1997 (2) TMI 275 - AT - Central Excise

Summary

Issues:
- Denial of notional credit under Rule 57B for goods manufactured on job work basis.

Detailed Analysis:

The appeal before the Appellate Tribunal CEGAT, New Delhi involved the denial of notional credit under Rule 57B for goods manufactured on a job work basis. The appellant, M/s. Marudhara Conductors, challenged the impugned order passed by the Collector (Appeals), Central Excise, New Delhi on the grounds that notional credit had been denied incorrectly. The issue centered around whether Rule 57B applied only to the purchase of inputs and not to the receipt of goods manufactured on a job work basis, even when the processor was a small scale unit. The appellant's representative, a Chartered Accountant, argued that the denial of notional credit was based on the interpretation that the word 'obtained' in Rule 57B referred to 'purchased,' which, according to the appellant, was not the correct interpretation. The appellant contended that the word 'obtained' should be understood as procurement rather than purchase, and it was highlighted that the word 'obtained' did not appear in the body of Rule 57B but only in the heading.

The appellant further relied on a previous case law, Frick India Ltd. v. UOI, to support their argument that the word 'obtained' should not be equated with 'purchased' and that headings should not control the plain words of the provisions. The appellant emphasized that the modvat credit availed by them had been permitted by the department, but notional credits, which were admissible under Rule 57B, had been denied based on the interpretation of the word 'obtained.' On the other hand, the Senior Departmental Representative reiterated the findings of the lower authorities in denying the benefit of notional credit.

Upon careful consideration of the matter, the presiding judge, Shri G.A. Brahma Deva, found the reasoning of the authorities in denying notional credit to be flawed. The judge noted that while modvat credit for goods received from the job worker had been allowed, notional credit had been denied based on an incorrect interpretation of the term 'obtained' as referring to purchase. The judge disagreed with this interpretation, stating that the word 'obtained' should not be equated with 'purchased,' especially when it was not explicitly defined as such in Rule 57B. The judge accepted the appellant's argument that notional credit should not be denied in this case, especially considering the Supreme Court's guidance on the interpretation of statutes. Consequently, the judge allowed the appeal, granting the appellant consequential relief.