Customs, Excise and Gold Tribunal - Delhi
Inalsa Ltd. vs Commissioner Of Central Excise on 4 October, 1996
Equivalent citations: 1997(90)ELT417(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. This appeal is directed against the Order-in-Appeal No. 338-C.E./DLH/92, dated 22-6-1992 passed by the learned Commissioner Appeals, Central Excise, New Delhi upholding the Order-in-Original No. 18/Refund/92, dated 27-2-1992 passed by the Assistant Commissioner, Central Excise, MOD-VI, New Delhi, rejecting the refund claim of the appellants for Rs. 1,87,347.58, for return of the said amount which was collected by the Department by directing the appellants to debit the Modvat credit on the inputs used by the appellants in their final products which had been destroyed in fire accident, already availed by the appellants and utilised for payment of duty on the final product cleared before the happening of the fire accident in the assembly/manufacturing section of the Appellant's factory.
2. As the facts go the appellants are manufacturers of food processers falling under sub-heading 8509.00 of the Central Excise Tariff Act, 1985 and had been operating under the Modvat Scheme under Chapter V, Section, AA of the Central Excise Rules, 1944. The inputs were so utilised in the manufacture of final products and the credit of duty paid thereon had been utilised in payment of the duty on such products cleared from the factory earlier to the said accident. There is no dispute about the receipt of the inputs, availing of the credit of duty paid thereon and also the utilisation of the credit.
3. Heard learned Counsel Shri Pravin Sharma for the appellants and Shri Jangir Singh, learned Departmental Representative.
4. The question is whether the conclusion of the lower authorities, that the final product was destroyed by fire, and therefore was not chargeable to any duty, and as such no credit on admissible in terms of Rule 57C Central Excise Rules, is correct. That Rule says that no credit shall be allowed if the final product is exempt from whole of the duty of excise leviable thereon or is chargeable to 'nil' rate of duty. In this case the inputs had been put to the intended use of manufacture of their final product. But since the final product was destroyed by fire, duty thereon has been remitted under Rule 49 Central Excise Rules which lays down that the manufacturer shall on demand pay the duty leviable on any goods which are not accounted for in the manner specified in the Rules, or which are not shown to the satisfaction of the proper officer to have been lost or destroyed by natural causes or by unavoidable accident during handling or storage in the approved store room or other approved premises. In this case the remission of duty has evidently been granted. The point is whether such remission of duty on the fire destroyed finished goods will be covered by the (sic) Modvat Rule 57C. In this connection the appellants rely upon the Tribunal decision the case of Reliance Industries v. Commissioner of Central Excise - 1995 (78) E.L.T. 595. In that decision Modvat credit was sought to be denied on inputs used in manufacture of final goods exported under bond without payment of duty invoking Rule 57C. The Tribunal set aside the demand by following the decision of Calcutta Bench of the Tribunal in the case of Orissa Synthetics v. Commissioner of Central Excise, Order No. A/447/Cal/1994, dated 30-5-1994 and the Bombay Bench decision Commissioner of Central Excise v. Indian Aluminium, Order Nos. 668-69/92, WRB, dated 29-4-1992. In the Calcutta Bench decision the Bench overruled the department's contention that Rule 57C is attracted in such case by relying upon the decision of Delhi High Court in Hindustan Aluminium Corporation Ltd. v. Superintendent, Central Excise, Mirzapur and Ors., reported in 1981 (8) E.L.T. 642 (Del.) wherein it was held by the High Court that the facility of removal for export under bond without payment of duty could not be equated with general exemption from payment of duty of excise. The Calcutta Bench also took note of a clarification issued by the Central Board of Excise and Customs in consultation with the Ministry of Law about the scope of proviso (i) to Sub-rule (2) of Rule 56A (analogous to Rule 57C). In that clarification it was stated that the proviso to Rule 56A(2) would not be attracted where the final product were exported under bond, since such removals could neither be construed to be exempted nor be regarded as goods charged to nil rate of duty. Similar view was taken by the Bombay Bench of the Tribunal to hold that Rule 57C is inapplicable in such situation. In the present case also the final product has not suffered duty only as a result of remission of duty given on fulfilling the conditions, therefore under Rule 49 which is not to be equated to a general exemption from duty on the goods being charged to nil rate of duty, in the light of the above precedents. Hence invoking Rule 57C, on the facts and in the circumstances of this case, is not sustainable. It is also to be noted that there is no dispute that the inputs have been put to the intended use in the manufacture of the declared final product. Even the department instructions in Bangalore Collectorate Trade Notice dated 19-9-1988 [1988 (37) E.L.T. T23] relates only to raw materials on which Modvat credit has been availed, being destroyed in fire accident before they are used in the manufacture of final product and goes on to say that in such cases no Modvat credit is admissible. In the present case that stage is definitely past, the inputs having admittedly been used in the manufacture of final product and hence on a better footing. In the result, for the foregoing reasons, we hold that the appellants are entitled to Modvat credit on inputs used in the manufacture of final product destroyed by fire accident on which remission of duty had been granted by the department. The impugned order is set aside and appeal allowed.