Bombay High Court
Castrol India Ltd. vs Union Of India (Uoi) on 5 August, 2002
Equivalent citations: 2002(5)BOMCR431, 2003(154)ELT19(BOM)
Bench: V.C. Daga, J.P. Devadhar
JUDGMENT J.F. Devadhar, J.
1. In this petition, the Petitioners have challenged the show cause notice dated 28th September, 2001 issued by the Deputy Commissioner of Central Excise, Panvel Division, wherein the Petitioners were called upon to show cause as to why penal action be not taken against them for availing Cenvat Credit of Rs. 21,74,227.00 in contravention of Rule 57AF(2) of the Central Excise Rules, 1944 ('Excise Rules' for short). The Petitioners had availed the Cenvat Credit for the aforesaid amount pursuant to the order passed by the Deputy Commissioner, Central Excise, Division 'E', Mumbai on 22nd September, 2000 and, therefore, it is the contention of the Petitioners that without challenging the order of the Deputy Commissioner of Central Excise, Mumbai dated 22nd September, 2000 it is not open to initiate the penal proceedings against the Petitioners and, therefore, the impugned show cause notice is liable to be quashed and set aside.
2. Ordinarily, we would not have taken up the onerous responsibility of adjudicating the show cause notice on our self, but in view of the facts of this case where utilisation of the credit is pursuant to an order dated 22nd September, 2000 and that order has become final, we are of the opinion that the question of taking any penal action against the Petitioners does not arise at all and hence instead of permitting adjudication we have decided to hear the matter on merits itself.
3. The facts having bearing to the subject matter of the present petition are as follows :
The first Petitioner company inter alia manufactures and sells lubricating oil. The Petitioners had a godown at Mazgaon wherein the Petitioners received manufactured lubricating oil in bulk from various manufacturing units of Petitioner No. 1 company situated at Patalganga, Wadala and Silvassa. The Petitioner repacked the said oil into various packs ranging from 50 liters to 250 m.l. The repacked goods were sold from the said godown by the Petitioners to various locations and across the country.
4. The Petitioners were entitled to avail Modvat Credit in respect of inputs used in the manufacturing of goods. The Petitioners issued Modvat invoices from time to time and the same were entered in the register kept for that purpose and there is no dispute regarding the allowability of Modvat Credit to the Petitioners.
5. It is the case of the Petitioners that during January, 1998 to March, 1998 as a measure of revenue collection drive, the Petitioners were requested by the Respondents to debit duty only in PLA and not to utilise credit from the Modvat Credit account. As a result whereof the goods came to be cleared during the above period on payment of excise duty and the amount credited under the Modvat account remained credited in their account. On 12th August, 1998 the Petitioners stopped repacking activities at the Mazgaon unit and transferred their repacking activity to the Patalganga unit. Since the Modvat Credit amount lying to their credit could not be utilised till the closure of the Mazgaon unit in August, 1998, the Petitioners by their letter dated 10th May, 2000 requested the Deputy Commissioner of Central Excise, Division 'E', Mumbai either to refund the amount due to them under Modvat Credit or permit them to transfer the balance Modvat Credit to their Patalganga unit.
6. By an order dated 22nd September, 2000 the Deputy Commissioner of Central Excise, Division 'E', Mumbai informed the Petitioners that he is permitting the Petitioners to transfer the unutilized credit balance of Rs. 21,74,227/- from Mazgaon unit to Patalganga unit in view of provisions of Cenvat Rules 57AF(1) and (2) of the Central Excise Rules, 1944. In the light of the aforesaid order, the Petitioners transferred the unutilised credit to the Patalganga unit and availed credit of the same in respect of clearances effected from Patalganga unit. By the impugned show cause notice, the Deputy Commissioner of Central Excise, Panvel Division sought to take action against the Petitioners on the ground that taking unutilized credit of Mazgaon unit at Patalganga unit was in contravention of the provisions of Cenvat Rules 57AF(1) and (2) of the Central Excise Rules and for wrongly availing the Cenvat Credit amounting to Rs. 21,74,227/- the Petitioners were liable for penal action. Challenging the said show cause notice, the present petition has been filed.
