Customs, Excise and Gold Tribunal - Mumbai
Mayur Colours Limited vs Commissioner Of Central Excise, ... on 17 August, 2001
Equivalent citations: 2000ECR55(TRI.-MUMBAI), 2001(136)ELT1111(TRI-MUMBAI)
ORDER
1. Under the modvat scheme the credit of duty paid on the inputs can be availed and utilised towards the payment of duty on the final products. Where the final products are exempted the credit is not allowed. It may happen that some inputs may be used in the manufacture of final products some of which are dutiable and the others are not dutiable. In that situation Rule 57C requires that the inadmissible portion of the credit should be written back. Some manufactures find it difficult to maintain elaborate accounts of duty paid inputs used in these two streams. Rule 57CC was latter introduced requiring a manufacturer to pay duty @ 8% on exempted products as an alternative to writing back of inadmissible credit in terms of Rule 57C. Rule 57CC does not do away with the provisions of Rule 57C. Where the manufacturer can keep the necessary accounts Rule 57C would apply. This exemption is embodied under sub-rule (1) as also in sub-rule (9) of Rule 57CC. Sub-Rule (1) and (9) requires to be reproduced in tot as below:
"(1) Where a manufacturer is engaged in the manufacture of any final product which is exempt from the whole of duty of excise leviable thereon or is chargeable to nil rate of duty and the manufacturer takes credit of the specified duty on any inputs (other than inputs used as fuel) which is used or ordinarily used in or in relation to the manufacture of both the aforesaid categories of final products, whether directly or indirectly and whether contained in the said final products or not, the manufacturer shall, unless the provisions of sub-rule (9) are complied with, pay an amount equal to eight per cent of the price of the second category of final products charged by the manufacturer for the sale of such goods at the time of their clearance from their factory.
"(9) In respect of inputs (other than inputs used as fuel) which are used in or in relation to the manufacture of any goods, which are exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty, the manufacturer shall maintain separate inventory and accounts or the receipt and use of inputs for the aforesaid purpose and shall not take credit of the specified duty paid on such inputs."
2. The present appellants used certain inputs in dutiable products and in some other products which were exempted. They were maintaining separate accounts. The credit of the duty earlier availed by them on that portion of the inputs which went into the exempted final product was written back from time to time by issue of invoices under Rule 258/173G. The show cause notice was issued on 23/05/1998. The charge in the show cause notice was that the practice adopted by the present appellant was in contravention of Rule 57CC. The specific averment in the show cause notice reads as under:
"However, M/s. Mayur Colours Ltd., D-2/2 Tarapur MIDC have transfered on reversal of proportionate duty on modvat inputs material mentioned in 'Annexure B' from modvat inputs stock for the manufacture of goods chargeable to NIL rate of duty namely Erasers (unconditionally exempted) and Colour Paste (enjoying exemption slab of 16/97). Now this is contravention of rule 57CC of Central Excise Rule 1944 in as much as such transfer can only take place on reversal of 8% advolareum of the Assessable value of the finished goods manufactured from these inputs. The details have been workout in 'Annexure 'B enclosed. This has resulted in short payment of Rs. 24,261.46 only."
3. Three more show cause notices were issued with the same allegations. The Dy. Commissioner disposed of all show cause notices by this common order-in-original. He accepted the statement (which was made in the show cause notices also) that the assessee were maintaining separate accounts of such inputs. He, however, observed that sub-rule (9) reproduced above required not only maintenance of separate accounts but also required "separate inventory".
4. The Commissioner (Appeals) after taking cognizance of two judgments of the Supreme Court which enabled such benefits to be taken on reversal of modvat credit confirmed the lower order without any further discussion but reduced the penalty imposed on the appellants. Hence the present appeal.
5. The appellant states that apart from reversal of the credit taken the representation of the physical inputs is also changed inasmuch as the physical representation is transferred from RG23A Part II register to Form IV register. This movement would satisfy the requirement of sub-rule (9). It appears to me that the learned Assistant Commissioner was of the opinion that the assessee should have physically segregated the goods into different premises. This is neither required nor expedient. If the rules are to be interpreted with this rigidity no manufacturer can have time and energy to produce the goods but would be engaged at all times in physically shifting the goods as per this interpretation. On perusal of the records I am satisfied that the present practice adopted by the appellant was valid in terms of sub-rule (9) of the Rule 57CC and therefore the demands confirmed against the appellants and the penalty imposed do not survive.
6. The appeal is accordingly allowed with consequential relief, if any.