Customs, Excise and Gold Tribunal - Tamil Nadu
Ashok Leyland Ltd. vs Commissioner Of Central Excise on 10 July, 2003
Equivalent citations: 2003(89)ECC453
JUDGMENT S.L. Peeran, Member (J)
1. Both these appeals raise a common question of law and facts and appeals arise from Order-in-Appeal No. 96/2000 and 97/2000 dt, 19.7.2000 by the Commissioner (Appeals), Chennai. The order of the Commissioner (Appeals) in para 6 in the impugned order is extracted below:
"6. I am afraid I cannot subscribe to the view of the appellants. The fact remains that the appellants diverted the inputs received by them for use in relation to the manufacture of the final products to the spare parts warehouse for sale on payment of duty. The appellants had taken credit on such inputs diverted to the spare parts market. On account of upward price revision, the supplier of such inputs paid differential duty and for this purpose they had obtained Rule 57 E certificates from the jurisdictional officers and forwarded the same to the appellants and the appellants have availed the credit on such certificates including the duty on spare parts and utilised the same. Therefore, the lower authority was correct in holding that the credit availed on the inputs should be paid on removal. In the light of the above, I do not find any infirmity in the impugned order demanding duty. Coming to the imposition of penalties, the lower authority had rightly observed that the appellants themselves should have debited the MODVAT credit on such diverted goods on their own under the self-assessment scheme which they have failed to do. Therefore, imposition of mandatory penalty under Section 11 AC is also justified. However, taking into consideration the totality of the circumstances, I observe that the quantum of penalty under Rule 173Q needs modification. Therefore, I reduce the penalty of Rs. 1,00,000 imposed under Rule 173Q to Rs. 50,000 (Fifty thousand only). But for the above modification, the impugned order is upheld as correct and sustainable in law. The appeal is rejected except for the above modification in the quantum of penalty imposed under Rule 173Q."
2. Appearing on behalf the appellants Ld. Counsel Shri R. Raghavan submits that the additional duty paid on inputs on price revision can be taken as credit under Rule 57E of the Central Excise Rules, 1944 although the inputs had been sold in the spare part market. While removing the inputs there was a upward price revision for sales in the spare parts market. Ld. Counsel clarifies that the price on spare parts was on higher duty paid on the rate of the spare parts while removing the goods besides reversing the credit taken on the inputs. He submits that 57E Certificate was issued to the appellants by supplier of inputs and countersigned by the Superintendent and a certificate issued under Rule 57E makes the assessee eligible for taking modvat credit. He submits that the requirement of Rule 57E is that:-
(i) item should be declared for utilising the credit
(ii) assessee should have taken the credit on the originally duty amount.
(iii) there should be revision of price from the end of the supplier of the inputs leading to payment of higher duty by the supplier. A certificate in form A is required to be issued by the supplier duly countersigned by the jurisdictional Superintendent of Central Excise.
He submits that on satisfaction of these three criteria they are eligible to take credit of duty on the higher revised price. He submits that there is no provision of law requiring original inputs to be available either in stock or having been utilised by them while availing the credit on the revised duty paid by supplier of the input.
4. Appearing on behalf of the Respondents, Ld. SDR pointed out that the inputs should go into manufacture of final product. This is a requirement which is laid down under Rule 57A. She submits that Rule 57E (2) refers to the manufacture of final product and the credit being taken by the manufacturer. It refers to revision of the price and payment of duty thereon making eligible the manufacture of final product for taking modvat credit. She submits that the manufacturer of the final product did not utilise the inputs but sold the same in the spare parts market. Therefore, the duty paid on the revised price is not eligible for taking Modvat credit as the said input was not available with the assessee, but sold in the spare parts market. Therefore, the impugned order is correct. She submits that the appellants had already reversed the credit on the duty paid on the inputs at the time of clearing it to the spare parts market. Therefore, additional duty paid on the inputs should also have been reversed. The demand of duty on such utilisation by the assessee is justified and correct. In counter Ld. Counsel submits that the duty for spare parts cleared by them is more than the original duty payment and the differential duty payment and hence they are entitled to get modvat credit on the duty on the revised price of the inputs. The judgment of the Hon'ble Madras High Court in the case CCE v. Home Ashok Lelyand Ltd., 2001 (134) ELT 647 (Mad) is also relied. Ld. SDR submits that this judgment does not refer to the situation wherein inputs were removed from the factory after reversal of the credit.
4. On a careful consideration of the submissions made by both sides, I notice that the Modvat credit scheme which lays down that duty paid on inputs can be utilised for taking credit while making payment on the final product. This is the situation contemplated in Rule 57A and Rule 57E (2) which is relied by the Ld. Counsel also does not depart from the situation wherein utilisation of the modvat credit on the inputs while clearing the final product as contemplated under Rule 57A and 57E (2) are reproduced herein below:
Rule 57A. Applicability.--
(1) The provisions of this section shall apply to such finished excisable goods (hereafter, in this section, referred to as the final products) as the Central Government may, be notification in the Official Gazette, specify in this behalf for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereafter, in this section, referred to as the specified duty) paid on the goods used in the manufacture of the said final products (hereafter, in this section, referred to as the inputs).
