TMI Blog2010 (4) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty on final product and use of credit availed goods. Availability of rebate on inputs used in export goods by unit availing area based exemption not a reason to avail credit contrary to provision. Credit can not be said as non-reversible when final product exempted. Lapsing of credit on inputs lying in stock on day of opting for exemption not restricted to situations mentioned in Rule 6(6) of Cenvat Credit Rules, 2004 but Rule 3 not considered in the impugned order. Matter remanded to adjudication authority for fresh decision based on observations in present order. - E/282/2007 - 218/2010-EX(PB), - Dated:- 30-4-2010 - Justice R.M.S. Khandeparkar, President and Shri Rakesh Kumar, Member (T) S/Shri B.L. Narsimhan with Ravi Raghavan, Advocates, for the Appellant. Shri Sunil Kumar, DR, for the Respondent. [Order per : Justice R.M.S. Khandeparkar, President (Oral)]. - The appellants are engaged in manufacture of medicament classifiable under Chapter 29 and 30 of the First Schedule of the Central Excise Tariff Act, 1985, having their unit located in the state of Himachal Pradesh. The appellants undertook expansion programme at their factory in order to avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that at the time of procurement of inputs, the credit was validly taken and duly utilized by the appellants, the question of denial of credit does not arise merely because subsequently the finished goods manufactured by the appellants had been fully exempted from the payment of duty, and that the credit can be disallowed only if it is proved that the same was not validly taken initially and not otherwise. Further, that the issue in this regard is no more res integra and is well settled by the decisions of the Larger Bench of the Tribunal in CCE, Rajkot v. Ashok Iron Steel Fabricators reported in 2002 (140) E.L.T. 277 and approved by the Supreme Court in 2003 (156) E.L.T. A212 (S.C.), and in HMT Limited v. CCE, Panchkula reported in 2008 (232) E.L.T. 217. Learned Advocate for the appellants submitted that the Larger Bench relying upon the decision in Dai Ichi case has declared the legal proposition that in a case where an assessee has taken credit on inputs and where the finished product later on becomes exempt, the credit of duty paid on inputs lying in stock on the day of availing exemption is not required to be reversed. The said law laid down by the Larger Bench in Ashok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision in Eicher Tractors Ltd. v. Union of India reported in 1999 (106) E.L.T. 3 (S.C.). 6. It was then sought to be contended that the Notification No. 50/03 granting exemption to the final product manufactured by the appellants did not contain a condition that the cenvat credit on inputs would not be available and in that regard, reliance is placed in the decision in the matter of Andhra Pradesh Paper Mills Limited v. CCE, Visakhapatnam reported in 2005 (185) E.L.T. 371. 7. It is then sought to be argued, in alternative, that the finished goods being cleared for export under bond, the same cannot be considered as the exempted goods. Therefore, it is submitted on behalf of the appellants that out of total credit available on inputs lying in stock on 10-1-2005, the credit to the extent of Rs. 4,68,12,729/- pertain to the inputs those were used f in the manufacture of export goods. Out of the total credit earned on the inputs lying in stock, those were contained in finished goods on 10-1-2005, the credit of Rs. 80,84,575/- pertained to the inputs used in the manufacturer of the finished goods those were cleared for export or meant to be exported. In this regard attention is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the input on which credit earned is used and the final product for which the credit earned on such input is used for payment of duty, and that the credit can be utilized for payment of duty on a final product other then the one in which the input has been actually utilized, yet such final product has necessarily to be dutiable product and not exempted one and till the such utilization of such input, it cannot be said that the credit is lawfully utilized. Reliance is sought to be placed in the decision in the matter of Super Cassettes India Limited v. Union of India reported in 1997 (94) E.L.T. 302 (All.), Maruti Suzuki v. CCE, Delhi-III reported in 2009 (240) E.L.T. 641 (S.C.), CCE v. Gujarat Narmada Fertilizers Co. Ltd., reported in 2009 (240) E.L.T. 661 (S.C.), Albert David Limited v. CCE, Meerut, reported in 2003 (151) E.L.T. 443, and the one in Raghuvar (India) Limited v. CCE, Delhi reported in 2002 (140) E.L.T. 280. He further submitted that the decision in Dai Ichi Karkaria case has no application to the matter in issue as the said decision was on the point of valuation of the goods. Besides, proper reading of para 17 of the said decision, on which heavy reliance is placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e three categories and not on the goods those have been cleared for export under bond. Further, the appellants have neither asserted that they had cleared the goods for export under bond nor have they submitted any documentary proof in that regard. 