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2013 (9) TMI 818 - HC - Central ExciseMODVAT Credit - Whether Glass Bottles used for packaging/containing aerated water were eligible for modvat credit under Rule 57A of the Central Excise Rules, 1944 as it existed during the material period Held that - The law as settled in the reports leads to an inevitable conclusion that the circular dated 13.9.1995, wherein the Board allowed the credit of duty paid on Glass Bottles/Crates only if the value of such Bottle was included in the value of the final product in case of a claim for modvat credit, binds the revenue and they cannot take a stand that the said circular was contrary to either Section 4 of the Act or Rule 57A of the Rules. Interpretation of Explanation (iii) appended below Rule 57A - Whether the CEGAT s interpretation of clause (b) (iii) of the explanation appended below Rule 57A of Central Excise Rules, 1944 as it existed during the material period of its order was lawfully correct Held that - Following C.C.E., Chandigarh-II vs- Dhillon Kool Drinks & Beverages Ltd. 2007 (12) TMI 228 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH - Under Rule 57A of the Rules, Modvat credit was admissible on the specified inputs used in the manufacture of final product - Explanation (iii) to Rule 57A of the Rules define that inputs does not include packaging material if its value had not been included during the preceding financial year in the cost of assessable value - The Tribunal had categorically found as a fact that the cost of packing material had been included in the assessable value although on installment basis and, therefore, the assessees were entitled to Modvat credit of duty. The plea taken by the assessees that the cost of glass bottles and plastic crates was included in the aerated water could not be rebutted by the revenue. Overriding Effect of Section 4 - Whether the provisions of Rule 57A of the Central Excise Rules, 1944 can override the provisions of Section 4 of the Central Excise Act, 1944 - Whether the Hon ble Tribunal was correct in holding that the assessee was entitled to claim modvat credit by exercising his option to include the value of the durable and returnable packaging material or container in spite of the fact that such packaging material of container was specifically excluded from the definition of input in Rule 57A of the Central Excise Rules, 1944 read with Section 4 (4) (d) (I) of the Central Excise Act, 1944 - Held that - The respondent have been including the value of the Glass Bottles and the Plastic Crates on prorata basis in the assessable value of the final products i.e. the aerated water which was permissible under the circular dated 13.09.1995 - The department cannot take a different stand and say that the aforesaid circular offends Section 4 of the Act - The respondent also submitted the report of the Charter Accountant suggesting the aforesaid fact and, therefore, this Court does not find that the stand of the petitioner can at all be tenable. There was a distinction between a decision in a particular assessment by a quasi-judicial authority and a decision on principle by the Board - While an instruction issued u/s 37B cannot be binding upon a quasi-judicial authority under the Act, the departmental officers conducting the lis before such quasi-judicial authority cannot take a stand contrary to the directive/instruction issued. The instructions which may be binding on the Central Excise Officers were not binding on the Assessee who may question the correctness of the same before a quasi-judicial authority and before a Court - Both the quasi-judicial authority and a fortiori, the Court, can question the correctness of the instructions - Decided against the revenue.
Issues Involved:
1. Eligibility of 'Glass Bottles' for Modvat credit under Rule 57A of the Central Excise Rules, 1944. 2. Inclusion of the cost of durable and returnable packing in the assessable value of a product under Section 4 of the Central Excise Act, 1944. 3. Lawfulness of CEGAT's interpretation of clause (b) (iii) of the explanation appended below Rule 57A. 4. Whether Rule 57A can override Section 4 of the Central Excise Act. 5. Tribunal's correctness in holding that the assessee can claim Modvat credit by including the value of durable and returnable packaging material. Detailed Analysis: 1. Eligibility of 'Glass Bottles' for Modvat credit under Rule 57A of the Central Excise Rules, 1944: The Tribunal allowed the Modvat credit on Glass Bottles used for packaging aerated water, provided the value of such Bottles is included in the value of the final product. The Tribunal clarified this position based on a Board circular dated 13.09.1995, which binds the revenue. 2. Inclusion of the cost of durable and returnable packing in the assessable value of a product under Section 4 of the Central Excise Act, 1944: The Tribunal held that the cost of durable and returnable packaging, such as Glass Bottles, can be included in the assessable value of the final product if the manufacturer opts to do so. This inclusion is necessary to avail Modvat credit under Rule 57A. 3. Lawfulness of CEGAT's interpretation of clause (b) (iii) of the explanation appended below Rule 57A: The Tribunal's interpretation of clause (b) (iii) was deemed lawful as it aligns with the Board circular dated 13.09.1995. The circular allows the credit of duty paid on Glass Bottles if their value is included in the final product's value, which binds the revenue. 4. Whether Rule 57A can override Section 4 of the Central Excise Act: The Tribunal found no inconsistency between Section 4 of the Act and Rule 57A. The Board circular clarified that the credit of duty on Glass Bottles is permissible if their value is included in the final product's value, thus not overriding Section 4. 5. Tribunal's correctness in holding that the assessee can claim Modvat credit by including the value of durable and returnable packaging material: The Tribunal held that the assessee is entitled to claim Modvat credit by including the value of durable and returnable packaging material in the assessable value of the final product. This inclusion aligns with the Board circular and the Tribunal's interpretation of the relevant provisions. Conclusion: The High Court dismissed the writ petition, upholding the Tribunal's decision. The Court found that the Board circular dated 13.09.1995 binds the revenue, and the department cannot take a contrary stand. The assessee's inclusion of the prorata cost of Glass Bottles and Plastic Crates in the assessable value of aerated water satisfies the requirements of Rule 57A. The Court also noted that the department's differential approach in accepting the order in one case and challenging it in another is not permissible. The writ petition was dismissed with no order as to costs.
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