TMI Blog1996 (5) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapters 84 and 87 of the Schedule to the Central Excise Tariff Act, 1985 (for short, the Act), using requisite parts received from the market. Since 1979, parts of motor vehicles, when intended for use in the manufacturing of excisable goods as original equipment, were wholly exempt from payment of duty (Notification No. 167/79). Where use was outside the factory manufacturing the parts, exemption was subject to following the procedure under Chapter X of Central Excise Rules, 1994 (for short, the Rules). The Act which came into force on 1-3-1986 introduced new tariff Schedule. Notification No. 167/79 was withdrawn with effect from 1-3-1986. The input-manufacturers, not being aware of the withdrawal of the exemption, continued to clear those goods at Nil rate of duty under Chapter X procedure for some period. Appellant's suppliers also did so. But subsequently, the duty payable was paid and certificates obtained from the Range Superintendent and based on such certificates, the appellant availed Modvat credit under Rule 57A of the Rules. This was disallowed by the lower authorities. Appellant is aggrieved by such orders. The appellant in Appeal No. E/2601/94, also a manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erential duty under Rule 57A itself. In Guest Keen Williams Ltd. v. Collector of Central Excise - 1990 (47) E.L.T. 141 (SRB) also a similar view was taken. In Collector of Central Excise v. SAIL - 1990 (47) E.L.T. 389 (ERB) price of inputs increased on account of operation of escalation clause in Contract and the final picture of the price emerged only at the time of finalisation of assessment. The Bench took note of the two amendments to Rule 57E and held that on a harmonious construction of Rules 57A and 57E of the Rules, as long as subsequent payment of duty is correctly authenticated, assessee would be eligible for Modvat credit for subsequently paid duty by virtue of Rule 57E. In Collector of Central Excise v. SAIL, Rourkela Steel Plant - 1990 (47) E.L.T. 394 (ERB), it was held that Rule 57A applies not only to the duty paid at the time of clearance of the inputs by the manufacturer of the inputs, but also to duty subsequently paid. Rule 57E as amended is not contrary to and does not expand the scope of Rule 57A and is only clarificatory and Modvat benefit would be available from 1-3-1986 when the scheme was introduced. The West Regional Bench in Mahindra and Mahindra Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed to be proved by the certificates issued by the Superintendents of Central Excise and Rule 57E in its various forms always reflected what is inherent in Rule 57A. Decisions of the Supreme Court are relied on to contend that procedural amendments are retrospective in the absence of clear contrary intention being shown, where there is a right, it is stated, remedy may be implied and if the plain and literal interpretation of any provision leads to manifest injustice, authorities must adopt the intepretation which promotes justice. Reference is also made to Sections 11A, 11B and 28 of the Act and Rules 9B and 173-I of the Rules. On behalf of the Revenue, the above contentions are rebutted and it is contended that Rule 57A does not confer any right on the Manufacturer, that Rule 57A does not contemplate variation of duty and the consequences thereof and provision in that regard is contained only in Rule 57E, that these parties are not entitled to any relief under Rule 57E as it stood at the relevant time, that Rule 57E is substantive and not procedural and the amendments thereto which are not expressly made retrospective have no retrospective effect. 5.The relevant portion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be gathered from a harmonious reading of all the relevant Rules in the Section. Each of the succeeding Rules deals with a specific aspect or ingredient of the scheme. To find out any particular facet or aspect of the scheme, other than the definition of "input", the provisions of the appropriate succeeding Rule have to be looked into, though the relevant Rule has to be understood in harmony with the contours of the scheme and the other provisions of the scheme. It is clear that Rule 57A does not create or vest any right in any one. Rights, duties and liabilities have to be traced to the succeeding Rules understood in the light of Rule 57A. The Rules relevant in this behalf are stated to be Rules 57G, 57E and 57-I. 7.Rule 57G deals with procedure to be observed by the Manufacturer of finished goods. He has to file a declaration with the jurisdictional officer containing relevant information and obtain a dated acknowledgement of the declaration. Sub-rule (2) with the first proviso as originally notified read as follows : "A manufacturer who has filed a declaration under sub-rule (1) may, after obtaining the acknowledgement aforesaid, take credit of the duty paid on the inputs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E deals with adjustment in duty credit. The Rule as originally framed with effect from 1-3-1986 reads thus :- "If duty paid on any inputs in respect of which credit has been allowed under Rule 57A is varied subsequently due to any reason resulting in payment of refund to the manufacturer or the importer of the inputs, the credit allowed shall be varied accordingly by adjustment in the credit account maintained under sub-rule (3) of Rule 57G or in the accounts maintained under Rule 9 or subrule (1) of Rule 173G or, if such adjustment is not possible for any reason, by cash recovery from the manufacturer availing of credit under Rule 57A." (Emphasis supplied) The Rule as amended with effect from 1-3-1987 reads as fullows :- "If duty paid on any inputs in respect of which credit has been allowed under Rule 57A is varied subsequently : (i) due to any reason resulting in payment of refund to the manufacturer or the importer of the inputs; or (ii) due to change in the classification of the inputs on the basis of instructions issued by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) resulting in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit account or the current-account maintained by him under intimation to the proper officer. (2) If any inputs in respect of which credit has been taken are not fully accounted for as having been disposed of in the manner specified in this Section, the Manufacturer shall upon a written demand being made by the Assistant Collector of Central Excise pay the duty leviable on such inputs within 10 days the notice of demand." (Emphasis supplied) The Rule dealt entirely with wrongful credit taken. The remedy was disallowance followed by adjustment or cash recovery. The Rule had nothing to do with variation of duty paid on inputs which is dealt with in Rule 57E. The manufacturer himself, if in the case of wrongful credit, may carry out the correction, if he does not, the proper officer can ensure that it is corrected. 