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TMI Blog2003 (2) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... Priyank Steels E/111/96-Bom. E/CO-135/96-Bom. Diamond Industries E/112/96-Bom. K.P. Steels E/I13/96-Bom. E/RA-157/97-Bom. Usha Rolling Mills E/114/96-Bom. E/CO-136/96-Bom. Vijay Steels E/115/96-Bom. E/CO-137/96-Bom. Laxmi Steel Rolling Mills E/116/96-Bom. Laxmi Steel Rolling Mills E/117/96-Bom. Gujarat Steel Rolling Mills E/118/96-Bom. Saraswati Steel Industries E/119/96-Bom. E/CO-117/96-Bom. Ajay Re-Rolling P. Ltd. E/120/96-Bom. Sonthalia Steel Rolling Mills E/121/96-Bom. E/CO-138/96-Bom. Sonthalia Steel Rolling Mills E/122/96-Bom. Jai Bharat Steel Industires E/123/96-Bom. R.K. Industries E/124/96-Bom. E/CO-123/96-Bom. Aggarwal Industries E/125/96-Bom. L. G. Industries E/127/96-Bom. E/CO-140/96-Bom. Kiran Ispat Udyog E/128/96-Bom. E/CO-141/96-Bom. Kiran Ispat Udyog E/129/96-Bom. Jain Steels E/130/96-Bom. E/CO-142/96-Bom. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thalia Steel Rolling Mills 23. E/496/2000~Mum. Tarsemlal J. Gupta 24. E/497/2000-Mum. Vijay Steels 25. E/498/2000-Mum. Murarilal Gupta 26. E/499/2000-Mum. Navyug Steel Industries 27. E/500/2000-Mum. Vishnu B. Tayal 28. E/508/2000-Mum. Aggarwal Industries 29. E/509/2000-Mum. Sanjiv Kumar Aggarwal 30. E/510/2000-Mum. Jai Bharat Steel Industries 31. E/511/2000-Mum. Pravin Kumar Bansal 32. E/512/2000-Mum. Saraswati Steel Industries 33. E/513/2000-Mum. Sushilkumar B. Jain 34. E/514/2000-Mum. Aggarwal Industries 35. E/515/2000-Mum. Sanjiv Kumar Aggarwal 3.The Central Excise duties are multipoint in the sense that during its transformation an article passes through a number of stages, being held separately excisable and dutiable at each stage. The Modvat scheme was designed to alleviate the "cascading" effect of such taxes. Simply put, the credit of the duty paid on the input is available for discharging duty on the final products and goods made theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the credit of duty under Rule 57A of the said rules in respect of such ingots and rerollable materials used, without undergoing the process of melting, in the manufacture of goods falling under Chapter 72 or 73 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), may be allowed at the rate of Rs. 920/- per tonne, without production of documents evidencing the payment of duty. "This Order shall come into force on the 1st day of April, 1994." 5.At the material time Notification No. 45/93-CE dated 01-03-1994 was in existence exempting dutiable products obtained by the breaking up of ships, boars and other floating structures from the entire duty of Central Excise leviable thereon. 6.Show cause notices were issued alleging that the assessees had obtained the inputs from the ship breaking yards. The deemed credit was wrongly taken and was required to be reversed. The noticees filed identical replies. The first claim made was that the demand was hit by limitation inasmuch as the utilisation of credit from this source was in the knowledge of the department. It was claimed that the order did not contain any exclusion clause and that such exclusion clause could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subject input received by the parties is from such stock lying in a factory, Customs area or a warehouse, if so it is clearly recognisable as being non-duty paid. Secondly the subject input have suffered any duty or otherwise irrespective of the facts, same have been procured from a factory, customs area or a warehouse." 10.He held that the ship breaking yards were inside the customs areas. As regards the character of inputs (duty paid or not?) he observed that the relevant tariff entries, namely, headings 72.30 and 73.27 were deleted from the tariff vide Finance Act, 1994 and the goods were also exempted in terms of Notification 45/94. The non duty paid nature of the contested goods thus stood established. On the plea that additional duty of customs had been paid on the ships up to 28-02-1994 he observed that the duty paid character could not attach to the goods manufactured by breaking of the duty paid ships. He thus established that the goods had not suffered duty. As regards the plea that the wordings of the order did not contain this clause, he held that the exceptions incorporated in the parent rule would apply in spite of this omission. As regards the plea that some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking scrap. The Commissioner relied upon Board's clarification under circular No. 77/77/94 dated 10-11-1994 advising denial of Modvat credit on account of the fact that such scrap was exempted under Notification 46/94-CE and confirmed the demands against the assessee. 