TMI Blog1994 (5) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... E. (N.T.), dated 5-9-1990 to another manufacturer, without payment of duty. The latter then manufacture the final product which is exported. The clearance of MMSF is without payment of duty on the strength of a suitable bond to ensure the utilisation of the said material for the manufacture of the final product which is exported. Rule 57C lays down that no credit of duty paid on the inputs used in the manufacture of a final product shall be allowed if the final product is exempt from the whole of the duty leviable thereon or is chargeable to nil rate of duty. The Collector has held in his impugned Order that they had made a very thin distinction between exemption and clearance without payment of duty, which is basically same. Shri Gopal Prasad submitted that this conclusion of the Collector is not correct. Notification 33/90, in terms of which they had cleared their product MMSF, permits goods to be removed without payment of duty for supply to manufacturers of final products which are exported. The expression (removal) without payment of duty is distinct and different from exempt from whole of the duty or chargeable to nil rate of duty. The Collector had referred to the amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any exemption issued under Rule 8 and hence the first prohibition contained in clause (i) of the proviso to sub-rule (2) of Rule 56A did not come into play. The learned Consultant submitted that the same position will apply to Rule 57C also. 4. Without prejudice to his arguments as above, Shri Gopal Prasad, learned Consultant submitted that even if it is held that removal of goods without payment of duty in terms of Notification 33/90 issued under Rule 191BB of the Central Excise Rules is held to be a case of exemption from the whole of the duty leviable, still their case will not be hit by Rule 57C. This is because that Rule can be applicable only in case where at the time when the inputs were received and when credit was taken, the finished goods were covered by a general exemption. Here Polyester Fibre (MMSF) manufactured by them was not exempted under a general exemption but attracted specified duty under the Tariff. Hence, Rule 57C was not applicable to them. Apart from this, they were eligible to utilise the credit in question in terms of Rule 57F(3). The said Rule provides that credit allowed may be utilised towards payment of duty on any of the final products in or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refor is non-speaking. Even if the Trade Notice referred to therein is taken note of that Circular will not also hit the Appellants. He contended that the Trade Notice as well as the Circular 6/92 dated 1-6-1992 issued by the Central Board of Excise and Customs on which the former is based are unintelligible and incapable of comprehension. The precise provision of law forming the basis thereof have not been indicated. It was, therefore, submitted by him that on the sheer ground of vagueness and lack of clarity and precision, the Circular has to be disregarded apart from the fact that it does not cite any provision of law which it has tried to interpret or construe. He urged that the question of availability or non-availability of Modvat Credit is solely and exclusively governed by the provisions contained in Rules 57A to 57J and no other provision of law. None of these provisions stipulate that if the manufactured goods are supplied under Rule 191BB, excise duty paid on the raw materials used in the said manufacture cannot be modvated. There is no justification for denying Modvat Credit of inputs used in the manufacture of goods supplied under Rule 191BB. 5. The learned Consultan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Modvat Rules 57A to 57J. He, therefore, pleaded that the Appeal be dismissed. 7. We have considered the arguments advanced by both the sides. We have perused the record. The contention raised by Shri Gopal Prasad, learned Consultant for the Appellants that the actual scope of Rule 57C does not extend to cases of removal of goods without payment of duty in terms of a Notification issued under Rule 191BB of the Central Excise Rules is quite valid. The decision of the Honourable Delhi High Court in Hindustan Aluminium Corporation Limited v. Collector of Central Excise, reported in 1981 (8) E.L.T. 642 supports such a view. The relevant observations therein in this regard have been referred to supra. The learned Counsel had also referred to the instructions issued by the Ministry of Finance, Department of Revenue and Insurance in a similar matter relating to admissibility of proforma credit under Rule 56A even if the goods manufactured are cleared without payment of duty for export. It was clarified in the said instructions which were issued in the light of the advice received from the Ministry of Law that such clearances for export without payment of duty did not attract Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was taken or such goods were first removed without payment of duty to another factory for manufacture of other goods which were then exported is not material. Whatever be the disposal of the goods removed under a Notification from the factory availing the credit, the significant fact is that such removals are without payment of duty. Such removals are not to be equated with exemption for the goods removed from the whole of the duty or their chargeability to nil rate of duty. This view accords with the interpretation of the expression - removal without payment of duty - by the Honourable Delhi High Court in the case cited as well as the view of the Ministry of Finance themselves vide their Circular No. 10/75-CX 6 referred to above. We also agree with the submissions made by Shri Gopal Prasad, learned Consultant that the Collector fell in error in holding that since Rule 57C was specifically amended to provide for removal of goods to Units in Free Trade Zone or 100 per cent export-oriented Units, removals for export should also have similarly been included therein in order to escape the ban of the said Rule. As correctly pointed out by the learned Consultant, removals to units in E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions contained in the Rules will have to be taken to mean exemptions so granted by the Central Government under Rule 8. 9. Obviously enough, in the present case, the exports under bond are duty-free not by virtue of any exemption notification issued under rule 8, and so the first prohibition contained in clause (i) of the proviso to sub-rule (2) of rule 56A does not come into play. 10. This leaves us with the second part of the prohibition i.e. whether the non-payment of duty in respect of goods exported under bond flows from the said goods being chargeable to nil rate of duty. In this connection, it would be relevant to note that rule 13, as its title indicates, refers to export under bond of goods on which duty has not been paid. The rule thus contemplates not goods on which duty is chargeable at nil rate, but goods on which duty ought to be paid, but has not been paid, then a claim for rebate would arise under rule 12. The manufacturer could, if he chooses so to do, export it in bond. without first paying duty and thereafter claiming rebate. In the circumstances, it cannot be said that the goods are chargeable to nil rate of duty. 11. In view of the above, the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which such inputs are intended to be used. He contended that what is required is only such intention at the time of taking the credit and not the actual use in the said manner. They manufacture MMSF which is cleared on payment of duty also in addition to the removals without payment of duty under Rule 191BB. At the time of taking the credit the pattern of removal is also not known. The intention is to clear on payment of duty. The subsequent removals under Rule 191BB cannot deny them the benefit under Rule 57F(3). In view of the decision we have taken, we are not pronouncing our stand on this submission, though we feel that this provision has to be read along with Rule 57C. If the case is hit by the latter Rule (not the later one), then credit will not be available. In this case, however, we have held that Rule 57C is not attracted. 12. Another argument advanced by Shri Gopal Prasad which, however, we need not go into in detail, is that the case is not covered by Rule 57-I as that provision is applicable only if credit is taken on account of an error, omission or misconstruction on the part of an Officer or manufacturer or if it is taken on account of wilful misstatement, coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if the Appeal is decided in favour of the assessee and the credit is held to be admissible, that decision would be held at bay raising the bogey of unjust enrichment. It is just as well that there is provision in Section 11B itself to guard against such aberrations. Recrediting of the amount of duty disallowed and debited from the RG 23A Part II account does not actually amount to refund of duty, though, even such refunds themselves, if they arise, are also not hit by Section 11B(2). 14. Before parting with the matter, we would like the Central Board of Excise and Customs to take note of the inadequacy of Rule 57C to deal with cases where the goods are cleared without payment of duty. While the present type of cases covered under Rule 191BB need not cause any alarm, other cases of clearances of final products free of duty simpliciter will continue to ontribute to the controversy. While Rule 57C is clear about the non-permissibility of the credit Rule 57F(3), with its liberalised language, permits utilisation of credit towards payment of duty on any of the final products in or in relation to the manufacture of which the inputs are intended to be used (emphasis added). Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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