12. The learned Commissioner in the impugned order while referring to the scheme of Cenvat Credit and rejecting the contention that when the credit was taken, the final product was not exempted from duty and it was only subsequently that they avail exemption and that, therefore, Rule 6 of the said Rule would not be attracted, has held that the whole scheme is in respect of excisable goods and, therefore, once the exemption is availed, Cenvat credit taken in respect of inputs which are in stock has to be reversed. Even in respect of the inputs used in manufacture of the final product cleared without payment of duty, the cenvat credit becomes inadmissible and will have to be reversed. The cenvat credit scheme is intended to reduce the burden of excise levy on the final consumer and any interpretation which gives a manufacturer/assessee the benefit of credit of duty on inputs whether on the final product, for manufacture of which the cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduct was exempted from duty liability. At the outset, it is to be noted that this is not the issue which arises for consideration in the matter in hand. In the case in hand, the issue relates to the credit remaining in stock on the day the assessee opts for manufacture of exempted final products on account of non-utilization of the inputs on which such credit was earned by the assessee and not relating to a matter where the credit so earned has already been utilized while the final products were dutiable and not exempted. 16. It is pertinent to note that the Larger Bench after taking note of the A decision of the Apex Court in Dai Ichi Karkaria case held that the Apex Court therein did not find favour with the submission that the credit so earned is a contingent credit, that it could be disallowed under certain circumstances, that the manufacturer does not have indefeasible right or title to it, that the credit of excise duty on raw materials in the register maintained for modvat purposes is only a book entry and the same can be utilized later on for payment of excise duty on excisable product and that it gets matured when the excisable product is removed from the factory and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted issue is before us to decide as to whether there was any provision in the rules for reversal of the input credit taken and legally utilized, when the final product was dutiable, subsequently becoming exempt". It was then held that :- "In the present case, there is no objection of Revenue whatsoever credit taken by the Appellants and its utilization at the clearance of the dutiable final products. So the taking of credit and its utilization were correct. The Hon'ble Supreme Court in the case of Dai Ichi Karkaria Ltd. (supra) decided that when the credit was legally taken and utilized, cannot be demanded unless there is specific provision. It is settled that there is no one to one correlation of utilization of credit and use of inputs in the Modvat/Cenvat Scheme. So, it cannot be said that the appellant utilized the credit wrongly with the provisions of Rule 12 of Rule 2002 equivalent to Rule 571, Rule 57AH of Rule 1944 would not apply". 18. Further, in para 20 of the decision, it was held by the Larger Bench that :- "On perusal of the rules 6 of Rule 2002 and the corresponding rules, as mentioned above, we are of the view that the appellants had correctly taken the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MT would, therefore, apparently disclose that the same did not decide the point which arise for the consideration in the matter in hand. Besides, the decisions therein where arrived at while holding that the point referred for decision stood answered by the decision of the Apex Court in Dai Ichi Karkaria case. Being so, it would be appropriate to scan through the decision of the Apex Court in Dai Ichi Karkaria case in order to ascertain the ratio thereof, the subject matter of the dispute and the issues dealt with, the proposition of law laid down therein and whether the same answers the issue in the matter in hand. 20. In Dai Ichi Karkaria case the point for determination was whether the excise duty paid on the raw materials should form part of the cost of the excisable product, for the purposes of Section 4(1)(b) of the Central Excise Act, 1944 read with Rule 6 of the Valuation Rules. The Apex Court has recorded the question for consideration therein in para 2 of the decision in following words : is part of the cost of the raw material the price paid by the manufacturer to its seller, as contended by the Revenue, or is it the price of the raw material less the excise duty there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available". 25. Immediately t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered in any of the decisions brought to our notice. 