10. Rule 57-I was completely recast on 6-10-1988 on the lines of Section 11A of the Act. The amended Rule reads as follows :- "(1) (i) Where credit of duty paid on inputs has been taken on account of an error, or omission or misconstruction, on the part of an officer or a manufacturer , or an assessee, the proper officer may, within six months from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an error or omission or misconstruction on the part of an officer or a manufacturer or an assessee" clarify and to some extent widen the concept underlying the words, "wrongly taken". Rule 57-I, as it originally stood and in its amended for deals only with credit not really due or entitled to but taken knowingly or unknowingly. Where the manufacturer takes less credit than what he is entitled to, it is not taking wrongful credit or credit taken on account of any error, omission or misconstruction. Such a mistake committed by the manufacturer is not within the ambit of Rule 57-I and cannot be corrected thereunder; that is because, it can be corrected by the manufacturer on realising his mistake by making further entries in the accounts under intimation to the proper officer. He has the right to take correct credit and duty to make necessary correct entries. A manufacturer does not require prior sanction or permission of any officer to take credit. Therefore, if originally he did not take credit or took credit of lesser amount than what he was entitled to on account of a mistake, he could take credit of the correct amount or the correct balance amount also without previous sanction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, inputs being accompanied by one or the other of the prescribed documents and the like have been followed by the manufacturers of final products in these cases. The second proviso to Rule 57G barring taking of credit after six months of the date of issue of any of the documents specified in the first proviso did not exist at the relevant time and is, therefore, inapplicable in these cases. Rule 57G(2) entitles a manufacturer who has filed a declaration under sub-rule (1) to take credit of the duty paid on the inputs, after obtaining dated acknowledgement of the declaration. Thus, going by Rule 57G, the manufacturers of final products in these cases, who otherwise attract the relevant scheme and have satisfied the requirements of Rule 57G would be entitled to take credit for the duty or differential duty paid by the manufacturers of inputs subsequent to the clearance of the inputs. During the period relevant in these cases, Rule 57E contained only a provision relating to variation of credit consequent on variation of duty resulting in payment of refund to the manufacturer of inputs and did not contain a provision for variation of credit consequent on variation of duty resulting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le period. But bar of limitation, as far as assessee is concerned, cannot be imported by analogy and cannot apply to the instance under consideration in these appeals. Thus, on a careful consideration, Rule 57G itself enables the manufacturers of final products to take credit of duty paid by manufacturers of inputs subsequent to clearance of inputs. The same must necessarily be the position when on account of variation of duty refund is made to the manufacturer of inputs. Such variation amounts to correction of entry relating to quantum of duty in the documents referred to in the first proviso to Rule 57G(2). Since the right of the manufacturer of final products is to take credit of the actual and correct amount of duty, where he has taken excess credit on the basis of the documents aforesaid, he has an inherent obligation to reverse the excess credit or pay the excess amount; that being so, in the event of his failure to do so, the department has right to direct him to do the right thing, namely, to reverse the excess credit or pay the excess amount. There is no difficulty in doing this, if the assessment on monthly RT 12 return has not been completed. Even if such assessment is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense. Any other view would result in manifest injustice to the manufacture of final products, there is nothing in the scheme or the provisions to contra-indicate the view that the amendment to Rule 57E is intended to have retrospective effect. There would be a large number of instances where the classification list or price list of the manufacturer of inputs had been provisionally approved and finalisation was made subsequent to the clearance of inputs or even subsequent to the documents referred to in the first proviso to Rule 57G(2). The provision of taking credit in sub-rule (2) of Rule 57G must necessarily be of the duty as finally and not merely of duty provisionally determined on the inputs. This aspect also supports our view that adjustment, refund or recovery of credit on variation of duty paid is implicit in Rule 57G and the provision in Rule 57E and the amendments made thereto are clarificatory and procedural and the amendment has retrospective effect. Of course, such adjustment, refund or recovery can be made only on satisfaction regarding the variation of duty on inputs. 17.We will now refer to a few other decisions placed before us. In M/s. Arvind Detergents Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e but subsequently paid the differential duty. The manufacturer of finished goods initially took credit of the duty originally paid and subsequently took credit of the amount of differential duty. The department issued notice objecting to the credit taken of the amount of differential duty. The Tribunal held that the variation of rate of duty was necessary to attract Rule 57E and it was not a case of variation of rate of duty but a case of a mistake committed by the manufacturer of the input and hence Rule 57E did not apply. The case was remanded for consideraticn of the matter under Rule 57A. In the second case, a single Member of the Tribunal held that where differential duty was collected after duty on input was paid at a wrong rate, it would not be a case of variation of rate of duty contemplated by Rule 57E and credit can be taken of the amount of differential duty under Rule 57A. These two decisions were clearly in error in proceeding on the basis that Rule 57E deals with variation of "rate of duty". Rule 57E deals with "variation of duty" and not "variation of rate of duty". We have already indicated that Rule 57A, besides defining "input", indicates the contours of the Modv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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