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TMI Blog1995 (12) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... redit, inter alia, on base/decorative papers used as an input in the manufacture of fibre board in their factory. The declaration was acknowledged by the Assistant Collector on 12-6-1987 and in terms of the sub-rule (2) of Rule 57G they were entitled to take credit with effect from the said date of acknowledgment. 3. Before obtaining the dated acknowledgment the appellants received 28.55 M.T. of imported base/decorative papers and the same were lying in stock on the date of filing the declaration. Accordingly, in a letter dated 4-7-1988 they requested the Assistant Collector to allow them, in terms of the transitional provisions of Rule 57H, the credit of the additional Customs duty amounting to Rs. 3,36,517.96 on the said 28.55 M.T. of base/decorative papers lying in stock. On the relevant date i.e. 12-6-1987 when the appellants became eligible for taking the Modvat Credit, the allowable credit or the actual duty paid, whichever was less, vide Notification No. 177/86-C.E., dated 1-3-1986 as amended by Notification No. 149/87, dated 20-5-1987. Applying the above rate of Rs. 800.00 per M.T. the base paper being 28.55 M.T. lying in stock was worked out to be Rs. 22,840.00 which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed. In this connection, he pointed out that when there was no restriction about the rate at which such modvat credit was to be allowed either at the time of receiving the inputs or at the time of filing application under Rule 57H or at the time of passing the order under Rule 57H, there can be no scope to allow the said credit lower than the duty actually paid on the inputs in question. He, therefore, contended that the interpretation sought to be given by the Department would lead to absurd and unwarranted results. He, therefore, contended that since there is no dispute about the inputs in question which are duty paid and that modvat credit was claimed only of the duty actually paid on the said inputs, therefore, there is no question of disallowing the same. He again contended before us that if in such a situation the modvat credit is restricted by applying a limit which was not even in operation on any of the relevant dates as stated above, it would be totally contrary to the object and purpose of the Modvat Scheme and would lead to wholly unjustified and unwarranted results. Such an interpretation is not in accordance with law and he, therefore, pleaded that the appeal may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 800.00 per M.T. or actual duty paid, whichever is less. The said restriction was in force only during the period from 20-5-1987 to 7-12-1987. The appellants filed their application under Rule 57H on 4-7-1988. The permission under Rule 57H was granted to the appellants by the Assistant Collector concerned on 20-4-1989. The aforesaid restriction was not in force either on the date of application or on the date of grant of permission by the Assistant Collector concerned under Rule 57H. It is also seen that the said restriction was not in force at the time of receiving the inputs at the appellants factory. Admittedly, the inputs were received in the factory of the appellants during the period from 20-10-1986 to 22-3-1987 whereas the said restriction of Rs. 800.00 per M.T. was imposed on and from 20-5-1987. The said restriction was not in force on 1-3-1987 when the Modvat Scheme was extended to the appellants products i.e. fibre boards falling under Chapter 44 of the Central Excise Tariff, nor was it in force on 4-7-1988 when the appellants applied for the said credit under Rule 57H. 9. In the aforesaid circumstances, merely because the said restriction was in force on 9-6-1987 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se may allow credit of the duty paid on inputs received by a manufacturer immediately before obtaining the dated acknowledgement of the declaration made under the said rule if he is satisfied that (i) such inputs are lying in stock or are received in the factory after filing the declaration made under Rule 57G, or (ii) such inputs are used in the manufacture of final products which are cleared from the factory on or after the 1st day of March, 1987." A perusal of the above provisions goes to show that it conferred power upon the Assistant Collector to allow credit of the duty paid on inputs received by a manufacturer subject to fulfilment of other conditions. But the Assistant Collector should be satisfied about the fact as to whether the inputs in question were lying in stock or not. If the inputs are lying in stock, then the modvat credit of the duty paid thereon has necessarily to be allowed. Therefore, when the inputs were lying in stock even prior to the restriction was imposed, the question of restricting the same to Rs. 800.00 does not arise. The modvat credit can only be taken by