27. No decision can be read ignoring the facts of that case and the points which arise for determination in that case. All the observations made in a judgment are to be understood with reference to the context in which they are made. The essence of a decision is to be carved out from the conjoint reading of the facts, the points for consideration and the decision arrived thereon. The observations in a judgment de hors the facts and the points for determination can not be read as it could lead to misreading and misunderstanding of the proposition of law laid down in such decision. 28. The concept of a ratio decidendi has been elaborately explained by the Apex Court in the matter of Union of India and Others v. Dhanwanti Devi and Others reported in (1996) 6 SCC 44. Therein it was ruled thus :- "It is not everything said by a Judge while giving judgment that constitutes a precedent. The only thing in a Judge's decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. According to the well-settled theory of preceden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a full exposition of law. Law cannot afford to be static and therefore, Judges are to employ an intelligent technique in the use of precedents". 29. In Commissioner of Central Excise, Delhi v. Allied Air Conditioning Corp. (Regd.) reported in 2006 (202) E.L.T. 209 (S.C.), the Apex Court ruled that :- "A judgment should be understood in the light of facts of the case and no more should be read into it then what it actually says. It is neither desirable nor permissible to pick out a word or a sentence from the judgment divorced from the context of the question under consideration and treat it to be complete law decided by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. [See Mehboob Dewood Shaik v. State of Mahatrashtra, 2004 (2) SCC 362]. 30. As regards the law of precedent is concerned, Article 141 of the Constitution clearly provides that the law laid down by the Apex Court is binding on all Courts in India. Any decision contrary to the law laid down by the Apex Court cannot have binding force. 31. Considering the law relating to precedent and ratio dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Apex Court in Dai Ichi case is neither on the issue relating to the credit in stock on the day the final product becomes exempted nor the said observations were made are in any way related to the said issue, nor it can be said to be the law laid down on the point in issue. In Mohandas Issardas v. A.N. Sattanathan, Collector of Customs reported in 2000 (125) E.L.T. 206, the Bombay High Court while dealing exhaustively the point relating to the concept of "obiter dictum", quoted, with approval, the following extract from Law of Halsbury's Law Vol. 19 at page 251, wherein it was stated thus :- "It may be laid down as a general rule that that part alone of a decision of a court of law is binding upon courts of the co-ordinate jurisdiction and inferior courts which consists of the enunciation of the reason or principle upon which the question before the court has really been determined. This underlying principle which forms the only authoritative element of a precedent is often termed the ratio decidandi. Statements which are not necessary to the decision, which go beyond the occasion and lay down a rule that is unnecessary for the purpose in hand (usually termed dicta) have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final product. It can be in relation to two different dutiable final products. However, till and until there is such complete utilization of the input and the credit, there can be no lawful availment and utilization of the credit. 36. The view that we are taking in the matter clearly stands approved by the decision of the Allahabad High Court in Super Cassettes Industries (supra) and not dissented from by the Apex Court in Dai Ichi case In fact, the Allahabad High Court while disapproving the decision of the Tribunal to the effect that the credit once taken in accordance with the Rules 57A to 57G of the said Rules was final and Rule 57G did not make any provision for reversing the credit, held that the credit in respect of the inputs either in stock or that have been used in the manufacture of final product, which have become exempt from duty liability needs to be reversed. It was also held that the procedure for payment of excise duty is inter alia provided under Rule 173G of the Central Excise Rules, 1944 which proves for the maintenance of an account-current popularly known as personal ledger account. This account is to be opened and maintained by cash payment into the Treasur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r varied on the ground that part of the inputs is contained in any waste, refuse, or by-product or on the ground that any intermediate products have come into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt. Rule 57E provides for adjustment in duty credit. It says that if the 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, or recovery of more duty from, the manufacturer or importer, as the case may be, of such inputs, the credit allowed shall be varied accordingly by adjustment in the credit