufacturer utilized for payment of duty on any other excisable goods (b) credit taken during any calendar month shall be utilized for payment of duty on the said final products only after the commencement of succeeding month. On verifying the credit account of the appellant for July & August 94, it is seen that credit taken on neem oil was utilized to the extent of Rs. 2,19,763 only as per Annexure "B" for reversal of excess credit availed on Rice bran oil. The reversal was because the rice bran oil is used in fatty acid, which was sold for use other than soap. The money availed irregularly also contains an amount of Rs. 51,352 credit taken on July 94 on neem oil, which was utilized in same calendar month for adjustment of excess credit availed in rice bran oil. Both the conditions of Notification No. 46/89 dated 11.10.89 resulted in irregular availment of money credit of Rs. 2,19,563.00 contravening Rule 57K of Central Excise Rules and Notification No. 46/89 dated 11.10.89. So irregular availment is recoverable under Rule 57P read with Rule 57I of Central Excise Rules, and appellant liable for penalty under Rule 173Q of said rules.
7. The defence of the appellant in his reply and written submission before the adjudicating authority, in this regard is that the allegation in the show cause is contrary to Rule 57N(1) Notification No. 46/89 and Clarification issued by department. As per Rule 57N(1) credit of money in respect of any input can be utilized towards payment of duty on final product in or in relation to the manufacture of which such inputs are intended to be used. As per Notification No. 46/89 read with Trade Notice No. 97/89 and 67/87 the credit taken for use of input for any variety of soap can be used for payment of duty on any soap and consolidated RG 23B Part II account can be maintained. The above statutory position is ignored in issuing show cause notice. Allegation based by bifurcating the money credit in RG 23B Part II account, on the basis of inputs used viz. Neem oil and Rice bran oil separately is not maintainable. Such credit ought to have been taken as whole. Credit of Rs. 2,19,763 reversed was of Rice bran oil money credit, not used in the manufacture of soap and it was utilized for the payment of duty on fatty acid manufactured out of Rice bran oil. On misconception, show cause notice is issued proviso to Section 57P is lost sight of while issuing show cause notice. According to it manufacturer can make adjustment on his own RG 23-B Part II account, where inputs are not used in the final product, for which the inputs had been declared under Rule 57(0). Appellant's action is in accordance with the above rule. There is no one to one correlation between inputs and the final products, which is supported by departmental clarification that common, RG 23B II can be maintained. Allegation cannot stand. This has been informed to department by correspondence to range Superintendent. As RG 23B, Part II account extract for July and August 1994, no amount of excess money credit available therein was refunded or was utilized for payment of duty on any excisable goods other than soap. Condition No. V of Notification No. 46/89 is not violated. Regarding contravention of condition No. IV under the above notification by utilising the money credit taken in July 94 in same calendar month it is stated Rs. 51,352 money credit taken on neem oil was not utilised for payment of duty on soap in July 1994, but was utilised for adjustment by way of reversal of money credit involved on inputs rice brawn oil, used for other than soap. The condition in the notification only provides that credits taken during any calendar month shall be utilised for payment of duty on the final products only after the commencement of next month in succession. It does not prohibit reversal of money credit in the same month for any reason such as wrong availment of money credit or utilising the input in the manufacture and final product, for which input had been declared. Admittedly, Rs. 51,352 money credit taken in July 1994 was not utilised for payment of duty on soap in that month but used for reversal of money credit as input is not used in the manufacture of soap. There was no contravention of condition No. (iv) of the Notification No. 46/89. Both conditions of Notification No. 46/89 was fulfilled. There is no irregular availment of money credit of Rs. 2,19,673, and no question of recovery. In the alternative, it is stated that appellant is entitled to earn the equivalent amount of credit on neem oil since that much amount of credit would have been remained in balance in RG 23B Part 11 account for neem oil, consequently there is no loss of revenue as per Tribunal decisions in 1999 (74) ELT 739 in Unique Suspension Pvt. Ltd. v. Collector of Central Excise Bombay-Iand in the case of Fedder Lloyd Corporation v. Collector of Central Excise, New Delhi, dealing in Modvat credit, where in nexus between input and final product was insisted, which is not so in money credit, wherein consolidated account in RG 23B Part II is permitted. No mala fide can be attributed. No penalty is called for, as all actions of appellant was under genuine belief supported by above rules and clarification of the department.
8. In the light of the above stand by both sides, Additional Commissioner in his Order-in-Original has considered the relevant Rule 57N(1), 570(3), 57(P) of Central Excise Rules and also condition No. (iv) of Notification No. 46/89(NT) Dated 11.10.89. Regarding reversal of wrong credits the contention of appellant Rule 57P proviso is negatived. Further, he has observed that under Rule 570(3) there is no condition to maintain RG 23B Part I & II input wise. Reversal of credit on any input in terms of Rule 57P can be affected from the consolidated balance. Credit available on all inputs is consolidated in RG 23B Part II. He has held that there is no contravention of R 57N. Credit available in the month is utilised for reversal of credit. Clause IV of Notification No. 46/89 (NT) dated 11.10.89 is not violated. As already observed in Para 4, Commissioner appeals has observed that appellant has utilised the credit for other purpose, contrary to Notification No. 46/89 dated 11.10.89, which is not supported by any discussion and reasoning.
9. From the appeal memorandum grounds, and the correspondence between the appellant and department, and departmental clarifications, and proviso to Rule 57P it is clear that the appellant has not violated the Rule 57N and 570, as observed and held by the Additional Commissioner, and conditions in Notification No, 46/89 are not contravened, as money credit was taken to pay duty on fatty acid. Reversal was made in the consolidated account of RG 23B Part II only for making adjustment in the account of Rice Brawn oil and Neem oil input account, which is not prohibited in the Notification. Proviso to Rule 57P enables the manufacturer to make such adjustments on his own in the credit account or account current maintained by him under intimation to the proper officer. In this case, appellant has informed the Range Superintendent. It is not disputed by the department as per Rule 57(0)(3), manufacturer of final product shall maintain an account in RG 23B Part I and II, and appellant has submitted that account of final product soap is maintained accordingly, which is not disputed. Department has clarified the procedure, regarding availment of credit on minor oils used in the manufacture of soap, which is not a different Notification as contended by JDR. The appellant's action are within the knowledge of Range Superintendent. There are no mala fide. The appellant has explained his action with the support of conditions in the Notification, Central Excise Rules governing it, and departmental clarifications under Trade Notice and CBE & C circular, and after considering it; proceedings were dropped by Additional Commissioner. The impugned order has not attempted to dislodge the defence of the appellant in setting aside the Order-in-Original. As contended by the appellant, there is no loss of revenue. In making adjustment and reversal, the appellant has acted with bona fide. There are no sufficient and satisfactory grounds to support the Impugned order. The reply to show cause notice is quite exhaustive and is backed by the Tribunal decisions. Appeal memorandum grounds make out that Impugned order is not one passed with application of mind. The contentions of the appellant has to be, and, are upheld. Point raised is answered in the affirmative. Hence I pass the following order.
ORDER
10. For the reasons discussed above, Impugned order is set aside, and the appeal is allowed, as prayed for, with consequential relief, if any, according to law. Stay application disposed of.