Customs, Excise and Gold Tribunal - Tamil Nadu
Madras Vanaspati Ltd. vs Cce on 27 October, 1998
Equivalent citations: 1999(80)ECR852(TRI.-CHENNAI)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from the order in appeal No. 107/96(M) dated 19.4.1996 passed by the Collector (Appeals) confirming the duty demand of Rs. 9,53,041.13 on the ground that Notification 27/87 had been rescinded and that the manufacturer was entitled to utilise the money credit only to the extent of Rs. 7,33,695/-. The brief facts of the case are that the appellants are engaged in the manufacture of vanaspati (hydrogenated vegetable oil). The Govt. of India in order to encourage the industries who were manufacturing vegetable products by using minor oils had introduced money credit scheme by virtue of Notification 27/87-CE dated 1.3.1987, issued under Rule 57K of the CE Rules 1944. Pursuant to the said scheme, the appellants were permitted to avail credit of Rs. 1,000/- per MT of minor oil used by them for manufacture of Vanaspati with regard to payment of duty. This benefit was utilised by them from 1987 onwards. However, by Notification 39/89 dated 25.8.1989, the earlier notification No. 27/87 was rescinded and the appellants were not permitted to avail of the money credit to the tune of Rs. 16,86,736.13 accrued to them as on 25.8.1989 as the department objected to the appellants utilising the money credit as on 25.8.1989. Appellants therefore, filed a writ petition No. 12979/89 before the Madras High Court challenging the action of the department. The Madras High Court by order dated 4.2.1992 allowed the writ petition permitting the appellants to utilise the money credit. The department while granting the relief under the said order however, took an undertaking from the appellants to grant the benefit subject to the outcome of the Writ appeal which they would pursue. However, the said writ appeal filed by the Revenue also was dismissed. The Revenue not being satisfied with the conclusive judgement of the Madras High Court rendered in the Writ Appeal holding that the appellants are entitled to utilise and avail the money credit accrued to them as on 25.8.1989, issued show cause notice dated 19.1.1994 calling upon the appellants to show cause as to why they should not finalise the provisional assessment done in respect of the clearances of the goods i.e. vanaspati effected under AR-1 717/92-93 dated 24.4.1992 and 174/92-93 dated 31.12.1992 by regularising the utilisation of credit to the extent of Rs. 3,77,695 (sic should read Rs. 7,33,695) which could not be utilised for the period from 25.8.1989 to 31.10.1989 in respect of 7,33,695 MT vanaspati cleared during the period on payment of full duty @ Rs. 1900 per MT and payment of excessive utilisation of credit to the extent of Rs. 9,53,041.13 by the manufacturer in the account current maintained by them under Rule 9 of the CE Rules and simultaneously granting credit of the said amount into RG 23B Part II maintained under Notification 45/89. In accordance with the Madras High Court Judgements dated 4.2.1997 and 21.7.1992 under Rule 9B and Rule 57P of the CE Rules, 1944 show cause notice was issued to the appellants calling upon them to explain why action proposed to be taken should not be taken under Rule 9B and Rule 57P. The show cause notice clearly indicated the various facts about the appellants filing Writ petition and succeeding before the Single Bench and the background of the Revenue taking undertaking subject to the Revenue filing Writ appeal. The show cause notice indicated that the undertaking taken from the manufacturer without executing a bond under Rule 9B till the outcome of the Writ appeal filed by the department could be treated as partly on provisional basis and in effect the notice alleged clearance of vanaspati effected under AR-1 17/92-93 dated 24.4.1992 to 174/92-93 dated 31.12.1992 were provisional under Rule 9B of CE Rules, 1944. Then it proceeded to say that the writ appeal was dismissed by the High Court on 21.7.1992 as it has no substance and also proceeded to say that the department had come to the conclusion that it is not a fit case to go in for SLP and therefore it became necessary to finalise the provisional assessment for the period from 24.4.1992 to 31.12.1992 in respect of the clearances of vanaspati effected under the said AR-1s. The main crux of the show cause notice is that the money credit can be utilised for payment of duty to the extent of Rs. 1000/- per MT only on RG 23B Part II maintained for the purpose of Notification 45/89 and the balance amount of Rs. 900/- is required to be paid by them as under the Notification they were required to pay full duty @ Rs. 1900 per MT. In effect the show cause notice stated that the appellants could utilise money credit in terms of Notification 27/87 and 45/89 in terms of its condition No. III on individual clearances of final product only to the extent of Rs. 1000/- per MT and the excess of it is required to be paid by them and money credit cannot be utilised for adjusting the entire duty liability as per the Notification @ Rs. 1900/- per MT.
