Customs, Excise and Gold Tribunal - Delhi
J.K. Synthetics Ltd. vs Collector Of Central Excise on 17 March, 1994
Equivalent citations: 1996(81)ELT648(TRI-DEL)
ORDER K. Sankararaman, Member (T)
1. These three appeals involving a common issue namely whether the benefit of exemption Notification 225/86, dated 3-4-1986 could be availed of only at the time of clearance of the goods on payment of duty or the said benefit in terms of the amount of duty paid on the inputs used in their manufacture could be kept in an account for being utilised for payment of duty on final products manufactured subsequently using further lots of the same inputs. When the appeals were heard initially the Bench that heard the matter took note of the submissions of both the sides, particularly the reliance placed by the learned counsel for the appellants on the Tribunal decision in Indian Petro Chemicals Limited v. Collector of Central Excise reported in 1992 (61) E.L.T. 138. That stand was opposed by the learned Senior Departmental Representative who contended that the Notification in question is different in its scope and terms from exemption Notification 201/79 which was the subject matter of the decision in Good Year India Limited by Delhi High Court which, it was contended, was wrongly followed by the Tribunal in the aforesaid decision. It was, therefore, pleaded by the learned Senior Departmental Representative before the Original Bench that the matter may be referred to a larger Bench for reconsideration of the said decision. Accepting that plea, the Bench had referred these appeals to this larger Bench, the point referred being - "whether IPCL decision of the Tribunal requires to be reconsidered or not."
2. Shri A.N. Haksar, learned Senior Counsel and Shri Sanjeev Grover, learned Advocate who had appeared for the appellants before the Original Bench argued the case of the appellants before us also. Shri Haksar submitted that the Tribunal decision in IPCL is good law and does not require to be changed. It had correctly followed the Delhi High Court judgment in the Good Year India Limited case and other similar Tribunal decisions. Shri Haksar also contested the submission of the learned Senior Departmental Representative during the earlier hearing which has been mentioned in the referring order that the wording of the subject set off Notification is identical with that in the pre-amended Rule 56A which, he urged, was wrong. He added that the subject Notification viz. 225/86 has not laid down any procedure as in Notification 201/86. He reiterated his submissions made in the earlier hearing before the Original Bench.
3. The arguments were opposed by Shri P.K. Jain, learned Senior Departmental Representative. He submitted that the IPCL case requires reconsideration. Reasons for such reconsideration have been cogently set out by the referring Bench, he stated. He pointed out that Notification 201/79 contains an important proviso viz. "provided that the procedure set out in the Appendix to this Notification is followed". Unlike this, Notification 225/86 does not have any such procedure. It is analogous on the contrary, to Notification 178/77 which was the precursor to 201/79 and which was superseded by it. Notification No. 225/86 is only an exemption Notification. There are hundreds of exemption Notifications. There is no scheme for taking credit in such cases. There is no reason why Notification 225/86 which is also a simple exemption Notification without any built-in procedure of taking credit of duty should be treated differently. He concluded by pleading that the IPCL decision of the Tribunal may be reconsidered.
4. We have taken note of the submissions. We have gone through the record. We have carefully perused the order passed in the IPCL case. It was the contention of the department in that case that IPCL who were availing the benefit of the very same Notification 225/86-C.E., dated 3-4-1986 which is under consideration in the instant appeals had not been maintaining the set off register and had not complied with the requirements of Trade Notice 126/81 issued by the Collectorate. It was contended by the appellants therein that there was no allegation in the show cause notice that for grant of benefit of set off, the manufacturer has to avail set off of duty equivalent to duty on inputs taken into use for manufacture of final products: It was held by the Tribunal that the Collector had travelled beyond the show cause notice and given a new interpretation to the wordings of the notification. The department, it was held, had not shown any violation had occurred especially when no ratio between input and final product has been prescribed in the notification itself and hence the allegation of not adopting the correct set off procedure available under Notification 225/86 had not been established. As it is the same Notification which is under consideration in the present appeal and as it is the stand of the department that the Tribunal's order in the aforesaid case is not correct and needs to be reconsidered which stand found prima facie acceptance by the Bench which heard these appeals originally it is necessary to examine the arguments advanced regarding the scope and effect of the said Notification.
5. Notification No. 225/86, dated 3-4-1986 is extracted below: -
"Set-off of duty on specific goods of Chapters 54 and 55 if manufactured from duty paid inputs. - In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods of the description specified in column (5) of the Table hereto annexed (such goods being hereinafter referred to as "final products") and falling under such Chapter, Heading No. or sub-heading No. of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), specified in the corresponding entry in column (4) of the said table from so much of the duty of excise leviable thereon under the Central Excises and Salt Act, 1944 (1 of 1944), as is equivalent to the duty of excise leviable thereon under the said Central Excises and Salt Act, or the additional duty leviable under the Customs Tariff Act, 1975 (51 of 1975), as the case may be, already paid on the goods of the description specified in the corresponding entry in column (3) of the said Table (such goods being hereinafter referred to as "inputs") used in or in relation to the manufacture of the final product and falling under such Chapter, Heading No. or sub-heading No. of the said Schedule as is specified in the corresponding entry in column (2) of the said Table."
