Customs, Excise and Gold Tribunal - Mumbai
Usha Re-Rolling Mills Pvt. Ltd. And P.T. ... vs Commissioner Of Customs And Central ... on 13 July, 2005
Equivalent citations: 2005(191)ELT1060(TRI-MUMBAI)
ORDER Moheb Ali M., Member (T)
1. These appeals arose out of the order of Commissioner (Appeals) Rajkot.
2. The issue relates to admissibility or otherwise of deemed credit under Rule 57G(2) of erstwhile Central Excise Rules. The period of dispute is October 1994 to March 1995. The appellants took deemed credit of Rs. 11.72.650/- and Rs. 3,32,976/- during the said period on the ship breaking scrap in terms of Board's letter F. No T8/36/94 TRU dated 1.3.94. Out of the said amount of credit the Commissioner (Appeals) confirmed denial of credit of Rs. 11,72.600/- and Rs. 3,32,976/- imposed a fine of Rs. 2,00,000/- after confiscating the plant & machinery, imposed a penalty of Rs. 25 lakhs on the appellant company under Rule 173Q and imposed a penalty of Rs.10 lakhs under Rule 209A on the power of attorney holder.
3. The appellant company was a re-rolling mills. When it came to know of the circular above cited they took credit of the said amounts as deemed credit on 7.11.95 on the inputs procured by them somewhere during October 1994 to 19.3.1995. The inputs were of ship breaking materials on which Central Excise duty was exempted vide Notification No. 45/94 C.E. dated 1.3.1994.
4. On the basis of Boards' circular No. 37/77/94 CX dated 10.11.94 the Department issued a show cause notice asking the appellants to show cause why the credit should not be denied and why penalties should not be imposed.
5. For proper appreciation of the issue we reproduce hereunder the two circulars.
"Sub: MODVAT : Deemed credit in respect of re-rollable materials Chapter 72 and 73.
In exercise of the powers conferred under the second proviso to Rule 57F(2) of the Central Excise Rules, 1944 and in suppression of Order F. No. 342/5/91-TRU dt. 7.7.92 as amended, the Central Government hereby directs that the ingots and re-rollable materials of Iron or Steel purchased from outside and lying in stock on or after 1.4.94 with the Re-Rollers, availing of the exemption under Notification No. 1/93-CE dated 28.2.93 will be deemed to have paid duty and the credit of duty under Rule 57A of the said rules in respect of such ingots and re-rollable materials used without undergoing the process of melting in the manufacture of goods falling under Chapter 72 and 73 of the Schedule to the Central Excise Tariff Act, 1985 may be allowed at the rate of Rs. 920/- per tonne without production of documents evidencing of the payment of duty.
2. This order this order shall come into force on the 1st day of April, 1944 (M F (D R) Order No TS/36/94-TRU dt. 1.3.1994)".
"Modvat-Deemed credit to ship breakers, denial of It has been brought to the notice of the Board that scrap generated by breaking of a ship etc. is not being allowed deemed modvat credit by certain field formations. The ship-breakers have also represented to the Board. The matter has been examined and the following instructions are issued;-
Rule 57G of the Central Excise Rules, 1944 stipulates that the Government has the power to allow deemed credit having regard to the period that has elapsed since the duty of excise was imposed on any inputs, the position of demand and supply of the said inputs in the country and any other relevant considerations. If no duty is imposed on any of the inputs then the provisions of Rule 57G cannot be invoked to allow deemed credit. Since the scrap cleared by the ship-breakers has not suffered the duty, it would not be correct to allow deemed credit on such scrap.
(Based on M F (D R) Circular No. 77/77/94-CX, dated 10.11.1994)".
6. Heard both sides.
7. It is an admitted fact that the inputs on which deemed credit was taken consisted solely of sip breaking scrap on which no Central Excise duty was paid because of the existence of Notification No. 45/94 Central Excise dt. 1.3.94. The appellants took deemed credit on scrap which was lying with them on 7.11.95, despite what is clearly stated in circular dated 10.11.94 on the specious plea that notification dt. 1.3.94 (cited supra) allows them to take deemed credit of Rs. 920 PMT on any scrap procured from outside. It is only to clarify that on not on all scrap deemed credit of Rs. 920 PMT is permissible the above cited circular was issued. The appellants chose to ignore the clarification and acted in contravention of Central Excise Rules in order to gain undue advantage by taking credit which is not due. Under these circumstances denial of credit as ordered by the lower appellant authority has to be upheld. The lower adjudicating authority seemed to have flown into a rage when he imposed stiff penalties (Rs. 25 Lakhs on the company and Rs. 10 lakhs on the power of attorney holder under Rule 173Q and Rule 209A respectively) and confiscated the plant and machinery under Rule 173Q. the appellants went ahead and took the credit even when they were asked not to do so by the Range Superintendent it appears.
8. While we understand the provocation caused we cannot support the imposition of such heavy penalties and confiscation on a matter concerning interpretation of Notification dated 1.3.94 cited supra. Having said so we observe that the appellants were definitely acting in a manner detrimental to Government Revenue. Such deliberate violation calls for penalty on the company and the power of attorney holder.
9. Having regard to what has been discussed above we uphold the denial of credit. We reduce the penalty on the appellant company to Rs. 2 lakhs and on the power attorney holder to Rs. 25,000/-, we set aside the confiscation of plant and machinery.