account maintained under sub-rule (3) of Rule 57G. Rule 57F deals with the manner of utilisation of the inputs and the credit allowed in respect of duty paid thereon. It requires inter alia that the inputs may be used in the manufacture of final products for which such inputs have been brought into the factory or shall be removed, after intimating the Assistant Collector of Central Excise having jurisdiction for home consumption or for export under bond, as if such inputs have been manufactured in such fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in accordance with Rules 57A and 57F and either excise duty on the final product is paid or the inputs are otherwise disposed of for home consumption or export etc. Till such events occur the Modvat credit is only provisional and cannot be said to be final and irrevocable". It is only for certain accounting purpose that the amount is credited to the PLA account and can be used as a credit balance for actual payment of duty on manufactured goods at the time of their removal. The final settlement would, however, happens only when such inputs have actually been used for the purposes of specified and/or excise duty has been paid on the final product. It was specifically ruled that it is true that Rule 57G does not specifically contemplate a reversal of the credit but this is implied from purpose of the Scheme and the nature of the Rules. 41. The Allahabad High Court also observed that Rule 57C clearly states that no credit of duty paid on inputs shall be allowed if the final product is exempt from whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. There is at another provision in Rule 57-I where the officer can demand the reversal of the credit w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCE, Ludhiana reported in 2006 (200) E.L.T. 365 = 2008 (12) S.T.R. 536 (S.C.), Ichalkaranji Machine Centre (supra) and Chandrapur Magnet Wires (P) Limited v. CCE, Nagpur reported in 1986 (81) E.L.T. 3, which have been relied upon by the learned DR. 44. In Maruti Suzuki case, the assessee was engaged in the business of manufacturing motor vehicles classifiable under Chapter 87 of the Central Excise Tariff Act, 1985. The vehicles were cleared on payment of duty. The assessee claimed cenvat credit on inputs in accordance with CENVAT Credit Rules, 2002. The assessee had installed three gas turbines in the factory for generation of electricity. Till June 2002, the assessee was using natural gas for running the gas turbines. No excise duty was leviable on natural gas and hence, there was no question of availing Cenvat credit on natural gas. During July 2002 to December 2002, the assessee used diesel as fuel to run those turbines. The diesel was subject to duty payment. The assessee, however, did not avail any cenvat credit till December 2002. From January 2003 the assessee started using naphtha as fuel to run the gas turbines and started availing credit on such naphtha. The assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e final product. None of the categories, any inclusive part of the definition would constitute relevant consideration per se. They would become relevant only when the crucial requirement of being "used in or in relation to the manufacture" stands complied with. In no uncertain terms, it has been ruled by the Apex Court that all these parts of definition are required to be satisfied before input becomes an eligible input and that the goods which do not satisfy all these three parts would not be eligible to avail cenvat credit. 47. Considering the law in relation to the cenvat credit as explained above, and applying it to the facts of the case in Maruti Suzuki, the Apex Court held that the definition of "input" brings within its fold, inputs which are used for generation of electricity or steam, provided such electricity or steam is used within the factory of production for manufacture of final products or for any other purpose. Therefore, the assessee was entitled to credit on eligible input utilized for generation of electricity to the extent to which they were using thy electricity within the factory for captive consumption and not in relation to the excess electricity cleared a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch inputs even if they are used in the manufacture of exempted goods. The cumulative reading of sub-rules (1) and (2) makes it abundantly clear that the circumstances specified in sub-rule; (2), which inter alia requires separate accounting of inputs, are not applicable to the fuel inputs. However, the said sub-rule (2) nowhere says that the legal effect of sub-rule (1) will stand terminated in respect of fuel-inputs which do not fall in sub-rule (2). In other words, the legal effect of sub-rule (1) has to be applied to all inputs including fuel-inputs, only exception being non-fuel inputs, for which one has to maintain separate accounts or in its absence pay 8% or 10% of the total price of the exempted final products". It was also specifically clarified that on the question of reversal of cenvat credit to the extent of electricity