As is seen from the wording of the Notification, it is an exemption Notification simpliciter though unlike the majority of Notifications, the extent of exemption has not been quantified and indicated as a particular percentage or amount. The extent of exemption granted to the final product is the duty equivalent to the duty of excise already paid on the goods used in or in relation to the manufacture of such final product. The particulars of such inputs and the corresponding final products has been specified in a Table appended to the Notification. The manner and procedure for availment of the benefit available under this exemption has not been spelt out as had been done in Notification No. 201/79, dated 4-7-1979 in the shape of the Appendix thereto. Paragraph 2 of the said Appendix laid down that a manufacturer may take credit of the duty already paid on the inputs which are received by him after submitting the declaration and utilise such credit for payment of duty of excise on the goods (final products). There was, however, another proviso in the said Notification (201/79) that nothing contained therein shall apply to the goods (final product) which are exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty. It was the scope of this condition in Notification 201 /79 that came up for decision before the Delhi High Court in the Good Year India Limited case which decision was followed by the Tribunal in the IPCL case which is now before us for possible reconsideration. Paragraphs 29 to 31 of the Good Year judgment reported in 1990 (49) E.L.T. 44-45 are extracted below:
"27. Under the present notification, a manufacturer is required to take profor-ma credit of the duty, paid on imports, as soon as, the inputs are brought into the factory. This credit is, then utilized and, the manufactured goods are cleared and is not linked to any particular item of the manufactured products. The language of the new notification does not require the inputs to be core-lated with end product. Similarly, under Rule 56A of the Rules, which is the procedure applicable to Notification No. 95/79-C.E. as amended by Notification No. 58/82-C.E., no co-relation is required between the inputs and the final product. Moreover, the Notification No. 201 /79, as well as, Rule 56A of the Rules, are self-contained codes and, the manner in which exemption is to operate, is laid down in the appendix to the said notification, as well as, Rule 56A.
28. Mr. Rajinder Dutt, on the other hand, has contended that the direction given by the Assistant Collector, is in accordance with law. As per the aforesaid Notification No. 201/79 and Rule 56A of the Rules nothing apply to the goods, which are exempted from the whole of the duty of excise and/or are chargeable to nil rate of duty.
29. In our view, there is a force in the contention of Mr. Ravinder Narain. It appears that the extent of credit, available in the' account, maintained in RG-23 can be utilized, at the time of clearing of the product, and there is no provision in the appendix to the notification, as well as, in Rule 56A, that at every stage of clearance of the end-product, utilisation of credit has to be correlated to the quantum of inputs, used in the manufacture of end-product.-
30. In fact, the scheme provides that the credit can be utilized for payment of duty, against any excisable products, that are brought from the factory. No debit cannot be claimed after the credit has been taken on goods brought into the factory. Once, raw materials enter the factory of petitioner-company, credit is to be taken in accordance with the procedure, prescribed in the Rules without any co-relation to the end-product. The credit can be utilized by petitioner, for the payment of duty on any goods, for which credit is taken. These goods need not be exempted goods, but will be those goods, on which duty is payable under the Act.
31. In our view, in terms of the said notification, there need not be any nexus between the inputs and outputs."
Following the ratio in the aforesaid decision as also Tribunal decisions in the Wipro Information Technology and Savottam Ispat (P) Limited case reported in 1988 (33) E.L.T. 172 and 1989 (41) E.L.T. 181 respectively, it was held by the Tribunal in the IPCL case that the Collector's implied finding in his impugned order that the condition for grant of benefit is that the manufacturer has to avail set off of duty equivalent to duty involved in the input taken into use for manufacture of the final product was erroneous and contrary to the rulings rendered in the aforesaid decisions. It had been held in these decisions that there was no one to one correlation of input and final product for the purpose of utilisation of credit. In fact the Good Year judgment went so far as to observe that in terms of Notification (No. 201/79) there need not be any nexus between the inputs and outputs.
