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TMI Blog1995 (4) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... ce No. 15/GL-3/CE/Cal-II/91, dated 8-2-1991 that the Appellant wrongly took Modvat credit of duty paid on aluminium foil (input) to the tune of Rs. 21,80,577.00 during the period 8-2-1991 to 31-3-1991 since the final products were exempted from payment of duty (in contravention of the provision of Rule 57C of the Central Excise Rules, 1944). 1.3 The Appellants were, therefore, asked to show cause as to why the aforesaid amount of Rs. 21,80,577/- of Modvat credit be not disallowed under the provision of Rule 57-I. 1.4 By Order-in-Original dated 23-12-1991, the Assistant Collector disallowed the said Modvat credit and further ordered that the said amount be recovered by debiting it from RG 23A Part II or through their PLA, or by deposit under T.R. 6 Challans. A penalty of Rs. 5,000/- for violation of the provisions of the Central Excises and Salt Act, 1944 and the rules framed thereunder. 1.4A On appeal before the Collector of Central Excise (Appeals), Calcutta, the Appellants herein did not succeed. Hence, this before the Tribunal. 2.1 Learned Advocate Shri S.K. Sinha for the Appellants has urged that they were not asked to show cause against recovery of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . the date of the Trade Notice. Contention of the Appellants that it should be given effect from 1-4-1991 when they became aware of the Trade Notice dated 8-2-1991 is not tenable. He further submits that the Trade Notice dated 8-2-1991 merely clarifies a legal position and there is no estoppel against law. Recovery, if any, which arises under the law can always be made, subject to statutory limitation against such a recovery. 4.1 Some questions were put to the learned JDR from the Bench on nature of power under Section 5A(1) of the Central Excises and Salt Act, 1944 [or under erstwhile Rule 8(1) of the Central Excise Rules, 1944] and consequently the nature of notifications issued thereunder. It was pointed out that power under Section 5A(1) is a power to exempt excisable goods from duty leviable thereon. It is a beneficial power. It is not a power, pure and simple to fix rates of duty. Therefore, an exemption notification, issued under such a beneficial power cannot be considered as having a compulsory character. An exemption notification, in its very nature, is optional in character and cannot be compulsorily imposed on a manufacturer who does not want to avail of it. Effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or manufacturers; or (ii)sold to different classes of buyers : Provided that in fixing different tariff values in respect of excisable goods falling under sub-clause (ii), regard shall be had to the sale prices charged by the different classes of producers or manufacturers or, as the case may be, the normal practice of the wholesale trade in such goods." "SECTION 5A. Power to grant exemption from duty of excise. - (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon : ***" 5.3 It is also appropriate to set out the Law Ministry's advice enclosed with the C.B.E.C.'s Circular - "NOTES IN THE MINISTRY OF LAW ADVICE (B) SECTION In this case, the Dept. is requesting for opinion of the learned Attorney General on the point as to whether a manufacturer of excisable goods has got an option to pay duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validity and therefore, the exemption is as if it is contained in the parent Act itself." 5. The observations of the Supreme Court referred to in the said opinion have great relevance to the issue under reference. Even though the opinion of the learned AG then given was on different issue, in view of the observations that the notification having been made in accordance with the power conferred by the statute have statutory force and validity and therefore the exemption is as if it is contained in the Parent Act itself, we consider that the law and notification have to be followed. It is not the sweet will of the manufacturers to pay the excise duty on exempted goods when they think that payment of such duty will be ultimately to their benefit. The executive instructions contrary to the statutory position have no legal sanctity. It is for the dept. to consider withdrawing the said executive instructions. In view of the above, therefore, there does not seem to be necessity of troubling the learned AG in this case. In view of reference of earlier opinion of Law Min. which is not available, Addl. Secy. may also kindly see. Sd/- JS & LA 12-12-1990 Addl. Secy. I would only li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on such excisable goods. Power to exempt is without doubt a beneficial power. It can only reduce rates of duty. Notifications, no doubt has statutory force, drawing their authority from the provisions of a statute. Notification having character of exemption cannot be forced upon an assessee if it does not suit him. If this character of a notification under Section 5AA(1) is ignored, and it is forced upon an assessee, then the power under Section 5A would have been simply a power to fix rates of duty, not exceeding the rate prescribed in the Schedule to the Central Excise Tariff Act, 1985 and perhaps simultaneously, the provisions in the said enactment would have expressed clearly that the rates prescribed are the `ceiling' or `maximum' rates subject to reduction by Central Government. In this connection, difference in language in Section 3(2) of the Central Excises and Salt Act, 1944 and Section 5A(1) is apparent. Section 3(2) gives the peremptory power to the Central Government to fix values in respect of excisable goods and those values replace the value under Section 4. It is neither the option of the assessee nor that of the department to assess the goods on the basis of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication having been made in accordance with the power conferred by the statute has statutory force and validity and, therefore, the exemption is as if it is contained in the present Act itself. The question for decision in this petition is whether the petitioners are entitled to avail themselves of this exemption, and whether, therefore, the levy was illegal". We are of the view that these observations were made in a totally different context. In that case, the Apex Court was examining the question whether a certain exemption notification issued by the authorities in the State of Uttar Pradesh under the Sales Tax Act of the State was applicable to certain goods of an assessee when he claimed the exemption. The Apex Court did not rule that the notification will have to be applied even if it was not claimed by an assessee. Nature of the `exempting' power was not under examination by the Court. 5.7 Nature of the power under Rule 8(1) of the Central Excise Rules has been subject matter of some cases, though on different aspects of that power. An exemption notification prescribed a rate of exemption (rebate) higher than the tariff rate of duty levied by the Schedule to the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used in the manufacture of a final product...shall be allowed if the final product is exempt from whole of duty of excise leviable thereon..." He submits that the wording of Rule 57C does not use the expression that "no modvat credit shall be allowed who avails of the full exemption of duty on final product." We are afraid that there is a fallacy in this argument. Once we hold that availment of an exemption notification is an option with an assessee, the expression in Rule 57C "... final product is exempt from whole of duty of excise ..." has to be read as ".... final product avails of exemption from whole of duty of excise leviable thereon..."; otherwise this will frustrate the basic purpose of the scheme of modvat credit, i.e. to avoid cascading effect of duty upon duty. 6.1 Now, we shall examine the other pleas taken by the Appellant's learned Advocate. He has urged that the show cause notice was only for disallowing the modvat credit wrongly taken and not for recovery of the `wrong' credit or imposition of penalty. We have carefully considered this plea as also the plea advanced by the learned JDR on this plea, opposed by him. Rule 57-I envisages a show cause notice fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to an act. Therefore, Rule 57-I would be applicable in the present case, if the `credit' taken is held to be wrong and its recovery in the manner laid down in Rule 57-I would also be sustainable, even though in effect Section 11A is also attracted. But we have already held (in para 5.9) that modvat credit was rightly taken by the Appellants because they had the option to pay duty ignoring the exemption notification. Our finding in this para does not affect the result of the Appeal. 6.3 Another plea of the learned Advocate for the Appellants is that if credit on the inputs is disallowed and recovered, they shall be given the refund of duty under Section 11B paid on the final product which was fully exempted. This plea also cannot be accepted because of the condition in Section 11B that burden of duty should not have been passed on to the customer. There is no plea from the Appellants that they have not passed on the burden of duty to the customers of their final product. Again, our finding in this para does not affect the result of the Appeal because of our finding in para 5.8. 6.4 In view of our finding in para 5.9, Appeal is allowed with consequential relief to the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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