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TMI Blog1995 (10) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs in the manufacture of final products, part of which are produced in the same unit and part of the final product are manufactured in another unit. They remove the intermediate goods (hereinafter referred to as intermediate inputs) for captive use within the same factory or remove to another unit belonging to them by availing exemption under Notification 217/86, as amended by Notification 97/89. They took Modvat Credit of duty paid on basic inputs and these basic inputs were used at the first stage, in the manufacture of intermediate inputs, which are captively consumed in the same factory or in another unit of the respondents. Modvate credit of duty paid on basic inputs was allowed by the department in respect of captive use within the same factory applying the provisions of Rule 57D. However the Department denied the Modvat credit of duty on basic inputs used in intermediate inputs removed to another unit removed in bond under Notification 217/86. There was no dispute that basic inputs are eligible inputs both for manufacture of intermediate products as well as the ultimate final products. There was also no dispute that the ultimate final products produced in the same factor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such goods manufactured are to be cleared to another factory of the same manufacturer, prior to amendment, duty was to be paid on their intermediate inputs and cleared to another unit, in which case Modvat credit of duty paid on these intermediate inputs cleared on payment of duty would be available towards payment of duty on the ultimate final product. If these intermediate inputs are cleared for captive use within the same factory, there is no requirement of payment of duty on such intermediate products, provided they are used in the manufacture of final products cleared on payment of duty. 6. It was brought to our notice that amending Notification 97/89 permitting interplant removals of intermediate inputs for captive use in another unit of the same manufacturer was issued based on representations from trade, as a measure of procedural simplicity to avert payment of duty at intermediate stage because of legal requirement of Rules 9 and 49 of the Central Ex. Rules and thereafter taking credit of such duty paid for clearance of the products at next stage in the line of manufacture of the same manufacturer. Text of the amending Notification 97/89 reads as below In the opening pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to nil rate of duty) : (Provided that such intermediate products are - (a) used within the factory of production (in the manufacture of a final product other than those cleared either to a unit in a Free Trade Zone or to a hundred per cent Export-Oriented Unit) on which the duty of excise is leviable whether in whole or in part and (b) specified as inputs or as final product under a notification issued under 57A). But when it came to removals of such intermediate goods under Chapter X procedure in terms of the said notification for captive use in another unit of the same manufacturer, the department has serious objection citing the provisions of Rule 57C, which reads thus : Rule 57C : Credit of duty not to be allowed if final products are exempt - No credit of the specified duty paid on the inputs used (in the manufacture of a final product other than those cleared either to a unit in a free trade zone or to a hundred per cent Export Oriented Unit) shall be allowed, if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. 7. The Revenue contends that the intermediate products are cleared as final products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules. We took the view that if intermediate inputs (referred to as inputs in the notification) are to be cleared on payment of duty for maintaining the chain of credit of duty paid on basic inputs, the object of amendment carried out under Notification 97/89 permitting inter-plant removals in respect of the same manufacturer would be detected. If Rule 57C is applied in regard to such removals, on the ground that the intermediate goods are exempted and they are to be treated as final products cleared without payment of duty availing exemption, it would lead to an anomalous position namely where basic input is used in the common and same intermediate inputs (referred to in this notification as inputs) and captively used in final products cleared on payment of duty, credit can be availed by applying Rule 57D, but where it is so used in another unit of the same manufacturer, credit is to be denied, notwithstanding the fact that corelation of the basic inputs right from stage one upto the final product is established as envisaged in the said notification. Hence we felt that there is a patent ambiguity in such an interpretation held by the department and applying the principle enunciated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to as `inputs going into the manufacture of final products to be cleared on payment of duty. Hence to equate such intermediate products as final products cleared from the factory without payment of duty is not apparently correct, because the notification itself calls them `inputs and permits their removals for captive use within the same factory or in another unit of the manufacturer by way of removals under bond. Hence such intermediate products removed as inputs to another unit of the same manufacturer are not to be equated as final products exempt from duty. Motor vehicle cleared in the case of Bajaj is the