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1999 (5) TMI 625

..... s, for the Appellant. Shri K.L. Ramteke, JDR, for the Respondents. ORDER [Order per : G.N. Srinivasan, Member (J)]. - These two appeals have been filed against the decision of the two Order-in-Original bearing Order No. V.Adj. (Ch.30) 15-111/97 passed by the Commissioner of Central Excise, Mumbai II on 24-6-1998 whereunder he had held that the Modvat credit wrongly availed by the chemical division of the Appellant company have intentionally colluded with each other (i.e. two divisions of the same Company having different excise Registration numbers.) with a mala fide intention to defraud the Government of legitimate revenue. The Appellant Company s chemical division sold their entire production of Bulk drugs to the appellants pharmaceutical .....

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..... ication 32/88 and they paid their duty according to the tariff rate. In view of the payment of the duty at the full rate, pharma division took Modvat credit on the inputs received from the chemical division. The Department took objection to the pharma division taking Modvat credit at a higher rate. In this view that they ought to have taken the Modvat credit at a lesser rate. It was not possible for chemical division not to take benefit of exemption and to pay tariff rate of duty. According to the Department, the tariff rate of duty paid was not duty but was only deposit. The credit taken on such duty paid pharma division was improper. Two show cause notices were issued on 17-7-1997 for the period 23rd July, 1992, to June, 1993. The appella .....

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..... ll settled by long run of judgments of the Tribunal that assessee has an option to forego the benefit of an applicable exemption notification and to pay duty on the goods and that any consequential benefit available on payment of duty viz. Modvat credit of the duty paid should not be a benefit to the assessee. He cites the decisions of the Tribunal in Everest Converters v. C.C.E. [1995 (80) E.L.T. 91], Bansal Auto Parts Industries and SS Tin (P) Ltd. v. Collector [1998 (79) ECR 850 (T) = 1998 (28) R.L.T. 268]. He submitted that in terms of the Modvat rules the factum of payment on the inputs creates a right in favour of the assessee for the availment of Modvat credit. Once such payment is not challenged the Department cannot deny the Modvat .....

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..... red the rival submissions. In the show cause notice dated 17-7-1997 it is alleged as follows: 2. Whereas it further appears that M/s. B.W/(C.D) were availing the credit of duty paid on the inputs of Bulk drugs. Since the rate of duty payable on the inputs of Bulk drugs. Since the rate of duty payable on the inputs was 15% ad valorem and that on the bulk drugs was 6% ad valorem evidently, huge credit was accumulated in the book of accounts of M/s. B.W.(C.D) and there was no legal means with them to encash the same. Hence, the said M/s. B.W.(C.D) evolved a modus operandi in collusion with M/s. B.W.(P.D) according to which M/s. B.W.(C.D) filed a revised classification list w.e.f. 23-7-1992 for their bulk drugs and opted to pay 15% ad valo .....

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..... Excise duty on the additional duty of Customs under Section 3 of the Customs Act was only admissible for availing the credit; and that any deposit as referred to above was not, specified duty under Rule 57A. 4. Thus, M/s. B.W. (C.D) have, in collusion with M/s. B.W (P.D) contravened the provisions of Rule 9(1) read with Rule 49 and Rule 173 F(b) not properly determining the duty liability on their goods. They have also contravened the provisions of Rule 173B, and 173B by not properly under Rule 173G. Further M/s. B.W.(P.D) have also in collusion with M/s. B.W.(C.D) contravened the provisions of Rule 57A read with 57G with intent to evade payment of duty." 6. It is admitted fact that the two divisions are under same divisions .....

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..... y, an assessee cannot be denied the benefit of Modvat credit of duty paid on inputs used in the manufacture of final product on which duty is paid, even though the final product is exempt from duty. Thus position reverts to the circular of 1988 relied upon by the Appellants herein which, in our view, correctly reflects the legal position. In the subsequent decision of the Bansal Auto Parts Industries and SS Tin (P) Ltd. v. Collector [1998 (79) ECR 850 (T) = 1998 (28) R.L.T. 268 after considering the Everest Converters case and also Lakshmi Enterprises case, [1997 (96) E.L.T. 428 (Tribunal) = 1997 (23) R.L.T. 613 the final order of the Tribunal, the Tribunal held that the option is left to the assessee to have full exemption or pay duty and .....

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