Customs, Excise and Gold Tribunal - Delhi
Finolex Cables Ltd. vs Collector Of Central Excise on 8 December, 1992
Equivalent citations: 1993ECR288(TRI.-DELHI), 1993(65)ELT60(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The issue in this appeal is regarding the liability or otherwise of the appellants to pay central excise duty on scrap of bare aluminium and copper wires on which MODVAT credit had been availed, as well as on scrap of insulated wires and cables.
2. The appellants are manufacturers of wires and cables falling under sub-heading 8544 CET and in such manufacture they use aluminium falling under Heading 7603.10 and copper under Heading 7403.19. They were availing MODVAT credit of duty paid on the wire rods (additional duty leviable under the Customs Tariff Act) scrap of electric wires and cables were being cleared without payment of duty in terms of circular No. 7/Electric wires and cables dated 6-7-1964 of the Central Board of Excise and Customs by following the procedure prescribed in the circular. The appellants filed a classification list on 6-3-1988 indicating processed scrap of electric wires and cables at Nil rate of duty at Sl. No. 7. Before any action was taken on the classification list, the Departmental officers visited the factory and scrutinised the records pertaining to MODVAT and the relevant duty paying documents. On 29-10-1986 a show cause notice was issued demanding duty on the scrap cleared without payment of duty. In their reply dated 15-12-1986 the appellants pointed out inter alia that scrap had been classified as assessable to Nil rate of duty; no duty was payable on scrap arising during the manufacture of wires and cables as per the circular referred to above; clearance of scrap was effected on written permission from the Proper Officer and no information had been suppressed by them. Subsequently the appellants wrote to the Collector on 18-12-1986 bringing to his notice a copy of the Ministry's letter dated 13-10-1986 classifying that waste and scrap of aluminium and copper arising during the manufacture of conductors and cables were exempt from payment of duty even though MODVAT credit had been availed of, and requested the Collector to re-credit the amounts in their accounts. The demand for duty was confirmed by the adjudicating authority holding that the charge of clearance of the scrap without payment of duty was proved because the dutiability of the scrap had not been disputed by the appellants. It was also held that there was no evidence to indicate that aluminium and copper received has discharged the levy of additional duty leviable under the Customs Tariff Act. Hence this appeal.
3. We have heard Shri B.B. Gujral, Advocate for the appellants and Shri M.S. Arora for the Respondent, and perused the records.
4. The findings of the Collector regarding admission of dutiability of scrap (uptil 18-12-1986) is not correct in view of the fact that the appellants had shown the rate of duty as "Nil" in their classification list and they paid duty only after the show cause notice was issued under the belief that the Circular No. 7 dated 6-7-1964 had been withdrawn. There was no question of duty paid voluntarily and even if duty was paid voluntarily the appellants have a right to ask for refund upon realisation no duty was payable. There is also no basis for the finding that the appellants had not produced any evidence to indicate that aluminium and copper received by them had paid the additional duty leviable under the Customs Tariff Act, because the MODVAT account had been verified by the Department with duty paying documents and the show cause notice was issued on the ground that scrap should bear duty as MODVAT credit was availed of on the imported aluminium and copper. The appellants had been availing of total exemption from basic excise duty on waste and scrap of copper and aluminium in terms of Notifications 172/84 and 182/84 dated 1-8-1984 (as amended by Notification 79/86 dated 10-2-1986) under which waste and scrap were totally exempt provided they were manufactured from goods falling under TI26A and the duty of excise leviable under the Central Excises and Salt Act, 1944 or the additional duty leviable under CTA 1975 has already been paid. Therefore, it is erroneous to hold that there was no evidence regarding payment of additional duty.
5. In the light of the above discussions we hold that the appellants were not liable to pay duty on the scrap of bare aluminium and copper wires on which MODVAT credit had been availed, as well as on scrap of insulated wires and cables. In view of this finding we see no reason to consider the other aspects of the matter. The impugned order is set aside with consequential relief if any.
S.K. Bhatnagar, Vice President
6. I observe that in the show cause notice the basic charge is with reference to Rule 57F which provides for the manner of utilisation of the inputs and the credit allowed in respect of duty paid thereon. Further the case has been made out with reference to sub-rule (4) although the same has not been specifically mentioned.
