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TMI Blog1985 (1) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... 84 (16) E.L.T. 373, dealt with a matter arising out of the same notification. However, we also found that these two appeals originally came up before the South Regional Bench, and that Bench itself had taken the view that jurisdiction to decide these two appeals would lie with a Special Bench and had accordingly transferred them from itself. We were inclined to agree with the South Regional Bench that these appeals could be regarded as involving a question having relation to a rate of duty. Shri Ravinder Narain, the learned advocate for the appellants in both cases, submitted that he had no strong views on the issue of jurisdiction and would leave the matter for our decision. Shri Verma, the learned representative of the Department, submitted that the appeals would appropriately fall within our jurisdiction. We accordingly held that the appeals fell within our jurisdiction and proceeded to hear them. 3. In the two orders of the Assistant Collector referred to above, he had disallowed the entire proforma credit of duty taken by the appellants on duty-paid raw materials falling under Item 68 of the Central Excise Tariff Schedule brought by them into their factory and utilised in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the manufacture of each of the exempted tyres, the total set-off of duty wrongly availed of by them could not be worked out. He thereupon passed orders disallowing the entire proforma credit of duty amounting to ₹ 1,78,848.72 taken by the appellants during the relevant period, on the ground that they had not fulfilled the conditions of Notification No. 201/79. 6. It will be seen from the above that although four (or five) grounds for disallowing the proforma credit were taken in the show cause-notice and noted in the order-in-original, ultimately only two grounds were discussed and the matter was decided on the basis of those two grounds. On appeal to the Collector of Central Excise (Appeals), that authority also set out the four grounds as in the Assistant Collector s order but his discussion was confined to the two specific grounds discussed by the Assistant Collector. On both these grounds, he upheld the findings of the Assistant Collector and rejected the appeal. 7. Appeal No. 2613/83D relates to the period January to June, 1982. (In this case it is stated that it relates to the credits taken during the above period). In the show cause notice dated 20-7-82, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o set out in considerable detail the grounds specified and discussed at various stages, in order to define the scope of the appeals before us. From what has been said above, it will be seen that the questions on which a definite finding was given by the Assistant Collector (in his order dated 18-5-82) were only two, namely, (a) whether the assessee was required to furnish full details of inputs used in the manufacture of each of the finished goods; and (b) whether the set-off (more correctly, proforma credit) was available in respect of outputs cleared under `nil rate of duty. To these could be added the finding at the end of his order, namely, (c) whether it was justifiable, on the basis that a part of the proforma credit was ineligible for utilisation, to disallow the entire proforma credit. 11. In order to appreciate the questions involved and the arguments advanced by the learned representatives of both sides, it would be useful to set out the relevant provisions of the notifications under consideration. Notification No. 178/77, dated 18-6-77 read as follows :- In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise having jurisdiction over his factory, indicating the full description of the said goods intended to be manufactured in his factory and the full description of the inputs intended to be used in the manufacture of each of the said goods. 2. A manufacturer may take credit of the duty already paid on the inputs which are received by him after submitting the declaration, and utilise such credit for payment of duty of excise on the said goods. 12. Appearing for the appellants, Shri Ravinder Narain submitted that provision for relief of the input duty in such cases was originally made through Notification No. 178/77. Under that notification it was necessary to link the duty relief on the outputs with the duty paid on the inputs used in the manufacture of those very outputs. According to Shri Ravinder Narain it was found not practicable to have such allocation and it was with a view to obviating this difficulty by avoiding the need for such allocation that notification No. 201/79 was issued by Government in supersession of Notification No. 178/77. In this connection Shri Ravinder Narain drew our attention to a newspaper report in the Bangalore edition of the Indian Express for 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for animal-drawn vehicles and O.E. tyres, that is, tyres used as original equipment of motor vehicles. Shri Ravinder Narain submitted that under Para 1 of the Appendix, the manufacturer was required to give the full description of the excisable goods intended to be manufactured in his factory and the full description of the inputs intended to be used in the manufacture of each of the excisable goods. This the appellants had duly done. Under Para 2, the manufacturer was permitted to take credit of the duty already paid on the Item 68 inputs which were received by him after submitting the declaration. This also the appellants had duly done. They were permitted, in terms of the same Para 2, to utilise such credits for payment of duty of excise on the excisable goods manufactured by them. This also they had done. There was of course no question of paying duty on goods which had been fully exempted, and they had not purported to do so. What they had done was to utilise the credits taken by them towards payment of duty wherever such duty was payable. It was his contention that there was nothing in the notification to prevent them from utilising the proforma credit in this manner. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods. He, therefore, submitted that the above decision should not be taken as deciding the issue before us or as adverse to the present appellants. 17. Shri Ravinder Narain placed reliance on the decision of the West Regional Bench in the case of Bajaj Tempo Ltd. The basic issues in that case have been stated in the subsequent order dated 6-8-84 of the same Bench on a Reference Application filed by the Collector of Central Excise, Pune. We give below relevant extracts from that order : The objection raised by the department was that after Notification No. 166/79 was rescinded, M/s. Bajaj Tempo ought to have sought fresh permission to continue to avail of the proforma credit under the Notification No. 201/79, dated 4-6-79. It has never been the contention that M/s. Bajaj Tempo were not entitled to avail of the proforma credit or to utilise the proforma credit so availed, but the only objection was that they should have sought fresh permission in terms of Notification No. 201/79. The Bench found that M/s. Bajaj Tempo Ltd., were throughout following the procedure prescribed in Rule 56-A for availing the proforma credit. The Bench further found that the procedure prescribed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstantial extent, if not the major extent. Shri Ravinder Narain replied that, in the absence of his clients, he was not able precisely to explain what their difficulty was in this regard. He submitted, however, that even if it was held that a part of the proforma credit was not utilisable, whatever benefit the appellants were entitled to on the basis of utilisation of the inputs in the manufacture of dutiable goods should be given to them. 19. Replying on behalf of the Department, Shri Verma submitted that there was no dispute that some of the goods manufactured with the Item 68 inputs were exempted from duty. Had the appellants quantified the inputs used in the manufacture of such exempted goods, only the proforma credit on those inputs would have been disqualified. However, the appellants had consistently expressed their inability to quantify those inputs. 