Customs, Excise and Gold Tribunal - Delhi
Tata Yodogawa Ltd. vs Collector Of Central Excise on 15 February, 1989
Equivalent citations: 1989(23)ECR361(TRI.-DELHI), 1989(40)ELT126(TRI-DEL)
ORDER V.P. Gulati, Member (T)
1. This is an appeal against the order of Appellate Collector of Central Excise, Calcutta. The brief facts of the case are that on a check of the appellants RG-1 and RG-23 account registers, they were found to be having an excess balance in their RG-23, Part II account. This amount was treated as excess credit after taking into consideration the closing balance of the stock of raw materials and the closing balance of the steel ingots manufactured from the same on the date of the check. The appellants were restrained from utilising this excess amount as this could not be related to the stock position of the input and the output manufactured out of the inputs. The Appellate Collector has observed that since the duty chargeable on the input and the output was the same, the excess credit should not have been there. He has held that as a part of the claim of credit of 56A procedure, the intention was to give the relief in regard to double taxation to the assessees and it was not intended to give any undue benefit or financial gain.
2. The learned Advocate for the appellants pleaded that the appellants had followed the Rule 56A procedure strictly and the outstanding balance of credit of duty taken on the inputs utilised was after utilising part of the credit taken towards the duty on the finished goods. He pleaded that in the nature of the things, there can always be a situation where some balance of the credit may remain unutilised at a particular point of time. He pleaded that under Rule 56A, immediately on receipt of the inputs to be utilised, the whole credit of the duty taken on the inputs could be utilised for payment of duty on the end product. He pleaded that there was no correlation prescribed between the input utilised and the particular lot of the end product cleared on payment of duty and that whole of the credit or part of the same could be utilised for payment of duty on the end product irrespective of whether only a part of the inputs have been utilised in the manufacture of the end product in respect of which the credit is utilised for payment of duty.
3. The learned Sr. Departmental Representative conceded that no doubt Rule 56A procedure had been followed but the logical consequence of the facility provided under Rule 56A is that after taking into account the quantum of the inputs used in the manufacture of the end product, if some proforma credit was found in excess, the same could not be kept outstanding for future use and the same, therefore, could not be utilised. He however, could not point out any specific provision under Rule 56A under which the assessee could be denied the benefit of utilisation of an outstanding credit.
4. We observe that Rule 56A is in the nature of a simplified self-contained procedure for giving relief to the extent of duty paid certain inputs used in the manufacture of specified end products. No batch to batch correlation of the inputs used and the end products cleared on payment of duty is prescribed. All that is prescribed is that the proforma credit taken should be utilised for payment of duty for clearances of specified end product for which the inputs are permitted to be utilised. The relevant operative part of Rule 56A(2) is set out as under -
* * * * * "The Collector may, on application made in this behalf and subject to the conditions mentioned in Sub-rule (3) and such other conditions as may from time to time be prescribed by the Central Government, permit a manufacturer of any excisable goods specified under Sub-rule (1) to receive material or component parts or finished product (like Asbestos Cement) on which the duty of excise or the additional duty under [Section 3 or the Customs Tariff Act, 1975 (51 to 1975)] (hereinafter referred to as the countervailing duty), has been paid, in his factory for the manufacture of these goods or for the more convenient distribution of finished product and allow a credit of the duty already paid on such material or component parts or finished product, as the case may be :
Provided that no credit of duty shall be allowed in respect of any material or component parts used in the manufacture of finished excisable goods -
(i) if such finished excisable goods produced by the manufacturer are exempt from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty, and
(ii) unless -
(a) duty has been paid for such material or component parts under the same item as the finished excisable goods, or
(b) remission or adjustment of duty paid for such material or component parts has been specifically sanctioned by the Central Government;
Provided further that no credit of countervailing duty shall be allowed in respect of any material or component parts used in the manufacture of finished excisable goods, if countervailing duty has been paid in respect of such material or component parts, as fall under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944).
Explanation. - Credit of the duty allowed in respect of any material or component parts shall not be denied or varied on the ground that part of such material or component parts is contained in any waste, refuse or by-product arising during the process of manufacture of the finished excisable goods irrespective of the fact that such waste, refuse or by-product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty or is not notified under Sub-Rule (1).
Provided (also) that if the duty paid on such material or component parts (of which credit has been allowed under this sub-rule) be varied subsequently due to any reason resulting in payment of refund to, or recovery of, more duty from the manufacturer or importer, as the case may be, of such material or component parts, the credit allowed shall be varied accordingly by adjustment in the credit account maintained under Sub-Rule (3) or in the account-current maintained under Sub-Rule (3) of Rule 9 or Rule 173-G(1) or, if such adjustments be not possible for any reason, by cash recovery from or, as the case may be, refund to the manufacturer availing of the procedure contained in this rule."
It may be seen that the credit can only be varied in specified contingencies. As pointed out, the Revenue has not shown as to under which provision the credit is sought to be extinguished. In fact we find that under Sub-Rule 56A(2) under which the procedure for utilisation of the proforma credit has been prescribed, Sub-Rule vi(a)(a) provides that the proforma credit in respect of materials etc. used in the manufacture of the goods which are allowed export without payment of duty could be utilised for payment of duty on any finished excisable goods if the same type of material or the same type of components are used in the manufacture of the same. Rule 56A being a self-contained simplified procedure providing for ruling under parameters laid down therein, the benefit of proforma credit cannot be taken away without any specific provision in this regard under the rule. Inasmuch as no provision has been brought to our notice, we hold that the lower authority was not right in denying the benefit of utilisation of the credit found to be outstanding as held by the lower authority. We observe that all that is required under the rule is that the proforma credit taken for the materials should be utilised for the payment of duty on the specified finished goods in the manufacture of which the imports are used. The Hon'ble High Court of Madras in the case of E.I.D. Parry (India) Ltd., Madras v. Government of India [1979 ELT (J 253)] have ruled as under in this regard -
"What is contended on behalf of the petitioner, there is no obligation that the imported Rock phosphates must be utilised in one and the same process and so long as it is properly accounted for, there is every satisfaction of Rule 56A(3)(vi). As against this, the department takes the stand that there must be a correlation between the actual quantity of the goods imported and the ultimate product that, according to the department, is the real purport and intent of Rule 56A(3)(vi).
In order to appreciate the respective contentions, let me extract Rule 56A(3)(vi):
Except to the extent provided in the second proviso to Sub-Rule (2) the credit allowed in respect of any material or component parts shall be utilised towards payment of duty on the finished excisable goods in the manufacture of which such materials or component parts are used or on the materials or component parts themselves and no part of such credit shall be refunded in cash or by cheque.
By reading of this rule, I do not get the impression that there is any obligation on the part of the manufacturer to correlate the Rock Phosphates imported to the ultimate finished product. In this case, it is not denied that the entire Rock Phosphate imported, namely 745 .... 490 MT was utilised for the manufacture of fertilisers, may be 56 C 298 MT was utilised, but later on the remaining quantity was also utilised. So long as there has been a complete utilisation, in other words there is no misdirection of the imported goods, there is every compliance with Rule 56A(3)(vi). Undoubtedly, the meaning of the word "such" has been misinterpreted by the Department and that is which led to this writ petition. Therefore, I hold that the writ petitioners are entitled to succeed. Accordingly, the writ allowed. No costs."
We therefore, in view of the above, find the lower authority's order is not maintainable in law and allow the appeal with consequential relief.