Customs, Excise and Gold Tribunal - Delhi
Indian Aluminium Cables Ltd. vs Collector Of C. Ex. on 19 September, 1996
Equivalent citations: 1997ECR126(TRI.-DELHI), 1998(97)ELT507(TRI-DEL)
ORDER K. Sankararaman, Member (T)
1. The appellants are manufacturers of ACSR conductor, AAC Aluminium Alloy Conductors and Steel wires for which they use Aluminium rods as inputs. They used imported Aluminium rods which were cleared by them free of duty under exemption Notification 116/88-Cus. dated 30-3-1988. They cleared Aluminium waste and scrap arising in the course of manufacture of their products, without payment of duty availing exemption under Notification No. 182/84. Show cause notice dated 22-3-1994 was issued calling upon them to show cause why Central Excise duty amounting to Rs. 7,94,792.28 should not be demanded from them in respect of Aluminium waste and scrap cleared without payment of duty during the period 27-7-1989 to 20-12-1992. The Collector of Central Excise, Meerut passed the impugned order demanding the duty amount mentioned in the notice and also imposed penalty of Rs. 5 lakhs holding that they were not eligible for the benefit of duty exemption availed by them, as the same was available only for waste and scrap manufactured from Aluminium on which excise duty or as the case may be, additional duty of customs had already been paid whereas in their case they had cleared the imported Aluminium rods under an exemption Notification free of such additional duty of Customs. He rejected their contention that clearance of goods under an exemption Notification at nil rate of duty amounted to payment of duty for the purpose of Notification No. 182/84 and that it did not disentitle them for the benefit of exemption available thereunder. Aggrieved with the said findings and the demand of duty and imposition of penalty the appellants have filed the present appeal.
2. Shri V. Sridharan, learned Counsel for the appellants stated that the benefit of exemption under Notification No. 182/84, dated 1-8-1984 was available to them in respect of waste and scrap arising in the manufacture of their products using Aluminium rods imported under the DEEC Scheme without payment of countervailing duty. In a number of Tribunal decisions which had followed the Patna High Court judgment in Tata Yodogaiva Ltd. v. Union of India -1987 (32) E.L.T. 521, it has been held that where the raw material is covered by an exemption Notification it is to be treated as having paid the appropriate duty leviable thereon and exemption on the finished product made from materials on which the duty of excise or additional duty of customs has already been paid will be admissible to such products made from exempted materials. He also referred to clarificatory instructions issued by the Ministry of Finance, to that effect. Shri Sridharan then submitted that, without prejudice to his aforesaid contention on merits, the show cause notice was entirely barred by limitation. There was no suppression or wilful mis-statement. They had submitted their invoices covering the goods in question along with their RT 12 returns and there was in fact no evasion at all. The decisions referred to by him and the Ministry's instructions will clearly justify department's understanding that exemption under such notification was available even when the product is made from material exempted from duty. The longer time limit applied by the Collector was not justified, he contended. After his arguments on merits and on limitation, Shri Sridharan submitted that the Collector was in error in applying the provisions of Section 12D of Central Excises and Salt Act to their case. This provision lays down that every person who has collected any amount from the buyer of any goods as representing duty of excise shall pay the amount so collected to the credit of the Central Government. This was not applicable in their case at all as they had not collected any amount as excise duty from their customers. Moreover, this section came into effect only in September, 1991 and does not apply to assessments already completed by them. He cited Calcutta High Court judgment in Gopal Hosiery - 1992 (58) E.L.T. 542. Moreover, this provision applies only where any amount is collected as duty of excise. They had not collected any amount as excise duty and hence there is no liability under Section 11D cast on them. The learned Counsel pleaded in conclusion that the appeal be allowed.
3. Shri K.K. Jha, learned Senior Departmental Representative stated in reply that the present case is distinguishable from the cases cited by the appellants' counsel as duty was paid in such cases at some stage whereas in the present case no duty was paid at any stage. The material was clearly identifiable as non duty paid. Hence exemption was not available for the waste and scrap arising from such non duty paid rods. As they had cleared their products without payment of duty even though it was not eligible for exemption, penalty had been rightly imposed. They had recovered duty from their customers as the purchase orders showed that their prices were inclusive of excise duty. As regards the plea that Section 12D does not apply retrospectively, he submitted that nobody has a right to collect duty and keep it with him. No substantive right of the appellants had been affected. The section is only procedural in nature and scope and it is, therefore, applicable retrospectively.
