9911796707
TMI Blog1997 (12) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (A.P.) = 1995 (57) ECR 252 (A.P.). The Hon ble High Court held that the assumption that there is an option left to the assessee either to avail of the credit on inputs under Modvat scheme or to avail the exemption from duty under Notification 202 of 1988 is not correct. This option theory according to Hon ble High Court has no legal basis. 3. We have heard both sides. Notification No. 1/93, dated 28-2-1993 exempts specified excisable goods cleared for home consumption by a manufacturer in case of first clearances of specified goods up to a value not exceeding Rs. 30,00,000 from whole of duty and allows partial exemption at 10% in case manufacturer avails credit of duty on inputs used in the manufacture of specified goods. This Notification under Clause (2), however, grants exemption up to Rs. 30,00,000 from whole of the excise duty leviable, in case of such a factory which is a factory not registered with the Directorate of Industries or which is registered with Director General of Technical Development, up to first clearance of Rs. 30,00,000. It has been held by the authorities below that since goods were exempted up to first clearances of Rs. 30,00,000, no credit could be ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty of excise leviable thereon. The raison d etre of this Rule is not difficult to seek. Credit is available under Chapter AA (which is the newly introduced Chapter to give effect to Modvat scheme) only towards the payment of duty leviable on the final products. If the final products themselves are exempt from the duty or chargeable to nil rate, the question of payment of duty and the allowance of credit in this behalf does not arise. The opening Rule 57A emphasises this concept in unmistakable terms by employing the words for using the credit so allowed towards payment of duty of excise leviable on the final products . Thus, the scheme embodied in Chapter AA of the Rules is not to allow Modvat credit, if final product is exempt. The operation of this rule does not depend upon the volition of assessee. 19(a). Rule 57C itself cannot be so construed as to provide for an option, by necessary implication or otherwise, to claim exemption or to avail of the Modvat credit. In construing Rule 57C, the only question to be asked and an swered is whether the final product is exempt from the whole of the duty of excise or it is chargeable to NIL rate of duty. Whether or not the final prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervations of Hon ble Andhra Pradesh High Court, therefore, would apply with greater force in relation to embargo placed by Rule 57C since goods hereunder Clause 2 are unconditionally exempted, in case of factories not registered with Small Scale Industries Directorate. It was also pleaded that option to avail Modvat credit was in-built in small-scale exemption under Notification 1/93 since option to pay duty at reduced rate was available in case manufacturers operate for Modvat. This position, however, is applicable only in case of Clause 1 of Para 1 of Notification and not in regard to Clause 2 of Para 1 of Notification which grants straight exemption. In fact, the fact that Notification was subsequently amended to provide for option would only support the view that before its amendment no such option was available. 9. The question therefore is if a manufacturer fulfils condition of ex emption, does he even then have the option not to avail exemption but to opt for Modvat scheme. High Court of Andhra Pradesh categorically held that : Rule 57C itself cannot be so construed as to provide option, by necessary implication or otherwise to claim exemption or to claim Modvat credit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re credit has been taken of duty paid on inputs used in the manufacture of final product, even though the final product is exempt from duty. The Tribunal held that the appellants were entitled to credit even though they could otherwise avail the benefit of Notification 1/93. This decision has been followed in the case of Mechiev Engineers v. CCE [1997 (20) RLT 200]. In this case, the Tribunal has noted the judgment of the Hon ble High Court in the case of Ganesh Metal reported in 1996 (81) E.L.T. 11 (AP) and has held that the facts in the case before the High Court were factually different from the facts in the case before the Tribunal inasmuch as the Hon ble High Court was called upon to examine the provisions of Notification 202/88 vis-a-vis Rule 57C. At this stage, the learned DR draws my attention to the judgment of the Hon ble Supreme Court in the case of CCE v. Parle Exports reported in 1988 (38) E.L.T. 741 (SC) and in particular to paras 11 and 12 wherein it has been held that when a Notification is issued under Rule 8 of the Central Excise Rules, it is in accordance with the power conferred by the Statute and has statutory force and authority and, therefore, the exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to re verse the Modvat credit of the amount in question because Modvat credit has been rightly availed by them, set aside the impugned order and allow the appeal. 