Customs, Excise and Gold Tribunal - Tamil Nadu
Shasun Pharma Ltd. vs Cce on 26 August, 2003
Equivalent citations: 2003(90)ECC425, 2003(162)ELT882(TRI-CHENNAI)
ORDER
Jeet Ram Kait
1. These appeals arise out of Order-in-Appeal No. 56/98(TRY) dated 5.6.1996 passed by the Commissioner of Customs & Central Excise (Appeals), Trichy by which the Commissioner has partially allowed the appeal of the assessee.
2. The brief facts of the case are that the assessee-appellants were engaged in the manufacture of bulk drugs viz. Analgin and its intermediate products falling under Chapter 29 of the CETA 1985 and got registered vide Registration Certificate No. 4/93 with the concerned Range Officer. They were availing the benefit of Modvat Credit under Rule 57A of the CE Rules, 1944. They stopped their manufacturing activities and voluntarily surrendered their Registration Certificate (RC for short) to the Range Officer on 14.12.94 vide their letter No. SPL:CEX:94-95 dated 14.12.94 and their premises were leased out to their main unit viz. M/s Shasun Chemicals and Drugs Ltd. and endorsement for the manufacture of Analgin and its intermediate products in the premises of M/s Shasun Chemicals & Drugs Ltd. was made in the Registration Certificate No. 18/92 of M/s Shasun Chemicals & Drugs Ltd. on the same day itself i.e. 14.12.1994. Further, at the time of stopping their manufacturing activities there was no stock of inputs and finished products either in the form of semi-finished or finished goods available with the assessee. Though the assessee has surrendered the RC they had not surrendered the Central Excise records even on insistence from the Range Officer, vide Range Officer's OC No. 2703/94 and they retained the records with them for audit by AG Accounts (CERA) and even after auditing, they did not surrender the RG 23A Part II and made debit entries towards the wrong credit as well as duty confirmed in the order in original passed by the Assistant Commissioner for Rs 1,52,074.66 from the closing balance of Rs. 23,04,221.78. The balance credit at the time of surrender of the RC as noted above was Rs. 23,04,221.78. Thus the balance left after the debit entry which was made subsequent to the surrender of RC was Rs. 21,52,147.12. The RC was cancelled on 15.12.96. However, with effect from 1.3.97 Sub-rule 17(b) of Rule 57F was introduced by which the credit of specified duty lying un-utilized as on 1.3.97 with the manufacturer of the bulk drugs falling under chapter 28 or 29 shall lapse and shall not be allowed to be utilised for payment of duty on any excisable goods whether cleared for home consumption or for export. By the Order-in-Original the original authority directed that an amount of Rs. 1,52,074.66 adjusted in their lapsed credit of duty lying in RG 23A Part II account was required to be paid in cash inasmuch as the assessee had surrendered the Registration Certificate and leased out their premises to M/s Shasun Chemicals & Drugs Ltd. and endorsement for the manufacture of Analgin and its intermediate products in the premises of M/s Shasun Chemicals & Drugs were made on the same day i.e. 14.12.94 as noted above on which day the balance of Rs. 23,04,221.78 which was laying in RG 23A Part II got automatically lapsed. Moreover, no credit was available with effect from 1.3.97 by virtue of Notification No. 6/97-CE (NT) dated 1.3.97 which incorporated Rule 57F(17)(b). In the impugned Order-in-Appeal, the Commissioner (Appeals) after considering the appeal filed by the assessee allowed their player to debit of Rs. 1,52,074.66 holding that the assessee had already debited the same sum as duty demanded on account of irregular availment of credit prior to 1.3.97 i.e. the date on which Rule 57F(17)(b) was amended. He has held that even though they had surrendered the RC on 14.12.94, the law does not debar the assessee from utilizing the said credit up to 28.2.97. He has also held that in terms of the amended rule ibid, no such credit was available for utilization with effect from 1.3.97 and thus the credit utilized prior to 1.3.97 was in order. He has however, further held that assessee cannot utilize the lapsed credit with effect from 1.3.97 against future demands that may be confirmed against them by taking a ground that the credit of Rs. 21,52,147.12 was earned by them prior to the introduction of Sub-rule 17(b) of Rule 57F ibid as the credit lapsed with effect from 1.3.97. Aggrieved by the above decision of the Commissioner (Appeals) the Department as well as the assessee have come in appeal. The assessee have also filed a cross objection against the appeal filed by we Department. In the cross objection they have taken the following ground:
"Even though the Commissioner's order on utilization of credit is in favour of the Respondent, the Commissioner (Appeals) should have taken into consideration the fact that it is indicated in the appeal filed by the department that the Registration Certificate was surrendered by the Respondent on 14,12.94. But the cancellation of the Registration Certificate appears to have been done by 15.12.96 by the Superintendent and it was communicated to them under letter OC No. 1916/97, dated 11.11.97 received by them on 27.11.97. Therefore, the date of communication of cancellation i.e. 27.11.97 alone can be taken to be date of cancellation. However, the respondent paid the amount in question based on the letters OC No. 1206/95, dated 9.5.95 & OC No. 127/95 dated 19.1.95 and expunged the amount in question in RG 23A Part II on 24.5.95 & 30.3.95. It may be seen that this debiting of RG 23A Part II had been done well before the cancellation of the Registration Certificate. The date of surrender of Registration of Certificate is not relevant to the issue but the date of cancellation of Registration Certificate is relevant i.e. 15.12.96, even which before this date the RG 23A credit was utilized. The Commissioner (Appeals) has erred in deciding the appeal though in favour of the Respondent on the basis of surrender of Registration Certificate rather than on the basis of cancellation of the Certificate which is communicated on 27.11.97."
3. Shri K. Sankararaman, learned Counsel appearing for the assessee-respondents/appellants reiterated the above ground and submitted that in the instant case, credit was earned by the assessee-respondents/ appellants much before the introduction of Rule 57F(17)(b). He has further submitted that Commissioner (Appeals) has erred in deciding the appeal based on the date of surrender of the Registration Certificate and it should have been done on the basis of the cancellation of the same and they should be permitted to re-open and revive the RG 23A Part II account. He has also invited our attention to the judgment of the Hon'ble Apex Court in the case of Samtel India Ld. v. CCE, Jaipur, 2003 (ELT) 14 (SC) wherein it was held that right to credit became absolute when the input was used in the manufacture of the final product.
4. The Revenue has come in appeal against the same order in Appeal on the ground that the assessee surrendered their Registration Certificate on 14.12.94 and on that date whatever balance they had in their account stood lapsed, even though the assessee did not surrender their books. Hence subsequent debit on lapsed credit is not correct and legal. Further, the law as it stands, does not contain any provision to interpret the rules of Modvat as held by learned Commissioner (Appeals).
5. Shri A. Jayachandran, learned JDR appearing for the Revenue reiterated the grounds of appeal in the Revenue appeal as noted above and submitted that in this case when the assessee stopped their manufacturing activities and have surrendered the Registration Certificate on 14.12.94 whatever credit they had on the date of surrender stood lapsed and any utilization of credit after that date is not covered by any rule. Therefore, there is no merit in the appeal and the cross-objection filed by the assessee, and he prayed for allowing the Revenue appeal and rejection of the party's appeal and their cross-objection.
6. We have carefully considered the rival submissions and gone through the case records and the case law cited by the learned Counsel for the assessee. We note that in the instant case, the assessee stopped their manufacturing activity and consequently surrendered their Registration Certificate to the Range Officer on 14.12.1994, in terms of Rule 174(8) which reads as under:
"174(8). Every registered person, who ceases to carry out the operation or operations he is registered for, shall surrender his registration certificate immediately."