2. By reply dated 17.2.1994 the appellants contested the claim of the department in the show cause notice on the ground that in terms of the Madras High Court judgement in the writ appeal, they are entitled to adjustment of any money credit accrued to them while clearing the final product under Notification 45/89. They contested the departmental claim of undertaking given by them at the time of utilising the money credit in terms of the judgement rendered in the writ petition to enable the department to go in for Writ appeal, cannot be considered as provisional assessment. They stated that the High Court had categorically held that they were entitled to avail the money credit accrued to them and they were entitled to adjust the same @ Rs. 900 per MT apart from claiming the benefit of Rs. 1000/- per MT as per Notification 45/89. They contested the Revenue's plea that money credit earned by them under both these Notifications issued under the rules cannot be regarded as separate and independent, as incorrect. They stated that both the Notifications 25/87 and 45/89 are independent from each other and were for different purposes. They stated that the money credit which were there in their account can be utilised for clearances made for final product under Notification 45/89 and in this regard relied upon the judgement of the Karnataka High Court in the case of Modern Mills Ltd. wherein on the same point the High Court had clearly clarified that party can utilise the benefit under Notification 45/89 in addition to the accumulated credit accrued to them under Notification 27/87 already earned upto the date when it was rescinded. They stated that the judgement rendered by the Madras High Court in Writ appeal is binding on the department and the question of not giving effect to the judgement by issue of show cause notice does not arise. The pleas were rejected by the AC and the AC held that the undertaking taken by the department at the time of filing the Writ appeal is required to be construed as provisional assessment and therefore held that the appellants cannot take dual benefit of both the Notifications. He held that he was finalising the assessment already resorted to in respect of clearances of vanaspati effected under AR-1 17/92-93 dated 24.4.1992 to 174/92-93 dated 31.12.1992 by regularising the utilisation of credit to the extent of Rs. 7,33,695 out of Rs. 16,86,733.13 rightfully earned by them. Further, under Notification dated 27/87 which was outstanding as on 25.8.1989 i.e. the date of rescinding of Notification 27/87 dated 1.3.1987 and which credit could not be utilised during the period from 28(sic).8.1989 to 31.10.1989 in respect of Rs. 7,33,695 MT of vanaspati cleared during the said period he demanded payment of excess utilisation of the credit to the tune of Rs. 9,53,041.13 under Rule 9 of the CE Rules, 1944.
3. The Collector (Appeals) also rejected the appellants' plea that there was no provisional assessment in terms of Rule 9B.
4. Arguing for the appellants, the learned Counsel Shri Mayilsamy took us through the judgement rendered by the Madras High Court in the Writ petition and also in the writ appeal. He contends that the detailed judgement of the learned Single Judge in the writ petition clearly shows that the appellants are entitled to utilise the money credit earned by them for paying duty with regard to the clearances made under Notification 45/89. He pointed out to the judgement of the Madras High Court and also the various other judgements which had also held likewise that the money credit earned under Notification 27/87 will not lapse on the Govt. rescinding the earlier Notification and the said money credit could be utilised in good faith for making payment towards duty in the subsequent Notification. He referred to paras 15 & 16 of the said judgement wherein the High Court conclusively agreed with the Division Bench judgement of the Punjab & Haryana High Court, and the Gujarat High Court 52 ELT 222 : 1991 (37) ECR 511 (Guj), and 55 ELT 148 : 1991 (36) ECR 458 (Kant) by the Karnataka High Court in the case of Modem Mills Ltd., wherein it is held that the petitioner has a right to utilise the credit earned by him in accordance with the scheme and the scheme was in force prior to 25.8.1989. He also referred to the Delhi High Court judgement in the Writ Petition CW 2834/89 on the same point wherein they have clearly held that "the respondents are directed to permit the petitioner to utilise the money credit earned by them as a result of hydrogenation of duty paid inputs before the Notification in question came to be rescinded for payment of excise duty on manufacture of vanaspati or soap as the case may be. These benefits will be available to the petitioners in addition to the benefits which have again been made available to them under Notification 45/89 and 46/89. Consequent adjustments also be made as a result of above direction in the PL accounts of the petitioner. Rule is made absolute".
5. The learned Counsel submitted that the SLP filed by the Board against this judgement has since been dismissed as can be seen from the copy of the order produced by him in SLP (Civil) No. 12554/93 (2089B). He further submitted that the undertaking given by the appellants at the time of Revenue proceeding to file writ appeal cannot be considered as provisional assessment. By Undertaking to do so on 23.4.1992 they were agreeable for provisional assessment for the goods cleared in accordance with Madras High Court Judgement in Writ Petition No. 12979/89. After filing this undertaking and without execution of any bond for this purpose as accepted by the CCE, yet undertaking not being in terms of Rule 9 of the CE Rules, the same cannot be considered as provisional assessment. He referred to clause 3 of the undertaking which states that the party will not press for the refund of the sum of Rs. 7,33,695/- claimed by letter dated 13.2.1992 addressed to the Asstt. Collector, Vellore. He also referred to para 4 of the Undertaking which states that they clearly understood that the utilisation of credit accrued in terms of Notification 27/87 and lying in RG 23B Part II account after recession of the said Notification is permitted purely on provisional basis on the strength of the High Court Judgement dated 4.2.1992 in Writ Petition No. 12979/89 without prejudice to the outcome of the Writ appeal filed by the Revenue before the Madras High Court against the above said judgement. He submits that this para cannot be considered as provisional assessment under Rule 9B of the CE Rules. The undertaking had stated that they requested the AC to permit them to effect clearances of vanaspati after payment of duty of Rs. 900/- per MT out of the unutilised credit of Rs. 16,86,736.13 lying in the appellants RG 23B Part II maintained with reference to Notification 27/87 dated 1.3.1987 and Rs. 1000/- per MT out of the credit earned under Notification 45/89 dated 11.10.1989 instead of paying any duty either through PLA or RG 23A Part II till the entire amount of Rs. 16,86,736.13 is covered by Notification 27/87 is availed/adjusted. Pointing out to this portion of the undertaking he submitted that the department fully understood the terms of the judgement of the Madras High Court in the Writ Petition permitted the appellants to utilise credit and therefore the contention raised in the show cause notice that they can utilise the credit to the extent of only Rs. 1000/- per MT out of the money credit earned by them under Notification 45/89 and pay the balance of Rs. 900/- per MT in cash is not correct both in terms of the undertaking given by them and also in terms of the judgement referred to by him.
