TMI Blog1994 (12) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... dit of duty paid on inputs used in the manufacture of POY/PSF cleared at `Nil rate of duty under Rule 191B/191BB has been utilised for payment of duty on the above final products cleared for home consumption, which is in contravention of Rule 57A read with Rule 57C and Rule 57F of the Central Excise Rules. Accordingly S.C.N. proposes to recover the credit alleged to have been availed of illegally. The demands have been issued within the time limit prescribed under Rule 57-I of the Central Excise Rules. 2.2 The Asstt. Collector under his order No.V(57A)4.9/92, dated 23-4-1992 confirmed the demands raised in four S.C.Ns. totally aggregating about Rs. 5.87 crores by ordering reversal of credit taken on POY/PSF cleared under Rules 191B/191BB of the Central Excise Rules. He also imposed a penalty of Rs. 5000/- on the appellants. On appeal before the Collector (Appeals), penalty imposed was set aside. On the main issue relating to order of reversal of Modvat credit, the Collector (Appeals) agreed with the Asstt. Collector, but directed the Asstt. Collector to rework the demand. The present appeal is against the said order. 3. Shri Bhatt, the ld. Advocate, on behalf of the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n issued under Rule 57A. He also does not dispute that the issue relates to eligibility of Modvat credit of duty paid on inputs used in the manufacture of such POY/PSF cleared without payment of duty under Rule 191B/191BB of the Central Excise. 5. The main thrust of his contentions can be summed up as below :- (i) Modvat is a scheme for averting the cascading effect of input taxation on the duty paid in regard to the final product. When the final product is cleared without payment of duty for whatever be the reason, there cannot be a cascading effect of input duty on the final product, so cleared without payment of duty. (ii) In this case, removals without payment of duty have been permitted to the exporters, who effected such removals in terms of the bond executed under Rules 191B/191BB of the Central Excise Rules. Reliance Industries are not exporting the goods. They take the credit of duty paid on inputs and use the inputs in the manufacture of POY/PSF, which are cleared without payment of duty under Rules 191B/191BB. Such credit of duty paid on these inputs is utilised for payment of duty on POY/PSF cleared by them for home consumption. Viewed in this context, it would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncies, when the Central Govt. can make rules. He invites our attention to clause (xvii) of the aforesaid Section to point out that the Govt. derives powers to exempt goods from the whole or part of the duty under the clause. Rules 191B and 191BB are also to be construed as rules granting such exemption for exports; because that is the only provision in Section 37(2) enabling the Govt. to make rules for granting exemption. He would urge that this proposition of law has not been considered in the decisions relied upon by the other side. Viewed in this context, Rule 57C would stand attracted, since such removals without payment of duty in terms of Notification issued under Rules 191B/191BB are to e construed as exemptions only. (viii) He also would seek to rely on the decision of Kirloskar Oil Engines - 1994 (73) E.L.T. 835 decided by the Larger Bench, wherein it has been held that if inputs go in the manufacture of exempted products, credit has to be reversed in terms of Rule 57C, irrespective of the fact that when inputs were received and duty credit taken, they were intended to be used for the manufacture of declared final product. 6.1 After hearing both sides, we first looked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals). Hence, the revenue came in appeal before the Tribunal. We did not agree with the contention of the dept. by holding that removal of goods for exports under Rule 191B could neither be construed to be goods wholly exempted nor chargeable to `Nil rate of duty. Since the proviso to Rule 56A(2) is similar to the provisions of Rule 57C, the issue is similar in this appeal, though not identical as in the case of Orissa Synthetics. 6.4 Going by the ratio of these decisions read with Board s own clarification given after obtaining Law Ministry s opinion and also in the context of the Delhi High Court Judgment in Hindustan Aluminium Corpn - 1981 (8) E.L.T. 642 (Del.), the objection that such removals are hit by Rule 57C has to be rejected. But then, the. counsel urges that there are valid legal points, which have not been considered in these decisions and hence would persuade us to differ from these decisions or refer the matter to a Larger Bench. Even for considering this request, the position becomes somewhat difficult, because apart from Law Ministry s opinion, there is a pronouncement of Delhi High Court on the issue against the stand taken by the Revenue. Hence, judicial d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit only on the manufacturer and not on the exporter of goods. (iii) Rule 57A is no doubt the Rule prescribing the applicability of the provisions of the Section relating to Modvat credit. But that rule cannot be read in isolation. It has to be read in conjunction with other rules contained in that section. The section as a whole envisages the availability of credit of duty paid on inputs used in the manufacture of final products, the manner of utilisation of inputs and of credit so earned. If one is to confine himself to read only Rule 57A for determining the quantum of credit to be availed of, the provisions of Rule 57B allowing higher notional credit in some cases has to be kept inoperative. We are to read the entire scheme as a whole as envisaged in Rules 57A to 57J. The relevant rule for denying credit is Rule 57C, which stipulates that no credit 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. We are to consider whether in the case of removals of goods under bond in terms of Rules 191B/191BB would be hit by the Rule. Likewise, we are to consider whether in the case of utilisati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported enters into a bond undertaking to export the goods. From Rule 13, it is clear that wherever rebate is permitted under Rules 12 12A, goods in like manner can be exported without payment of duty in accordance with the relevant provisions of Chapter IX of the Rules. Rules 191B 191BB are the rules prescribing the export of excisable goods under bond figuring in Chapter IX of the Central Excise Rules. Hence, we cannot give any other meaning to the words final products cleared for export under Bond figuring in the proviso to Rule 57F(3), other than that is contained in Rule 13, which is the general provision permitting export of excisable goods for export under bond. Hence, we are not impressed with the argument of the ld. counsel for the Revenue that Modvat scheme is to be considered de hors export under bond, which is a separate scheme for exports. (v) In so far as the appellants are concerned, POY/PSF are the final products. They are the goods exported under bond, referred in the proviso to Rule 57F(3). Hence, proviso to Rule 57(3) would be available to the appellants for removing similar goods for home consumption. It is not the case of the Revenue that the appellant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid on excisable goods for export. We consider that Rules 12, 12A, 13 Chapter IX of the Rules relate to (xvi) of Section 37(2) and cannot come under (xvii) relating to exemption as pleaded by the ld. counsel for the revenue. (viii) The decision of the Larger Bench in the case of Kirloskar Oil Engines would come into play, only when we can hold that Rule 57C is attracted in this case and proviso to Rule 57F(3) is not available to the appellants. Since our view is that Rule 57C cannot be attracted in this case and credit is permissible under Rule 57F(3), this decision does not help the Revenue. 6.5 Thus having considered each of the submissions of the ld. counsel for the Revenue, we feel that none of the points persuades us to either disagree with the ratio of the decision of East Regional Bench in the case of Orissa Synthetics or with our own decision in the case of Indian Aluminium Co. 7. Before parting with this order, though it was not pleaded before us by the Revenue, we had an occasion to come across a Trade Notice No. 46/Bombay III/General (24)/94, dated 22-6-1994, where certain clarifications are reported to have been given presumably based on the instructions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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