Customs, Excise and Gold Tribunal - Bangalore
Kailash Auto Builders Ltd., Attibele, ... vs The Commissioner Of Central Excise ... on 30 October, 2001
Equivalent citations: 2002(79)ECC266, 2002(140)ELT148(TRI-BANG)
JUDGMENT S.S. Sekhon, J.
1. The appellant were issued a notice on 8.1.1996, as it was observed that they had availed modvat credit amounting to Rs. 1,26,044/= on capital goods received by them under the provisions of Rule 57Q of the Central Excise Rules 1944. The goods were, High Welding Machines (3 nos.), Welding Rectifier (12 nos.), 160 KVA DG Set (1 no.). It was further alleged that credit of duty paid on the capital goods was to be utilized towards payment of duty on the dutiable final products in terms of Rule 57S of the Rules and subject to fulfillment of conditions there under and since in the instant case the appellants were manufacturing and clearing/transport of vehicles falling under Heading 8704 of CETA 1985 exempt under Notification 162/86 from April 1995 onwards, the capital goods, mentioned herein above, which were already installed/ put into use in the registered premises had been used for the manufacture of final products on which no duty payment was made as the appellants had admitted that they were not manufacturing any final products which were chargeable to duty. The above said credit was proposed to be denied in terms of Rule 57U.
2.1 The Assistant Collector disallowed the credit as he came to the finding that credit of duty paid on capital goods is admissible under Rule 57Q only when capital goods are used in the manufacture of final products which are chargeable to Central Excise duty.
2.2. The Commissioner appeals in appeal after considering the submissions came to the following finding to confirm the Order of the Assistant Collector:-
"The appellants in their grounds of appeal and at the time of Personal Hearing held on 4.3.1999 contended that the capital goods have life span of 5 years and they have made their intention clear that they would be using the said capital goods in the manufacture of excisable final products once the factory starts working to its full capacity. If their intention to make excisable goods in proven to be false, action for mis-statement can be initiated under Rule 57U. The goods have been installed and utilization will take place when manufacture and clearance of dutiable goods commences. The capital goods are used for manufacture of both, exempted as well as dutiable products. Therefore, they are eligible for Modvat Credit. The case can be remanded to the Assistant Commissioner to verify the correctness of their contention that said credit was actually used for goods cleared on payment of duty. At the time of Personal Hearing, while reiterating their contentions in their grounds of appeal, copies of certain documents in support of their contentions were enclosed.
I have carefully examined the facts of the case, the finding of the Assistant Commissioner in the adjudication order, the grounds of appeal and the written and oral submissions made at the time of Personal Hearing.
Rule 57Q as it stood during August 1995 stipulated that credit of duty paid on capital goods used by the manufacturer in his factory, can be utilized towards payments of duty of excise leviable on the final product. At the time of receipt and installation of the subject goods the appellant were not at all manufacturing any dutiable excisable goods. The said capital goods, installed in factory during August 1995 were used exclusively for the manufacture of exempted goods. It is only during September 1996 that the subject capital were utilized for the first time in the manufacture of dutiable excisable products as well as exempted product. The appellants were very well aware that the capital goods would be first utilized for the manufacture of exempted goods and were not at all sure when these gods would be utilized in the manufacture of dutiable final products. No credit can be allowed, in the anticipation that the capital goods would be utilized, at a future date, in the manufacture of dutiable final products. The department cannot allow the credit first and then keep track for 5 years whether there was mis-statement and take corrective action of recovering the credit taken. From 1.1.96, amendment to the Rule was carried out to the effect that credit could be taken only when the capital goods are installed or used for manufacture of excisable goods. This also goes to show that credit can be taken only when the capital goods are utilized in the manufacture of dutiable final products and not in the anticipation that the dutiable final products would be manufactured at a later date. The amendment effected on 1.1.96 vide Notification 1/96 CE (NT) dated 1.1.96 has only made explicit what was earlier implicit in the rule, os far as the use of the goods in the manufacture of dutiable excisable goods are concerned. In the case for about 13 months all goods manufactured and cleared were fully exempt.
This apart, I find that Rule 57 U provides that where the credit has been taken on account of an error, omission or misconstruction, the proper officer should serve notice to the manufacturer who was taken the credit why such credit should not be disallowed. In this case, the manufacturer took credit erroneously, as the credit could not be utilized, in term of Rule 57Q. Accordingly, Show Cause Notice issued in terms of Rule 57 U, which has been upheld as the provisions of Rule 57 Q were not fulfilled as brought out in the proceeding paragraph. Therefore, on this ground also the order of the Assistant Commissioner is correct, proper and legal and does not require any interference."
The present appeal is against this order of Commissioner (Appeals).
3. After hearing both sides and considering the submissions, I find:-
a) The credit was availed on 23.5.1995 and 25.7.1998 in Part I RG 23 C register and on 18.8.1995 in Part II in RG 23 register.
b) The relevant Rule 57Q on the relevant dates read as follows:-
"57Q.Applicability-(1) The provisions of this section shall apply to finished excisable goods of the description specified in the Annexure below (hereinafter referred to as the final products") for the purpose of allowing credit of specified duty paid on the capital goods used by the manufacturer in his factory and for utilizing the credit so allowed towards payments of duty of excise leviable of the final products, or as the case may on such capital goods if such capital goods have been permitted to be cleared under Rule 57S, subject to the provisions of this section and the conditions and restrictions as the Central Government may specify in this behalf:
(2) Not withstanding anything contained in Sub-rule (1), no credit of the specified duty paid on capital goods (other than those capital goods in respect of which credit of duty was allowable under any other rule of notification prior to the 16th day of March, 1995) shall be allowed if such capital goods were received in the factory before the 16th day of March, 1995"
On a plain reading of the rule one cannot come to a conclusion, that the capital goods were received prior to 16.3.1995, therefore no reason can be found for disallowing the credit of the specified duty paid on the capital goods in this case, for the reason that at the relevant time, that is somewhere in August, 1995, the appellant were not having any dutiable products to be cleared by them. No provision of law of one to one co-relation has been relied upon by the lower authorities nor any clause brought forth or has been relied upon, to show that credit could be denied, merely because there were no dutiable items, which were required to be cleared, on payment of duty on the date capital goods credit was taken. There is no time limit for utilizing the capital goods credit taken.
c) I find that once credit on capital goods is availed the goods can be utilized as prescribed under Rule 57S; this rule as it existed at the relevant time read with Notification No. 11/95-CE(NT) dated 16.3.1995 allowed to be used in the factory of t he manufacturer of the final products'; and the credit could be utilized for declared/undeclared products. A reading of this rule does not bar the utilization of the capital goods to be used in the factory of the manufacturer for uses other than in the manufacture of the final products nor is there a finding to the effect. The finding is only as regards use in manufacture of duty free goods and not use in other than the final products. Therefore, there is no reason to reverse the credit eligible otherwise.
4. In view of my findings the appeal should be allowed after setting aside the orders of the lower authority.
5. Ordered accordingly.
(Pronounced in open Court on 30/x/2001