Customs, Excise and Gold Tribunal - Delhi
Achal Alloys (P) Ltd. vs Collector Of Central Excise on 8 July, 1994
Equivalent citations: 1994(73)ELT718(TRI-DEL)
ORDER
1. M/s. Achal Alloys Pvt. Ltd. of Ujjain have filed this appeal Aagainst the order of Collector, Central Excise (Appeals). The Collector (Appeals) in his order had held :-
"I have carefully gone through the impugned order and the submissions made by the appellants. The appellants have admitted that they had purchased MS Scrap from the rolling mills but have emphasised that the rolling mills have purchased it from the market and after selecting re-rollable material out of it they had sold the melting scrap to them under their own invoices/bills. I am unable to agree with this contention of the appellants as the appellants had purchased the scrap from the rolling mills where scrap is generated out of the process of rolling of ingots/billets. Keeping this in view, I do not find any merit in the appeal of the appellants, I uphold the impugned order and reject the appeal of the appellants."
2. Briefly stated the facts of the case are that M/s Achal Alloys Pvt. Ltd. are manufacturers of steel ingots classifiable under Central Excise Tariff Chapter Heading No. 7206.00. The appellant opted to avail modvat credit facility on scrap. During the period June 1986 - September, 1986 they purchased scrap weighing 115.535 MTs from Rolling Mills and took deemed modvat credit of Rs. 42,170.27 and the department was of the view that as the scrap was cleared by the party at nil rate of duty on GP-1s, therefore, a Show Cause notice was issued to the appellant on 4-1-1988 asking them to show cause as to why an amount of Rs. 31,165.52 (out of a total amount of Rs. 42,170.27, the appellant had already paid an amount of Rs. 11,004.75) should not be recovered from them.
3. Shri Anil Ligga, Managing Director of the appellant firm appeared and submitted that deemed modvat credit on steel scrap was allowed by the Govt. of India under Order F. No. B-22/5/86/TRU, dated 7-4-1986 for the period April, 1986 to 28th August, 1986; that the appellant took deemed credit during the period 24-6-1986 to 3-9-1986 without producing any duty paying document; that deemed credit facility was withdrawn from 29-8-1986 by the Govt. of India; that in pursuance of this withdrawal, the appellant had debited an amount of Rs. 11,004.75 in PLA on 28-2-1987; that the appellant had purchased the steel scrap from the open market and from some rolling mills; that the finding of the Asstt. Collector that the scrap purchased from rolling mills cannot be treated as duty paid because rolling mills had not paid any duty of Excise and the material was not accompanied with the duty paying documents was not correct; that no evidence has been brought on record to prove that the scrap was non-duty paid; that Bombay High Court in the case of Vapson Products, Bombay v. UOI reported in 1987 (27) E.L.T. 608 (Bom.) had held:
"Apart from the presumption which arises in favour of the petitioners, the petitioners have produced before the Department documents to substantiate their claim that duty was paid on the base dyes purchased from the open market. The petitioners have produced invoices in respect of the purchase and that was the requirement prescribed by the Collector of Central Excise by publication of trade notice dated 25-11-1961. The trade notice, inter alia, mentions :
Such manufacturerrs should produce to the Central Excise officers on their visits to the factories the necessary documents to establish that the dutiable dyes used in the manufacture of processed dyes, have been brought from outside, such as invoices in case of dyes purchased from the market."
Referring to Hon'ble Calcutta High Court's judgment in the case of Calcutta Paper Mills Manufacturing Co. v. CEGAT reported in 1986 (25) E.L.T. 939 wherein it was held :
"It is absolutely impossible for a purchaser to know whether excise duty on the manufactured goods sold to the purchasers had already been paid by the manufacturers. If the purchaser has to satisfy the excise authorities that goods which he has purchased from the market suffers duty, it would impose a burden which no purchaser would be able to discharge.