7. Mr. Pochkhanawalla, learned Counsel appearing on behalf of the Petitioners submitted that the Petitioners had transferred the unutilised credit from Mazgaon unit to Patalganga unit as per the order dated 22nd September, 2000 passed by the Deputy Commissioner of Central Excise, Division 'E', Mumbai and since the said order has become final, it is not open to the Respondents to issue show cause notice and contend that the Petitioners have wrongly availed credit and seek to penalise the Petitioners. It was submitted that the Petitioners had cleared the goods during the period from January, 1998 to March, 1998 on payment of duty without availing the Mod-vat Credit only at the request of the Respondents and having accepted the order passed on 22nd September, 2000 it is not open to the Respondents to contend that the Petitioners have deliberately taken credit of the unutilized amount in violation of Cenvat Rules 57AF(1) and (2) of the Central Excise Rules, 1944.
8. Mr. Shah, learned Counsel appearing on behalf of the Respondents submitted that the permission granted on 22nd September, 2000 for transfer of unutilised credit was subject to the provisions of Cenvat Rules 57AF(1) and (2) of the Central Excise Rules, 1944. It was submitted that under Rule 57AF(2) of Excise Rules transfer on Cenvat credit can be allowed only if the stock of inputs or the capital goods were also transferred to the new site. It was submitted that in the instant case only the credit was transferred and not the inputs or manufactured goods in contravention of Rule 57AF(2) of the Excise Rules and hence the petitioners were liable for penal action.
9. After hearing both the parties and after perusing the records placed before us, we are of the opinion that by the order dated 22nd September, 2000 the Deputy Commissioner, Division 'E', Mumbai had clearly and unequivocally permitted the Petitioners to transfer the unutilised credit from Mazgaon unit to Patalganga unit in view of provisions of Rules 57AF(1) and (2) of the Excise Rules, 1944 knowing full well that the inputs and the consequent manufactured goods have already been cleared on payment of duty. The permission granted in the said order for transfer of credit "in view of the provisions of Cenvat Rules 57AF(1) and (2)" cannot be read as "subject to the provisions of Cenvat Rules 57AF(1) and (2)" as contended by the Respondents. From the facts placed on record it is evident that the petitioners had during the period from January, 1998 to March, 1998 cleared the goods on payment of Excise duty without availing the Modvat credit as requested by the respondents (as a measure of revenue collector drive) and by the said or-
der dated 22nd September, 2000 the Deputy Commissioner of Central Excise, Division 'E', Mumbai instead of refunding the amount to the Petitioners through it fit and proper to permit the Petitioners to transfer the unutilised credit balance of the Mazgaon unit to the Patalganga unit. If at all the Respondents were aggrieved by the said order, it was open to them to challenge the same by adopting appropriate proceedings and it is not in dispute that the order dated 22nd September, 2000 is an appealable order. Having accepted the said order it is not open to the Respondents to issue a show cause notice and contend that the petitioners have contravened the provisions of Cenvat Rules 57AF(1) and (2) of Central Excise Rules, 1944. Even in the show cause notice, it is specifically stated that the petitioners have taken and availed Cenvat credit of Rs. 21,74,227/- as per order of the Deputy Commissioner, Central Excise, Division 'E', Mumbai dated 22nd September, 2000. However, it is contended by the Respondent that the Petitioners have misconstrued the said order and wrongly availed the Cenvat credit. In our opinion the construction placed by the Petitioners on the said order dated 22nd September, 2000 is justified and from the said order it was evident that the Petitioners were permitted to transfer the unutilized credit balance from Mazgaon to Patalganga in accordance with Cenvat Rules 57AF(1) and (2) of the Central Excise Rules, 1944. Even in the return the Respondents have not specifically denied the contention of the Petitioners that during January to March, 1998, the goods were cleared by the Petitioners on payment of duty without taking Modvat credit at the request of the Respondents. It appears that in view of the above facts, the Deputy Commissioner of Central Excise, Mumbai permitted the Petitioners to transfer the credit without there being transfer of inputs or manufactured goods. In that view of the matter no fault can be found with the Petitioners for transferring the unutilized Modvat credit and availing the same and they cannot be said to have contravened the provisions of Cenvat Rules 57AF(1) and (2) of the Central Excise Rules, 1944.
10. Accordingly, we quash and set aside the impugned show cause notice dated 28th September, 2001 and make the rule absolute in terms of prayer Clauses (a) and (b). However, in the present facts and circumstances of the case, there will be no order as to costs.