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TMI Blog2000 (2) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... lied to BSL; that the three parts were sold to MUL on payment of appropriate duty; that MUL used to take credit of the duty paid on parts immediately on receipt of gate passes; that the said parts were reissued to BSL for the manufacture of seats on job work basis; that BSL supplied the complete seats to MUL who used them in the manufacture of motor vehicles; that prior to 21-1-1989, parts of seats used to be physically transported by BSL to MUL under gate passes and then these parts were physically re-issued to BSL under Rule 57F(2), as it stood at the material time for manufacturing seats by BSL; that from 21-1-1989, parts of seats did not actually move from the factory of BSL to the factory of MUL and vice versa; that, however, Modvat credit was availed of the duty paid on such parts of seats by MUL; that MUL also issued challans under Rule 57F(2) to BSL as if the parts of seats had been sent to BSL for further processing. Separate show cause notices both dated 5-10-1993 were issued to M/s. BSL and MUL for initiating action for recovering of credit, for imposing penalty and for confiscating the seized goods. 1.2The Collector, under the impugned Order No. 122/93 dated 15-12-199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of MUL goods; that they did not follow the prescribed procedure and that it was never the case of the party that they were availing facility under this provision and it was only an after thought. 2.Shri Joseph Vellapalli, Sr. Advocate appearing on behalf of M/s. Bharat Seats Ltd. along with Shri V. Sridharan, learned Advocate, submitted that it is not mandatory or compulsory for the appellants to avail of exemption; that as the Appellants pay duty on parts of seats, they are eligible to avail of Modvat credit of the duty paid on inputs used in or in relation to the manufacture of parts of seats. Reliance was placed on the decision in the case of Uniair (P) Ltd. v. CCE, New Delhi, 1994 (70) E.L.T. 795 (T) wherein it was held that "The appellants had undoubtedly a choice to either opt for Modvat and pay duty on the exempted goods and take credit or take the benefit of notification. The learned Sr. Counsel also mentioned the decision in Facit Asia Ltd. v. CCE, 1991 (54) E.L.T. 347 (T); Bright Steel Mac Fabrics v. CCE, Ahmedabad, 1994 (81) E.L.T. 276 (T), and Everest Converters v. CCE, Calcutta-II, 1995 (80) E.L.T. 91 (T) in which it was held that "If an assessee does not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax payer later that he (tax payer) cannot do anything that may be a consequence of the incorrect assessment made by itself (tax collecting agency)." Reliance was also placed on the decision in Mafatlal Industries v. UOI, 1997 (89) E.L.T. 247 (S.C.) wherein it was held that one of the principle of law based on public policy is the sanctity attached to the finality of any proceeding. An order does not become ineffective or unforceable simply because at a later point of time different view of law is taken. The learned Sr. Advocate emphasised that in their classification list effective from 20-3-1990 they had claimed classification for complete seat under Heading 94.01 declaring tariff rate of duty of 25% as the applicable duty; that this classification list was duly approved by the Department despite complete exemption available under Sl. No. 2 of Notification No. 80/90. Similarly in the same classification list exemption under Notification No. 217/86 for captive consumption of parts of seat was approved by the Asst. Collector despite the exemption available under Sl. No. 1 of Notification No. 80/90. He also contended that Bharat Seats has not misrepresented any fact to the Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending the inputs directly to the job worker's premises not withstanding the issue of Notification No. 356 at a later date, the appellants cannot be straight away disqualified for the benefit of Modvat credit." He finally submitted that the appellants have undisputedly taken Modvat credit only to the extent of the actual amount of duty paid on the parts which have ultimately been used in the manufacture of motor vehicles which in turn were cleared on payment of duty; that accordingly having regard to the purpose and objective of Modvat scheme, the credit cannot be denied to Maruti Udyog Ltd. 5.Countering the arguments, Shri N.K. Bajpai, learned Advocate appearing for the Revenue, submitted that Modvat Rules have specific provision to deal with the cases where Modvat credit has been wrongly availed of and the department has proceeded only under the provision of Rule 57-I of the Central Excise Rules to disallow wrong availment of Modvat credit; that the department is not challenging the classification list at all; that accordingly the ratio of the decision in Jay Industries case is not applicable to the facts of the present matter as the facts are totally different. He further subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced by the learned counsel for the appellants on the Board's Circular is wholly incorrect; that the only relaxation which the circular permitted was dispensing with the requirement of receipt of inputs first by the manufacturer and thereafter their transfer to the job worker in order to save time and expenses involved; that, however, in such cases the fact that this is being done has invariably to be indicated on the documents; that this squarely shows that the situation stipulated is one in which 3 parties are involved - supplier of the inputs, the manufacturer and the job worker; that the plain reading of the Board's Circular will show that the Circular does not cover such situation wherein 57F(2) challan are being used to cover up the captive consumption of intermediate products by the supplier of the inputs to the manufacturer availing the Modvat credit facility; that no circular/notification/rules can be so interpreted so as to perpetuate fraud/illegal acts; that the Constitution Bench of the Supreme Court in McDowell Co., 1985 (3) SCC 230 has cast responsibility on the Courts/Tribunals to interprete the legal instrument in such a way that such fraud/devices perpetuating fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for exemption in his humble submission is not a correct view; that wherever the intention was to provide option to the assessee to avail of the exemption, it was specifically stated so in the notification which is evident from Notification Nos. 7/97 dated 1-3-1997 and 38/97 dated 27-6-1997 that further view taken in Everest Converters case is contrary to the view taken by the Larger Bench of the Tribunal in the case of Kirloskar Oil Engines v. CCE, Pune - 1994 (73) E.L.T. 835. He emphasised that Rule 57C uses the expression "if the final product is exempt" and not the words that "if the assessee opts to claim the exemption"; that the Rule has to be read as it is without adding or substracting any word. He also referred to the decision of the Supreme Court in the case of Chandrapur Magnet Wires Pvt. Ltd. v. CCE, Nagpur 1996 (81) E.L.T. 3 (S.C.) wherein the Supreme Court held that "Rules 57C specifically provides that credit of duty cannot be allowed, if final product is exempt from payment of excise duty." He also mentioned that in the case of Everest Converters the matter has been referred to the Calcutta High Court for answering the question of law. He also relied upon the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which would arise on application of Rule 57C to a situation when intermediate products are exempt from duty the Central Government deliberately and conciously enacted Rule 57D(2) for captive use and Rule 57F(2) for manufacture of intermediate product by job workers. He also placed reliance on the decision in the case of Kinetic Honda Motor Ltd. v. CCE, Indore, 1996 (88) E.L.T. 508, wherein it was held that where the inputs had been sent directly by the supplier to the job worker with endorsement "A/c. Kinetic Honda Motors Ltd." in the gate passes the mere fact that the appellants failed to adhere strictly to the modified procedure for sending the inputs directly to the job worker should not come in the way of extending Modvat credit to them. 8.We have considered the submissions of both the sides. The case of the department is that the parts of car seats manufactured by BSL were captively consumed by them in the manufacture of car seats which are exempt from payment of duty as per Sl. No. 2 of Notification No. 80/90. The said notification also exempts parts of steel furniture if they are used in the factory of production for manufacturing or assembling steel furniture and as such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that, as observed earlier, the Collector himself has not confirmed the demand where the parts actually moved from the premises of BSL to MUL and were received back. This particular movement of the inputs was intended to be saved by issue of the procedure under the Board's Circular. The various other points have been taken by the Collector in the impugned order such as violation of Rule 51A for not obtaining the permission to retain the duty paid goods in the premises, and in not following completely the procedure under Rule 57F(2). These are not to come in the way of availing of the Modvat credit once it is not disputed that duty was paid and the inputs were used in the manufacture of finished product which were cleared on payment of duty. This view is strengthen by the decision of the Tribunal in the case of Kinetic Honda Motor Ltd., supra, wherein the Tribunal held, relying upon the decision in the case of C.C.E. v. Roshan Tin Printer, 1994 (74) E.L.T. 325, that as there is no dispute that the duty paid material received by the supplier have come to the hands of the user manufacturer after some processing the procedural non-compliance cannot be held against the user manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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