TMI Blog1993 (12) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the said notification. 2.In order to appreciate the grievance of the appellants-authorities, it is necessary to note a few relevant facts leading to these proceedings. 3.The first respondent is a Public Limited Company incorporated under the Companies Act, 1956 which is engaged in the manufacture of vege- table products (Vanaspati). The second respondent - original second petitioner is a share-holder of the original first petitioner Company. It is the case of the respondents original writ petitioners that Vanaspathi manufactured from raw oils is subjected to various processes before latter can be converted into Vanas-pathi. That under Section 3 of the Central Excise Act, the final product Vanas-pathi manufactured by the respondents is excisable. That at the relevant time, for the excise duty leviable from 1st March, 1987 the appellant authorities inserted Rule 57K to 57P in the Central Excise Rules, 1944. They were inserted under a new Section AAA in Chapter V. It dealt with credit of money in respect of certain materials used in the manufacture of certain excisable goods. The case of the respondents is that in exercise of the powers conferred by Rule 57K, the Central G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal benefit of the said notification. According to the respondents for every tonne of Vanaspati being the final product cleared at the factory gate as against the liability of Rs. 1900/- per metric tonne of excise duty, the respondents were entitled to debit Rs. 1,000/- to the account of credit earned under new Notification No. 45/89 and the balance of Rs. 900/- could be adjusted by debiting the accumulated credit account so far as the accumulated credit under old Notification No. 27/87 was concerned and thus the respondents were not liable to pay in cash any excise duty for future clearances of final product Vanaspati oil and that the insistence of the Department that for even such future clearances despite the balance of accumulated credit under old notification, the respondents were to pay per tonne in cash Rs. 900 and could get the past accumulated credit adjusted only by debit entry of Rs. 1,000 was unjustified and illegal. 5.The learned counsel for the appellant authorities submitted before the learned Single Judge that accumulated credit under the Old Notification No. 27/87 lapses with rescission of the old notification. So far as the new Notification No. 45/89 was concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the accumulated credit account and Rs. 900 remaining part of the duty had to be paid in cash and the respondents cannot get double debits benefit under the said notification. 7.The learned counsel for the respondents, on the other hand submitted that the order passed by the learned Single Judge was perfectly justified, that no argument about the premature filing of the writ petition was submitted by the appellants before the learned Single Judge, that in any case, the respondents had submitted that the notification rescinding the earlier Notification No. 27/87 was ultra vires and illegal. That such a contention could not have been canvassed before the departmental authorities and therefore, the writ petition was maintainable. On merits, it was submitted that a number of High Courts namely, Gujarat High Court. Andhra Pradesh High Court, Punjab and Haryana High Court and Delhi High Court had taken the view on this very scheme of the rules and the notifications that accumulated credit under Notifi- cation No. 27/87 did not get effaced nor did it lapse on the rescission of the said notification and with the advent of the new Notification No. 45/89 respondents became entitled to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in, or imported by land into, any part of India as, and at the rates, set forth in the Schedule to the Central Excise Tariff Act, 1985. The word `prescribed' is defined by Section 2 of the Act to mean prescribed by rules made under this Act. Section 37 amongst others confers rule making power to the Central Government. Sub-section (1) thereof lays down that the Central Government may make rules to carry into effect the purposes of this Act. Sub-section (2), Section 37 says; in particular, and without prejudice to the generality of the foregoing power, such rules may ...... (ib) provide for the assessment and collection of duties of excise, the authorities by whom functions under this Act are to be discharged, the issue of notices, requiring payment, the manner in which the duties shall be payable, and the recovery of duty not paid. In exercise of this rule making power amongst others the Central Government has framed rules called the Central Excise Rules, 1944. Chapter V of the Rules deals with manufacture of goods other than salt. The said chapter consists of various sub-parts. AAA thereof deals with credit of money in respect of certain raw materials used in the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - writ petitioners had ample remedy under the Act to file objections to the show cause notice and ultimately if decision went against them, they could pursue remedy under the Act before appropriate authority. The writ petition therefore was required to be dismissed as premature. As a general proposition of law no exception could be taken to the aforesaid contention of learned counsel for the Revenue. However, on the peculiar facts and circumstances of this case it is too late to entertain such a contention in this appeal nor can such contention be entertained even on merits. The reasons are obvious. Such a contention does not appear to have been raised for consideration of the learned Single Judge who allowed writ petition after hearing learned counsel for both the sides. On the contrary it appears that both the sides joined issues on merits and invited the decision of the court thereon. Therefore, it can be said that the Revenue had not pressed this point before the learned Single Judge. Learned counsel for appellant submitted that such a contention was raised but does not appear to have been dealt with. If that is so it was open to the learned counsel for the Revenue to