Shri Ligga submitted that their case is fully covered by this decision of the Hon'ble Calcutta High Court; that the ld. Asstt. Collector ignored the decision of CEGAT in the case of CCE v. Capson Electro Stampings reported in 1988 (37) E.L.T. 323 in which it was pleaded by the Department that if such inputs are clearly recognisable as being non-duty paid or charged to nil rate of duty is applicable to M.S. Sheets, it is for the department to produce sufficient evidence in support of their contention. The department has produced no evidence whatsoever that the M.S. Sheets purchased by the appellants are non-duty paid or have been charged to nil rate of duty. Summing up his arguments, Shri Ligga prayed that in view of the pre-ponderance of the ratio of the judgments cited by him and relied upon, the impugned order may be set aside.
4. Shri B.D. Bhagat, the ld. JDR appearing for the respondent submitted that the appellant had purchased the rolling scrap from Rolling Mills; that this scrap was either generated or purchased by Rolling Mills on payment of nil duty; that this fact is clearly stated in the Show Cause notice. Thus, it was not necessary to prove further that the goods were recognisable as non-duty paid. He submitted that modvat credit even in the form of deemed credit as a matter of policy is the refund of duty actually paid on the goods; that in the scheme of deemed credit duty is supposed to be paid first and then deemed credit becomes available. In the instant case, the ld. JDR submitted that it was in connivance with the Rolling Mills that the appellants were purchasing the scrap from other manufacturers on GP-1s at nil duty and therefore there was no question of allowing modvat credit of duty on this scrap. He reiterated the findings of the lower authorities.
5. Heard the submissions of both sides and considered them. I find that the appellant has placed reliance on the contents of Board's letter F. No. B-22/5/86-TRU, dated 7-4-1986. In this order, deemed modvat credit was denied if (a) the goods are clearly recognisable as being non-duty paid, or (b) the goods are charged to nil rate of duty.
6. On the question of the goods being clearly recognisable as being non-duty paid, the onus was on the department as was held by Hon'ble Bombay High Court as well as the Hon'ble Calcutta High Court, relevant paras of the decisions whereof have been quoted in preceding paragraph. The whole question boils down to the interpretation of the provision in the order dated 7-4-1986 reading as "If such inputs are clearly recognisable as being non-duty paid or charged to nil rate of duty." I find that this issue on identical facts was examined by the Tribunal in the case of Arun Auto Springs & Mfg. Co. v. CCE reported in 1990 (49) E.L.T. 284 which has been cited and relied upon by the appellant. For the sake of proper appreciation of the order, the same is reproduced below :-
"10. The aforesaid arguments further narrow down the area of interpretation with regard to the following provisions in the order :-
"If such inputs are clearly recognisable as being non-duty paid or charged to nil rate of duty.
It is not the case of the department that the goods have been removed from Excise or Customs area without payment of duty and hence they are to be construed as non-duty paid. The department states that the goods have been supplied by a manufacturer, who is entitled to avail of the exemption legally extended under Notification No. 208/83. In view of this position, the goods cleared, availing of exemption legitimately available to the manufacturer, cannot be construed to be non-duty paid. They are to be considered as goods having been legally cleared availing of the exemption. Now the question is as to whether they could be construed as goods charged to nil rate of duty. The department's contention is that since the goods are exempted, they are to be construed as goods charged to nil rate of duty. We are unable to appreciate this stand for the following reason :
The words 'charged to nil rate of duty' appear to have a special significance. Section 3 of the Central Excises and Salt Act is the charging section. Thereunder, it is laid down that duty of such excise on all excisable goods shall be levied and collected at the rates set forth in the First Schedule. Hence, levy and collection on excisable goods is to be done as per the rates set forth in the First Schedule. Where duty on any goods is leviable at nil rate as per the Schedule, such goods may be construed to be the goods charged to nil rate of duty. Where goods are charged to rates specified as set out in the Schedule and they are exempted by way of an exemption notification under Rule 8(1) of the Central Excise Rules, they could be construed as goods subject to the rates specified in the First Schedule but are exempted and they cannot be construed as goods "charged to nil rate of duty". Hence, in our view, the words 'charged to nil rate of duty' referred to in the order of the Govt. of India dated 7-4-1986 have a special connotation and meaning and used in the context of the 'rate' of duty as specified in the First Schedule. This view of ours is also strengthened by the fact that the Govt. of India in its later order dated 20-5-1988 specifically referred to goods wholly exempted from duty as not eligible for deemed modvat credit. The relevant portion of the order of the Govt. of India No. 342/10/88-TRU dated 2-5-1988 is reproduced below :-
"No such credit shall, however, be allowed -
(i) ...