14.The other appeals in this batch are filed by the assessees against order-in-appeal No. Commr(A)/76 to 108/RHA/99 dated 29-10-1999. In this order the Commissioner (Appeals) upheld the lower orders denying deemed credit placing reliance on the cited circular of the Board. The arguments in the appeals filed by the department and the arguments made by the respondents in these cases are relevant in disposal of this batch of cases. 15.Shri Parelkar submits that the areas in Saurashtra where bulk of the ship breaking units were situated are notified as Customs areas under Section 8 of the Customs Act, 1962. Referring to the wording of Rule 57G(2) of the Central Excise Rules, 1944 he submits that stocks lying in a customs area being clearly recognisable as non-duty paid came out of the purview of the deemed credit facility. It is his claim that even in the absence of a specific clause in an order issued pursuant to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date which contained this prohibition to support his plea. It is submitted that the Board's instructions were not binding on the Tribunal citing the ratio of the judgment of the larger bench in the case of Machine Builders. He cited that the issue was settled in favour of the assessees. 19.Shri Seth continued to submit that the benefit should not be denied to the assessees who had crossed the turn over limit of Rs. 75 lakhs firstly against the bulk of the show cause notice this issue was not raised and secondly that the wordings of the exemption order did not suggest such denial. On this ground he distinguished the larger bench decision of the Tribunal in the case of Digambar Foundary v. CCE - 2000 (118) E.L.T. 85. It was his further submission that the denial of Modvat credit on the inputs purchased from dealers in the open market on the presumption that the goods in turn must have been bought from ship breakers was entirely untenable. 20.We have considered the submissions and have seen the authorities cited. 21.For deemed credit facility the second proviso to Rule 51G(2) seeks to confer the status of "duty paid" on all stocks of the specified inputs in the country. The rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it is not possible to say that the point of origin of the ship breaking scrap was inside a customs area. Exclusive reliance has been placed by the Commissioner, Rajkot in his order on circular No. 77/77/94-C, dated 10-11-1994. The opinion of the Board reads as follows : "It has been brought to the notice of the Board that scrap generated by breaking of a ship etc. is not being allowed deemed Modvat credit by certain field formations. The ship-breakers have also represented to the Board. The matter has been examined and the following instructions are issued: "Rule 57G of the Central Excise Rules, 1944, stipulates that the Government has the power to allow deemed credit having regard to the period that has elapsed since the duty of excise was imposed on any inputs, the position of demand and supply of the said inputs in the country and any other relevant considerations. If no duty is imposed on any of the inputs then the provisions of Rule 57G cannot be invoked to allow deemed credit. Since the scrap cleared by the ship-breakers have not suffered the duty, it would not be correct to allow deemed credit on such scrap. "2. Suitable instructions may be issued to the field forma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two tariff entries has also taken considerable space of the proceedings. These two entries and similar entries in other chapters making the source of the goods as the ground key for classification was obviously for the purpose of facilitation and for ease of referencing. It did not create or identify a separate class of products. In other words all the products falling there under already stood enumerated in the various earlier tariff headings. Therefore the temporary removal of the two entries did not spell exclusion of such goods from the benefit available to the assessees. 33.The remaining major issue in these proceedings is the availability of the benefit of the deemed Modvat credit after the beneficial unit has crossed the limit of duty free value of clearance as prescribed under Notification 1/93. Shri Seth raised that this allegation did not figure in the show cause notice. We do not consider this to be a material objection. The benefit in the order of the Government was for the assessees availing the benefit of this notification and whatever interpretation was put on the said notification would affect the availment of the benefit of this notification. Therefore the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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