9911796707
TMI Blog2009 (2) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... imposition of penalty is justified in the circumstances of the case?" 2. Brief facts of the case necessary for disposal of the controversy raised in the instant appeal may first be noticed. The dealer - appellant is engaged in the manufacture of embroidery products falling under Chapter No.5805.19 of the Schedule to the Central Excise Tariff Act, 1985. It had been (for brevity '1944 Rules'). Accordingly, the dealer-appellant had also been availing the facility of Modvat Credit on the capital goods installed in the factory in terms of Rule 57Q of the 1944 Rules. The dealer-appellant had imported capital goods and had taken credit of the duty amounting to Rs.31,18,085/- being the countervailing duty paid thereon as permissible under the scheme of Modvat. This credit had been entered in the relevant record on 18-3-1998. The credit so availed was being utilized for payment of Central Excise duty on the manufactured goods as available under the compounded levy scheme. The dealer -appellant had utilized an amount of Rs.3,01,820/- towards payment of duty on the manufactured goods. 3. On 11-3-1999, a show cause notice was issued to the dealer - appellant requiring it to sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the fact that the duty payment on the capacity of the production of the embroidery machines is an optional one." 6. The Tribunal also decided the issue of limitation in favour of the revenue in Para 7 which reads as under:- "As regards the time bar issue I find the show cause notice is for the demand of clearances made during the period September 1998 to February 1999. The show cause notice is issued to the appellant on 11-3-1999, which is well within the period as indicated under the provisions of Section 11A of the Central Excise Act, 1944. The monthly returns for the month of September 98 are to be filed by the appellant on or before 5th October, 1998 and the limitation period starts from that date. The demand on the appellant being of the duty of the clearances made by them without discharging the duty and not for the reversal of the Modvat Credit, hence the appeal fails on this count also." 7. Dealing with the arguments that imposition of duty on the capacity of production is ultra vires, the Tribunal observed that an assessee intended to avail the benefit under the rules was required to first make an application under Rule 96 ZH of the Rules and the discharge of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of utilizing the credit taken had been promulgated for the capital goods installed or used in the factory of manufacture in addition to the other specified goods. According to the learned counsel, there is no distinction discernible either from the perusal of the Act or the Rules barring taking of permissible credit. He has emphasized that the very purpose of introducing the scheme of Modvat on capital goods is to encourage the domestic industry manufacturing capital goods and also keep it on par with the imported capital goods by permitting the credit of countervailing duty on such goods. In that regard, he has referred to the Finance Minister's speech made during the budget for the fiscal year 1994-95. 9.Another argument raised by the learned counsel is that the amendment made to Rule 96 ZH(I) would operate prospectively and would not affect the utilization of the credit taken by the dealer appellant prior to the amendment. He has highlighted the fact that the credit by the dealer - appellant had become available prior to the date of the amendment made on 2-6-1998 and by amendment its utilization could not be denied to the dealer - appellant. In support of his submission, learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the period from September 1998 to February 1999 is wholly unwarranted and the Tribunal has rightly declared the same to be unlawful. 11. Having heard the learned counsel and after minute perusal of the record with their able assistant, we find that it would first be appropriate to read Rule 96 ZI as it stood before the amendment made on 2-6-1998 and the same reads as under:- "96ZI DISCHARGE OF LIABILITY FOR DUTY ON PAYMENT OF CERTAIN SUM. (1) Having regard to the average production of the embroidery per machine, and any other relevant factor, the Central Government may, by notification in the Official Gazette, fix from time to time, the rate per metre length of such machine, per shift, or per day, or per week, subject to such conditions and limitations as it may think fit to impose, and may fix different rates for such machines employed in the manufacture of different varieties of the embroidery or of the embroidery done on different varieties of base fabrics or for machines working at different speeds or for machines installed during different periods; and if a manufacturer whose application has been granted under rule 96ZH pays before the commencement of any shift a sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le that officer to verify the statement so filed. After the proper officer has completed the verification, the sum payable under sub-rule (1) in respect of such period shall be calculated by application of the appropriate rate to the metre length of all the machines employed by the manufacturer in each of the shifts during that period; and such sum shall be paid by the manufacturer in one lump sum into the Government treasury. (6) In this rule - (a) "metre length", in relation to a machine, means the distance between the points provided for the first and the last needles of the rollers on such machine; (b) "shift" means a period not exceeding eight hours working in a day, exclusive of rest interval, provided the work of the same kind is carried out by the same set of workers." 12. It would also be necessary to read the second proviso which was added by amendment dated 2-6-1998 in Rule 96 ZI(I) and the same reads as under:- "Provided further that no credit of duty paid on the inputs used in the manufacture of the embroidery and capital goods used within the factory of manufacture of such embroidery shall be allowed under Rule 57A, 57B or 57Q as the case may be." 13. The prohib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manufacture of the final products and the final products which have already been cleared from the factory alone is sought to be lapsed, that is, the amount that is sought to be lapsed relates to the inputs already used in the manufacture of the final products but the final products have already been cleared from the factory before 16-3-1995. Thus the right to the credit has become absolute at any rate when the input is used in the manufacture of the final product. The basic postulate, that the scheme is merely being altered and, therefore, does not have any retrospective or retro-active effect, submitted on behalf of the State, does not appeal to us. As pointed out by us that when on the strength of the rules available certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that right, which had accrued to a party such as availability of a scheme, is affected and, in particular, it loses sight of the fact that provision for facility of credit is as good as tax paid till ..... X X X X Extracts X X X X X X X X Extracts X X X X
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