wheeled out or cleared to the grid and to the township, the judgment in Maruti Suzuki would apply. In other words, in case of utilization of inputs on which cenvat credit is sought to be availed in the manufacture of final goods when they are not subject to duty would justify an order of the reversal of credit and/or payment of 8% or 10% of the price of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of enameled copper winding wire and had cleared final products utilizing paid inputs while being entitled to benefit of modvat scheme and to get credit of the duty paid on the inputs which were utilized for manufacture of the final products. The credit amounts were adjusted against the duty leviable on the final product as soon as the inputs were purchased, the duty paid on inputs was entered in the register which had to be maintained as per statutory provisions regarding the amount of credit allowable to the manufacturer. The problem arose because of some of the goods manufactured were exempted from duty under a Notification No. 69/86-C.E., dated 10-2-86 which was further amended by Notification No. 106/88, dated 1-3-1988 by which copper winding wires were exempted from payment of whole of the duty subject to the condition that the final products were manufactured from copper wire bars of over 6mm and also subject to that no credit of the duty paid on goods used in their manufacture had been taken under Rule 57A of the said rules. There was no dispute that the inputs which were utilized in the manufacture of the copper wires were duty paid and that the amount of duty paid on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture of the final exempted product will stand deleted in the accounts of the assessee. In such a situation, it cannot be said that the assessee has taken credit for the duty paid on the inputs utilized in the manufacture of the final exempted product under Rule 57A. In other words, the claim for exempted of duty on the disputed goods cannot be denied on the plea that assessee has taken credit of the duty paid on the inputs used in manufacture of these goods". Obviously, therefore, merely because credit was sought to be availed, in the books of account and statutory records, it cannot be said that the same is non reversible pursuant to final product being declared as exempted from the payment of duty. 54. The decision in Albert David Limited (supra) also needs to be taken note of. The Tribunal therein was dealing with the issue as to whether the cenvat credit had to be reversed if subsequent to the availment of credit, the finished product becomes exempted fully from the payment of duty and held that "the cenvat credit scheme is a scheme to remove the cascading effect of the central excise duty as the same is levied at each stage of manufacture. The credit is available only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken at the time when the final product was not exempted from duty and it was utilized, subsequent exemption of the final product would not be a reason for reversal of the credit. The S.L.P filed by the department against the decision in Ashok Iron Steel Fabricators (supra) was dismissed by the Apex Court. On the other hand, the contra view taken by a Two-Member Bench of the Tribunal in the case of Albert David Ltd. (supra) after distinguishing the case of Ashok Iron Steel Fabricators (supra) stood affirmed by the Apex Court when the civil appeal filed against it by the party was dismissed by the court. The review petition filed by t the party was also dismissed by the court in an order reading as follows : "Delay condoned. We have gone through the review petition and the connected records. We do not find any merit therein. The review petition is, therefore, dismissed." Applying the doctrine of merger, we find that the view taken in Albert David case having the stamp of approval of the Apex Court, has binding effect. In Albert David case, Cenvat credit had been taken by the party when their final products (I.V. fluids) were chargeable to duty. Subsequently, the I.V. flu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of manufacture. The cenvat credit is available only if the final product suffer the excise duty. If no excise duty is payable in respect of final product the question of availing the cenvat credit does not arise as there is no duty at more than one level, and therefore, modvat credit on the inputs either in the stock or contained in the finished goods lying in stock on the day when the final product was declared as exempted from payment of duty was not available to the manufacturers. 57. Following the decision of the Allahabad High Court in Super Cassettes case, the Larger Bench of the Tribunal in Khanbhai Esoofbhai v. Collector of C. Ex., Calcutta reported in 1999 (107) E.L.T. 557 had observed thus :- "10. We are of the view that the above extracts of the Allahabad High Court/judgment, fully covers the issue raised before us. Respectfully following the ratio we hold that Modvat credit taken in respect of inputs which are in stock as well in respect of inputs used in the manufacture of final products which have become exempt, would be inadmissible and will have to be reversed. 