Customs, Excise and Gold Tribunal - Mumbai
Cce And C vs Merry Weather Food Products Ltd. on 21 December, 1998
Equivalent citations: 1999(110)ELT904(TRI-MUMBAI)
ORDER J.N. Srinivasa Murthy, Member (J)
1. This is Department's appeal against the Order-in-Appeal No. P-270/92, dated 23-10-1992 passed by the Collector (Appeals) Pune, praying for setting aside the same, and restore the order-in-original of Assistant Collec- tor of Central Excise, Nasik-I, dated 1-7-1992 and to allow the appeal. The facts of the case are that the Respondent is the manufacturer of tomato sauces, fruit jam, pulp juice, etc. falling under Chapter Heading No. 2006.10. Tomato Ketch up and Sauce falling under the Chapter Heading No. 2103.11 of Central Excise Tariff Act, 1985. They were exempted from duty under Notifications 19 and 27/91, dated 25-7-1991 respectively. Respondent had balance in the RG23A-II Rs. 35,970.82, and balance of duty paid inputs on which the credit worked out to Rs. 69,872/-. They had also stock of finished goods, in which the duty paid inputs were used and the quantum of such duty involved on such input were Rs. 3,67,744.82 as on 25-7-1991. Total balance of credit on the above dated was Rs. 4,37,616.82 ps. Respondent did not reverse them.
2. Show-cause notice was issued on 28-1-1992 by the Superintendent of Central Excise Range "A", Nasik-I, to the Respondent asking him to show cause to the Assistant Collector as to why credit of Rs. 4,37,616.82 ps. should not be recovered under Rule 57-1 read with Section 11A of Central Excise Act on the ground that their final products were exempted from duty from 25-7-1991, and the Modvat credit was not allowed in terms of Rule 57C, and why penalty should not be imposed. On receipt of the reply from the Respondent, after going through the records, Assistant Collector of Central Excise and Customs, Nasik-I Division, confirmed the demand as per show cause notice and imposed penalty of Rs. 5,000/- on the Respondent on 1-7-1992. The Respondent preferred appeal against the above order, which was allowed under the impugned order on 23-10-1992 holding that Modvat was correctly availed by the Respondent/assessee, and effect of complete exemption of duty on the products manufactured by Respondent with effect from 25-7-1991 would be that Modvat credit was available with them cannot be utilised. However, the credit available with the assessee cannot be recovered under Rule 57-1 of Central Excise Rules. Hence this appeal by the Department.
3. The case of the Respondent, as per the reply dated 20-3-1992 to the show cause notice dated 28-1-1992 and contentions before the lower authorities as evident from their order is clear admission on factual position of availing Modvat credit on inputs and exemption of Central Excise duty on final products from 25-7-1991, and also the legal position under Rule 57C, but denied the contravention of Rule 57C on the ground that after 25-7-1991, they have neither availed Modvat credit, on duty paid inputs, nor they have utilised the credit balance lying in RG-23A Part H There is no rule either to reverse or debit it. It automatically stands lapsed, due to non user. They admit that they should debit the Modvat credit to the extent input contained in the final product as shown in Annexure II to show-cause notice as final products will be cleared at nil rate of duty after 25-7-1991. The total stock of finished goods, which are carry forward stock of the last more than 4 years contain damaged or deteriorated goods, which are not fit for human consumption, which are at Sl. Nos. 1 to 3 of Annexure II to show-cause notice. They have applied for permission to destroy it as early as 1988, which is still to be granted by the Collector. As soon as it is received, they will be destroying the same. Inputs have been used in or in relation to the manufacture of final products, which are likely to be destroyed after the permission of the Collector, Modvat credit taken in respect of such inputs, need not be reversed, as it will not be cleared out of factory. Demand of duty in such case is not legal and proper. There is no allegation of availing Modvat credit and utilising it on or after 25-7-1991 by the Respondent and also there is no allegation that the stock of finished goods lying in the bonded store room of Respondent is less than the stock held on 25-7-1991, to establish clearance of final product at nil rate of duty, without reversing Modvat credit taken on inputs used to manufacture the stocked final product. There is no contravention of any rule as alleged in the show cause notice under Rules, 57C, 57G, 57F (1)(i) to invoke penal action under Rule 173Q of Central Excise Rules. They undertake to reverse the Modvat credit in respect of inputs contained in the final products which will be cleared at nil rate of duty or in case there is insufficient balance, they will pay in cash, subject to receipt of permission for destruction and after it is carried out by them.
4. Point for consideration whether there are sufficient grounds to allow the appeal. My finding is in the affirmative.
5. Heard the learned DR. He has urged that Credit balance of duty paid on inputs and stock of finished goods on which duty paid inputs are used require reversal by Respondent under rule 57C of Central Excise Rules. Perused the order in original page 4. The discussion of the Assistant Collector is too vague viz. "legal requirements of reversal of Modvat credit has not been fulfilled and not observed the Central Excise procedure prescribed under Modvat Rules, regarding availment utilisation and reversal of Modvat credit" as alleged in the show-cause notice. There is no pointed discussion on this point about the contravention of specific provision of the rules, in view of the specific stand of the Respondent. In the impugned order, in the course of discussion in para 6 of the order in pages 3 and 4 the above defect observed is pointed out. As held, Rule 57-1 of Central Excise Rules is not at all applicable, as no such situation has arisen in this case. No recovery can be ordered. The stand taken by the Respondent is proper and correct.
6. But in view of the undertaking it is necessary to verify whether the final products are destroyed by the Respondent, after the receipt of permission of Collector dated 21-4-1992, as he has undertaken to pay the cash amount in default towards the credit availed. Apart from it, Assistant Collector should consider the case afresh, and hear the Respondent, and dispose of the case in accordance with the proper provision under the Central Excise Act and Rules. So point raised is answered in the affirmative and the following order is passed.
ORDER For the reasons indicated above the appeal is allowed, and impugned order is set aside. The case is remanded to the adjudicating authority to verify the undertaking of the Respondent and its compliance as observed above, and hear the Respondent, and dispose of the case under the specific provision of the Central Excise Act and Rules.