6. The learned DR arguing for the department contended that the undertaking is a provisional assessment. He submitted that the High Court in its judgement did not hold that the appellants can adjust Rs. 900/- per MT also from the money credit earned in terms of the earlier notification. They can utilise the money credit to the extent of Rs. 1000/- per MT for paying duty but were required to pay Rs. 900/- per MT towards duty.
7. The learned Counsel submitted that the demand raised by show cause notice dated 19.1.1994 was barred by limitation.
8. On consideration of the submissions made we notice that the issue pertaining to utilisation of money credit scheme has been clearly held in the appellants' favour in the judgement of the Madras High Court cited supra. The Revenue wanted to contest the plea of the appellants which was allowed, by filing a writ appeal. In order to give effect to the judgement rendered in the Writ petition the Revenue took an undertaking. In terms of the undertaking itself it is clear that the appellants adjusted unutilised credit of Rs. 16,86,736.13 lying in RG 23B Part II maintained with reference to Notification 27/87 dated 1.3.1987 and Rs. 1000/- per MT towards credit earned under Notification 45/89 dated 11.10.1989. Instead of paying any duty either through PLA or through RG 23A Part II till the entire amount of Rs. 16,86,736.13 covered by Notification 27/87. Therefore, it is clear from the Undertaking itself that the Revenue clearly understood the terms of the judgement rendered in the writ petition to mean that they can follow the said procedure of payment. The Revenue did not succeed in the writ appeal. Therefore it followed that the procedure adopted by the Revenue for asking payment is understood from the terms of the undertaking became conclusive and therefore there was no question of taking a different view and to proceed in the terms of the show cause notice. In the show cause notice, the Revenue had taken a different stand which is contrary to the judgement rendered by the Madras High Court in this matter. The Revenue intends to understand the terms of the Notification in a different manner than what has been laid down in the judgement rendered by the High Court in this matter which is not permissible and not correct. The stand of the appellants before the High Court that they can adjust Rs. 900/- per MT apart from availing the benefit of Rs. 1000/- per MT under subsequent notification 45/89, which has been upheld by the High Court and therefore, to say that the appellants cannot utilise both the benefits is to clearly misread the judgement of the Madras High Court and not to give effect to the same which is not permissible in law. Further, we notice that the Division Bench of the Delhi High Court in the case of Shriram Foods & Fertilizers Industries and another in CW No. 2834/89 clearly directed the Revenue to permit the petitioners to utilise the credit of money earned by them as a result of hydrogenation of duty paid inputs before Notification in question came to be rescinded for payment of excise duty on manufacture of vanaspati or soap as the case may be. The High Court further held that this benefit will be available to the manufacturers in addition to the benefits which have again been made available to them in terms of Notification 45/89 and 46/89 dated 11.10.1989. Consequently adjustments were also allowed to be made as a result of the direction in the PLA account of the petitioners. This judgement has been confirmed by the Hon'ble Supreme Court by dismissing the SLP filed by the department. Therefore, it follows that the appellants having utilised the money credit for paying duty in terms of the High Court judgement is sustainable and they are entitled to succeed in this appeal. Further the contention of the appellant that the show cause notice cannot constitute clearance as provisional as provisionality is governed by Rule 9B of the rules is correct. We also find that in the case of Agarwal Industries v. UOI reported in 1992 (57) ELT 501 : 1994 (51) ECR 165 (AP), the Andhra Pradesh High Court held that the petitioner therein is entitled to use money credit and it clarified it by issuing writ of mandamus and directed the Revenue to permit the petitioner to utilise the credit earned by them as a result of purchase of duty paid notified goods which remained accumulated to the credit of the petitioner. It further clarified that these benefits will be available to the petitioners in addition to the benefits which have been made available to them in terms of Notification 45/89 and 46/89. In view of these judgements, it is clear that the procedure adopted to make payment was accepted by the Revenue in the undertaking and the undertaking in effect was in terms of the judgement of the High Court and hence it follows that the procedure adopted by them to pay duty from the accumulated money credit is in accordance with the law laid down by these judgements cited supra. We find there is no justification to take a different view. In this view of the matter, the appellants succeed and the appeal is allowed.
(Pronounced in Open Court on 27.10.1998)