final product. Rule 57C can be attracted, only if such motor vehicle is cleared without payment of duty under an exemption. If such components are cleared to the market as spares, then they could be construed as final product, in which case they are to clear the spares on payment of duty, if they are to avail the modvat benefit on steel materials. But where such components are cleared as inputs (as referred to in the Notification) to another unit of the same manufacturer for further use in the manufacture of Motor Vehicles, motor vehicle only can be construed as final pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew taken by us in interpreting the provisions of Rule 57C in the context of such a notification is not applicable in regard to Notification 217/86, which is esoteric to Modvat scheme and is entirely based on that scheme. Hence the decision of the Larger Bench in Kirloskar Oil Engines case is not applicable in this context. It appears that there is a misconception on this, because Notification involved in Kirloskar Oil Engines was also numbered 217, but it relates to 1985 whereas Modvat notification now under reference is 217/86. 8.5.5 Another argument of the ld. DR is that removals to 100% E.O.U. and Free Trade Zone are specifically excluded from operation of Rule 57C and no such exemption is available as here. Removals to 100% E.O.U. and Export Processing Zones in terms of an exemption notification have been specifically provided as exceptions in Rule 57C because they grant exemption to removals for 100% E.O.U. or Export Oriented Units, irrespective of whether final products manufactured out of such inputs in the export oriented units are to suffer duty or not. Hence such removals are without payment of duty on an exemption notification, irrespective of whether the final produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in revenue. As on date the respondents can opt to pay duty on the intermediate goods cleared already under Chapter X Procedure as per the above Trade Notice and once they pay duty, Modvat credit, on basic inputs (sought to be denied) would get restored. Duty paid on intermediate products would be eligible as credit at the other unit under Rule 57E of the Central Excise Rules, read with this trade notice. All these exercises would generate only paper work without any commensurate revenue gain apart from expenditure of considerable time of the judicial forums in resolving this legal point. However, we agree that whether there is a revenue angle or not, we are to look into the questions posed before us only from the point of law. But we cannot ignore the fact that this legal process, even when carried to its logical conclusion, resulting in success to the Department, would not result in any revenue gain, excepting payment of duty in one unit and taking it as credit in other unit. 9.1 Whatever be our feelings or views, we have already taken the final decision. Now the stage is over for holding that only our views on a point of law should hold good, while considering a reference appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etting value is upto Rs. 1800/- but when the aggregation of annual letting value of all buildings and land is permitted, then, all such buildings and lands have to be taken as a one unit for purposes of taxation, since any other construction would render the proviso negative and defeat the object of the Act. The Legislature could not have intended that all buildings or lands owned by a single individual should get exemption from taxation even if their total letting value exceeds rupees eighteen hundred. 10.2 The other case relied upon is that of M/s. Girdhari Lal and Sons v. Balbir Nath Mathur and Others - AIR 1986 SC 1499. This case relates to Delhi Rent Control Act, 1958 where it was held that requirement of notice of sub-tenancy may be evidenced by a single document and in that context the Court observed that to avoid patent injustice, anomaly or absurdity or to avoid invalidation of a law, the court would be well justified in departing from the so- called golden rule of construction so as to give effect to the object and purpose of the enactment by supplementing the written word, if necessary. 11. The two cases are therefore, in our view distinguishable. Denial of Modvat cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sought to be achieved in the scheme of Notification 217/86 itself and when it is not disputed that the final product turned out of intermediate inputs cleared in bond for use in their manufacture, are cleared on payment of duty, can we be justified in ignoring this substantive compliance and deny the credit, merely based on a rigid and literal reading of Rule 57G de hors the substance of Notification 217/86 and its objective? This is a question which does not appear to have been considered in the prima facie view of the North Regional Bench. 9.6 Be that as it may, it is not for us to say which approach should be adopted on the manner of interpretation on a point of law. The prerogative of the final say vests with the High Court. Since this is a point of law, on which the ld. Members of North Regional Bench do not share our views, a reference to the High Court as required under Section 35G of the Central Excises Act is called for. Hence we allow both the reference applications from the Revenue. 10. Before setting out the statements of facts and the questions for reference, both the sides are required to be heard and finally decided on the draft statement and questions to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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