request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finished product of vanaspati had to be paid in cash to the department. It is also to be kept in view that as per Rule 57N accumulated credit of money, allowed in respect of inputs could be utilised towards payment of duty of excise on the final products in or in relation to the manufacture of which such inputs were used. It is also not in dispute that respondents filed requisite declaration as per Rule 57-O. Chapter VII(A) deals with the removal of excisable goods on the determination of duty by producers, manufacturers or private warehouse licensees. Rule 173G deals with the procedure to be followed by the assessee. Sub-rule (1) of Rule 173G provides that : "Every assessee shall keep an account-current with the Collector separately for each excisable goods falling under different Chapters of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), in such form and manner as the Collector may require, of the duties payable on the excisable goods and in particular such account (and also the account in Form R.G. 23, if the assessee is availing of the procedure prescribed in rule 173K) shall be maintained in triplicate by using indelible pencil and double-sided carbon, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umulated credit available to a manufacturer of finished products so far as notification under Rule 57K is concerned. It is difficult to appreciate how the balance of credit as found computed in Column XI of Part II of RG Form 23(B) would get automatically wiped off the moment the parent notification under Rule 57K gets rescinded. No Rule to that effect is found under Part AAA of Chapter V of the Central Excise Rules. On the contrary Rules 57N and 57-O r/w Form RG 23(B) Part II clearly indicate that such accumulated credit earned by a manufacturer during the currency of notification under Rule 57K enures for his benefit and becomes available as a reservoir, by utilising which, future clearances of finished products which have used permissible inputs could be effected. Permissible debit entries could be made by the manufacturer in this running current account so long as accumulated credit balance is available for the purpose. It is therefore not possible to agree with the contention of the learned counsel for the appellant that the moment Notification No. 27/87 got rescinded, the entire balance of accumalated credit lying in the current account maintained during the currency of not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the rules and the notifications for payment of excise duty on Vanaspati and soap manufactured by them after 25-8-1989." 16.A Division Bench of Punjab Haryana High Court consisting of J.V. Gupta, Ag. C.J. M.S. Liberhan, J., in the case of Amrit Banaspati Co. Ltd. v. Union of India - 1990 (50) E.L.T. 64 (P H) - speaking through M.S. Liberhan, J., held that such accumulated credit during the currency of notification of R. 57K would be available to the concerned manufacturer under the doctrine of promissory estoppel. It was observed that it is unconscionable and unjust not to allow the petitioners to utilise the credit already earned towards the payment of excise duty in terms of the Scheme as prevalent when the credit was earned. 17.In the case of Agarwal Industries Ltd. v. Union of India in 1992 (57) E.L.T. 561 (A.P.), a Division Bench of the Andhra Pradesh High Court consisting of Yogeshwar Dayal, CJ, (as he then was) and Upendralal Waghray, J., also considered this very scheme and agreeing with the view of the Gujarat, Delhi and Punjab Haryana High Courts held that Rule 57N r/w Notification No. 27/87, dt. 1-3-1987 conferred a right on the petitioner to utilise the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to pay in cash any amount of excise duty. This submission can be highlighted by taking the following example : If Rs. 5000/- stand to the credit of the manufacturer of vanaspati, which he has earned during the currency of earlier Notification No. 27/87 and a further amount of Rs. 5000/- is earned by way of credit under the new Notification No. 45/89, when such manufacturer of vanaspati wants to clear one tonne of finished product of vanaspathi the duty leviable on this one tonne would be Rs. 1900/- per tonne. For discharging this duty liability the manufacturer could debit maximum amount of Rs. 1000/- to the accumulated credit account under new Notification No. 45/89. While the balance duty of Rs. 900/- can be discharged by his effecting a further debit entry of Rs. 900/- to its accumulated credit account under the earlier Notification No. 27/87, meaning thereby so far as these two sources of accumulated credit accounts are available to him, he need not pay any duty in cash for the cleared final product and can discharge his duty liability by effecting these two debits." This according to the learned counsel for the respondent-petitioner is the effect of double benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in service in connection with utilisation of accumulated credit under the old notification after its rescission. 23.Having given our anxious considerations to the rival contentions we have reached the conclusion that there is lot of substance in what is submitted by the learned counsel for the appellant and it is not open to manufacturer of Vanaspathi to insist on clearing his finished product without paying any amount of cash duty by merely effecting two debit entries in the same accumulated credit account maintained as per Form RG 23(B) Part II. 24.We now proceed to amplify our aforesaid conclusion. The credit accumulated under earlier Notification No. 27 of 1987 itself provides that the grant of credit and utilisation thereof, shall, in addition to the provisions of the said Section, meaning Section AAA of Chapter V be subject to the following conditions, namely (i), (ii) and (iii). the credit shall be taken only in respect of the quantity of(i) oil subjected to hydrogenation on or after the 1st day of March, 1987 for the manufacture of the said final products and the credit shall be taken only on the date on which the oil has been so hydrogenated; the credit taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition No. (iii) governing the limit