(ii) if such inputs are clearly recognisable as being non-duty paid or wholly exempt from duty or charged to nil rate of duty."
11. This later order of the Govt. of India itself brings out the distinction between the goods, wholly exempted from duty vis-a-vis those goods charged to Nil rate of duty. In view of the fact that the inputs in respect of which deemed credit is sought to be denied during the period 1986-87 in terms of Govt. of India's order dated 7-4-1986, it has to be construed that the said order does not bar the deemed credit in respect of inputs wholly exempted from duty. It is not proper to construe the provisions made in the subsequent order dated 20-5-1988, that too issued in supersession of the earlier orders as holding the ground during the period 1986-87, when the deemed credit is to be construed only in terms of order dated 7-4-1986. We are also unable to take a view that the subsequent order could be a clarification of the earlier order, since the earlier orders have been superseded. In this view of the matter, we hold that even if the goods have been received from a manufacturer availing of exemption under Notification No. 208/83, deemed credit in terms of the Govt. of India's order dated 7-4-1986 would be available. This order only contemplates purchases from outside, which can even be from the manufacturer as has been held by the Supreme Court in the case of Ahura Chemical Products cited by the ld. advocate. The Supreme Court in that case has clearly held that purchases from another manufacturer can also be regarded as purchases from the open market. In view of this position, unless the Govt. of India specifically bars the extension of deemed credit in respect of goods wholly exempted from duty as has been done in order dated 20-5-1988 deemed modvat credit at the specified rate prescribed in the relevant order dated 7-4-1986 is required to be extended. We, therefore, allow all the four appeals with consequential relief."
7. I have carefully considered the submissions made by both sides and the case law cited and relied upon by them. On the one side there is the judgment of the Tribunal in the case of Arun Auto Spring cited supra which distinguishes the non-duty paid character of the goods observing that the goods cleared availing of exemption legitimately available to the manufacturer, cannot be construed to be non-duty paid whereas in the case of Capson Electro Stampings, it was observed by the Tribunal that it is for the department to produce sufficient evidence whatsoever that the M.S. sheets purchased by the appellant are non-duty paid or charged to nil rate of duty.
8. Deemed modvat credit is the benefit extended to the trade on the ground that all excisable goods available in the market are duty paid and hence whenever a manufacturer, mainly a small one who does not purchase goods direct from the manufacturer should be entitled to get the benefit. In the instant case, I have to examine whether the department has been able to establish the non-duty paid character of the scrap purchased by the appellant. I find that the scrap was purchased from Rolling Mills. It was also evident that it was generated out of the conscious manufacturing activity. It was also cleared on the strength of GP-1 as is made amply clear in the Show Cause notice which has not been controverted in reply to the Show Cause notice. I, therefore, hold that the Department had discharged the burden of proving that the scrap was clearly recognisable as non-duty paid.
9. Having regard to the facts and circumstances of the instant case and the ratio of the judgment of the cases cited supra, I find that the situations in the two cases are identical and the same issue arose for resolution in both the cases. The Tribunal had examined the issue as reproduced above and had come to different findings. I have analysed both the decisions and have come to the conclusion that the department had proved that the goods were clearly recognisable as non-duty paid. I, accordingly, uphold the impugned order and reject the appeal.