From the rule it is clear that the assessee is required by law to surrender the registration certificate once he has taken a conscious decision to stop the operation(s). With the surrender of the RC, the assessee's premises were leased out to their main unit viz. M/s Shasun Chemicals & Drugs Ltd. and endorsement for the manufacture of Analgin and its intermediate products in the premises of M/s Shasun Chemicals & Drugs Ltd. were made in the RC of M/s Shasun Drugs & Chemicals Ltd. At the time of surrender of the RC, as noted by the original authority in para 8 of the order in original and which fact has not been disputed by the assessee, there was no stock of inputs and final products either in the form of semi-finished or finished product by which they could utilize the credit. With the surrender of the RC, the assessee was required to surrender the Central Excise Records. In fact in the instant case, the assessee even after surrender of the Registration Certificate chose to retain the Central Excise Records on the pretext of CERA audit and even after the audit, the Central Excise records were not returned. The intention was quite clear that they wanted to make debit entries even after surrender. We are of the considered opinion that so far as the assessee is concerned, once the manufacturing activity is stopped and the Registration Certificate is surrendered and the premises were leased out to their main unit as noted above, he was no more an assessee or a registered person under the Central Excise law and any benefit flowing from the Central Excise Act or the rules made thereunder cannot be given to a person/assessee who was not an assessee/person under the Central Excise law and once the assessee has surrendered the Registration Certificate, the consequential action of cancellation of the Registration Certificate automatically follows. The Rule does not say that the assessee should wait for the cancellation of the RC by the Department. Can it be said that in such circumstances, the Department can hold back cancellation of the RC after surrender of the RC and leasing out their premises? The answer is certainly an emphatic no. Therefore, the plea taken by the assessee that it is the date of cancellation and communication of cancellation which is relevant and not the date of surrender of the Registration Certificate cannot be accepted. In the instant case, the assessee have utilized a portion of the credit to the tune of Rs. 1,52,074.66 towards some miscellaneous demand much after surrender of the RC when they were not an assessee under the Central Excise. Further, the Central Excise law itself was changed with effect from 1.3.97 vide Notification No. 6/97-CE(NT) dated 1.3.97 which incorporated Rule 57F(17)(b) by which credit of specified duty lying un-utilized on 1.3.97 with the manufacturer of bulk drugs falling under Chapter 28 or 29 shall lapse and shall not be allowed to be utilized for payment of duty of any excisable goods whether cleared for home consumption or for export. The department also cannot be expected to re-open the closed RG 23A Part II accounts as per the convenience of the assessee, after the surrender of the RC and leasing out the premises to M/s Shasun Chemicals & Drugs Ltd. and making necessary endorsement in the RC of M/s Shasun Chemicals Drugs Ltd. for manufacture of Analgin on the date of surrender of RC itself. Further, it is worth noting that on the date of surrender of the RC there was no stock of inputs and final products either in the form of semi-finished or finished product to utilize the Modvat Credit. Therefore, we are of the considered opinion that the view taken by the lower appellate authority that even though they had surrendered the RC on 14.12.94, since the debit for Rs. 1,52,074.66 was made before coming into force of the new rule with effect from 1.3.97, the assessee could utilize the credit to the extent of that amount viz. 1,52,074.66, is not correct. As noted above, with the surrender of the RC, the assessee was no more a Registered person under the Central Excise law and whatever credit they had on the date of surrender and leasing out the premises stood lapsed. Therefore, the question of allowing such person to make debit entries in the records or to revive the closed accounts does not arise. The case law cited by the learned Counsel for the assessee does not come to their rescue as the law laid down is distinguishable from the facts of the case. In that case there was no surrender of RC involved and the question was utilization of credit earned after coming into force of Rule 57F(17)(b). In view of our discussion above, the impugned order stands modified to the extent indicated above insofar as it relates to utilization of the credit of Rs. 1,52,074.66 is concerned. The rest of his order relating to the quantum of the lapsed credit which cannot be utilized also stands modified. Accordingly, we restore the order of the original authority and dismiss the appeal filed by the assessee. The appeal filed by the Revenue is allowed. The cross-objection filed by the assessee stands disposed of accordingly.