Customs, Excise and Gold Tribunal - Bangalore
Motor Industries Co. Ltd. vs Cce on 4 February, 2003
Equivalent citations: 2003(108)ECR274(TRI.-BANGALORE)
ORDER G.A. Brahma Deva, Member (J)
1. This appeal arises out of and is directed against the Order-in-Appeal No. 576/2001-CE dated 4.9.2001 passed by the Commissioner of Customs and Central Excise (Appeals), Bangalore.
2. The appellants, M/s Motor Industries Co. Ltd., are manufacturers of excisable goods falling under Chapters 84 & 85 of Central Excise Tariff Act, 1985. They filed declaration under Rule 57G of the Central Excise Rules, 1944 declaring the inputs used in the manufacture of final products as well as those used in the manufacture of intermediate products in respect of which credit of duty was availed in terms of the Rules 57A and 57J of the Rules. In pursuance to such declaration filed, the appellant started availing the credit in terms of Rule 57A to the extent of 95% of the duty paid on the inputs received on or after second day of June 1998 which were used in the manufacture of final products. However in respect of the inputs which were used in manufacture of intermediate products, the appellants availed credit to the extent of 100% of the duty paid, even in respect of inputs received on or after the second day of June 1998. The appellant claimed such credit under bona fide belief that the amendment brought about to the Notification No. 5/94-CE(NT) dated 1.3.1994 by Notification No. 14/98-CE(NT) dated 2.6.1998 did not apply in respect of credits taken on inputs used in the manufacture of intermediate products under Rule 57J of the Rules. A Show Cause Notice was issued raising the demand on the ground that the appellants had availed credit in excess of 95% duty paid and that being availed in contravention of the conditions of the Notification No. 14/98-CE(NT) dated 2.6.1998. The show cause notice was duly answered by the appellants stating that they are entitled to take full credit and stressed that the credit was taken under Rule 57J which falls outside the purview of Notification No. 14/98-CE(NT) dated 2.6.1998 and the restriction imposed by the Notification does not apply for the transactions falling under Rule 57J because Rule 57J is a "non-obstante clause" which will override the provisions of Rule 57A. The Assistant Commissioner who adjudicated the matter has confirmed the disallowance of the Modvat credit to the extent of Rs. 1.33,185/- availed by the appellants. The Assistant Commissioner confirmed the demand and passed the order based on the following findings-
(i) The appellant has contrived the provision of the Notification No. 14/98-CE(NT) by availing credit in excess of 95% of the duty of excise paid on the inputs received on or after 2.6.1998.
(ii) Rule 57J does not outside the scope of the Notification because the notification restricts credit to the extent of 95% of duty paid on inputs that are used "in or in relation" to the manufacture of final products. Moreover under Rule 57J Modvat Credit can be availed only for specified inputs used as intermediate products which are in turn are used in the manufacture of final products.
(iii) Rule 57J is not independent of Rule 57A which is a basic rule. Credit of duty cannot be allowed in full under rule 57J. The Commissioner (Appeals) order in Case No. 257/91 was not taken into consideration because it was not relevant to the present issue and relates to the eligibility of Ethyl Cellulose as an input or intermediate product.
3. Being aggrieved by the above order the appellants filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals), as per impugned order, upheld the portion of the order passed by the Assistant Commissioner in disallowing the excess credit on inputs received on or after 2.6.1998 and set aside the portion of the adjudicating authority's order, disallowing the excess credit of inputs received prior to 2.6.1998. Hence this appeal.
4. Shri Rajesh Chander Kumar, learned Advocate appearing for the appellants submitted that both the authorities below erred in holding that Notification No. 14/98-CE dated 2.6.1998 which has been issued under Rule 57A would equally apply to the credit availed on inputs used in the manufacture of intermediate products under Rule 57J. He said that the Rule 57J is an independent Rule by itself and in view of the 'non obstante clause' it has got an overriding effect. He said that 'non-obstante clause' in Rule 57J clearly over rides the provisions of Rule 57A. he said that the Tribunal in the case of Titan Industries Ltd. v. Commissioner of Central Excise, Meerut held that since the appellant was operating under Rule 57J, even if there was any contravention of the provisions of any other rule, by virtue of the 'non-obstante clause' in Rule 57J, the provisions of Rule 57J would override the provisions of the other rules like Rule 57F (4). Since the appellant was operating under Rule 57J, there was no reason as to why the provisions of Rule 57F(4) relating to the time frame for receipt of the intermediate products from the job worker was required to be observed by the appellants. In other words it was held therein Rule 57J was an independent provision which overrides the provisions contrary to the provision of the Rule 57J. The Commissioner distinguished the above decision on the ground that the Tribunal has decided merely the issue of time limit and not the quantum of duty. He failed to appreciate the ratio of the decidendi in the case which categorically holds the provisions of Rule 57J to have an overriding effect over the provisions of Rule 57A. The Counsel also referred to the decision of the Tribunal in the case of Ballapur Industries Ltd., v. Collector of Central Excise, Nagpur , wherein it was held that Rule 57B with non-obstante clause, as per law of interpretation, prevails over the provisions of the clause sought to be excluded under Notification 177/86-CE issued under Rule 57A. He said that the view taken by the Tribunal with reference to overriding effect of un-amended Rule 57B was upheld by the Supreme Court in the case of the Commissioner of Central Excise, Hyderabad v. Associated Cement Companies Ltd. and particularly he drew my attention to Para 4 & 5 of the said decisions which read as under-
4. In our view, unumended Rule 57B leaves no doubt on the issue in question. It provides that notwithstanding anything contained in Rule 57A, the manufacturer of final product shall be allowed to take credit of the specified duty paid on the goods used for generation of electricity or steam used for manufacture of final product or for any other purpose within the factory of production. This rule was amended only on 2.3.1998 by adding following explanation:
Explanation-for the purposes of this sub-rule, it is hereby clarified that the term 'inputs' refers only to such inputs as may be specified in a notification issued under Rule 57A.
