TMI Blog1996 (3) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case. 3. The appellant company carries on business of manufacturing motor vehicles falling under sub-headings of the Chapter 87 of the Central Excise Tariff Act, 1985. The appellant company also manufactures internal combustion engines of motor vehicles, Shovels and Cranes and Steel Ingots and Steel Castings. The appellants are entitled to avail of Modvat facility in respect of the inputs used by them in or in relation to the manufacture of the said final pro- ducts. There are various common inputs like steel sheets, bars, billets, copper and brass sheets and strips, paints, chemicals and components which are used by them in or in relation to the manufacture of their final products. At the time of receipt or issue of the said common inputs, it is not possible for the appellants to identify the final products in which the same would be used. Hence, they found it impossible to maintain separate RG 23A Part II Register for each final product. In view of this practical difficultly they requested the Collector of Central Excise to permit them to maintain the said Register under three product groups, namely :- (i) Motor Vehicles, including internal combustion engines, (ii) Sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods cleared for home consumption were not similar products, the appellant company was entitled to the refund of Modvat Credit attributable to inputs used in the manufacture of the said exported motor vehicles and the assessments were all still provisional and necessary adjustments should be made. 7. After hearing the appellants the Assistant Collector concerned had accepted the appellants contention and following the judgment of the Supreme Court in the case of Nat Steel Equipment Private Limited v. Collector of Central Excise reported in 1988 (34) E.L.T. 8 held that utilisation of Modvat Credit relating to motor vehicles exported for clearance for home consumption, was proper and dropped the proceedings. 8. The matter was taken up in appeal before the Collector (Appeals) by the Department and the impugned order was passed. Ld. Collector of Central Excise (Appeals) by an order dated February 23, 1994 held that credit in respect of inputs used in the manufacture of motor vehicles exported falling under sub-heading Nos. 8706.20 and 8706.40, could not be used for payment of duty on the motor vehicles falling under sub-headings other than sub-heading Nos. 8706.20 and 8706.40. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ody-building was a process of manufacture is not correct. In this connection, he pointed out that subsequently it was introduced by Chapter Note 3 in the Central Excise Tariff Act that body-building amounts to manufacture. But for the said fiction subsequently introduced by Chapter Note 3, no manufacture of goods was involved in body-building. 12. It was further contended that even assuming that the motor vehicles cleared for home consumption and the exportable goods thereof, were not `similar products , the Collector should have held that the appellant company was entitled to the refund of Modvat Credit and in that event, no demand could be made from them. 13. It was also contended before us that the finding of the learned Collector (Appeals) that the question of refund was not an issue before him on the ground that appellants had not filed any such claim, is not correct. It was contended that since the Collector had permitted the appellants to maintain the Modvat account chapterwise and since no loss of revenue was involved by such procedure, the demand of duty is not in accordance with law. In support of his contention, the following decisions have been relied upon :- (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verned by the provisions of Section 11B. In such circumstances, he contended that the appellant company has not filed any refund claim in this behalf and the claim of refund cannot be considered by the Collector (Appeals) or the Assistant Collector concerned since the same was beyond the period of limitation. He, further, contended that the Tribunal and the other authorities functioning under the Act are statutory authorities and they cannot go beyond the Statute and grant a refund. In this connection, he relied upon the decision of the Supreme Court in the case of Doaba Co-operative Sugar Mills reported in 1988 (37) E.L.T. 478 (SC). Therefore, he stated that the inputs used in the final products cleared for export under bond and the products cleared for home consumption are not similar products and he further stated that since no refund application was filed in this behalf in time and since refund is governed by Section 11B of the Central Excises and Salt Act, 1944 the refund cannot be granted to the appellant company herein. So also, the Tribunal cannot go beyond the Statute and grant any such relief. 