the appellants after permission of the Assistant Collector concerned. The only relevance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso to Rule 57G(2) of the Central Excise Rules, 1944. In this background, if the amended notification bearing No. 149/87 is looked into, it will be seen that the same was in force for a limited period from 20-5-1987 to 24-12-1987. Its application can only be to the inputs received at the factory on or after 20-5-1987 and before 24-12-1987. The reason is that all such notifications are prospective in operation (Sic) the above notification it is specifically mentioned that it has got no retrospective application. In this view of the matter, the appellants are entitled to succeed. Accordingly, this appeal is allowed with consequential reliefs. Sd/- (T.P. Nambiar) Dated : 1-8-1995 Member (J) 14.1 [Contrar per : P.C. Jain, Member (T)]. - I regret with respect, I differ from my learned Brother. I would like to record a separate order. 14.2 Short question involved in this matter is as follows : What is the relevant date for taking the modvat credit to be taken on inputs in respect of which such modvat credit (credit of specified duty) is restricted in terms of proviso to Rule 57A read with notification issued under the said rule? Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Brother in his Orders at para 11. It is observed that Rule 57H overrides the restrictions contained in Rule 57G by use of the expression Notwithstanding anything contained in Rule 57G . It is to be repeated that Rule 57G allows a manufacturer to take credit of duty on inputs received by him after obtaining the dated acknowledgment of the declaration filed by him. Rule 57H, in relaxation of the aforesaid restriction enables a manufacturer to apply to the Assistant Collector for obtaining credit of duty on inputs received by him immediately before obtaining the dated acknowledgment of the declaration. 16.1 It is to be noticed that Rule 57G requires a manufacturer, before he can take credit of duty on inputs to (i) apply or declare the inputs and final products and (ii) take dated acknowledgment of that declaration. Rule 57G, it also needs to be noticed, does not spell out the date when the manufacturer should take credit. A manufacturer can take credit of duty on inputs received by him after he has taken the dated acknowledgment of his declaration. He may take the credit on the date of receipt of inputs, or even on any subsequent date after receipt of inputs, so long as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as are manufactured in India, as their input, will not be entitled to take full credit of duty paid on such inputs. The credit of duty on such goods has been restricted to Rs. 365 (now Rs. 520) per tonne or the duty actually paid, whichever is less. 5. However, the above restriction is not imposable if the said vegetable products or products falling under Heading No. 72.15 or 73.09 were produced or manufactured in a free trade zone or by 100% export-oriented units. Notification No. 175/87 has come into operation from l9th June, 1987 and, therefore, the above restriction of credit would be operative in respect of consignments which are received on or after 19-6-1987. The assessees who are availing MODVAT credit on the aforesaid products are, therefore, advised to come forward suo motu to reverse the credit of duty in excess of above restriction in respect of inputs received on or after 19-6-1987 under intimation to their Range Superintendent." [Emphasis supplied by me] It will be observed that the assessees who are availing MODVAT Credit should suo motu reverse the credit. The Trade notice does not envisage in respect of manufacturers/assessees who are not availing modv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of this case, the Appellants are entitled to modvat credit at the restricted rate of Rs. 800/- per M.T., as held by Member (Technical); or at the rate at which duty has been actually paid on the inputs, as held by Member (Judicial)? Sd/- Sd/- (T.P. Nambiar) (P.C. Jain) Dated : 4-9-1995 Member (J) Member (T) 18. [Order per : K. Sankararaman, Member (T) ]. - A point of difference has arisen between learned Member (Judicial) and learned Member (Technical) in regard to the rate of modvat credit admissible in respect of paper which is an input used in the manufacture of the final product by the Appellants, viz. M/s. Mangalam Timber Products Ltd. This point has been referred to me by the President of the Tribunal for resolution of the difference. Accordingly, I have heard the learned Counsel for the Appellants Shri S.K. Bagaria and Shri B.B. Sarkar, learned Departmental Representative, who appeared on behalf of the Respondent Collector. 