4. Shri Sridharan, learned Counsel gave a rejoinder that the appellants get duty paid rods as well as exempted rods. They pay excise duty on the scrap arising from duty paid Aluminium rods. They clear such scrap on payment of duty without availing exemption as they take Modvat credit of the duty paid on the Aluminium rods. For the imported wire rods, they clear it without duty, availing exemption and hence there is no Modvat credit to be availed. The scrap arising from it is cleared duty free under the exemption Notification in question. He referred in this connection to Para 43 of their reply to the show cause notice, a copy of which is available in the Appeal Paper Book (Page 126 of the Paper Book) wherein they had stated that even in respect of waste and scrap cleared on payment of duty, their price is the same as the waste and scrap cleared without payment of duty and that they do not recover the duty from their customers. It has been stated by them that there is no necessity for them to charge excise duty from their customers as the duty paid on the wire rods contained in the waste and scrap would be more than the duty on the scrap and hence no duty had been charged from the customers even in respect of such scrap cleared on payment of duty. He reiterated his plea that no duty had been recovered by them from the purchasers of waste and scrap from them.
5. We have considered the submissions made before us by both the sides. We have perused the record. The appeal mainly involves two questions, the first of which is whether excise duty is exempted under Notification No. 182/84-C.E., dated 1-8-1984 as amended subsequently for Aluminium waste and scrap manufactured from imported Aluminium rods which had been cleared without payment of duty availing of exemption under the DEEC Scheme. The relevant requirement in the said Notification 182/84 is that the waste and scrap are manufactured from goods (falling under 76.01 to 76.08 and cast articles of Aluminium falling under 7616.90) on which duty of excise or the additional duty (countervailing duty), as the case may be, has already been paid. The stand of the department to treat the Aluminium rods as non-duty paid and hence the waste and scrap manufactured therefrom to be not eligible for the benefit of exemption under the aforesaid Notification has been countered by the appellants citing the following judgments and decisions as well as the circular dated 7-8-1992 of the Central Board of Excise and Customs :
(1) Tata Yodogawa Ltd. v. Union of India -1987 (32) E.L.T. 521 (Pat.) (2) Ajit Metal Industries v. CCE -1993 (66) E.L.T. 81 (Tribunal) (3) Purolator India Ltd. v. CCE -1990 (45) E.L.T. 91 (Tribunal) (4) IEL Ltd. v. CCE -1988 (35) E.L.T. 142 (Tribunal) (5) Ambika Forgings v. CCE -1995 (78) E.L.T. 352 (Tribunal) (6) Ambika Forgings v. CCE -1995 (78) E.L.T. 759 (Tribunal) (7) (Circular of CBEC)-1987 (31) E.L.T. T-10 (8) Circular dated 7-9-1992 of CBEC at page 178 of paperbook.