(2) The credit of specified duty allowed under Sub-rule (1) shall be utilised towards payment of duty of excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the notification issued under Sub-rule (1) and subject to the provisions of this section and the conditions and restrictions, if any, specified in the said notification.
(3) The Central Government may also specify in the said notification the goods or classes of goods in respect of which the credit of specified duty may be restricted.
(4) The credit of specified duty under this section shall be allowed on inputs used in the manufacture of final products as well as on inputs used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final product or not.
(5) Notwithstanding anything contained in Sub-rule (1), the Central Government may, be notification in the Official Gazette declare the inputs on which declared duties of excise or additional duty (hereinafter referred to as declared duty) paid shall be deemed to have been paid at such rate or equivalent to such amount as may be specified in the said notification and allow the credit of such declared duty deemed to have been paid in such manner and subject to such conditions as may be specified in the said notification even if the declared inputs are not used directly by the manufacturer of final products declared in the said notification, but are contained in the said final products.
Explanation.--For the purposes of the sub-rule, it is clarified that even if the declared inputs are used directly by a manufacturer of final products, the credit of the declared duty shall, notwithstanding the actual amount of duty paid on such declared inputs, be deemed to be equivalent to the amount specified in the said notification and the credit of the declared duty shall be allowed to such manufacturer.
(6) Notwithstanding anything contained in Sub-rule (1), the Central Government may, by notification in the Official Gazette, declare the inputs on which the duty of excise paid under Section 3A of the Central Excise Act, 1944 (1 of 1944), shall be deemed to have been paid at such rate or equivalent to such amount as may be specified in the said notification, and allow the credit of such duty in respect of the said inputs at such rate or such amount and subject to such conditions as may be specified in the said notification:
Provided that the manufacturer shall take all reasonable steps to ensure that the inputs acquired by him are goods on which the appropriate duty of excise as indicated in the documents accompanying the goods, has been paid under Section 3A of the Central Excise Act, 1944 (1 of 1944).] Rule 57E. Adjustment in duty credit.
(1) If a manufacturer of final products has taken credit on any inputs and subsequently it so happens that any refund of the duty paid by the manufacturer of inputs or importer of inputs, as the case may be, is allowed to him for any reason, then the manufacturer of the final products shall accordingly adjust the amount of credit in his credit account and if such adjustment is not possible for any reason, the manufacturer of the final products shall pay the amount in cash equal to the amount of refund allowed to the manufacturer of inputs or importer of inputs.
(2) If a manufacturer of the final products has not taken any credit or has taken credit on any inputs and subsequently it so happens that any additional amount of duty is recovered by the manufacturer of such inputs or importer of such inputs in respect of such inputs, then the manufacturer of the final products shall be allowed an additional credit equal to the amount of duty so recovered, if the manufacturer or importer of such inputs has passed on the incidence of the additional amount of duty to the manufacturer of final products.
(3) The provisions of Sub-rule (2) shall not apply in cases where the additional amount of duty became recoverable from the manufacturer or importer of inputs on account of any short levy or non-levy by reason of fraud, collusion or any wilful mis-statement or suppression of facts or [contravention of any provisions of the Act or of the Customs Act, 1962 (52 of 1962)] or rules made thereunder with intent to evade payment of duty.
A simple reading of Rule 57E clearly states that if a manufacturer of the final product has not taken any credit on inputs on which subsequent additional duty has been paid, he is entitled for utilizing of the same. In the present case, the appellants had not utilised the Modvat credit on the duty paid on the inputs. They have sold the same in the spare parts market by reversing the credit and paying the additional duty and the goods were sold in the spare parts market. Therefore, the department stand that the appellant is required to reverse the credit utilised improperly on the additional duty paid or deposit the amount on the confirmation of demand as a consequence of the issue of the show cause notice is correct and requires to be confirmed. The situation referred to by the Ld. Counsel in the case of Home Ashok Leyland Ltd. (supra) is that in that case additional duty paid on the inputs by the manufacturers of input subsequent to the duty paid by them were allowed to take credit while paying duty on the final product. The situation in the present case is different. Therefore, the citation is distinguishable. There is no merit in the arguments of the Ld. Counsel that they can utilise the credit of the additional duty paid on the inputs as correct which have already been sold.
5. Insofar as the submission of the Ld. Counsel that no penalty is leviable under Rule 173Q and Section 11 AC as they had already reversed the credit and paid the same even before the issue of the show cause notice and that the issue is covered by Apex Court judgment rendered in the case of CCE v. Elgi Equipments, 2001 (74) ECC 285 (SC) : 2001 (128) ELT 52 (SC) and that of Amritsar Crown Caps (P) Ltd. v. CCE, 2002 (140) ELT 437 (T) is required to be considered. Ld. SDR submits as there was a violation, mandatory penalty is leviable. On a careful consideration, I notice that the citation referred by the Ld. Counsel supports to the facts of the case as in the present case, 2the appellants had reversed the credit amount even before the issue of show cause notice. In that view of the matter, no penalty is leviable, and therefore, the imposition and confirmation of penalty under Section 11 AC and under Rule 173Q are set aside. Except for this modification, the appeal is otherwise rejected. Ordered accordingly.