7. This sub-rule reads as follows :-
"Any waste, arising from the processing of inputs, in respect of which credit has been taken may -
(a) be removed on payment of duty as if such waste is manufactured in the factory; or
(b) be removed without payment of duty, where it belongs to such class or category of waste as the Central Government may from time to time by order specify for the purpose for being used in the manufacture of the classes or categories of goods as may be specified in the said order subject to the procedure under Chapter X being followed; or
(c) be destroyed in the presence of proper officer on the application by the manufacturer, and if found unfit for further use, or not worth the duty payable thereon, the duty payable thereon being remitted:
Provided that such waste may be destroyed by the manufacturer governed by Chapter VIIA after informing the proper officer in writing regarding the quantity of such waste and the date on which he proposes to destroy, at least seven days in advance and after observing all such conditions as may be prescribed by the Collector of Central Excise by a general or special order with regard to the manner of disposal of such waste".
In view of this position any waste arising from the processing of inputs could be removed with or without payment of duty subject to the fulfilment of the required conditions and following the prescribed procedure. Therefore any excisable waste belonging to the prescribed class or category of waste for the purpose of being used in the manufacture of the class or category of the goods as may be specified in the order could be removed without payment of duty subject to the procedure under Chapter X being followed.
8. In the instant case, the appellants have contended that the aluminium and copper wire rods used as inputs by them had borne the incidence of the additional duty under the Customs Tariff and they had produced the photocopies of the certificates issued by M/s. Hindustan Copper Limited to show that the inputs were relatable to the countervailing duty paid on the imported raw materials and these facts were not controverted by the learned DR.
9. They have also shown that in the classification list effective from 1-3-1986 submitted by them to the department they had indicated nil rate of duty and therefore it was upto the department to either object or accept this claim at the time of approval of the classification lists.
10. They have also shown that the accounts were being maintained in the form of RG23Al.
11. They have also contended that they had declared the items under 85.44 but the officers had put them under 76.02 and indicated Notification Nos. 172/84 and 182/84 (instead of 33/81 mentioned by them). The classification list had been verified and finally approved with the remark that the assessee was required to debit the credit if already availed on inputs while availing modvat.
12. The appellants have also mentioned in their reply to show cause notice about letters dated 15-12-1986 and 18-12-1986 referring to the Board's Circular No. 7/Electric Wires and Cables/84 and the Ministry's letter F. No. 149/12/86-64 dated 13-10-1986 which clarify that waste and scrap arising out of imported wire rods on which an additional duty has been paid would be entitled to the exemption under 182/86 even though modvat may have been claimed on wire rods. They have also drawn our attention to notification 172/84 and 182/84 as amended by 76/86.
13. It is observed that the above facts and circumstances have not been specifically controverted by the learned DR although he has drawn our attention to the operative portion of the Collector's order and reiterated the view points as expressed therein.
14. In this connection it is interesting to observe that neither of the two sides has been able to show us any notification or order specifically issued with reference to Rule 57F(4)(b), and this gains significance in view of the fact that there can be hardly two opinions on the point that once the modvat credit has been availed of on a particular item it virtually reverts to non-duty paid character so to say and would in the normal course be required to be treated as such. Further no authority has been quoted by the Board or the Ministry in support of its view that the items would be entitled to exemption under such notifications [as 172/84 (as amended) or 182/84 (as amended)], even though modvat credit may have been taken.
15. Ministry's letter of course refers to some opinion of the Attorney General. However, it does not spell it out and merely refers to the Board's letter dated 20-12-1985. Further neither this letter nor the opinion of the Attorney General has been placed before us. This is apart from the fact that these have neither been referred to in the Collector's orders nor any pleadings been advanced with reference to them before us. Even otherwise a simple letter of the Ministry/Board by itself does not have the force of law. Be that as it may. In so far as the present case is concerned the grounds on which the learned Collector has denied them refund are not well taken inasmuch as the documents produced do show that the input entries had borne the incidence of additional duty and the output had been classified by the officers themselves under 76.02. Further neither the Collector nor the DR has challenged the authority or applicability of the letter of the Ministry/CBEC.
16. Similarly the DR's arguments that they had paid the duty voluntarily does not hold water.
17. Before parting, it may be mentioned that the department has neither claimed nor shown that the refund claim was barred by time.
18. In view of the above facts and circumstances peculiar to this case, I accept the appeal as already announced in the open Court and I agree with the Member (J) that the appellants are entitled to consequential relief if any due.