1996 (1) TMI 205 - AT - Central Excise

Issues Involved:
1. Eligibility of Money Credit for raw oil used in the manufacture of Vanaspati (V.P.) under Notification 45/89-(N.T.) C.E.
2. Interpretation of the term "subject to hydrogenation" in the context of Money Credit.
3. Application of Rule 57M of the Central Excise Rules, 1944.
4. Estoppel based on an affidavit filed by the Under Secretary in the Supreme Court.
5. Comparison with the Modvat Credit Scheme.
6. Precedent from the Supreme Court decision in Liberty Oil Mills.

Detailed Analysis:

1. Eligibility of Money Credit for Raw Oil:
The appellants claimed Money Credit for the entire quantity of raw oil used in manufacturing Vanaspati (V.P.), arguing that the Notification 45/89 does not specify that only refined oils are eligible for money credit. The Department contended that Money Credit should only be taken for the quantity of oil actually subjected to hydrogenation, as per the notification. The Tribunal found that the notification clearly stipulates that credit shall be taken only for the quantity of oil subjected to hydrogenation and not for the raw oil drawn for processing before hydrogenation.

2. Interpretation of "Subject to Hydrogenation":
The appellants argued that the term "subject to hydrogenation" should include the entire quantity of raw oil drawn for the process, as refining is a necessary first stage before hydrogenation. The Tribunal, however, held that the notification's language is clear and that credit is to be given only for the quantity of oil subjected to hydrogenation on the date of hydrogenation.

3. Application of Rule 57M:
The appellants invoked Rule 57M, which allows money credit even if part of the input is contained in waste or by-products. The Tribunal, however, ruled that Rule 57M cannot be applied to claim credit for the quantity of oil lost during refining before hydrogenation. Rule 57M could only be invoked if there was a loss during or after the hydrogenation process.

4. Estoppel Based on Under Secretary's Affidavit:
The appellants argued that the Department is estopped from contesting the appeal based on an affidavit filed by the Under Secretary in the Supreme Court, which agreed with the Assistant Collector's action of dropping the show cause notices. The Tribunal rejected this argument, stating that the affidavit did not constitute a legal concession on the issue of quantity eligible for money credit. The appeals had already been filed before the affidavit, indicating a possible communication gap between the Collector and the Ministry.

5. Comparison with Modvat Credit Scheme:
The Tribunal distinguished the Money Credit Scheme from the Modvat Credit Scheme, noting that Money Credit is a form of monetary subsidy given under specific conditions, unlike Modvat Credit, which is intended to avoid the cascading effect of duty paid on inputs. The Tribunal emphasized that the Money Credit Scheme should be read strictly as it replaces an exemption previously given under Rule 8(1) of the Central Excise Rules.

6. Precedent from Liberty Oil Mills:
The Department cited the Supreme Court decision in Liberty Oil Mills, where the Court held that in cases of ambiguity, the benefit should go to the State. The Tribunal found this principle applicable, stating that the Government has the discretion to specify the quantity eligible for subsidy and the date on which it can be taken.

Conclusion:
The Tribunal dismissed all six appeals, holding that Money Credit under Notification 45/89 can only be claimed for the quantity of oil subjected to hydrogenation and not for the raw oil drawn for processing before hydrogenation. The Tribunal also rejected the estoppel argument based on the Under Secretary's affidavit and upheld the Department's interpretation in line with the Supreme Court's decision in Liberty Oil Mills.

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