Customs, Excise and Gold Tribunal - Bangalore
M/S. Bharat Earth Movers Ltd., ... vs Collector Of Central Excise, Bangalore on 22 February, 2001
ORDER
Shri S.S. Sekhon, Member(T)
1. This appeal from a Public Sector Undertaking was granted an interrim stay to obtain the clearance of Committee of Secretary, and is taken up final decision since the clearance has been obtained, as submitted by the appellant.
2. The appellant is inter ali(SIC) manufacturer of several kinds of equipment including "Rail Coaches". This appeal is against the order of the Collector for denial of the benefit of exemption notification rates for 817 on such coaches; as per notification 452/ 1986 CE dated 20.11.86, cleared and supplied to the ministry of Railway, Government of India, during the period 20.11.86 to 31.1.89, at specific rate of duty as prescribed. A demand of Rs 7,49,42,342. 50 of differential duty was made under proviso to Section 11A. On these clearances a penalty of Rs 15,00,000/- was imposed under Rule 173 Q (1)/226 on the appellant.
3. The Collector, came to the following findings -
"To Summarise the whole issue, the salient features of findings are enumerated hereunder:
It is not in dispute that M/s BEML Bangalore has opted for availment of exemption under Notification No 4452/86 dt 20.11.86 (as amended). It is also not in dispute that they have availed the exemption under this notfn. from 20.11.86 onwards. One of the essential condition for availing this Notfn. is that -
"no credit of duty paid on any of the inputs used in the manufacturer of the said goods has been availed of under Rule 56A or 57A of the CER 1944".
Pursuant to this requirement, M/s BEML have given a declaration to the effect in the CL that :
"We undertake that we have not availed credit of duty on inputs used in the manufacture of the above goods under Rule 56A or 57A".
Thereafter, they have also filed a declaration on 10.8.87 consequent to Range Supdt. letter dt 6.7.87, indicating the total duty liability on 30 inputs on which credit was availed which were reflected as closing balance as on 19.11.86.
However, there were other items on which the party had not reversed the credit and they had also not declared the stock of inputs on which credit was availed which were lying unutilised in shop floor. They had also not declared the quantum of inputs which has gone into the manufacture of rail coaches pending clearances as on the specified date and which were subsequently cleared by availing the exemption.
Further, Modvat credit was also availed on inputs which were not declared under Rule 57G of CER 1944. In addition, the other inputs on which credit of duty was taken during the relevant period, were actually being utilised in the manufacture of Railway Coaches and cleared subsequently.
Further, it is obvious and beyond doubt that BEML had availed modvat credit on oxygen & acetylene for the manufacture of OHE, TLE and other final products which were actually diverted in the manufacture of rail coaches in violation of the first proviso of the Notfn. 452/86 dt 20.11.86.
It is in this back ground the admissibility or otherwise of the exemption has been viewed and also it had to be decided whether there was any misdeclaration on the part of M/s BEML. These facts have been discussed above and it has been held that there was a wilful mis-declaration on the part of the assessee. As regards availment of modvat credit on inputs used n the manufacture of Rail coaches on or after 20.11.86, this fact has been proved in the aforesaid discussions. It was also examined in this light whether there was any suppression regarding the actual utilisation of the materials, which fact also stands admitted and established n view of the above findings.
The proviso of the Notfn No 452/82 stipulated that no credit of duty on any input used in the manufacture of the said coaches should be availed under Rule 56A or 57A of the said rules. It has been conclusively established that this proviso has been violated by M/s BEML, as a result of which, they stand dis-entitled to avail the benefit flowing from the said notification. It is also now well laid down by various decisions of the Hon'ble Supreme Court that the exemption Notfn. is to be construed strictly and it should by understood by the language employed therein bearing in mind the context in which the exemptions occur.
M/s BEML have relied on the Supreme Court decisions in the case of Tata Oil Mills Co. & Wood Papers Ltd. The Hon'ble Supreme Court n the Tata Oil Mills case have held that "in trying to understand the language used by an exemption notification, one should keep in mind two important aspects: (a) the object and purposes of the exemption; and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which the exemption is granted".
In the present case, the purpose of the exemption was to fix specific rate of duty on Rail Coaches provided certain conditions are satisfied. As held supa, there is clear evidence of non-fulfilment of condition of the proviso to the exemption notification. The nature of actual process involved is of non consequence in the present case as it relates to determination of whether any modvat availed input is used int he manufacture of Rail Coaches or not. For this reason, this decision of the Hon'ble Supreme Court stands distinguished.
In the case law of Wood Papers Ltd., which has been relied upon by BEML, it has been held that:
"In fact an exemption provision is like an exception. Its construction, unlike charging provision, has to be tested on different touchstone. On normal principles of construction or interpretation of statutes, it is construed strictly either because of legislative intention of an economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment state revenue. But once exemption or exception becomes applicable no rule or principle requires it to be construed strictly. Truely speaking, liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it".
As could be seen byu this judgement, liberal & strict construction of the exemption provision are to be invoked at different stages of interpreting. There is no scope for taking liberal view when there is a clear non-fulfilment of the condition of the proviso to the exemption notfn.
