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TMI Blog1995 (12) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... or their product `Polynol i.e., Polyvinyl Alcohol and using VAM, the raw material, captively for the same. In view of this fact, the assessees are not required to pay any duty on VAM. Moreover, they were entitled for duty exemption under Notification No. 217/86-C.E., dated 2-4-1986, they have preferred to forgo the exemption for captive consumption on VAM available under Notification No. 217/86-C.E., dated 2-4-1986 and to pay the duty. It has been further noted that the assessees were well aware of this fact, which can be seen from Para 4 of their letter dated 18-1-1991, addressed to the Chairman, CBEC, New Delhi. In view of this, the ld. Collector has held that the assessees are not entitled for the benefit of Notification No. 53/88-C.E., dated 1-3-1988. He has further held that the assessees had availed Modvat credit on VAM when used captively, it means that duty paid VAM is retained by them by way of availing Modvat credit and hence, VAM cannot be treated as duty paid and, therefore, the concessional rate of duty under Notification No. 53/88-C.E., dated 1-3-1988 cannot be made available as it falls to fulfil the condition of notification. The ld. Collector has held that if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yone of them. He submitted that the assessee had represented to the Board on this point. He submitted that the Assistant Collector has approved the classification list without granting the benefit of Notification No. 217/86. He submitted that the question of payment of duty for availing the Modvat credit and as to whether the goods are non-duty paid has not been answered by the ld. Collector. He submitted that the payment of duty does not make the goods non-duty paid and in this regard the ld. Consultant has relied on the ruling rendered in the following cases : (i) Metrosyl, Jesidhi Industrial Area v. Collector of Central Excise - 1991 (53) E.L.T. 93 (ii) Union Carbide India Ltd. v. Collector of Central Excise - 1993 (63) E.L.T. 696 (iii) Indoswe Engineers Pvt. Ltd. v. Union of India - 1989 (41) E.L.T. 217. He submitted that the party had also filed Modvat declaration under Rule 57G for availing the credit of duty on inputs to be used for manufacture of their product `Polyvinyl-Alcohol of various grades , by their letter dated 19-3-1990 and that the Assistant Collector had not disallowed the same. He submitted that the VAM is a dutiable commodity and the department cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If, Manufactured from Vinyl Acetate Monomer on which appropriate amount of duty of excise under Section 3 of the Central Excises and Salt Act, 1944 (1 of 1944) or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), as the case may be, has already been paid." As can be seen from the terms of the Notification, the product Polyvinyl Alcohol is entitled for exemption provided it has been manufactured from Vinyl Acetate Monomer on which appropriate amount of duty of excise under Section 3 of the Central Excises Salt Act, 1944 or the additional duty under Section 3 of the Customs Tariff Act, 1975 as the case may be, has already been paid. It is the case of the department that VAM being exempted by a separate Notification No. 217/86-C.E., dated 2-4-1986, the appellants could not have paid the duty on VAM and then taken the benefit of the Notification No. 53/88 and such availment of benefit is irregular and the payment of duty made on VAM is a mere deposit. This has been seriously contested by the appellant and they have brought to our notice various citations, wherein it has been held that exemption from duty is not deniable in the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has held that the final product gets exemption in the relevant notification. 10. In the case of CCE v. SAIL as reported in 1990 (47) E.L.T. 389 wherein Para 5, the Tribunal has referred to the clarification contained in the Publication ICE Trade Digest March, 1988, brought out by the Directorate of Publications, Customs and Central Excise, New Delhi, wherein it has been clarified that it is the option of the assessee either to avail of the full exemption available or to pay duty leviable on the goods manufactured by them. In the latter event, Modvat credit cannot be denied on such duty paid inputs if used in the manufacture of final product. The Tribunal also referred to the Trade Notice issued by the Bhubaneswar Collectorate itself bearing No. 39/GI/20/88 dated 17th March, 1988, which clarifies to the effect that Modvat credit is admissible to the assessee who chooses to pay the duty in respect of the goods being fully exempt from use in manufacture of final products. Therefore, taking these materials into consideration, the Tribunal held that the Revenue had not made out a case and therefore, accepted the assessee s contentions. 11. In view of the ratios laid down by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VAM is only an intermediate product and therefore, the credit of duty could not be availed with reference to VAM. It could, if otherwise due, be availed of only with reference to the final product namely the POA. 18. Even otherwise no credit could be utilised with reference to VAM as it was wholly exempted from duty under [Notification No.] 217/86 and this position is not altered by the fact of the appellants depositing any amount as duty on the ground that they do not intend to claim benefit of [Notification No.] 217/86. This is because of the fact that such a utilisation is permissible only with reference to the duty leviable or payable in accordance with an assessment; And the concerned officer was duty bound to take the relevant exemption notification into account while determining the duty payable. 