11. It is settled law, that in the absence of any decision of a High Court holding a contrary view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty of Rs. 10,000/- (paid on 100 tons of barley malt) from out of the duty payable on 250 tons of Horlicks cleared from Rajamundry factory, whereas according to the Revenue since the quantity cleared at Rajamundry on payment of duty is only 1/4th of the total quantity manufactured using 100 tons of barley malt, the appellant is entitled to take credit of only Rs. 2500/- against the duty payable at Rajamundry. Revenue also says that the respondent is not entitled to take credit of balance of Rs. 7,500/- (duty paid on 75 tons of barely malt) from out of the duty paid on 750 tons at Bangalore. The question is who is right?" We may respectfully point out that the word 'respondent' in the above quotation is not correct; It should be 'appellant' because the manufacturer H.M.M. is an appellant and not respondent]. Further, vital difference in facts is that 'Horlicks', the final product was not exempt in H.M.M.'s case, unlike the final products in these cases. Therefore, the learned Advocate's reliance on H.M.M. urging that Hon'ble Allahabad High Court's judgment in Super Cassette Industries is per incurian H.M.M. is not at all tenable. He would have been correct, had the controversy be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... producing the para 17 of the decision in Dai Ichi Karkaria case held that it is not necessary to reverse the entry of credit immediately, if the credit was availed during the time the final product was not exempted one. It was also held that utilization of credit conies subsequent to its availment. However, the effect of subsequent utilization, after the product becoming exempt, has not been dealt with in the said decision. 61. The Commissioner of Central Excise, Chandigarh v. CNC Commercial Ltd. reported in 2008 (224) E.L.T. 239, the issue for consideration was whether the duty, in the absence of availability of sufficient balance to reverse cenvat credit earned on the inputs lying in stock, the inputs in process of manufacture of the final product and the inputs contained in the finished goods at the time of opting out of cenvat credit scheme, is required to be paid through cash payment/PPLA or not and the same was answered that the credit of duty paid on inputs cannot be confined to a particular raw material to which the credit is related to and out of which the final product is manufactured and, therefore, the assessee is not required to reverse the credit while holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the scope and ambit of Rule 57CC of the Central Excise Rules, 1944 as were introduced in 1996 under notification dated 23-7-1996, however, in view of the decisions of the Apex Court referred to above including those in Maruti Suzuki Limited and Gujarat Narmada cases, with utmost respect, it cannot be said to be a good law particularly to understand the scope and ambit of Rule 6(1) of the said rules. 64. The Himachal High Court in CCE, Chandigarh v. M/s United Vanaspati Limited reported in 2010 (251) E.L.T. 373 (H.P.) = 2009-TIOL-723 HP-CX and in CCE, Chandigarh v. Saboo Alloys Private Limited reported in 2010 (249) E.L.T. 519 merely followed the decision of the Rajasthan High Court in Hindustan Zinc Limited. In Purval and Associates, (supra) the Tribunal merely followed the decision of Hindustan Zinc Limited and in P.A. Precision Components, the decision in Purval and Associates was followed without considering all the points which are considered herein. 65. In Commissioner of Central Excise, Indore v. Ivis Drugs India Pvt. Limited reported in 2005 (199) E.L.T. 639 the Tribunal while dealing with the question as to whether the credit on inputs used in the manufacture of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vide : Rai Agro Industries Ltd. v. Director General of Foreign Trade reported in 2006 (206) E.L.T. 123 (Del.). 67. Merely because Rule 9(2) of the Cenvat Credit Rules, 2004 speaks of two situations for lapsing of credit, there is no scope to draw an inference that the legislature deliberately wanted to restrict such lapsing of Cenvat credit on inputs lying in stock on the day of opting for exemption to only two situations and to exclude all other situations. Any such inference would be purely fenciful imagination. It should always be remembered that any machinery provision, if something found missing in it for the purpose of being effective for enforcement of charging provision, certainly Courts and Tribunals have to read down such provision to make them more effective and enforceable. In this regard one of the important rule of statutory construction stated in Craies on Statute Law, 7Ed. At page 111 is as under :- "If a statute is passed for the purpose of enabling something to be done, but omits to mention in terms some details which is of great importance (if not actually essential) to proper and effectual performance of the work which the statute has in contemplation, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces the principle of unjust enrichment can be ignored and no citizen can claim to get enriched at the cost of public exchequer. 