12. Since the High Court judgment has been discussed and distinguished as set out above, I see no necessity for the matter to be placed before the Larger Bench for resolving the conflict and I propose setting aside of the impugned orders and allowing of the appeals of the assessees. Sd/- (Jyoti Balasundaram) Member (J) Dated : 24-11-1997 DIFFERENCE OF OPINION 13. The following difference of opinion is placed before the Hon ble-President for reference to a third Member : Whether the matter requires to be placed before a Larger Bench for resolu tion of the conflict as to whether an assessee has an option not to avail ex emption under Notification 1/93, dated 28-2-1993 and instead opt for Modvat scheme, as proposed by Member (Technical). or the impugned orders are required to be set aside and the assessees appeals allowed, as proposed by Member (Judicial). Sd/- (Shiben K. Dhar) Member (T) Dated : 4-12-1997 Sd/- (Jyoti Balasundaram) Member (J) Dated : 4-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edent case on the said legal issue was that of the East Regional Bench of the Tribunal in the case of M/s. Everest Convertors v. Collr. of Central Excise, Calcutta-II reported in 1995 (80) E.L.T. 91 (T). In the rest of the decisions, relied upon by the appellants, the ratio laid down in Everest Converters was followed. Examining the nature of exemption notification issued under section 5A(1) of the Central Excises and Salt Act, 1944 or under the erstwhile Rule 8(1) of the Central Excise Rules, 1944, it was observed by the Bench that an exemption notification is a beneficiary piece of legislation which gives rebate or lowers down the rate of duty prescribed under the Tariff. Sometimes such reduction in rate of duty is available to the assessee only on fulfilment of certain conditions. If the assessee does not fulfil those conditions, the reduced rate of duty is not available. In some of the notifications, there is reduction in rate of duty simpliciter, without fulfilment of any conditions attached to it. Now the question which arises is whether such type of notification can be made applicable to all those which are covered by its terms, can they be compelled to avail this benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eproduced below for the sake of ready reference : 57C. No credit of the specified duty paid on the inputs used in the manufac ture of a final product........................shall be allowed if the final product is exempt from whole of duty of excise leviable thereon. Now, the question arises whether the wordings if the final product is exempt from whole of duty are referring to mere existence of an exemption notification which is sufficient to oust the assessee from Modvat scheme or whether referring to the clearance of final product without payment of duty in terms of the exemp tion. Where there is an exemption notification, but still the final product, for whatever reason, are being cleared on payment of duty, can it be said that provisions of Rule 57C will have it play. Further, no difference is made between the conditional and un-conditional exemption notification in Rule 57C. A conditional exemption notification also exempts the goods from whole of duty of excise leviable thereon subject to the fulfilment of the conditions enumerate therein. It may so happen that condition to avail the exemption is a simple one let us presume, giving an undertaking to the department to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture of other item as an input and credit of duty paid on the same has been availed by the second manufacturer as Modvat credit. As such, reversal of debit entries made originally would lead to complications and need to be avoided. I also note that the appellants had availed credit and utilized the same for payment of duty on their final product. If they would not have adopted this course of action, they would have cleared their final product without payment of duty. So where is the loss of revenue in this transaction. 21. Now coming to the Andhra Pradesh High Court s judgment in the case of Ganesh Metal Processing Industries, I note that it is not for the first time that this judgment has been taken note of by the Bench. This has been placed earlier also by the departmental representative by strongly relying upon them. The said judgment has been considered by the Tribunal in the cases of M/s. Mechiev Engineers, M/s. Laxmi Enterprises, M/s. Pascal Paramount Pvt. Ltd., M/s. Jain Datu Udyog and M/s. C.K. Metal Works referred supra. In all these cases, it has been observed by the Tribunal that the facts before the High Courts and in the appeals under consideration were di ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
