9911796707
TMI Blog1993 (10) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... though some of the inputs on which Credit had been taken were utilised in the manufacture of final products that came to be wholly exempted from duty. 3. Shri N.K. Mondal, learned Departmental Representative appeared for the applicant Collector and Sarvashri Sekhar Mukhopadhyay and Madhu Sudan Dey, learned Advocates appeared for the respondents, M/s. Sreeram Drinks. Shri Mondal submitted that the order-in-appeal is erroneous as no Credit would be admissible in respect of inputs used in the manufacture of final products wholly exempt from duty in view of the provisions of Rule 57C. The case relied upon by the Collector (Appeals) was with reference to Credit availed of and utilised before 1-10-1987 where the inputs in question were themselves utilised after that day when the final products, Aerated Waters, had been taken off the Modvat Scheme. In that case, the said final products continued to be dutiable whereas in the present case, the final products had become fully exempt from duty. He, therefore, pleaded that the Department's appeal be allowed. 4. Shri Sekhar Mukhopadhyay pleading for the respondents supported the impugned order. He stated that the issue has been decided in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1986 (8) ECR 254 Special Bench 'D' (Tribunal) (iv) Warner Hindustan Ltd. v. Collector of Central Excise, Hyderabad - 1984 (16) E.L.T. 373 SRB (Tribunal) (v) Vikrant Tyres Ltd. v Collector of Central Excise, Bangalore - 1985 (21) E.L.T. 620 = 1985 ECR 1661 Special Bench 'D' (Tribunal) (vi) I.B.P. Co. Ltd. v. Collector of Central Excise, Belgaum - 1993 (65) E.L.T. 296 (Tribunal) = 1993 (46) ECR 124 SRB (Tribunal) (vii) Geoffrey Manners & Co. v. Union of India - 1980 (6) E.L.T. 7 (Bom.) (viii) Kirloskar Oil Engines Ltd. v. Collector of Central Excise, Pune - 1993 (67) E.L.T. 412 WRB (Tribunal) = 1993 (48) ECR 303. 6. In the last-cited case, the matter has been referred to the Hon'ble President of the Tribunal for constituting a Larger Bench for deciding on the following question :- [vide para 6 at page 307 of the case reported in 1993 (48) ECR 303] "Whether, in the context of the provisions of Rule 57C vis-a-vis Rule 57F(3)(i) of the Central Excise Rules, Modvat credit of duty paid on inputs used in the manufacture of declared final products, part of which are cleared free of the whole of duty of excise leviable thereon, in terms of an exemption Notification, could be disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the final products in the manufacture of which such inputs are to be used, the scope of the expression - 'such inputs' - will be traced to the inputs which have already been referred to in the said provision. The said reference is to inputs, duty-paid on which, is to be utilised for payment of duty on the final products made therefrom. Thus, this points to a link between the duty-paid inputs and the final products made therefrom. In other words, the credit of duty from a certain quantity or lot of inputs can be utilised only for payment of duty for the final products manufactured from that lot and not for those manufactured from different lots, say previous lots. This may appear to bring the Modvat Scheme on a par with the set-off procedure with its strict correlation between input and final product which had been dispensed with by executive instructions. But the executive instructions and procedural relaxations cannot go beyond the statutory stipulations. The latter are represented by Rules 57F(3) and 57C. There is no doubt that, going by Rule 57C, no credit of duty will be permissible if the inputs are used in the manufacture of wholly exempted goods. Thus, if a manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for payment of duty on the final products without insisting on strict correlation of input and output will not offend Rule 57C as long as the final products remain dutiable but, as stated above, if they become wholly exempt it will go against the said rule if the credit is permitted to be utilised. Merely because the credit has been already utilised the operation of Rule 57C cannot be thwarted." As explained in the above discussion, the purpose of Modvat Credit is to provide relief in the duty payable on the final products to the extent of the duty paid on the inputs used in or in relation to the manufacture of such final products. In other words, the purpose of affording Credit by way of the duty paid on the inputs is to provide relief to the duty payable on the final products to that extent. But where the final products do not have to pay duty, say because of exemption, the Credit earned on the inputs relating to such final products would have no role to play. The provisions of sub-rule (3)(i) under Rule 57F laying down that Credit allowed in respect of any inputs may be utilised towards payment of duty on any of the final products in or in relation to the manufacture of which s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had, however, been already utilised without, however, using the inputs themselves, which are actually used in or in relation to the manufacture of exempted final products the reversal of the Credit in question would be the only proper course if Rule 57C were to serve any purpose. We are not impressed with the argument that since under Rule 57C no Credit shall be allowed if the goods are used in the manufacture of exempted products, the Credit already allowed cannot be disturbed. Allowing the Credit and the use of the inputs takes place at different times and since the purpose of the Modvat Scheme is to provide relief in the payment of the duty on the final products, such final products becoming exempt from duty would have its effect on the Credit taken even if it had already been utilised. The concept of there being no need to have a one-to-one correlation between the inputs and the final products is only an executive benediction not having its roots in the actual statutory provision. This procedural relaxation can have meaning and justification only as long as the final product remains dutiable and duty is actually paid. Once it becomes exempt, the link between Credit of duty p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No debit can be claimed after the Credit has been taken on goods brought into the factory. Once raw materials enter the factory, Credit is to be taken in accordance with the procedure prescribed in the Rules without any correlation to the end-product. The Credit can be utilised for the payment of duty on any goods for which Credit is taken. These goods need not be exempted goods but will be those goods, on which duty is payable...... In terms of the said notification there need not be any nexus between the inputs and outputs." . 10. I submit with respect that there has to be a nexus between the inputs and outputs to justify the availment of the benefit under the Notification or the Rules as the case may be. The relaxation in not insisting on strict correlation between particular lots of inputs and the quantity of final products arising therefrom will be workable as long as the final product pays duty as the purpose of Credit or exemption is to give relief in the matter of such duty. But the moment the final product is cleared without payment of duty, the proviso to Rule 56A(2) or the second proviso to Notification No. 201/79 or Rule 57C as the case may be, will come into reckonin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