16. In a rejoinder, ld. Advocate, Shri Bajoria contended before us that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35% 87.04 8704.00 Motor vehicles for the transport of goods 25% 87.05 8705.00 Special purpose motor vehicles, other than those principally designed for the transport of persons or goods (for example, breakdown lorries, crane lorries, fire-fighting vehicles, concrete mixer lorries, road sweeper lorries, spraying lorries, mobile workshops, mobile radiological units) 25% 87.06 Chassis fitted with engines, for the motor vehicles of heading Nos. 87.01 to 87.05 8706.10 - For the vehicles of heading No. 87.01 15% 8706.20 - For the vehicles of heading No. 87.02 25% 8706.30 - For the vehicles of heading No. 87.03 35% 8706.40 - For the vehicles of heading No. 87.04 25% 8706.50 - For the vehicles of heading No. 87.05 25% 87.07 8707.00 Bodies (including cabs) for the motor vehicles of heading Nos 87.01 to 87.06 25% 87.08 8708.00 Parts and accessoris of the motor vehicles of heading Nos. 87.01 to 87.05 20% 87 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing with the domestic electrical appliances. In that decision at para 7 their Lordships of the Supreme Court held as follows :- 7. We agree that it is not necessary to be a domestic electrical appliance that it must be actually used in the home or the house. It must be of a kind which is generally used for household purposes. It appears to us that the types of items concerned in this appeal are generally used for household purposes and that is sufficiently good test for classification in the light of the explanation to Tariff Item No. 33C. 21. In that particular case, it was only held that the goods in question could be used generally for domestic purposes. But it is not necessary that it must be actually used in the house. But a chassis fitted with the engines will not be used generally as a motor vehicle for transport of goods or motor car for transport of persons or as a tractor and therefore, it cannot be said to be a similar goods. 22. The other decision relied upon by the learned Advocate in this regard has been reported in 1994 (72) E.L.T. 729 (Tribunal) in the case of Krishna Fabricators Pvt. Ltd. v. Collector of Central Excise. In that particular decision, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Hence, when the input is common for different final products, and all the final products are covered by the Notification issued under Rule 57A and such final products are cleared on payment of duty and not exempted, credit of duty paid on the common input can be utilised towards payment of duty on any of the final products covered by the declaration filed under Rule 57G. No quantumwise accountal of input for each final product or apportioning the duty credit for clearance of each of the dutiable final product is contemplated either under Rule 57F(3) or under Rule 57G(3). 25. These principles are well settled. But the point which is to be determined in this case is once if we come to the conclusion that the goods exported under bond are not similar goods as dealt with while dealing with the Issue No. (1), whether the demand itself is sustainable or not? 26. In order to appreciate the argument of the learned Advocate for the appellant company, it is necessary for us to deal with the Rule 57F(3) and the proviso thereon, which reads as follows :- Provided that the credit of specified duty in respect of inputs used in the final products cleared for export under bond or used i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The only issue raised is that the sub-headings have not been specified, and that the self-same goods are not cleared for home consumption. Since the rules provide for refund even when there is no adjustment possible, it is submitted that the demand of duty is not justified. It is also pertinent to note that all the assessments are still provisional and that there is no final adjustment of any duty in this regard so far. As on date provisional assessments cover the period mentioned in the show cause notice. Therefore, if there is any procedural requirement for availing of claims for adjustment, the same can be internally done within the department for the purposes of satisfying the relevant procedural conditions. Since the Notification for availment of Modvat clearly stipulates that relief is to be availed of against clearance of finished products which are covered by Notification, and since the exported goods and the goods cleared for home consumption are covered by the same notified chapter heading and also since all these types of goods are similar products for the reason that they are motor vehicles , it is submitted that the show cause notice initiated by the Superintenden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7. The application for refund together with the proof of due exportation and the relevant extracts of Form RG 23A in original are lodged with the Assistant Collector of Central Excise before the expiry of the period specified in section 11B of the Central Excises and Salt Act, 1944 (1 of 1944). 8. The refund of excise duty shall be allowed by the said Assistant Collector of Central Excise." 