Madhya Pradesh High Court
Gilt Pack Ltd. vs Assistant Collector Of Central Excise on 30 October, 1993
Equivalent citations: 1994(45)ECC59, 1994ECR1(MP), 1993(69)ELT222(MP)
ORDER A.G. Qureshi, J.
1. This order shall also govern the disposal of Misc. Petition No. 723 of 91 (M/s. Neo Sack Limited v. The Asstt. Collector, Central Excise, Indore) wherein identical point of law is involved for decision.
2. The facts leading to this petition, in short, are that the petitioner is a registered Company incorporated tinder the provisions of the Companies Act, having its registered office at Indore. The Company manufactures HDPE woven sacks, HDPE tapes and HDPE fabrics and has a factory installed at Pitampur, District Dhar. According to the petitioners to remove the cascading effect of the Central Excise duties, MODVAT (Modified Value Added Tax) was introduced from 1st March, 1986 through the introduction of a new Part AA in Chapter V of the Central Excise Rules, 1944 (hereinafter referred to as Rules) by Notification No. 176/86 dated 1-3-1986 with effect from 1-3-1986. In the aforesaid scheme transitional provision in the Rules, vide Rule No. 57H was introduced, which reads as under :
"57H(1) Notwithstanding anything contained in Rule 57F, the Assistant Collector of Central Excise may allow credit of the duty paid on inputs received by a manufacturer before filing a declaration under Rule 57G if he is satisfied that-
(a) such inputs are lying in stock or are received in the factory on or after the 1st day of March, 1986, or
(b) such inputs are used in the manufacture of final products which are cleared from the factory on or after the 1st day of March, 1986, and that no credit has been taken by the manufacturer in respect of such inputs under any other rule or notification:
Provided that no credit under this Sub-rule shall be allowed in respect of inputs received on or after the 1st day of April, 1986."
Thereafter this transitional provision was substituted by the Central Excise (First Amendment) Rules, 1987 with effect from 1-3-1987 vide Notification No. 25/87-C.E., dated 1-3-1987, which reads as under :
"57H.(1) Notwithstanding anything contained in Rule 57G, the Assistant Collector of Central Excise may allow credit of the duty paid on inputs received by a manufacturer immediately before obtaining the dated acknowledgment of the declaration made under the said rule if he is satisfied that -
(i) such inputs are lying in stock or are received in the factory after filing the declaration made under Rule 57G, or
(ii) such inputs are used in the manufacture of final products which are cleared from the factory on or after the first day of March, 1987, and that no credit has been taken by the manufacturer in respect of such inputs under any other rule or notification :
Provided that such inputs are not used in the manufacture of final product which is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty."
3. The petitioners have further submitted that the inputs used by the petitioners and the final product manufactured by the petitioner both fall under Chapter 39 in which the MODVAT Credit is allowed. The petitioners therefore started availing of the MODVAT Credit under Chapter 39 and filed the necessary declaration on 12-12-1988 as required by Rule 57G of the Rules and also filed an application under Sub-rule (3) of Rule 57H showing the particulars of the inputs lying with the petitioner as on 11-12-1988 for availing of the MODVAT Credit and the inputs used in the final product, according to scheme made for credit of duty paid on inputs, which were cleared from the factory on or after 1-3-1987. The applications are annexed as Annexures PI and P2. But the department did not decide the applications filed by the petitioners. Therefore they filed M.P. No. 1604 of 90 and 1590 of 90 before this Court. This Court, vide order dated 27-2-1991 directed the respondents Department to consider and decide the said applications by 15th April, 1991 (order is annexed as Annexure-P3). The Department decided the applications of the two petitioners vide its order dated 9/11-4-1991 (Annexure-P4) wherein it was held that according to Sub-rule (1) of Rule 57H credit of duty under the Rule is admissible only to inputs which are received by manufacturer immediately before filing of the declaration. Therefore, the application to allow credit on all the inputs which were used in the manufacture of final product which were cleared after 1st March is not tenable. The credit can be allowed only on the inputs which are lying in stock or received in the factory after filing the declaration under Rule 57G, and the inputs used in the manufacture of the final products which are cleared from the factory on or before 1st March, 1987. It was further held that mere mention of the date 1st March, 1987 does not indicate that the credit can be allowed on the inputs used in die manufacture of final product which have been cleared from the factory and as such the claim of the petitioner cannot be entertained in respect of those inputs which were not available for verification. Aggrieved by the aforesaid order the petitioners have again come up in these petitions before this Court.