19. In the above circumstances, the appellants are required to reverse the credit taken by them. Once they had done so they would be entitled to the Modvat benefit with reference to the final product namely Polyvinyl Alcohol if otherwise due. 20. The appellants are not eligible for benefit of Notification No. 55/38 because it is available only in respect of that quantity of V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove observations and the law. Dated: 24-3-1995 Sd/- (S.K. Bhatnagar) Vice President In view of the difference of opinion between Hon ble Member (J) and the Vice President, the matter is submitted to the Hon ble President for reference to a third Member on the following point :- 1. Whether in the facts and circumstances of the case, the impugned order is required to be set aside and the appeal allowed as proposed by Hon ble Member (J) or the matter is required to be remanded for de-novo consideration in accordance with law in view of the observations of the Vice President. Sd/- (S.L. Peeran) Member (J) Sd/- (S.K. Bhatnagar) Vice President 27. [Order per : P.K. Desai, Member (J)]. - With difference of opinion between the two members [the Vice President and the Member (J)] who heard the appeal, the matter is referred to the third Member, on the point whether the impugned Order-in-original No. 45/CEX/1993, dated 17-3-1993 of the Collector of Central Excise Customs, Pune confirming the demand of duty of Rs. 92,23,422/- vide Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excises and Salt Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the duty and hence, it was not open to the appellants to voluntarily pay the duty thereon and avail of the benefit of concessional rate, vide Notification No. 53/88. The demand was accordingly raised for a period from 1-4-1990 to 10-1-1991 by issuance of show cause notice dated 3/6-4-1992. The appellates contested the same, by pleading that they had an option available not to claim exemption under Notification No. 217/86 and when they had actually paid the duty and used duty paid VAM in manufacture of Polynol, benefit under Notification No. 53/88 could not be denied. The contention of the appellants was not accepted, and the impugned order was passed. 32. Appeal preferred by the appellants, to the Tribunal, came up for hearing and the disposal before Special Bench `C (as it then existed). In the order, numbered as Misc. Order No.63/95-C, the ld. Member (Judicial) is of the view that the appellants had a choice to pay the duty on VAM and avail of benefit of concessional rate vide Notification No. 53/88 and has proposed allowing of the appeal. He has also observed that even otherwise, the demand raised is hit by period of limitation, and is time barred. The ld. Vice President, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he demand beyond the period of six months, prior to issue of the subject show cause notice, therefore, has to he held as hit by time bar. 34. With the entire demand being beyond the period of six months has, therefore, to be held as not sustainable, and the Order-in-Original, to that extent has to be held as not sustainable. Ordering remand for de novo consideration, in regard to duty demand, for such period which is within six months would be infructuous, and is not warranted. 35. The next point to be considered is whether, the order of imposition of penalty vide Rule 173Q(1) of the Rules, should be set aside, or that the matter ought to go back for reconsideration. Mr. Gautam Doshi, the ld. C.A., appearing for the appellants has pleaded that when no mala fide exists and when demand of duty is held to be not sustainable, there is no scope for imposing penalty. He has referred to the decision of the Supreme Court in Collector of Central Excise v. HMM Ltd. - 1995 (76) E.L.T. 497 (SC), to the effect that the question of penalty would arise only if the department is able to sustain its demand. Mr. Doshi has submitted that in the case before the Supreme Court, also, the demand was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (4) of said Section, this Notification is deemed to have been issued under Section 5A of the Act. He has also referred to another decision of the Tribunal in Bajaj Tempo Ltd. v. Collector - 1994 (69) E.L.T. 122 (Tribunal) where examining the provisions of Notification No. 217/86 and of Rule 57C of the Rules, it is held that the said Notification is intended to merely avert payment of duty at the intermediate stage. He then refers to the Board s letter F.No. 267/16/89-CX. 8, dated 15-2-1988 permitting option to the manufacturers of paying duty on fully exempted goods and submits that the same has been withdrawn vide Board s Circular No. 2/91-CX. 3, dated 4-1-1992 for which Trade Notice No. 30/91 dated 28-2-1992 has been issued by Pune Collectorate. He pleads that such withdrawal of the facility could only be prospective, and is issued much after the period covered under the subject demand. He has also produced Finance Ministry Circular No. 125/36/95 and has pleaded that the said circular is specified to be of general applicability. In his submission, even if the exemption under Notification No. 217/86 was availed of, the clearance of VAM for captive consumption would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 1992 (62) E.L.T. 753 (Tribunal), wires manufactured out of re-rollable material have been held as intermediate product for manufacture of cement spun pipes VAM in relation to manufacture of Polynol has therefore, to be treated as intermediate product. 41. Viewed from this angle, so far as availment of Modvat credit in relation to the inputs used in manufacture of VAM is concerned, the same could have been used in payment of duty on final product Polynol vide Rule 57D(2) of the Rules, that the appellants have actually done, could have stood condoned as mere procedural irregularity with virtually no major financial implication and might not have been viewed as attracting any penal consequences. 42. The main issue is whether, it was open for the appellants to pay duty on VAM captively consumed, though, the same was exempt from payment of duty vide Notification No. 217/86, and avail of benefit of concessional rate vide Notification No. 53/88. The same is held as not permissible, vide Government Circular dated 4-1-1992 followed by Pune Collectorate Trade Notice dated 28-2-1992. The said circular is neither specified to be having retrospective effect, nor could be read as such, not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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