19. The point of difference as spelt out in the referring order is as follows :- Whether in the facts and circumstances of this case, the Appellants are entitled to modvat cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obstante clause notwithstanding anything contained in Rule 57G . Hence, the reliance placed by the Hon ble Member (Technical) on the provisions of Rule 57G with reference to their application and entitlement of modvat credit is misplaced. He read out Rule 57H as it stood at the material time. It laid down, inter alia, that the Assistant Collector may allow credit of the duty paid on inputs received by a manufacturer.............." (emphasis added) 21. It would, therefore, be seen, he contended, that the credit allowable by the Assistant Collector under this rule is the duty paid on the inputs and unless the Assistant Collector so allows the credit on the basis of an application by them, they do not become automatically entitled to the benefit in question. Since their application for the aforesaid benefit under Rule 57H and the decision of the Assistant Collector thereon are events after the restriction on the quantum of credit had been lifted, they would be eligible for credit to the extent of the duty actually paid on the inputs. The learned Counsel then referred to the observation made by the learned Member (Technical) that there was no anomaly involved as contended by them a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with reference to the date of declaration which, as he had already pointed out, was not applicable in their case. He then referred to the order proposed by the Hon ble Member (Judicial) and pleaded that the matter may be decided on that basis. He also pointed out that as has been indicated therein, if two views are possible, the view which is more favourable to the assessee should prevail. 23. The arguments were opposed by the learned Departmental Representative Shri B.B. Sarkar. He fully supported the view taken by the Hon ble Member (Technical) in his proposed order and pointed out that the anomaly referred to by the learned Counsel had been adequately dealt with in that order. He gave the analogy of the rates of duty applicable to imported goods and stated that the rate of duty would depend upon the date of filing of the Bill of Entry or the entry inwards of the vessel, as the case may be. If two importers import the same goods by the same vessel but they file the Bills of Entry on different dates, the rates of duty would then be dependent on such dates of filing of the said documents and if the rates have undergone a change, then it is inevitable that different rates would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reas also there was a reduction in the rate at which credit could be taken. All relevant events as have been pointed out by the learned Counsel have taken place after the ceiling on the rate at which credit could be taken had been lifted. These events are, at the cost of repetition, filing of application under Rule 57H, obtaining of the Assistant Collector s order thereon allowing them to take the credit of duty paid, use of the inputs in the manufacture of the final product, clearance of the latter on payment of duty for which purpose the credit was utilised. 25. The anomaly pointed out by the learned Counsel of different modvat credit rates for paper as input depending upon the date of filing the declaration under Rule 57G did not cut any ice on the learned Member (Technical) who had observed in his order that it was of their own making as they had delayed their Rule 57G declaration. Whether it is an anomaly or not, there can be no escape from it if the rates of credit vary and different rates are applicable at different times under the law. 26. Shri B.B. Sarkar, learned Departmental Representative sought to make out that the anomaly pointed out by the Appellants and in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id what they did. As the Modvat Scheme is a beneficial one to help the manufacturers to avoid the cascading effect of duty payment, the benefit of the second Notification restoring the normal rate of credit gets squarely attracted in their case. The restriction in the credit rate was an exception to the normal arrangement of providing credit equal to the duty paid and the exception was applicable strictly within the period specifically applicable. As I have held that the restriction in this period was not applicable to them in the given circumstances of the case, they are eligible for the benefit as applicable after 8-12-1987. 28. For the foregoing reasons, I agree with the view taken by the Hon ble Member (Judicial) and hold that the Appellants were entitled to take the modvat credit to the extent of full countervailing duty paid by them without the restriction of Rs. 800/- per tonne. 29. The matter may be placed before the original Bench which heard the Appeal for passing the final order. Sd/- (K. Sankararaman) Dated : 24-11-1995 Member (T) FINAL ORDER In view of the majority opinion, Appeal is allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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