4. A preliminary objection was raised in respect of tenability of the petition in view of the fact of availability of the alternative remedy. But this objection has no force in view of the fact that this petition is already admitted and has come up for final decision. Furthermore the period of appeal has also expired during the pendency of this petition. This Court in the case of Mad-humilan Syntex (P) Ltd. v. Union of India [1987 (32) E.L.T. 489 (M.P.)] has held that when the petitioners have again directly approached the Court and the petition was entertained, at this stage when the period of filing an appeal has already expired, it will not be proper to dismiss the petition on the ground of existence of an alternate remedy. The preliminary objection raised on behalf of the respondents cannot, therefore, be upheld.
5. A similar view was taken in the case of Tata Exports Ltd., Dewas v. Union of India and Ors. (M.P. No. 1271 of 82) reported in 1985 (22) E.L.T. 732 (M.P.) wherein it has been held that the Court has held in a series of decisions that once a petition has been admitted it could not be dismissed on the ground of alternate remedy. Therefore, this court has taken a consistent view that after the admission of the petition and expiry of the period of limitation for filing an appeal alternate remedy is no bar to the decision of a petition.
6. As regards the merits, let us first look at the provisions contained in the transitional provision contained in Rule 57H. Undisputedly this provision has been introduced by the law makers to give benefit to those who could not understand the new phenomena of the MODVAT credit and those debarred from filing the declarations as required by the Rules allowing the MODVAT credit. The purpose apparently appears to be to give the credit to the manufacturers for those raw materials on which they have already paid the duty used as inputs for the manufacture of the goods which are liable to the duty as a final product. Rule 57H has two limbs, one pertains to such inputs as are lying in stock or are received in the factory after filing the declaration made under Rule 57G and the second limb of the Rule pertains to those inputs which are used in the manufacture of final products and which are cleared from the factory on or after 1st March, 1987 provided that no credit has been taken by the manufacturer in respect of such inputs under any other Rule or Notification or that the final products of such inputs are dutiable. A bare reading of the aforesaid two provisions shows that a manufacturer is entitled to get credit on the inputs which are lying in stock or are received in the factory after filing the declaration and also on such inputs which are already used in the manufacture of the final products and those final products are cleared from the factory on or after 1st March, 1987. As such when an argument is advanced that the inputs are not available for verification as they are not lying in stock, acceptance of such an argument would result in making the provision of second clause of Rule 57H nugatory. It appears that the purpose behind the Rule was to give credit both to the inputs which were lying in stock for verification and also those inputs which were already used in the manufacture of the goods which were cleared from the factory on or after 1st day of March, 1987. The clear language of the Rule does not admit of any other interpretation than the one which gives benefit in both the cases.
7. In the instant case the petitioners after having filed a declaration under Rule 57G on 12-12-1988, also filed an application with the Assistant Collector, Central Excise-Div. II, Indore seeking the benefit under Rule 57H in respect of those inputs which were utilised in the manufacture of final products cleared from the factory on or after 1-3-1987. As such the benefit claimed was for the goods which were actually used in the manufacture of final products cleared from the factory on or after 1st March, 1987 as well as for those goods which were to be used as inputs and were received in the factory and lying in stock. The Assistant Collector, however, disallowed the credit in respect of those inputs which were already used by the petitioners for manufacture of the final products.