29. A perusal of the abovesaid Notification goes to show that the refund is subject to the provisions of Section 11B. Therefore, there is a specific method which is provided under the Scheme of the Act for claiming that amount i.e. by way of refund and this refund is governed by Section 11B of the C.E.S.A. If there is a particular mode provided under the Act, that mode should be followed by the appellant company and it is no answer saying that anyhow they would have got the refund and on that ground, the demand of duty is not justified. Demand of duty is justified in view of the fact that these are not similar goods as has been discussed by us above while dealing with the Issue No. (1). Therefore, the adjustment as is contemplated under Rule 57F(3) is not possible. If that were so, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilised wrongly. Thus we find no infirmity in the order of the Collector (Appeals). Accordingly, this appeal is dismissed. 31. [Contra per : P.C. Jain, Member (T)]. - I have carefully perused the judgment proposed by my learned brother Shri T.P. Nambiar, Judicial Member, but I regret, with respect, that I am unable to agree with the conclusion reached therein. Hence this dissenting order. I will not recapitulate the facts since these have already been set out by the learned brother in his order. 32. Issue involved is whether the demand raised against the Appellant for wrong utilisation of Modvat credit on inputs used in manufacture of goods exported is sustainable or not. Lower appellate authority has held that Rule 57F(3) permits utilisation of Modvat credit towards payment of duty on final products `similar to exported goods. Credit has not been utilised in `similar final products which in this case are motor vehicles falling under sub-headings other than sub-headings 8706.20 and 8706.40 pertaining to which the chassis fitted with engines were exported to Bangladesh. 33. Learned Advocate for the Appellants has pleaded that the credit has been utilised for `similar f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise Rules, 1944, have to be applied to the vast variety of excisable goods classified under the Central Excise Tariff under various Chapters, headings and sub-headings. Further classification of excisable goods has to be determined with reference to the various Section Notes, Chapter Notes and the general statutory Rules of Interpretation as given in Central Excise Tariff Act, 1985. Detailed classification with reference to the Central Excise Tariff Act, 1985 and the statutory `notes and rules of interpretation is only for the purpose of determining the rate of duty applicable on any excisable goods manufactured and intended to be cleared on payment of duty. Those Chapter notes, Section Notes etc. given in Central Excise Tariff Act, 1985 do not have relevance to interpretation of the provisions of Central Excise Rules, 1944 or of the Central Excises and Salt Act, 1944, unless the context otherwise so guides. Therefore, Chapter Note 3 of Chapter 87 relied upon by the learned lower appellate authority for the finding that `chassis of a motor vehicle is not `similar to motor vehicle with a body is of no help, in my view, in interpreting the provisions of Rule 57F(3). 36.1 We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... created. Such a legal fiction, as held earlier, has to be only for the purpose of determining the rate of duty in terms of the Central Excise Tariff Act, 1985 and not for the purpose of Modvat Rule 57F(3). I, therefore, hold that the very foundation of demand is untenable. It is liable to be set aside on this ground and I order accordingly. 36.4 If the test of `similarity is the same heading/sub-heading of the article, it would have been far easier for the rule-makers to use the expression final products falling under the same heading sub-heading as that of final products cleared for exports in the proviso to Rule 57F(3) and express their intention clearly. Since that has not been done, the word `similar needs to be given a wider meaning beyond the concept of headings/sub-headings of the Tariff. We know there are exemption notifications which give exemption to goods falling under certain headings/sub-headings thereby making the intention clear. 37. There is yet another plea by the learned Advocate for setting aside the demand. He submits that under Rule 57F(3), the Appellants had two alter- natives before it - firstly, either to utilise the credit earned on inputs utilised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time limit for refund, as held by the Hon ble Supreme Court in the case of Doaba Co-operative Sugar Mills (supra). Question of grant of refund at this stage, submits the learned JDR, does not arise when the time limit of six months as laid down in Section 11B read with the Notification No. 85/87-C.E., dated 1-3-1987 is long past now. 39. Learned Advocate Shri Bajoria submits that the Appellants have not applied for refund and so the question of time limitation would not arise. He has taken this plea of accrual of refund to them to resist the demand raised by the department for the reason that no loss of revenue has been caused or no extra benefit has accrued to the Appellant by adopting the course as they have done inasmuch as they had the second alternative open to them at that