Therefore, this case law of the Hon'ble Supreme Court is also distinguished as it is not applicable.
In fact, the following decisions of the Supreme Court are relied upon in support of my contention, that the interpretation of the exemption notfn. is to be construed strictly and understood by the langu(SIC) employed therein:
i) CCE Vs Parle Exports (1988 (38) ELT 741)
ii) Hansraj Goparhbandas Vs HS Dave (1978(2) ELT J530) &
iii) S.P. Gupta Vs UOI (AIR 1982 SC 299).
In the case of S.P. Gupta, the Hon'ble Supreme Court have held that there is only one principle on which there is complete unanimity of all the courts in the world and this is that where the words or the language used in a statute are clear and cloudless, plain, simpleand explicit unclouded and unobscured, intelligible and pointed so as to admit of no ambiguity, vagueness, uncertainty or equivocation, there is absolutely no room for deriving support from external side. In such cases, the statute should be interpreted n the face of the language itself without adding, subtracting or omitting words therefrom. Where the language is plain and unambiguous the Court is not entitled to go behind the language so as to add or supply omissions and thus play the role of a political reformer or of a wise Counsel to the legislature.
The proviso to Notfn. 452/86 dt 20.11.86 is reproduced below -
"Provided that no credit of duty on any of the inputs used in the manufacture of the said goods has been availed of under Rule 56A or 57 of the said Rules".
In this case, the term 'any' clearly indicates that no modvat credit should have been availed at all, i.e. even if it is availed on one item, the exception automatically ceases. From the aforesaid discussions, it is clear that M/s BEML have not fulfilled this basic condition of the notification due to the fact that availment of modvat credit on some items like Oxygen & acetylene gas which have actually been used in the manufacture of rail coaches, is not being controverted (even in the manufacture of rail coaches) in the reply by M/s BEML. Therefore, by applying the principles of interpretation BEML becomes disentitled to the benefit of the above notification.
It is a fact that modvat availed oxygen & acetylene gases among other inputs has been clearly utilised in the manufacture of Rail coaches cleared at specific rate of duty and such facts have been wilfully suppressed from the dept. and hence the declaration by them in the CL is a clear instance of wilful mis-declaration and establish their malafide intention to wrongly avail the benefit of the exemption. No where in the reply it has been established by BEML that they have fulfilled all the conditions stipulated in the said notfn. The arguments resorted to, indicate that they were willing to reverse the modvat credit. Moreover, there has been clear evidence that availment of modvat credit was not within the knowledge of the dept. (eg. in respect of items like oxygen & acetylene etc. during the period Nov 86 to Jan 89). A condition has to be fulfilled in toto and not partially. It is the axiomatic principle of law that the exemption can be availed only if the conditions specified in a particular notfn are fulfilled in whole and even if it is established that they have not partially fulfilled the same, the exemption cannot be availed.
There is no room for flexibility in this regard as per the wordings exployed in the notification.
The next aspect is regarding the justification of invoking the proviso to Sec 11A of CESA 1944 for demanding duty for the extended period. M/s BEML in their reply to SCN have stated that since the assessment have been completed, the extended period cannot be invoked. I do not accept this contention, as per proceedings under Rule 173I or Rule 52 have been completed. To arrive at this decision, I take support from the judgement of Hon'ble High Court of Delhi in case of Star Paper Mills Vs UOI (1984 (8) ELT 577). Further, the Hon'ble Tribunal in the case of Lustre Lampions Vs Collector (1989 (18) ELT 76 (T) has held that "where inadmissible exemptions availed unauthorisedely extended time limit is applicable. So also, the Hon'ble High Court of Patna in the case of TISCO Vs UOI (1988 (33) ELT 297 Pat) has held that when exemption is wrongly availed by not completely disclosing the facts, rather by misguiding the dept., five years time limit is applicable". Also from my above findings, both the facts of misdeclaration and the classification list & wilful suppression of utilisation of modvat availed inputs in the manufacture of Rail Coaches cleared on or after 20.11.86 are clearly established beyond any doubt. From all the above reasonings, it is irrefutably proved and justified that the invoking of the larger period under proviso to Sec 11A of CESA 1944 is maintainable.
In view of my above findings, it is proved that M/s BEML have contravened CER 1944, as alleged in show cause notice, rendering themselves liable to penal action. It is pertinent to note here that the party, during the proceedings have contended that the notice does not specify any particular charge under Rule 173Q of CER 1944, which has been violated, nor there are any allegations to indicate the same in the notice. The party's contention is not acceptable as mere non-mention of a particular clause, does not vitiate the show cause notice when the charge against them for wrong availment of Notfn. 452/86 has been clearly brought out in the show cause notice. To arrive at this conclusion, I take support from the decision of Hon'ble Tribunal in the case of Indore Bottling Co. Vs Collector (1986 (24) ELT 80(T)).
