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TMI Blog2009 (2) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the appellant. - 54 of 2007 - - - Dated:- 26-2-2009 - M.M. Kumar and H.S. Bhalla, JJ. REPRESENTED BY: Shri Suvineet Sharma, Advocate, for the Appellant. Shri Rajiv Maihotra, Advocate, for the Respondent. [Order per: M.M. Kumar, J.]. - The dealer-appellant has approached this Court by filing the instant appeal under Section 35 G of the Central Excise Act, 1944 (for brevity 'the Act') challenging order dated 8-12-2006 (A-4) passed by the Custom, Excise and Service Tax Appellate Tribunal, New Delhi (for brevity 'the Tribunal') claiming that following question of law would emerge from the order of the Tribunal: "(i) Whether the Tribunal and the quasi judicial authorities are correct in ordering recovery of the Modvat Credit taken prior to the amendment to rule 96 ZI but utilized at a later date? (ii) Whether an amendment to a substantive provision would have retrospective effect despite there being no mention of retrospective application in the amendment itself? (iii) Whether imposition of penalty is justified in the circumstances of the case?" 2. Brief facts of the case necessary for disposal of the controversy raised in the instant appeal may firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbroidered products manufactured by him under the provisions of Rule 96 ZH of the Central Excise Rules 1944 and that it is also not disputed that the appellant during the relevant period availed the benefit of Modvat Credit on the capital goods under Rule 57 Q of the Central Excise Rules 1944. In order to appreciate the rival claims it is necessary to read the provisions of Rule 96 ZH as amended, during the relevant period by notification No.15/98 and applicable to the current case. I may read the same:- "Provided further that no credit of duty paid on inputs used in the manufacture of the embroidery and capital goods used within the factory of manufacture of such embroidery shall be allowed under Rule 57A, 57B or 57Q as the case may be." It can be notified that the proviso very clearly precludes the appellant from availing the benefit of the Modvat under rules 57A and 57Q. If that be so, then the appellant's contention that they should not be denied the beneficial legislation falls flat on the face of the fact that the duty payment on the capacity of the production of the embroidery machines is an optional one." 6. The Tribunal also decided the issue of limitation in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of manufactured goods. The provisions of the rules 96 ZH to 96 ZM were introduced for smoother way of collection of the duty and is for proper assessment of the duty on embroidered goods. The said rules cannot be considered as ultra vires for levy and collection of the duty, more so on the fact that the working under these rules were optional." 8. Mr. Suvineet Sharma, learned counsel for the dealer assessee has argued that the purpose behind the grant of Modvat Credit is to avoid the cascading effect of duty on the final product before it reaches the consumer. Therefore, it is unwarranted for the Tribunal to assume that the dealer - appellant had opted for the compounded levy scheme as envisaged under Rule 96 ZH and the Modvat Credit would not be available to the dealer - appellant. He has further submitted that the assumption has been occasioned on account of an amendment made in the Rule 96 ZH(I) w.e.f. 2-6-1998 vide notification No.15/98/CE (NT). He has also submitted that Modvat Credit and the scheme of utilizing the credit taken had been promulgated for the capital goods installed or used in the factory of manufacture in addition to the other specified goods. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ZH (1 3) and argued that the view taken by the Tribunal for making an application by the dealer-appellant to the Commissioner to avail benefits in substitution of the some provision in preference to others is mandatory. It is only then he could be permitted to switch over for availing the benefit under the other scheme. In order to substantiate his submission, learned counsel has placed reliance on a judgment of the Tribunal, Northern Bench, New Delhi rendered in the case of United Leasing Industries Ltd. and argued that an embroidery manufacturer who had opted for availing the benefit accruing from special provisions of Section E-IX of Chapter V of the Rules 1944 for any period prior to 2-6-1998 would not be entitled to avail himself of the Modvat Credit facility in respect of inputs or capital goods. Mr. Malhotra has emphasized that availment of Modvat Credit by the dealer - appellant on capital goods under Rule 57 Q and utilization thereof by it for payment of duty on embroidery under Rule 96 ZI in respect of the period from September 1998 to February 1999 is wholly unwarranted and the Tribunal has rightly declared the same to be unlawful. 11. Having heard the learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturer shall, unless otherwise directed by the Commissioner, and in exceptional circumstances, be liable to pay duty on his entire production of the embroidery during the shift or shifts, in respect of which the payment was to be made, at the rate specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). (5) Where the Commissioner has permitted the manufacturer to avail himself of the special provision contained in this section in respect of any period referred to in sub-rule (5) of rule 96ZH, the manufacturer shall file with the proper officer a duly signed statement showing in respect of every shift worked on each day during that period - (a) the brand name and other identifying particulars of each of the machines employed. (b) month and year of installation of each such machine, (c) maximum revolutions per minute which each such machine is capable of working, at, and (d) metre length of each such machine; and shall, on demand, produce before such officer all his records and accounts to enable that officer to verify the statement so filed. After the proper officer has completed the verification, the sum payable under sub-rule (1) in respect of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the scheme was under consideration of the Hon'ble Supreme Court. After taking into account the various contentions raised by the parties, their Lordships has laid down that the dealer -appellant became entitled to take the credit of the input instantaneously once the input is received in the factory and the right to the credit has become absolute. The observation of the Hon'ble Supreme Court in that regard reads as under:- "The stand of the assessees is that they have utilized the facility of paying excise duty on the inputs and carried the credit towards excise duty payable on the finished products. For the purpose of utilization of the credit all vestitive facts or necessary incidents thereto have taken place prior to 16-3-1995 or utilization of the finished products prior to 16-3-1995. Thus the assessees became entitled to take the credit of the input instantaneously once the input is received in the factory on the basis of the existing scheme. Now by application of Rule 57F (4A) credit attributable to inputs already used in the manufacture of the final products and the final products which have already been cleared from the factory alone is sought to be lapsed, that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned herein and, therefore, we may have no hesitation to hold that the rule cannot be applied to the goods manufactured prior to 16-3-1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods." 15. The aforesaid view taken by the Hon'ble Supreme Court and also by the Division Bench of Rajasthan High Court in the case of Shankeshwar Fabrics Pvt. Ltd. (Supra) do not leave any doubt that retrospective application of the amended scheme cannot defeat the accrued rights to avail Modvat Credit which in the present case have accrued to the dealer - appellant on 19-3-1998 and the amendment has come into force on 2-6-1998. The argument of Mr. Rajeev Malhotra, learned counsel for the revenue that the procedure given in Rule 96 ZH(I 3) was required to be followed has not impressed us because such a procedural requirement is not mandatory once there is substantial compliance with the other requirements namely that the inputs have been used in the final product then the credit could be availed either under the compounded levy scheme or under the Modvat Credit Scheme. 16. Appeal is accordingly decided in favour of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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