8. The petition has been resisted by the Department mainly on the ground that the Assistant Collector had allowed credit of inputs which were in stock on 12-12-1988 vide his order dated 9/11-4-1991. That it is the satisfaction of the Assistant Collector about the admissibility of the credit which is important and the Assistant Collector was satisfied that the credit in respect of only those goods which were lying in stock could be given. The Assistant Collector was not satisfied for giving credit in respect of the inputs which are used in the manufacture of final products. Therefore, the order of the Assistant Collector is valid and cannot be challenged being arbitrary or erroneous.
9. In our opinion the reply itself shows that the approach of the Assistant Collector is neither reasonable nor fair. He has not cared to take the provisions of clause (ii) of Section 57H into consideration while passing the impugned order. Whenever a provision is made in a particular law, the persons who are responsible for the execution of the provisions of law and for interpreting them as quasi-judicial authority are expected to decide the questions raised before such authority objectively after properly appreciating the purpose behind the provisions made in a particular Rule or law and then to make a decision pertaining to a claim which may be based on such a provision. In the instant case when the final products of the manufacturers are cleared by the Central Excise Authorities after payment of full duty there is a complete record of the goods cleared and it is also in the knowledge of such authorities that what are the inputs for the manufacture of a particular product. A detailed account of the inputs and the manufacture of the goods is kept with the authorities and the manufacturers submit that account periodically as per the Rules to the Authorities.
10. In the instant case the manufacturers have submitted the details of the inputs used by them for the manufacture of the goods which were cleared by the Central Excise Authorities on 1-3-1987 and thereafter, till filing of the declaration. As there is no time limit for filing the declaration and there being no definition of the words "immediately before filing the declaration" it should be held that if the declaration is filed by the manufacturers claiming the credit, that declaration has to be considered in the light of the record available with the Central Excise Authorities. It is not the case of the Central Excise authorities that the details of the inputs which are already used for manufacturing the goods cleared by the authorities on 1-3-1987 and after are not available with them. They have actually been filed by the petitioners along with the applications as is manifest from the petition and that fact has not been denied or disputed by the authorities. Therefore, on the basis of those details the credit should always be given to the manufacturers after verification of the inputs used for the manufacture of the goods cleared on 1-3-1987 and thereafter. But it seems that the authorities concerned have not cared to look into this aspect of the matter. The credit has been allowed only on those goods which were lying in stock as per the first clause of Rule 57H of the MODVAT Rules. The authority has not cared to look into the provisions of sub-clause (ii) of Rule 57H of the Rules which clearly provides for allowing the credit for the inputs which have been consumed for manufacture of goods cleared on 1-3-1987 and thereafter.
11. Learned counsel for the petitioners have cited many judgments of the CEGAT in support of his arguments that such a credit should be allowed. One judgment has also been filed in support of the contention raised by the learned Standing Counsel for the Government of India. But in view of the clear provisions contained in clause (ii) of Rule 57H we may not discuss those judgments which although are not a precedent for this Court, but have a persuasive value.
12. As a result of the aforesaid discussion we hold that the order impugned passed by the Assistant Collector, Central Excise, Indore dated 9/11-4-1991 (Annexure-P4) disallowing the credit to the petitioners for the inputs received in the factory and used for production of the goods which were cleared from the petitioners' factory on or after 1st March, 1987, is erroneous. The order of the Assistant Collector is, therefore, quashed to that extent. Instead it is directed that the credit for the inputs used for manufacturing goods cleared from the factory on 1st March, 1987 and thereafter shall be given to the petitioners. As a sufficiently long period has already elapsed, we further direct that the credit for the inputs as contained in sub-clause (ii) of Rule 57H of the Rules shall be given to the petitioners on the strength of their declaration and the details of the inputs filed by them after taking an undertaking from the petitioners that in case on verification if any part of the statement is found to be factually incorrect, they shall be liable to repay the sum. The verification has to be made on the basis of the record which is already with the Department and which may also be available with the manufacturers. The verification may be completed within a period of one month from the date of this order.
13. The petitions are allowed with the aforesaid direction. In the circumstances there shall be no order as to costs. Security cost, if any, deposited by the petitioners shall be refunded to them, after due verification.