The final aspect to be decided is regarding imposition of penalty. It has been alleged that M/s BEML have not struck the balances in RG23A Pt. I which facts have been established supra, justifying the invoking of penal clause in the instant case as there is contravention of Rule 226. So also, it has been held by the Hon'ble Tribunal in the case of Grawer & Weil Vs Collector (1986 (5) 338 (T) that penalty is imposable when an exemption to which the assessee is not entitled to, is availed off. So also the Hon'ble Tribunal in the case of Mahindra Radio & TV Vs. Collector (1988 (35) ELT 668 (T) ) has held that when the provisions of the CESA or the Rules made thereunder are contravened, with an intent to evade payment of duty or to avoid payment of duty, penalty is imposable."
4. After hearing both sides and considering the submissions, we find -
(a) The appellants were availing MODVAT Credit on inputs and paying duties on "Railway Coaches at advetorum rates. Notification No 452/86-CE dt 20.11.86 providing for specific rate of duty, when no credit of duty on any inputs under Rule 56A or 57A was availed, came to their knowledge late and on 4.12.86; they filed a classification list claiming the specific rate under the notification which was approved on 26.12.88. From time to time filed other classification list on 1.3.87, 1.3.88 & 1.3.89 for the same claim which were approved. During the period 1.3.86 & 19.11.86, the appellant has cleared 246 coaches on specific rate of duty as per approved list. From the assessment Memorandum of RT 12 for the month of November 1986, it is apparent, that for the clearances effected on 21.11.86 on GP No 87 & 88 & GP No 90 dt 23.11.86. the duty was paid through PLA on GP No 89 dt 22.11.86 it was paid partially through PLA and partially through RG 23A (MODVAT) Credit assessment; and on GP No 1 dt 23.11.86 it was paid entirely from RG 23A (MODVAT Credit) Account. The assessing officer, vide his assessment order dt 22.5.87, after deducting the amounts of debits made in the RG 23A register on 22.11.86 & 23.11.86 from the total duty debit of excess made in the PLA (Due to the beneficial rate of duty vide Notfn. No 452/86 dt 20.11.86) granted the refund of excess of the duty of Rs 6,26,484/- and ordered the credit to be taken of the same in the PLA. He did not raise any objections on account of the notification No 452/86 conditions. It is, crystal clear to us, that the department knew and was concious of the fact that MODVAT was claimed and utilised, still they granted the benefit of the notification rate. This assessment on 22.5.87 was not up set by review and or appeal.
(b) A detailed verification was done by the officers and on 6.7.1987, a letter was sent to the appellants asking them to revise credit of Rs 27,34,282.55 availed in exces, this was worked out for the period 1.3.86 to 19.11.86; after protracted correspondence, examination of records the department granted a re-credit of Rs 18,13,506.74 on 25.11.87. However, on 16.8.88 a show cause notice was issued proposing a recover a sum of Rs 57,12,999.39 under Rule 57-1 on the grounds that there was a stock of MODVAT availed inputs on 28.11.86, (the date of notification No 452/86) which was sufficient for 3 months production, therefore duty was sought to be reversed at advalaram rates by denying the cleared from 20.11.86 to 20.2.1987 under notification No 452/86 rates. A reply was submitted to this notice and the Assistant Collector, without granting a hearing dropped the proceedings. However, the very same A.C took up further investigations and the present show cause notice was issued pursuent to the same on 1.10.90 from this portion, we are of the view that there is case to invoke the proviso clause of section 11A (1) in the facts of this case.
(c) The appellants have submitted and are prepared to reverse such amount of credits, as can be proved by the Department so that they can enjoy the benefit of the Notification. We have considered this aspect and find that the Supreme Court on the case of Chandrapur Magnet Wires (P) Ltd - 1996 (81) ELT 3 (SC), consider the question of reversal of credit and its permissibility in case of a similar notification which provided the exemption from payment of whole of duty subject to the condition that no credit of duty paid on the specified goods used in the manufacture has been taken under rule 57A of the Rules and held, that benefit of exemption was eligible on debiting the amount of credit taken. The Larger Bench of the Tribunal in the case of "ORISSA EXTRUSIONS LTD - 1996 (83) ELT 308 has also held "there can be a reversal of the credit and consequently the manufacturer will become eligible for exemption" following the same, we would also hold that the rate of notfn. 452/86 would be eligible if the reversal is made. From the detailed findings of the Collector we observe that even if he has found that the MODVAT Credit accounts have not been adequately and correctly maintained or the MODVAT procedure were not followed, yet he has not determined any quantum of credit availed inputs to have been used except for Acelytine & Oxygen gases and certain other goods. We would therefore while not upholding the demand of duty on time being and insists would direct that the assessee should reverse the MODVAT Credit availed as inputs so utilised.
(d) When we do not find that demand of Rs 7,49,42,342.50 cannot be sustained on ground so limitation and in view of the law laid down by the Supreme court and the Larger Bench as found herein. We find no reason to uphold the imposition of penalty.
We made it clear that Revenue is free to ensure and verify that the relevant credits are reversed.
6. In view of our findings, the impugned order is set aside and this appeal allowed.