In the said circular Board had clarified that the expression "duty already paid" would also apply when duty paid is nil (under an exemption Notification). The Tribunal decisions have mainly followed the judgment of the Patna High Court in the Tata Yodogawa case. That case dealt with a similarly worded exemption Notification (No. 66/73-C.E., dated 1-3-1973). It was held by the Patna High Court in their judgment that the words "duty already paid" used in the said Notification is to be given the same meaning as given to such an expression used in Notification 150/77. A reference was made to the clarification issued by the Central Government stating "assessment includes nil duty and the expression "paid" has to be construed to mean contracted to be paid and it is not necessary that [some] amount of duty should have been assessed and actually paid for interpreting the said expression. Specified types of melting scrap which are exempted under Notification 150/77 are to be treated as having paid the appropriate duty of excise for eligibility to duty reduction in terms of Notification 152/77-C.E. as amended. Taking note of this clarification as well as a judgment of the Delhi High Court in Sulekh Ram & Sons v. Union of India -1978 (2) E.L.T. (J 525), and Supreme Court judgment in N.B. Sanjana v. The Elphinstone Spinning & Weaving Mills Co. Ltd. - 1978 (2) E.L.T. (J 399) and Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. -1978 (2) E.L.T. (J 416) it was held by their Lordships of the Patna High Court in the Tata Yodogawa case that the term "the duty already paid" used in Notification No. 66/73 must mean the duty contracted to have been paid and the instructions issued by the Board for the purpose of Notification 150/77 for the grant of exemption to goods made from exempted material would equally apply to Notification 66/73 also. The Collector has sought to distinguish these cases from the present one by stating that the Notification in question here contains a proviso that the exemption shall apply only if no credit under Rule 57A of the Central Excise Rules has been taken on the input from which such scrap has been generated or if such credit had been taken, an amount equivalent to such credit taken on such inputs from which the scrap has been generated should be debited back in the relevant account of the assessee. He has, therefore, observed that since the non-taking of credit of duty paid on the inputs is provided for, there should be payment of duty on the inputs and that if the inputs are exempted from duty such a condition will become irrelevant and hence not applicable. We find that though this argument is attractive, it cannot be accepted as the Notification 66/73 dealt with in the Tata Yodogaiua judgment also contained a similar provision that no set off or proforma credit had been availed of in respect of the duty paid on the steel melting scrap used in the manufacture of steel ingots. But there is an important additional provision in the present Notification with which we are concerned, which was referred to by the learned Senior Departmental Representative during his argument. He referred to the Explanation in the Notification which excludes stocks as are clearly recognisable as being non duty paid from the stocks in the country which are deemed to be goods on which duty has already been paid. The submission is valid. Such an exclusion was not there in the notifications considered in the decisions relied upon on behalf of the appellants. Hence it is necessary to look into this question.
6. We find that this question has been considered by a Larger Bench of the Tribunal in Machine Builder and Ors. v. Collector of Central Excise, Bolpur and Ors. - 1996 (83) E.L.T. 576. It was held therein that the words '"inputs clearly recognisable as being non duty paid' comprehends all inputs on which it is patent that duty has actually not been paid for any reason i.e. rate of duty is stated to be nil rate in the Schedule to the Tariff Act or the inputs are wholly exempt from duty or for any reason". This view would point to the possibility of the exemption under the subject Notification not being admissible to Aluminium waste and scrap manufactured from wholly exempted Aluminium falling under 76.01 to 76.08 and 7616.90.
7. We also find that the question whether goods could be treatable as duty paid when nil duty is attracted is before the Supreme Court on a Civil Appeal filed by the Collector of Central Excise, Patna against the Tribunal Final order 213/88-B dated 5-5-1988 in Collector v. Usha Martin Industries Ltd. The order of the Supreme Court appearing in the feature "Court Room Highlights" in 1995 (79) E.L.T. A57 is reproduced below :
"In view of the conflict in the judgments of the Court reported in 1978 (2) E.L.T. (J 399) - N.B. Sanjana, Asstt. Collector of Central Excise, Bombay and Ors. v. The Elphinstone Spg. & Wvg Mills Ltd. and 1986 (25) E.L.T. 3 (Andhra). - Re-Rolling Works, Hyderabad v. U.O.I. and Ors., the appeal is admitted and it is referred to a Large Bench of at least three judges."
The Tribunal decision following the decisions reported in Tata Yodogawa Ltd. v. Union of India -1987 (32) E.L.T. 521 and Steel Authority of India Ltd. v. Collector of Central Excise - 1984 ECR 1336 was that the manufacturer was eligible for the concession of Notification 206/63, dated 30-11-1963 even if the raw material was exempt from duty.
8. In view of this position, it cannot be said that the appellants have a case on merits. However, their plea that the demand was barred by limitation as the longer period of limitation beyond the normal period of 6 months was not available to the department, there being no suppression or wilful mis-statement or any contravention with a view to evade duty needs to be considered. The appellants had disclosed the fact of their using imported exempted Aluminium rods in their manufacture of finished products and the clearance of the resulting waste and scrap under exemption. Even if such a declaration were not there, their belief that such waste and scrap was exempt from duty was consistent with the trend of authoritative decisions, that are holding the field at present. That these decisions may be distinguishable from the case on hand would be a debatable exercise and, at the material time when the clearances were taken, such a belief cannot be said to be a stretched or mala fide one. The notice dated 22-3-1994 was wholly beyond six months from the last date of the period covered therein viz. 27-7-1989 to 28-12-1992. The appellants had disclosed the fact of clearance of such waste and scrap availing of exemption by submitting copies of invoices covering them along with their monthly RT 12 returns. Earlier they had filed classification lists claiming such benefit. In the circumstances, no suppression or mis-statement can be held out against them. The demand is, therefore, liable to be set aside on the ground of limitation. It is ordered accordingly.
