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TMI Blog2013 (4) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... so as to give effect to internal complexity for fiscal adjustment. In CCE Vs. Mysore Electrical Industries Limited (2006 (11) TMI 202 - SUPREME COURT OF INDIA) held that a circular which is beneficial in nature applies retrospectively but a circular which is oppressive has to be applied prospectively. In short, a circular which is against the assessee is always prospective in nature. Also in Suchitra Components Limited Vs. Commissioner of Central Excise Guntur (2007 (1) TMI 4 - SUPREME COURT OF INDIA) it was observed that when a circular is against the assesee they have a right to claim enforcement of the same prospectively. Thus, applying the above principle, as the circular dated 9.7.2010 is against the assessee, as it purports to withdraw the benefit extended to the asseseee vide circulars dated 8.9.1971 and 17.9.1975, it has to be treated as prospective in nature and cannot be applied with retrospective effect. Department to insist for claiming remission under Rule 21 of the Rules in respect of exemption of excise duty on 0.5% of the tolerance limit permitted in the circulars - Held that:- The circular dated 8.9.1971 in plain and simple language permits exemption of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81 of 2012 - - - Dated:- 22-3-2013 - Pankaj Mithal,J. JUDGMENT The two writ petitions are identical on facts and involve a similar controversy as to whether petitioners are entitle to exemption of excise duty to the extent of 0.5% of tolerance limit on the production of aerated and mineral water as provided by CBEC circular dated 8.9.1975 as reiterated and modified vide circular dated 17.9.1975 on account of the breakage of bottles during handling and movement. The facts in brief are narrated below. Petitioners are engaged in manufacturing of aerated waters etc. which are excisable items under the Central Excise Tariff Act, 1985. Petitioners availed CENVET credit in respect of 0.5% of the finished goods on account of loss due to breakage in handling as per the above circulars and when the petitioners on being asked to reverse the CENVET credit, refused to abide, they were served with show cause notices dated 23.5.2008, 1.8.2008 and 3.11.2008 by the Joint Commissioner, Central Excise, Meerut-2 to show cause as to why a sum of Rs. 15,64,299/- and Rs. 1,08,080/- for the period June 2002 to June 2007 and July 2007 to September 2007 respectively may not be recovered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the parties broadly, the following three points arise for consideration:- i) whether the circulars dated 8.9.1971 and 17.9.1975 have the binding effect upon the parties; ii) whether withdrawal of the said circulars vide circular dated 9.7.2010 under the changed circumstances is retrospective in nature; and iii) whether the benefit of the circulars can be extended to the petitioners without following the procedure for remission under Rule 21 of the Rules. It is well known that duties of excise specified in the schedule to the Central Excise Tariff Act, 1985 are leviable on all excisable goods which are produced or manufactured and is to be collected in the manner prescribed. The aerated and mineral waters are undoubtedly excisable items specified in the first schedule to the Central Excise Tariff Act, 1985. Therefore, whatever quantity of aerated and mineral water is produced by the petitioners, the same is subject to payment of excise duty. Section 37 B of the Central Excise Act, 1944 (hereafter referred to as Act) empowers the Central Board of Excise and Custom to issue such orders, instructions and directions to the Central Excise officers as it may deem fit inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handling and movement on proper investigation by the Range Staff. This exemption has been permitted after careful consideration of the practical aspect that loss to such an extent is routine and normal during handling and movement therefore, ordinarily, the production of aerated water would stand reduced by tolerance limit prescribed subject to verification by the Range Staff. In the cases at hand loss due to breakages of bottles in handling upto 0.5% stand certified by the Range Staff. Therefore, production of aerated waters would stand reduced by 0.5% for the purposes of levy of excise duty. The law is settled that the circulars issued in exercise of statutory power by the departments are binding upon the authorities and the officials of the department. The three Judges Bench of the Supreme Court in UCO Bank Calcutta Vs. Commissioner of Income Tax W.B. (1999) 4 SCC 599 while dealing with circular issued by the Central Board of Direct Taxes took the view that circulars issued by the CBDT is to tone down the rigour of the law and are binding upon Income Tax Authorities. In Paper Products Limited Vs. Commissioner of Central Excise (1999) 7 SCC 84 their Lordships of the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime, the scheme of MODVATE/CENVAT credit was not available to the assessees and, therefore, there was no issue of reversal of credit taken on bottles, which wee subsequently broken/destroyed. After the introduction of MODVATE and subsequent replacement of the same with CENVAT, any circular, instruction or provision inconsistent with the same has no relevance. As per the provisions of Rule 21 of Central Excise Rules, 2002, remission of duty before removal can be claimed on any goods lost or destroyed by natural causes or unavoidable accident, claimed by manufacturer to be unfit for consumption or marketing. The said remission is granted subject to the condition of reversal of cenvat credit taken on inputs used in the final product, as per the Circular No. 800/33/2004-CX dated 01.10.2004. Rule 3 (5C) was also inserted in CENVAT Credit Rules, 2004, w.e.f. 07.09.2007, to specifically provide for the same. Further, as per Rule 3(5B) of CENVAT Credit Rules, 2004, if the value of any input is written off, the cenvat availed on the same is required to be reserved. Therefore, if the final product (i.e. bottled beverage) is broken/destroyed then remission can be claimed and if the bottle (in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts to avoid disputes in future. The objects of withdrawing the circulars have no impact upon the applicability or binding nature of the circulars so long they were enforceable. In view of the above, the circular dated 9.7.2010 is held to be prospective in nature and it cannot be applied to transactions relating to earlier periods ie. to the production of excisable goods during the period June 2002 to September 2007. Now I come to the third point referred to above. Rule 21 of the Rules provides for remission of excise duty where excisable goods are lost or destroyed by natural causes or by unavoidable accident or are otherwise unfit for consumption or marketing subject to the satisfaction of the excise Commissioner. In view of the above Rule the submission proceeds that unless petitioners claim remission therein they are not entitle to benefit of exemption on the tolerance limit as per the circulars. The aforesaid Rules came into force in 2002. Earlier to the enforcement of the above Rules, Central Excise Rules 1994 were in force and applicable. The aforesaid Rules also vide Rule 49 provided for remission of excise duty para materia with Rule 21 of the present Rules. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dling and not for any other other purpose. The import of Rule 21 is therefore very wide and that of the circulars very narrow. Therefore, the procedure for remission of excise duty prescribed under Rule 21 of the Rules is to be followed where it is being claimed for reasons other than those prescribed in the circulars. However, as regards 0.5% tolerance limit provided for aerated water it stands exempt on being certified by the Range Staff in terms of the circulars. The said circulars have the effect of impliedly reducing the quality of aerated water produced by 0.5% of the monthly production. In this situation, when the quantity produced stand reduced there is no necessity for claiming any remission. The aforesaid circulars are not in conflict with the general provision of remission of excise duty provided in Rule 21 of the Rules but ensure fair enforcement of the provisions of the Act and has the effect of toning down the rigour of law keeping in mind the practical aspect that during handling and movement of excise goods like aerated waters, breakage is unavoidable leading to certain percentage of loss. The said circulars as such ensure just, proper and efficient levy and colle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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