70. As already observed above, the cenvat credit scheme is a scheme to remove the cascading effect of the central excise duty as the same is levied at each stage of manufacture. The credit is available only if the final product suffers the excise duty. The scheme is, therefore, evolved to avoid multiplication or duplication of duty element upon the ultimate cost of the product when it reaches to the hands of the consumer. In other words, it is a procedure to avoid cascading effect of duty on manufactured products. As it forms part of procedure, the question therefore arises is whether the procedure to be followed to avail the benefit of such credit can be said to create a substantive or vested right? Or will it be merely an existing right, subject to fulfillment of the conditions attached to it, prescribed under the statutory provisions? 71. It is well settled that a substantive right is one that can be protected or enforced by law. It is a right of substance, rather than the form, i.e. procedure. A procedural right is one that derives from legal or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ization of credit encompasses both the aspects - use of credit and use of goods on which the credit is earned. The availment of credit is first step towards the utilization of such credit. The stage of utilization is accomplished after its availment and on use of the inputs in the manufacture of the final product. In fact, this stage has two parts, one relating to the use of such credit and other pertains to use of the goods on which credit is earned. Both the parts need to be completed for complete utilization of credit within the meaning of the said expression under Cenvat Credit Rules. This is irrespective of the fact that there is no co-relation between the goods on which the credit is earned and the final product in respect of which such credit is used for payment of duty thereon. 75. The argument about absence of condition in the exemption notification about non-availability of cenvat credit to the beneficiary of such notification needs to be recorded only for the purpose of rejection thereof. It is really surprising that the arguments were advanced on the basis of the ruling which has been specifically overruled by the Supreme Court. The decision in Andhra Pradesh Paper Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law has remained the same. The exemption notification does not grant exemption to the excisable goods cleared for home consumption so as to contend that the manufacturer would pay duty on the export when the export is not effected under bond. It grants exemption to a unit. Since unit of the noticee is wholly exempt, the cenvat credit on inputs going in the manufacture of export goods is not admissible". There is hardly any scope to make grievance about the finding of the Commissioner in this regard. 78. There is no doubt that Rule 6(6) of the Cenvat Credit Rules, 2004 excludes the goods cleared for export under bond from the applicability of the provisions of law comprised under Rule 6(1) of the said Rules. At the same time, Rule 3 of the Cenvat Credit Rules, 2004 relates to the entitlement of credit in relation to the duty paid on the inputs. Learned Commissioner does not seem to have taken into consideration the effect of these provisions of law while rejecting the claim based on the contention of the appellants about clearance of goods for export under bond. Certainly the adjudication authority will have to consider this point with reference to those inputs which are stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty to be paid by the appellants. We have no doubt that if any such material is placed before the authority, the same would be entertained and appropriate order will be passed by the adjudicating authority bearing in mind the decision herein and the provisions of law applicable to the matter. This aspect can very well be dealt with alongwith the claim of the appellants regarding the entitlement of benefit under Rule 6(6)(v) of the Cenvat Credit Rules, 2004 which relates to the subject of export of goods under bond. 81. The fallout of above discussion is that the first point for determination framed above is to be answered in affirmative; the second and third points are to be answered in negative; as regards the fourth and fifth points are concerned, the same will have to be considered primarily by the adjudicating authority bearing in mind the observations herein above. 82. The appeal accordingly partly succeeds on the limited grounds mentioned above and while setting aside the findings relating to the issue pertaining to the claim of applicability of Rule 6(6)(v) of the Cenvat Credit Rules, 2004 and regarding the quantum of duty, the matter is remanded to the adjudicating a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