9. The impugned order has pressed into service Section 11D of the Central Excises & Salt Act, apparently as an alternative approach. This section requires that every person who has collected any amount from the buyer of any goods in any manner as representing duty shall forthwith pay the amount so collected to the credit of the Central Government. Such payment is to be made even if such amount is not payable as duty. It is enough for the purpose of this section if the person (manufacturer) collects any amount, as duty of excise. The invoking of this Section was assailed by the learned Counsel for the appellants on the ground that the section was not applicable retrospectively and it could not apply to past cases. It was also contended that from a reading of Sub-section (2) of Section 11D along with Sub-section (1) thereof would point to such amount paid by the person under the said Sub-section (1) being adjusted against the amount of duty finalised on assessment. Here the assessment having already been finalised, such a course is not open to the department. We do not agree. Even if the assessment had been finalised already, if the amount becomes payable due to the department subsequently coming to know about its collection, as duty, by the manufacturer, it has to be paid and its disposal has to be as per Sub-section (2). The assessment may have to be reopened, if necessary. If, however, no duty is recoverable, then the amount collected as duty will have to be disposed of as per Sub-section (2).
10. The contention was raised by the appellants that no amount had actually been collected by them as duty from their customers. The Collectors has disputed this claim made before him. The purchase orders placed on them by their customers showed that the price was inclusive of duty. The Collector has referred to one Gate pass, namely GP 1 No. 36, dated 31-3-1993 for goods cleared. The Collector had held that the violation of Section 1 ID is obvious and the amount of duty recovered from the buyers is recoverable under that Section and that it can be recovered even if it pertained to the period prior to introduction of Section 11D on 19-9-1991. He has relied upon the Supreme Court judgment in Union of India v. Jain Spinners -1992 (61) E.L.T. 321 for his finding that Section 3 of Central Excise & Customs Laws (Amendment) Act, 1991 through which Section 11D was introduced has got retrospective effect. On a perusal of the said judgment we find that the question decided therein was the amended provisions of Section 11B. It was observed by the Supreme Court that on 20-9-1991, the Central Excise & Customs Laws (Amendment) Act, 1991 came into operation making the amended provisions of Section 11B applicable with retrospective effect to all pending applications for refund of duty. Such retrospective applicability of Section 11D in the manner held by the Collector is not apparent from a perusal of that Section. Even going by the department's allegation that the appellants had recovered certain sums as duty from their buyers, they could not be expected to make the payment of such sum to the Government before the coming into force of Section 11D(1). Obviously, such a requirement is capable of compliance only where such collection of any amount as duty takes place after the introduction of the said Section. There is no express provision in the Section as to what the Central Excise officers are to do by way of notice, adjudication etc. when the payment is not made by the concerned person as required thereunder. The show cause notice as well as the impugned order refer to certain Gate Passes and invoices as illustrations which, as pointed out in the appeal, are of a date (30-6-1993) not covered in the period relating to the show cause notice. The appellants have contended that they are charging the same price from their customers for waste and scrap manufactured from duty paid indigenous Aluminium rods as well as from imported rods which are exempted from duty. The Collector has referred to certain invoices and Gate Passes to reach a finding that the appellants had in fact recovered a higher price as excise duty. But, as pointed out in the appeal these are stray documents numbering one or two which relate to a period not covered in the notice. Moreover, the "order" portion in the impugned order only seeks to confirm the demand of Rs. 7,74,792.08, under the proviso to Section 11A of the Act. This demand has been held by us to be barred by limitation. No order has been passed under Section 11D of the Act. No order thereunder is also called for in the facts and circumstances of the case. The same will hold good for the penalty also. Accordingly, the impugned order demanding duty and imposing penalty is set aside. The appeal is allowed.