TMI Blog1999 (3) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... as was equivalent to duty of Excise or the additional duty of Customs already paid on the MEG used in or in relation to the manufacture of the said final product. The appellants were availing the benefit of the said Notification after following the procedure and after maintaining the requisite records. 2.3 Show cause notice dated 27-2-1992 was issued to the appellants alleging that credit of duty amounting to Rs. 1,02,23,493.49 has been wrongly availed on 2553.494 metric ton of MEG under Notification No. 225/86-C.E., dated 3-4-1986 during the period March, 1987 to December, 1990 inasmuch as the said quantity of MEG was used in the manufacture of their final product which was cleared for export on which no duty was paid. Accordingly the notice proposed to recover the said credit of duty allegedly wrongly availed and utilised by them by invoking the larger period of limitation and also proposed imposition of penalty. 2.4 The appellants defended the show cause notice before the Commissioner on various grounds. It was the appellants contention that the longer period of limitation was not available to the department inasmuch the credit was being availed and utilised towards payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit of set off of duty under Notification No. 225/86. In support of his submissions that goods removed for export under bond cannot be treated as exempted goods, he relies on the following decisions, wherein the department s contention for denying the Modvat credit in terms of Rule 57C in respect of the goods removed under Rule 191BB without payment of duty for use in the manufacture of goods for export was rejected :- (a) 1995 (78) E.L.T. 595 - Reliance Industries Ltd. v. C.C.E. (b) 1995 (79) E.L.T. 111 - Indian Aluminium Co. Ltd. v. C.C.E. (c) 1996 (87) E.L.T. 389 - J.K. Synthetics Ltd. v. C.C.E. (d) 1997 (21) RLT 758 - JCT Fabrics Ltd. v. C.C.E. (e) 1995 (77) E.L.T. 350 - Orissa Synthetics Ltd. v. C.C.E. 3.2 The ld. Advocate further submits that the same Notification No. 225/86 was considered by the Tribunal in the case of Indian Petro-Chemical Ltd. v. C.C.E. - 1992 (61) E.L.T. 138. Wherein the department s contention that the duty on the final product was required to be paid on the basis of approved input-output ratio was rejected by the Tribunal. The correctness of the said decision was doubted in the subsequent case of J.K. Synthetics Ltd. and the matter was refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appendix to Notification No. 201/79 the Hon ble Supreme Court came to the conclusion that one to one co-relation is not needed and it permitted adjustment of the credit being allowed for the entire quantity of raw material that is one hundred tons of Barley Malt towards payment of duty on 250 tons of Horlics without proportionate disallowance towards 750 metric tons of Horlics cleared under bond without duty from the appellants Raja Mundari factory. As no one to one co-relation in required as held by J.K. Synthetics case, the same conclusion has arrived at by the Supreme Court in H.M.M. s case would inevitably follow in the case of Notification No. 225/86-CE. The ld. Advocate also vehemently argued that the entire demand is barred by limitation having been raised after normal period of limitation of six months. He submitted that the period involved in the present case is March, 1987 to December, 1990 and the show cause notice was issued on 27-12-1992. Arguing on the plea that extended period was not invokable, the ld. Advocate submitted that the appellants unit was under physical control at the relevant point of time. Prior to removal of the staple fibre, an application in fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to two decisions of the Tribunal reported in 1993 (67) E.L.T. 321 and 1996 (87) E.L.T. 49, wherein benefit of Notification No. 201/79 was held not available where the final product was exempt. He submits that intention behind the issuance of the Notification is irrelevant as there is no ambiguity in the Notification. Notification should be interpreted in a constrained manner and as the Notification grants exemption to the final product to the extent of duty paid on the inputs, and as the duty paid on the inputs cannot be utilised towards payment of duty on the final product exported under bond without payment of duty, the same duty should not be allowed to be utilised towards payment of duty on the final product cleared for home consumption. He submits that the ruling of the Larger Bench in J.K. Synthetics is only to the effect that there is no one to one co-relation between the inputs and final products. And the issue whether the benefit of the Notification would be available where the final product is exported without payment of duty was not before the Larger Bench. As such he submitted that the demand has been rightly confirmed against the appellants. 4.2 As regards the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d final products batch-wise will permit the availment of exemption on overall clearances of partially exempted final product instead of rationing the benefit according to the quantity of inputs used for particular batch of such final product. Accordingly after considering various decisions it has been laid down that under Notification No. 225/86, such utilisation of inputs will permit the benefit thereunder without batchwise co-relation of inputs and final products. 6.2 The effect of the ratio of the larger Bench decision in J.K. Synthetics Ltd. that no one to one co-relation between inputs and final products is required under Notification No. 225/86 would be that the utilisation of the credit of duty paid on the inputs is not required to be co-related to the quantum of inputs used and contained in an unit of the final product. Now the question arises as to whether final product which has been exported by the appellants under bond is required to be treated as exempted product, not requiring any further exemption in terms of the said Notification and thus necessitating the reversal of credit availed by the appellants on MEG i.e. the raw material. The appellants have referred to nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als used in the manufacture of exported goods was available towards payment of duty on the other final products. As one to one co-relation has already been held not applicable under the Notification No. 225/86 by the larger Bench decision in the J.K. Synthetics, the same conclusion that the set off so availed would be available for clearance of final product for home consumption follows. Accordingly we hold that the disallowance of set off and the imposition of penalty was not justified. 7.2 The appellants also have a good case on limitation inasmuch as the entire facts were before the Central Excise authorities. The department was aware of the fact that the appellants are taking the credit of the entire quantity of raw material which was being used in the manufacture of exported as well as home consumption cleared final product and no credit so taken was being debited back or reversed by the appellants. The reasoning of the adjudicating authority for invoking the larger limitation on the ground that the appellants have not followed the trade notice is not inconsonance with the principles laid down by the Hon ble Supreme Court in the various judgments that for invoking the extend ..... 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