2013 (9) TMI 696 - AT - Central Excise

Captive consumption - Disallowance of Modvat credit - Rule 57C of the Central Excise Rules, 1944 - Notification No. 108/95 - Goods falling under the Schedule to the CET Act, 1985 were exempted from the whole of the duty of excise when supplied for the official use of UN or or for the projects funded by UN Held that - Benefit of exemption in respect of intermediate product was available under Notification No. 217/86-C.E. dated 2.4.1986 - the parts assembles to the motor vehicle which was the final product supplied to unit - Therefore, the intermediate product of the parts assembled, the benefit of Notification No. 67/1995 read with Notification NO. 108/95 was available to the appellants. As per Notification No. 108/95-CE dt. 28.8.95 the goods were exempted which were supplied to the United Nations or an international organization for their official use - as there was a anomaly in the Rule to plug that anomaly Notification NO. 11/97-Ce dated 1.3.1997 came into effect Indian Aluminum Co. Ltd. vs. Collector Of Central Excise, Cochin 1995 (4) TMI 167 - CEGAT, NEW DELHI - No bond was executed in these cases, as they fell within the category of export units where taking of bond was not obligatory and such non-execution is only a procedural lapse and for such lapse, the benefit of the exemption cannot be denied order set aside Decided in favour of Assessee.

Summary

Issues:
1. Interpretation of Notification No. 108/95 dated 28.8.95 regarding exemption from duty for goods supplied to United Nations or International Organizations.
2. Application of Rule 57C of the Central Excise Rules, 1944 in the context of duty exemption for final products.
3. Retroactive effect of Notification No. 11/97 dated 1.3.97 on supplies made in February 1997 to International Organizations.
4. Clarificatory nature of Notification No. 11/97 in relation to Notification No. 108/95.

Analysis:
1. The case involved a dispute regarding the interpretation of Notification No. 108/95, which exempted goods supplied to United Nations or International Organizations from excise duty. The appellants, a manufacturing company, claimed entitlement to Modvat credit for duty paid on components used in manufacturing motor vehicles supplied to such organizations. The issue arose due to an amendment through Notification No. 11/97, which included International Organizations for duty exemption, effective from 1.3.1997. The dispute specifically focused on supplies made in February 1997, with the Department demanding duty on intermediate products used in the final product. The appellants argued for retrospective application of the amendment, citing precedents and the concept of Revenue Neutral. The Commissioner (Appeals) had upheld the duty demand, leading to the appeal.

2. Rule 57C of the Central Excise Rules, 1944 was crucial in determining the availability of duty credit for inputs used in manufacturing final products exempted from duty. The rule specified that no credit of specified duty paid on inputs shall be allowed if the final product is exempt from excise duty. The Tribunal examined the rule in conjunction with Notification No. 108/95, which exempted goods supplied to International Organizations. The subsequent amendment through Notification No. 11/97 aimed to address any anomalies, indicating that the final product's duty exemption did not preclude duty credit for intermediate products. Citing a previous case involving aluminum extrusions, the Tribunal clarified that the benefit of exemption should extend to intermediate products used in manufacturing the final product, such as parts assembled into motor vehicles.

3. The contention regarding the retroactive effect of Notification No. 11/97 on supplies made in February 1997 was crucial. The appellants argued that the notification should apply retrospectively to cover the period in question, aligning with the principles established in earlier cases and the clarificatory nature of the amendment. The Tribunal considered the retrospective application justified based on the legislative intent to rectify any gaps in the duty exemption framework, ensuring consistency in the treatment of supplies to International Organizations.

4. The case also addressed the clarificatory nature of Notification No. 11/97 concerning Notification No. 108/95. The appellants asserted that the later notification clarified and supplemented the earlier one, emphasizing the need to interpret them harmoniously to achieve the intended duty exemption for supplies to International Organizations. The Tribunal concurred with this interpretation, setting aside the impugned order and allowing the appeal in favor of the appellants, granting consequential relief as applicable.