of utilisation of such accumulated credit cannot be ignored while deciding the question as to how the accumulated credit is to be utilised. It is also pertinent to note that under new Notification 45/89 similar condition like condition No. (iii) is imposed. It is not possible to agree with the contentions of the learned counsel for the respondent-petitioners that on the rescission of parent Notification No. 27/87, condition (iii) regarding the manner of utilisation of accumulated credit would cease to exist and the fetter on the utilisation of accumulated credit would not survive. It is nowhere provided in the relevant rules or the notification that the accumulated credit can be utilised after the rescission of the notification in any unlimited manner. In this connection, it is necessary to note that the accumulated credit account is only one and single account as seen from Form No. RG 23 (B) Part. II which shows only one running current account where at any time there is only one balance amount of accumulated credit. It is, therefore, difficult to appreciate the contention of the learned counsel for the respondents that qua finished product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , cannot be subject to the condition of utilisation of credit as found in the parent Notification No. 27 of 1987. 26.So far as the contention of the ld. Counsel for the respondents that if this view is taken, earlier accumulated credit would be merely a paper credit also does not stand scrutiny. The additional benefit under the new notification 45 of 1989 when made available would mean that accumulated credit account would be further hiked by the credits which are earned during the currency of the later notification. Thus the earlier accumulated credit account would get inflated from time to time by the influx of additional credits earned during the currency of the later Notification 45 of 1989. Thus the entry point would remain open so far as the accumulated credit account is concerned. But so far as exit point is concerned namely, the debiting of this accumulated credit account, it will be governed by the express terms and conditions of both these notifications. The learned Counsel for the respondent submitted that even if the manufacturer is permitted to effect double debits to the accumulated credit account, he would not be committing breach of any of the conditions of both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be paid in cash. That condition would stand violated the moment it is insisted that the manufacturer of such final product need not pay anything in cash and can discharge his tax liability by effecting two debits. It is also not possible to agree with the contention of the learned counsel for the respondent that in such a case accumulated credit under the old notification would remain a paper credit. The following illustration will amply demonstrate how that contention cannot be accepted and how the benefits of both the notifications regarding accumulated credit can be made available to the manufacturer of final product. Supposing under the old Notificaiton No. 27 of 1987 Rs. 5,000/- are in balance as accumulated credit. If that notification is rescinded and is not followed by a new notification of similar nature, then this Rs. 5,000/- can be utilised by the manufacturer for clearing any future 5 tonnes of vegetable Vanaspathi and for these five clearances on every occasion, he can pay Rs. 900 in cash out of Rs. 1,900/- being the total duty per tonne and can effect a debit of Rs. 1,000/- per tonne in the accumulated credit account. The result will be that five metric tonnes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut also will be entitled to the further benefit of accumulated credit that accrued to him under the new Notification 45 of 1989. It is, therefore, not possible to agree with the contention of the learned counsel for the respondents that the accumulated credit under the old notification would remain a paper credit and would be of no real effect to the manufacturer, in such a case. It has to be kept in view that notifications under Rule 57K are in the nature of concessions given to the manufacturers of excisable commodity to pay off the excise duty in the manner provided by the notifications. The chargeable event is the manufacture of excisable commodity. Once it is manufactured, the charge settles. It becomes effective so far as collection of duty is concerned when the manufactured item leaves the factory gate. It is at that stage that the charge is enforced. While enforcing that charge, if the Rule making authority has given any concession in the mode of collection of duty as per notification under Rule 57K, it is only that mode subject to the conditions imposed therein, that will be operative and no manufacturer can insist that the concession given to him under the notification sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 900 per metric tonne, respondents will not be entitled to effect any further debit to the accumulated credit account. It will also be directed that the benefit of subsequent Notification No. 45 of 1989 in so far as it entitles the manufacturer to earn further credit under the said notification will be available to the respondents-writ-petitioners but the utilisation of the accumulated credit under both the Notifications 27/87 and 45/89 will be subject to the upper limit of Rs. 1000/- per metric tonne of finished product cleared at the factory gate and not more. Both the sides will be accordingly required to adjust the equities, rights and liabilities in connection with payment of excise duty on the cleared final finished product Vanaspathi in the light of the aforesaid directions. It will be open to the Department to take appropriate steps for recovering the Duty payable on the cleared consignments of Vanaspathi pending these proceedings to the extent of the Duty which exceeds Rs. 1000/- per MT. of the cleared consignment. As and when such proceedings are initiated after hearing the respondents appropriate orders can be passed in the light of the present order, and if any reco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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