time. 40. I have carefully considered the pleas advanced from both sides. I agree with the contention of the learned Advocate that they had a bona fide belief of availability of the first alternative spelt out in Rule 57F(3). Their bona fides cannot be doubted because the second alternative of refund of such credit of equal benefit, if not more, was available to them at that time. Their bona fide belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s discussed. The department proposing to deny the first, the first alternative under Rule 57F(3) at a much later date and that issue being still in dispute, cannot take the plea of denying the second alternative only on the question of limitation. As pointed out, limitation is a dispensable requirement in such circumstances. It is appropriate to mention that Revenue s Appeal against Tribunal s judgment in Kothari Chemical (supra) was dismissed by the Apex Court as reported in 1995 (78) E.L.T. 141 (Court-Room Highlights). There is no dispute about any other condition of Notification 85/87. In any case, all other conditions are also procedural and are, therefore, liable to be waived in the facts and circumstances of this case as set out above. What the revenue seeks to recover by denying the benefit of first alternative under Rule 57F(3) would have been available to the Appellants by way of refund of such credit. 41. In view of the foregoing discussion, demand is not sustainable on this ground as well Appeal is, therefore, allowed with consequential relief to the Appellants. Whether in the facts and circumstances of this case, demand of duty as confirmed in the impugned order ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imself. Accordingly, their utilisation of the Credit amount in question is correct. He pleaded that this view may be concurred with. Turning to their alternative plea regarding refund, the learned Senior Counsel stated that they are not actually pressing for refund. This was only their defence against the demand for duty by disallowing the Credit. Their refund claim has been held to be subject to the condition under Section 11B of Central Excises and Salt Act, 1944. In this connection, Shri Bajoria pointed out that a refund claim by them cannot be said to be barred by limitation at all. Refund is to be allowed only if it is not possible to utilise the Credit for payment of duty on similar products cleared for home consumption. In their case, they had, in a bona fide manner utilised the Credit in such a manner and the Assistant Collector had also allowed them such a facility. When it was alleged that Credit could not be utilised for payment of duty on their clearance of Motor Vehicles for home consumption, they had raised the plea before the Collector (Appeals) while countering the Department s appeal that if Credit could not be so utilised by them, then refund should be admissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .06. Thus 87.06 also covers Motor Vehicles. That heading actually mentions Chassis fitted with engines for Motor Vehicles of Headings 87.01 to 87.05. Thus Chassis are Motor Vehicles themselves falling under Tariff Heading 87.06. This position has not been taken note of in any of the Orders including the Orders of the two Learned Members who have passed their separate and opposing Orders. Shri Bajoria reiterated his plea that the Order proposed by Learned Technical Member may be concurred with. 46. I have taken note of the arguments advanced before me. I have perused the papers. I have carefully gone through the two Orders prepared by my Learned Brothers. The first question is whether the goods exported by the appellants namely Chassis for Motor Vehicles (of Heading Nos. 8702.20 and 8702.40) and classifiable under 8702.60 were goods similar to Motor Vehicles falling under other sub-headings of Chapter 87 or whether the finding that they were not, as held by Collector (Appeals) in his impugned Order which finding has been upheld by Learned Judicial Member in his proposed Order, is to be preferred and concurred with by me discarding the opposite view taken by the Learned Technical M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cles namely (i) Chassis and (ii) Motor Vehicles with a body - been dissimilar and were different goods, there was no need for a special definition in the Chapter Note in question. He has referred to the Judgment of Punjab and Haryana High Court in Darshan Singh Pavitar Singh v. Union of India reported in 1988 (34) E.L.T. 631 which view was upheld in the letters patent appeal. The said Chapter Note had been enacted to get over the problem by creating a legal fiction which will not apply to other provisions like 57F(3). The Learned Technical Member has then noted that if the test of similarity is the same Heading/Sub-heading of the goods, it would have been easy for the Rule-Makers to use the expression, final products falling under the same Heading/ Sub-heading as that of final products cleared for exports in the proviso to Rule 57F(3) and expressed their intention clearly. Since that has not been done, the word, `similar needs to be given a wider