1996 (10) TMI 82 - SC - Central Excise

Whether the appellant is entitled to take credit at Rajahmundry only of that portion of duty paid on inputs (barley malt) as is proportionate to the Horlicks cleared on paying the duty vis-a-vis the total quantity of Horlicks manufactured out of the said barley malt to avail notification (No. 201 of 1979) benefit? Held that - As appellant is not asking for any transfer of credit to any other factory of the appellant. All that he wants is that the appellant be allowed to take credit of the entire duty paid on inputs (barley malt) received into its Rajahmundry factory as against the duty payable on the goods (Horlicks) cleared at Rajahmundry on payment of duty. This it is entitled to do.For the reasons given above, we are of the opinion that the appellant is entitled to succeed in this appeal

Issues Involved:

1. Interpretation of Notification No. 210 (sic) of 1979-C.E., dated 4-6-1979.
2. Entitlement to credit of duty paid on inputs (barley malt) against duty payable on finished goods (Horlicks).
3. Provisions for transferring credit to other factories.
4. Correlation between inputs and finished goods for claiming credit.
5. Procedural requirements under the notification and Appendix.

Issue-wise Detailed Analysis:

1. Interpretation of Notification No. 210 (sic) of 1979-C.E., dated 4-6-1979:

The central issue in this case revolves around the interpretation of Notification No. 210 (sic) of 1979-C.E., which exempts excisable goods from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs. The appellant contends that they are entitled to take credit of the entire duty paid on barley malt against the duty payable on Horlicks cleared at Rajahmundry. Conversely, the Revenue argues that credit should be proportionate to the quantity of Horlicks cleared on paying the duty at Rajahmundry.

2. Entitlement to credit of duty paid on inputs (barley malt) against duty payable on finished goods (Horlicks):

The appellant claims entitlement to take credit for the entire duty paid on barley malt, irrespective of the fact that only a portion of the Horlicks manufactured is cleared at Rajahmundry after paying the duty. The Revenue, however, asserts that credit should be proportional to the quantity of Horlicks cleared at Rajahmundry, and there is no provision for transferring the credit to other factories.

3. Provisions for transferring credit to other factories:

The Revenue maintains that the appellant is not entitled to transfer the credit to its other factories where the goods are cleared on payment of duty. The appellant clarified that they are not seeking to transfer the credit to any other factory but only to take credit of the entire duty paid on inputs received at Rajahmundry against the duty payable on goods cleared at Rajahmundry.

4. Correlation between inputs and finished goods for claiming credit:

The rules under the notification do not explicitly require an exact correlation between the inputs and the finished products for claiming credit for the duty paid on the inputs. The manufacturer is entitled to take credit of the duty already paid on the inputs and utilize such credit for payment of duty of excise on the manufactured goods. Rule 9 of the Appendix allows the credit of duty taken in respect of any inputs to be utilized towards payment of duty on any said goods for the manufacture of which such inputs were declared to be brought into the factory.

5. Procedural requirements under the notification and Appendix:

The notification and its Appendix outline the procedural requirements for availing of the credit for the duty paid on the inputs. The manufacturer must give a declaration to the Superintendent of Central Excise, indicating the full description of the goods intended to be manufactured and the inputs intended to be used. The credit of duty taken in respect of any inputs may be utilized towards payment of duty on any said goods for the manufacture of which such inputs were declared to be brought into the factory.

Conclusion:

The court concluded that the appellant is entitled to take credit of the entire duty paid on inputs (barley malt) received into its Rajahmundry factory against the duty payable on the goods (Horlicks) cleared at Rajahmundry on payment of duty. The decision of the Tribunal was set aside, and the appeal was allowed. The court emphasized that the objective of the notification is to prevent the cascading effect of duties and to make goods available at reasonable prices to the consumer. The interpretation of the notification should be reasonable and in line with the language employed, ensuring the objective of the notification is achieved.

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