Customs, Excise and Gold Tribunal - Delhi
Raghuvar (India) Ltd. vs Commissioner Of Central Excise, Delhi on 7 January, 2002
Equivalent citations: 2002(140)ELT280(TRI-DEL)
JUDGMENT
K.K. Usha, President
1. This is an appeal at the instance of assessee from the order of Commissioner (Appeals) vide Order-in-Appeal No. 180 (KDT)CE/JPR-I (103)/2001, dated 3-4-2001 confirming a differential duty demand of Rs. 7,07,445/- against the appellant and imposing an equal amount of penalty under Section 11AC of the Central Excise Act and also interest.
2. The appellant is engaged in the manufacture of vegetable products falling under sub-heading 1504.00 of Central Excise Tariff Act. It was availing Modvat credit of the duty on the inputs used in the manufacture of said vegetable products under Rule 57A of the Central Excise Rules. By Notification No. 16/96, dated 23-7-96 vegetable products classifiable under the above sub-heading were exempted from Central Excise duty. A show cause notice dated 25-8-99 was issued to the appellant alleging that consequent upon withdrawal of duty on vegetable products, the appellant ought to have reversed the Modvat credit taken on the inputs which were still to be converted into finished products and that by not doing so, it had taken the Modification credit with intent to evade duty.
3. It is not disputed that at the time of taking the Modvat credit the final products were dutiable. The appellant, therefore, contended that the subsequent exemption to the final product from duty would not result in violation of any of the provisions of Rules. The adjudicating authority passed an order disallowing the credit of Rs. 7,62,439/- and imposed penalty of same amount under Rule 57I(4) and Rs. 50,000/- under Rule 173Q of the Rules alongwith the interest under Rule 57I(5). The above order was challenged before the Commissioner (Appeals) who took a view against the appellant following Super Cassettes Industries Ltd. v. Union of India - 1997 (94) E.L.T. 302, a decision of the Allahabad High Court and Khanbhai Essofbhai v. CCE - 1999 (107) E.L.T. 557.
4. The learned Counsel for the appellant would contend that the above mentioned two decisions are no longer good law in the light of the decision of the Supreme Court in Dai Ichi Karkaria Ltd. - 1999 (112) E.L.T. 353. A similar issue came up for consideration before us in CCE, Rajkot v. Ashok Iron & Steel Fabricators (A. No. E/813/2001-MUM). [2002 (140) E.L.T. 277 (Tri. - LB)]. There, referring to the following paragraph from the decision of the Supreme Court in Dai Ichi Karkaria Ltd. we have taken the view that if the credit was taken at a time when the final product was not exempted from duty and it was utilised, a subsequent exemption of the final product will not be a reason for reversal of the credit by the Excise authority:
"It is clear from the Rules, as we rad them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof, it is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no correlation of the raw material and the final product, that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available."
In the present case it is admitted that the final products manufactured by utilising part of the duty paid inputs and the remaining portion of the duty paid inputs are not yet cleared. Since the final product is now exempt from duty, the Modvat credit taken can be reversed. To that extent the impugned order is upheld, but there is no reason for recovering any amount by way of duty on this count or imposition of penalty or recovery of interest. Imposition of penalty and interest is set aside. The appeal stands partly allowed.