1994 (4) TMI 139 - AT - Central Excise

Summary

Issues Involved:
1. Entitlement to credit of duty paid on asbestos and cement used in the manufacture of Asbestos Cement Products under Rule 56A.
2. Applicability of sub-rules (1) and (2) of Rule 56A and their proviso.
3. Cross Objection regarding the effective date for availing proforma credit.

Detailed Analysis:

1. Entitlement to Credit of Duty Paid on Asbestos and Cement:
The appeal by the Collector of Central Excise, Patna challenges the Order-in-Appeal No. 19/BR/85, which allowed M/s. Hyderabad Asbestos Cement Products to claim credit for the duty paid on asbestos and cement. The appellant argued that the appellate order contradicted Rule 56A, specifically sub-rule (2) and its proviso, which stipulate that no credit shall be allowed unless the duty has been paid for materials under the same item as the finished excisable goods. In this case, asbestos and cement fall under different Tariff Items than the finished Asbestos Cement Products.

2. Applicability of Sub-rules (1) and (2) of Rule 56A and Their Proviso:
The appellate order was criticized for misinterpreting sub-rules (1) and (2) of Rule 56A. The Collector (Appeals) believed that once excisable products are notified under Rule 56A, the restrictions in the proviso to sub-rule (2) do not apply. The Tribunal found this interpretation incorrect, stating that the non obstante clause "Notwithstanding anything contained in these Rules" applies to the entire Rule 56A, not just parts of it. Therefore, the requirement that materials and finished goods fall under the same Tariff Item remains applicable. The Tribunal upheld the Assistant Collector's interpretation, which correctly read sub-rules (1) and (2) together, emphasizing that the stipulation in the proviso (ii) to sub-rule (2) must be adhered to.

3. Cross Objection Regarding Effective Date for Availing Proforma Credit:
M/s. Hyderabad Asbestos Cement Products filed a Cross Objection, arguing that the benefit of Rule 56A should be available from the date of their application, not from the date of the Assistant Collector's permission. They cited the Bombay High Court's decision in Empire Dyeing and Manufacturing Co. Ltd. v. V.P. Bhide, which was deemed outdated by the Tribunal. The Tribunal referred to the Supreme Court's judgment in Laminated Packings (P) Ltd. v. Collector of Central Excise, Guntur, which clarified that manufacture occurs and is dutiable even if goods belong to the same entry but are different identifiable goods. The Tribunal found the respondents' contentions against the statutory provisions of Rule 56A(2) and rejected their reliance on the interim order of the Andhra Pradesh High Court. The Tribunal also noted the Andhra Pradesh High Court's final judgment, which required raw materials and finished goods to fall under the same Tariff Item for eligibility to proforma credit.

Conclusion:
The Tribunal allowed the Department's appeal, setting aside the Order-in-Appeal and restoring the Assistant Collector's original order. The Tribunal also rejected the Cross Objection filed by M/s. Hyderabad Asbestos Cement Products, affirming that the conditions in Rule 56A(2) must be satisfied for availing credit. The Tribunal noted subsequent developments, such as the introduction of the Modvat scheme, which resolved similar issues.