6. On a close examination of the subject order of the Tribunal in the IPCL case and the exemption Notification 225/86, dated 3.4.1986, we find that the benefit of exemption is to the extent of duty paid on the inputs used in or in relation to the manufacture of the final products. The quantum of exemption available is thus the excise duty paid on the inputs so used. The notification lays down that specified final products are exempt from duty equivalent to the duty paid on the inputs used in or in relation to their manufacture. It does not require that the quantum of exemption equivalent to the duty paid on particular lot of inputs should be utilised only for payment of duty on the final products made from that lot of inputs. There is neither an express or implied condition in the Notification to that effect. In other words, exemption from duty for a particular lot of final products is not to be limited to the duty paid on the inputs used in or in relation to their manufacture. This type of exemption is not to be treated on a par with notifications where the goods are exempt from duty in excess of particular percentage. Thus, if the effective rate of duty fixed under an exemption notification is, say 10% as against the non-exempted rate of, say 50%, it will be required of the manufacturer to avail the benefit at the time of clearance of the goods or if he does not do so is to file a refund claim. In such a case, it will not be open to the assessee to pay duty at the non-exempted rate and utilise the differential amount of duty as credit for payment of duty on subsequent clearances. The present Notification (225/86) provides otherwise. The classifications and decisions about the absence of one to one correlation between inputs and final products batchwise will permit the availment of the exemption on overall clearances of the partially exempted final product instead of rationing the benefit according to the quantity of inputs used for particular batch of such final products. The absence of one to one correlation between inputs and final products approved under Rules 56A, 57F and Notification 201/79 will equally apply to this Notification notwithstanding the absence of an in-built procedure for taking credit therein. The IPCL decision of the Tribunal is correct in its own right within the confines of Notification 225/86 and not because it treaded the Good Year path as also that of Wipro and Savottam. The IPCL decision is actually on stronger ground as the final products were cleared on payment of duty and not exempt from duty or chargeable to nil rate of duty whereas in the aforesaid cases certain final products (made from inputs which had contributed the credit) were cleared free of duty. These cases were, however, distinguished by the larger Bench of the Tribunal while deciding the case of Kirloskar Oil Engines v. Collector of Central Excise reported in 1994 (73) E.L.T. 835. The Bench took note of the contrary decisions of the Bombay High Court in Geoffrey Manners and Co. Ltd. v. Union of India 1980 (6) E.L.T. 7 and the Tribunal decision in East India Pharmaceutical Works Limited v. Collector of Central Excise 1994 (54) E.L.T. 355. In the last mentioned decision, it was observed that the liberal treatment in regard to the utilisation of credit for payment of duty on the final products without insisting on strict correlation of input and output will not offend Rule 57C as long as the final products remain dutiable. Under Notification 225/86 under examination now also, such utilisation of inputs will permit the benefit thereunder without batchwise correlation of inputs and final products.
7. We find that the Western Bench of the Tribunal in Indian Plyzvood Mfg. Co. Ltd. v. Collector of Central Excise, Bombay reported in 1995 (78) E.L.T. 164 had held that the exemption under Notification 225/86 is to be availed of as the time of clearance of final products by setting off the duty paid on the inputs used in their manufacture and that no credit is contemplated. The Bench was concerned in that case with the question whether on the analogy of Rule 57E credit could be taken of the duty paid at a subsequent stage on the inputs. It was held that as Notification 225/86 did not contemplate taking of credit, benefit of Rule 57E could not be invoked, therefore which would be available only in respect of inputs received where Modvat credit benefit is provided either in the Rule or in the Notification in respect of the duty payable on the final product. It was observed that when additional duty is paid on such inputs they can only claim refund of excess duty paid on the final products, if it is otherwise permissible under Section 11B. With respect, we would like to state that while certainly credit cannot be taken under Notification 225/86, for the duty paid on inputs whether paid originally or subsequently the benefit under that notification has to be allowed as abatement on the duty payable on the final products without insisting that at every stage of clearance of the final product, the utilisation of credit has to be correlated to the quantum of inputs used in its manufacture. Such a position was laid down by the Delhi High Court in the Good Year case, as already stated with reference to Notification 201/79. Though our Notification 225/86 is not exactly on all fours with the former, the non-applicability of the strict one to one correlation between inputs and final products is nevertheless, true of this Notification also, as already discussed earlier. Again we are of the view that the remedy of refund which was the stand of the authorities in the present case and which has been indicated by the West Bench in the Indian Plywood case in respect of additional duty paid subsequently, need not be effective in those cases where the original payment of duty of a higher amount which is sought to be remedied had been making such refund claims time barred. Where extra duty on inputs is required subsequently after the final products are cleared, it need not have been possible for the manufacturer availing Notification 225/86 to take into effect such duty. If such extra payment of duty is made more than six months after the clearance of the final product, a refund claim would be time barred. In other words when the cause of action for a claim arises namely the payment of additional duty on the inputs, the refund claim is a still born baby because of time bar. Hence the interpretation of this exemption notification which is different in its wording and scope from other run of the mill, exemption notification has to be such as to make it invokable and not wipe out its effectiveness. While refund claims, where made and where made in times may be appropriate, such refund claims are not the only solution. The exemption can be availed to the extent of duty paid on the inputs for payment of duty on the specified final product without one to one correlation with the inputs. In that view of the matter, the decision of the Bench in the IPCL case was in order. We hold accordingly and answer the question posed before us by saying that the Tribunal's decision in the said case of IPCL was in order does not require any reconsideration.