meaning beyond the concept of Headings/Sub-headings of the Tariff. He has taken note of the argument advanced on behalf of the appellants that the Chassis are also Motor Vehicles under Chapter 87 and they are also registered as Motor Ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants if it is held that they were not eligible to use the Credit in the manner for payment of duty on their clearances for home consumption. I agree with the view expressed by the Learned Technical Member for the reasons spelt out by him and the additional reasons spelt out hereunder. No doubt, statutory authorities are bound by the time-limits prescribed under the Statute. Refund of duty under Section 11B is for refunds claimed by a manufacturer of the duty paid by him. The refund under Rule 57F(3) is an exceptional benefit where a manufacturer is to be granted refund of duty paid, not by him, but by the manufacturer of the inputs in question. The inputs are used in or in relation to the manufacture of the final products exported in bond and the Credit of Duty, if it could not be utilised for the payment of duty on similar final products cleared for home consumption, then the Credit amount is to be adjusted by refund. Refund is thus the second alternative and is to be allowed by the Department only if the first alternative of payment towards duty on similar products cleared for home consumption, is not available. In the instant case, the appellants had utilised the dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes. 7. The application for refund together with the proof of due exportation and the relevant extracts of Form RG23A in original are lodged with the Assistant Collector of Central Excise before the expiry of the period specified in section 11B of the Central Excises and Salt Act, 1944 (1 of 1944)." 49. Section 11B is referred to in para 7. It is laid down that the application for refund is to be lodged with the Assistant Collector before the expiry of the period specified in Section 11B of the Central Excises and Salt Act, 1944. Para 2, however, contains a condition that the claims are submitted not more than once in any quarter in a calendar year. This may create problems in given cases, if a manufacturer is unable to file his claim in the particular quarter when it is due to be filed. In the next quarter or the subsequent quarter when time-limit under Section 11B may be available, he will not be able to file it within six months, if in that next or subsequent quarter, he has filed other refund claims. A condition that prevents the manufacturer from filing a refund claim within the statutory limit permissible is not in order. 50. On the question of specified period in Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason, I hold that the second alternative of refund cannot be denied to them on the ground of limitation. 51. It was argued by Shri Bajoria, learned Senior Advocate that they are not claiming refund in cash but that ground is advanced only to defend themselves against the demand. The said plea did not find favour with Learned Judicial Member who observed that if there is a specific mode for claiming refund then that particular mode should have been followed and it is no answer to say that since they are entitled for the refund, the demand itself is not justified. With respect, I would like to state that since the claim for refund has been made as an alternative ground at the appropriate stage of reply to the show cause notice in the event of a decision holding that Credit cannot be utilised for payment of duty, the claim cannot be held to be barred by limitation. I accordingly, agree with the view of the Learned Technical Member. I agree with the submission that there is no revenue loss for the Government in the matter. For the goods exported, the appellants could have followed either the procedure of rebate after payment of duty or claimed drawback. Both these possibilities ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 642 which took such a view with reference to the corresponding and analogous provisions of Rule 56A under the Proforma Credit Scheme. The Bench also took note of the instructions of the Government contained in letter F. No. 211/2/73-CX. 6, dated 3-4-1975 (Circular 10/75-CX. 6), issued in consultation with the Ministry of Law. Relevant extracts of the latter s advice are reporduced below :- 7. Clause (i) of the proviso to sub-rule (2) of rule 56A, as referred to above, refers to the inapplicability of proforma credit to finished products which are either exempted from the whole of duty or are chargeable to nil rate of duty. 8. The term `exemption , as far as Central Excise duty is concerned, has a definite connotation in that such exemption will have to be attributable to a notification by the Central Government, as contemplated in Rule 8 of the Central Excise Rules, 1944. Since the said rule empowers the authorisation of exemption of duty, the term `exemption as used in other 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-f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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