5. In this view of the matter, in our view, the Tribunal was fully justified in arriving at the conclusion that the assessee was entitled to get the benefit of the notification till Rule 57B was amended. In the result, this appeal fails and is dismissed. There shall be no order as to costs.
5. While referring to Rule 57J, Shri Narasimha Murthy, JDR for Revenue submitted that since Rule 57J provides for taking credit of specified duty and in view of the use of the specified duty therein it must be read with Rule 57A for availing credit since the specified duty referred in Rule 57A is applicable. He said that both the Rules should be read together for harmonious construction. In support of his contention he referred to the following decisions-
(1) Jindal Polymers v. Commissioner of Central Excise, Meerut .
(2) Jindal Polyester v. Commissioner of Central Excise, Meerut 2001 (137) ELT 355 (Tri. Del.) : 2001 (98) ECR 487 (T).
In the case of Jindal Polyester (supra), it was held that specified duty in terms of erstwhile Rule 57B of Central Excise Rule, 1944, the Notification No. 14/97-CE(NT) issued under erstwhile Rule 57A ibid becomes relevant. It was held therein that it is not only the definition of inputs which is relevant for interpreting Rule 57B but also of specified duty.
6. I have carefully considered the submissions made by both sides. The short point to be considered in this case is whether provisions in Rule 57J of the Central Excise Rule, 1944 would have an overriding effect on the Notification issued under Rule 57A of the Rules.
7. Both the rules fall within the family of Modvat scheme. While agreeing with the submission of the Departmental Representative that Rule 57A is the main provision from which the entire Modvat scheme, and the credit benefit there under, flows, the said rule covers several distinct features. Firstly, it provides for identifying the final product and the inputs in relation to which Modvat credit could be availed of and also circumscribes the periphery of the word "input", secondly it provides for availment of credit for duty or additional duty specified under the Tariff Act; and thirdly it authorises the Government to restrict the availment of duty to an extent of some specified amount.
8. The Rule 57J which reads as under-
RULE 57J. Credit of duty in respect of inputs used in an intermediate product.-(1) Notwithstanding anything contained in these rules, the manufacturer shall be allowed to take credit of the specified duty paid on inputs described in column (2) of the Table below and used in the manufacture of intermediate products described in column (3) of the said Table received by the said manufacturer for use in or in relation to the manufacture of final products described in the corresponding entry in column (4) of the said Table:
TABLE xxxxx xxxxxx xxxxxx
9. A plain reading of Rule 57J, clearly indicates that there does exist non-obstante clause, which has to be read as intended to give overriding effect to some provisions contained in other rules. Even if there was any contravention of the provisions of any other rule, by virtue of the non-obstante clause in Rule 57J, the provisions of Rule 57J would override the provision of the other rules as it was rightly pointed out by the Counsel for the appellants. Because Rule 57J is also a part of Modvat Scheme and is governed by the basic structure of the scheme, the non-obstante clause cannot be read as covering all the provisions of Rule 57A. A careful reading of Rule 57J, however, makes it clear that the same is intended to give an overriding effect on credit of duty amount and as per the law of interpretation, the provisions with non-obstante clause will prevail over the provisions of clause sought to be excluded. Since admittedly appellants were operating under Rule 57J, they are governed by the said rule notwithstanding anything contained in other Rules. Ruling given by the Apex Court in the case of Commissioner of Central Excise, Hyderabad v. Associated Cement Companies Ltd. with reference to non-amended provision of 57B vis-a-vis Rule 57A strengthened this view. What the Department wants to rely upon and to restrict the availment of duty to the specified extent, is Notification No 14/98-CE(NT) dated 2.6.1998 issued in exercise of power under Rule 57A. When non-obstante clause in Rule 57J is specifically in relation to availment of credit for the duty amount, the said provision obviously prevails over the direction issued by Notification No. 14/98-CE(NT) and as such the restriction imposed vide said Notification cannot be brought into apply. The denial of credit to the extent to Rs. 1,33,185/- is only because of Notification No. 14/98-CE(NT) dated 2.6.1998 and not on any other count and said Notification cannot be brought into apply. The demand raised and upheld cannot be sustained and deserves to be set aside.
10. In the result, the appeal is allowed with consequential relief if any.
Pronounced in the court on 7.2.2001