20. Shri Verma submitted that the basic question was regarding the interpretation of Notification No. 201/79. According to him, it was clear from the notification that proforma credit of duty could not be taken or utilised in respect of inputs used in the manufacture of exempted goods. He submitted that the notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowing the proforma credit wrongly taken on inputs subsequently used in the manufacture of exempted goods existed in Paras 4 and 8 of the Appendix to Notification No. 201/79 which read as follows : 4. If the credit of duty paid on inputs has been taken wrongly, the credit so taken may be disallowed by the proper officer and the amount so disallowed shall be adjusted in the credit account or the account-current or if such adjustment is not possible for any reason, by a cash recovery from the manufacturer of the said goods. * * * * * 8. If any inputs in respect of which credit has been taken are not duly accounted for as having been disposed of in the manner specified herein, the manufacturer shall, upon a written demand being made by the proper officer, pay the duty leviable on such inputs within ten days of the notice of demand. 24. The Bench drew Shri Verma s attention to Para 9 (a) of the Appendix to the Notification which reads as follows : 9.(a) The credit of duty taken in respect of any inputs may be utilised towards payment of duty on any said goods for the manufacture of which such inputs were declared by the manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant to the present case. 28. It was put to Shri Ravinder Narain by the Bench that the substantive part of the notification appeared to limit the benefit granted thereunder to whatever duty had been paid on the inputs actually used in the manufacture of the output goods. In view of this, he was asked whether it would be proper to read the Appendix to the notification as conveying a greater benefit in respect of dutiable goods by allowing utilisation of the credit taken in respect of inputs used in the manufacture of other (exempted) goods. Shri Ravinder Narain submitted that the Appendix set out in detail how the benefit of the notification was to be given, and it had reference to the first proviso to the notification. Therefore, the appellants would be entitled to whatever benefit could be derived by the application of the Appendix. 29. We have carefully considered the submissions made by the learned representatives of both sides. As mentioned above, a number of grounds were taken in the two show cause notices, but ultimately in the order dated 18-5-82 of the Assistant Collector (followed by him in his order dated 20-11-82) only two of these grounds were discussed and dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f exemption is from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs . If, as admitted by Shri Ravinder Narain, Notification No. 178/77 required allocation of the inputs to each of the output goods, it should follow that the effect of Notification No. 201/79, whose operative clause is identically worded, should be the same. 34. Shri Verma had also drawn our attention to the second proviso to the notification, to the effect that nothing contained in the notification shall apply to the said goods which are exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty. Shri Ravinder Narain submitted that, on his interpretation, this proviso would be satisfied because it would only require that we should simply leave the exempted goods out of consideration, but should not preclude the appellants from utilising the proforma credit of duty on inputs used in the exempted goods from being utilised for payment of duty on the dutiable goods. We, however, find it difficult to accept this argument. The proviso makes it clear that nothing, that is, no provision either in the substantive pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn. (In view of our finding on the basic question before us and our observation that the procedural provisions of the Appendix cannot overrule the substantive provisions of the main part of the notification, we do not also think that the provisions of Para 9(a) of the Appendix could be read as contrary to the view we have arrived at). 38. Apart from what we have said based on the wording of the notification, we may observe that the interpretation advocated by Shri Ravinder Narain would lead to anomalous results. According to that interpretation, if a manufacturer produces, only exempted goods, he cannot get the benefit of duty relief on the inputs, through the proforma credit procedure. However, a manufacturer who produces a small quantum of similar dutiable goods could take credit for the entire amount of duty paid on the inputs for all the goods, and utilise that credit for the payment of full duty on the dutiable goods. An interpretation which would lead to such an anomalous situation does not commend itself. 39. Reference has been made earlier to the orders of the West Regional Bench and the South Regional Bench on similar issues. The order of the South Regional Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utilisation and the appellants did not furnish the allocation required, the entire amount of proforma credit should be disallowed. It is clear that the appellants were, in terms of Notification No. 201/79, entitled to the benefit of proforma credit in respect of a part (in all probability the major part) of their inputs. It is true that a part of the proforma credit was ineligible for utilisation, and that the appellants did not co-operate by furnishing the information (which was within their special knowledge) necessary for making the allocation. Even so, instead of disallowing the entire proforma credit, it would have been proper for the Assistant Collector, on the basis of his best judgment, to arrive at the quantum of the proforma credit which was allocable to the exempted goods, and to allow only the balance of the proforma credit. We consider, therefore, that on this aspect the appellants are entitled to relief. 42. We, therefore, modify the two orders before us to the extent that the proforma credit shall be disallowed only to the extent of the inputs calculated as having been used in the manufacture of goods which were exempted from the whole of the excise duty or were c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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