1999 (3) TMI 297 - AT - Central Excise

Summary

Issues:
1. Classification and dutiability of Fibre Glass Reinforced Plastic (FRP) bodies manufactured by M/s. Roplas (India) Ltd.
2. Applicability of duty on FRP bodies fitted on jeeps of M/s. Mahindra and Mahindra Ltd.
3. Validity of the procedure approved by Central Excise Authorities for movement of chassis and FRP bodies.
4. Application of Modvat credit in the duty payment process.

Classification and Dutiability of FRP Bodies:
The judgment involved appeals by M/s. Roplas (India) Ltd. regarding the dutiability of FRP bodies fitted on jeeps of M/s. Mahindra and Mahindra Ltd. The initial classification under sub-heading 8707.00 as approved by the Assistant Collector was challenged in an appeal under Section 35E(2) of the Central Excise Act, 1944. The impugned order set aside the classification list and demanded duty on the FRP bodies, leading to a duty demand of Rs. 62,69,055.00 for clearances during 1992 and 1993.

Applicability of Duty on FRP Bodies:
M/s. Roplas (India) Ltd. had a long-standing arrangement with M/s. Mahindra and Mahindra Ltd. where the latter paid duty on the jeeps inclusive of the value of FRP bodies. The Central Excise Authorities had approved this arrangement, and previous show cause notices demanding duty on FRP bodies had been dropped. The judgment highlighted that the approved procedure for movement of chassis and FRP bodies, including the use of Modvat credit, should not be retrospectively challenged to demand duty.

Validity of Approved Procedure:
The judgment emphasized that the procedure for movement of chassis and FRP bodies, approved by the Central Excise Authorities and reaffirmed in an adjudication proceeding in 1991, could not be questioned later. The order of the Assistant Collector affirming the procedure had become final as it was not challenged. The judgment cited previous decisions of CEGAT and the Supreme Court supporting the contention that once a procedure is approved, retrospective changes leading to duty demands are impermissible.

Application of Modvat Credit:
M/s. Roplas (India) Ltd. argued that the Modvat credit system should have been followed, allowing them to pay duty on raw materials used in manufacturing FRP bodies and enabling M/s. Mahindra and Mahindra Ltd. to utilize the same credit for duty payment on jeeps. The judgment agreed that the entire movement was covered by the Modvat procedure, and any reassessment leading to duty demands would be revenue-neutral as duty paid at intermediate stages would be available as Modvat credit.

In conclusion, the appeals were allowed, setting aside the duty demand, and emphasizing that changes in procedure should be prospective in cases like these.