ORDER
G.R. Sharma, Member (T)
1. The Collector (Appeals) in the impugned had held that it has been expressly mentioned in proviso to Rule 57F(3) that credit of specified duty in respect of inputs used in the final products cleared for export under bond or used in the intermediate products cleared for export in accordance with Sub-rule (2) shall be allowed to be utilised towards payment of duty of excise on similar final products cleared for home consumption on payment of duty. There is neither any exceptions incorporated in the said proviso nor any such exemption can be imported into it and therefore, he allowed the appeal on this count. The ld. Collector (Appeals) also held that Modvat credit on phosphoric acid used for purification is an input and therefore, is eligible for Modvat credit. On the question of caustic soda Lye the ld. Collector (Appeals) held that the appellants did not produce any documentary evidence of payment of duty and therefore, the credit of duty on caustic soda lye has rightly been denied. Being aggrieved by the order of the ld. Collector (Appeals), the present appeal has been filed by the appellant.
2. The facts of the case are that the respondents herein are engaged in the manufacture of soaps. They were availing also the credit of duty paid on inputs under the Modvat scheme. The Deptt. alleged that inputs obtained indigenously and used in the manufacture of soaps exported under bond under the DEEC Scheme were not entitled to Modvat credit inasmuch as export under DEEC/under Para 347(1) of Hand Book of Export Procedure 1990-93 stipulated that advance licence can be granted only if the assessee has not availed of the relief of credit of duty paid on the materials originally used in the manufacture of goods under Modvat scheme. It was also alleged that since the assessee had taken Modvat credit in respect of duty paid on indigenous material used in the exported soap and have also applied for advance licence for replenishment of the materials originally used in the manufacture of exported soap, the assessee was not eligible to take/avail Modvat credit in respect of duty paid on indigenous inputs used in the manufacture of soaps. It was also alleged that the assessee had used phosphoric acid for purification and since phosphoric acid is not an input used in the manufacture of soap, therefore, no Modvat credit was admissible to phosphoric acid. It was also alleged that for caustic soda lye, no duty paying document was produced and therefore, Modvat credit on caustic soda lye was not admissible. In reply to the show cause notice, the respondents herein contended that there was no provision of denying Modvat credit on the inputs used in the export product in the Modvat rules, that there was no correlation between the Import Policy and the Modvat credit taken on inputs used in the manufacture of export goods. In so far as phosphoric acid is concerned, the respondents herein submitted that phosphoric acid was an input and therefore, Modvat credit was admissible to them. After careful consideration of the submissions made, the A.C. confirmed the demand of Rs. 40,07,280.60 also holding that Modvat credit will not be admissible on phosphoric acid and caustic soda lye. The respondents therein filed an appeal before the ld. Collector (Appeals) who disallowed Modvat credit on caustic soda lye but allowed the appeal of the respondents herein on the other counts. Against this order, the appellant has filed the present appeal.
3. Shri Jangir Singh, the ld. DR submitted that as per the Import-Export Policy, advance licence is issued to registered exporter for import of materials without payment of duty and export of resultant products or replenishment of materials which have gone into the production of resultant products already exported in anticipation of grant of advance licence; that under the Import-Export Policy 1990-93, the assessee can apply for advance licence only if he did not avail of credit of duty paid on the inputs originally used in the manufacture of goods under Modvat scheme; that it was contemplated in the Import-Export Policy that the benefit of duty free imports is not permissible if the manufacturer availed of Modvat credit on the inputs used in the manufacture of finished products; that this was a statutory requirements; that the documents clearly indicate that the goods were exported under the DEEC Scheme; that it was an error committed by the assessee to have availed Modvat credit on the inputs while such credit was not available to them. The ld. DR therefore, submitted that Modvat credit has rightly been denied by the A.C. and that the order of the ld. Collector (Appeals) was erroneous inasmuch as he did not understand the implication of the various provisions of Import Policy and Rule 57F(3) of the Central Excise Rules, 1944.
4. Shri J.P. Kaushik, the ld. Advocate appearing for the respondents submitted that Modvat credit is taken and availed in terms of Section AA and Rules 57A and 57G; that credit of Modvat taken is utilised as provided for under Rule 57F. The ld. Counsel submitted that both the inputs and the final product were specified for purpose of Rule 57A; that requisite declaration was filed as required under Rule 57G; that the manner of utilisation of the inputs and the credit allowed in respect of duty paid thereon is provided under Rule 57F; that Rule 57(3)(a) provides: “(a) For the purpose of test, repair, refining, reconditioning or carrying out any other operation necessary for the manufacture of the final products and return the same to his factory for further use in the manufacture of the final product or remove the same without payment of duty under bond for export, provided that the waste, if any, arising in the course of such operation is also returned to the said factory.” He submitted that Rule 57F(3) is very clear that the goods on which Modvat credit under Modvat Rules is taken can be exported; that there was no condition adopted whatsoever nor can anything be imported into Rules unless the same is specifically provided for. He submitted that Modvat credit is therefore, correctly taken in respect of the goods exported.
5. In so far as the use of phosphoric acid is concerned, the ld. Counsel submitted that admittedly phosphoric acid is used for purification and thus it is used in or in relation to the manufacture of soap and therefore, it was an input and Modvat credit has rightly been claimed on this. No arguments were however, adduced in respect of caustic soda lye.
6. Heard the submissions of both sides. On careful consideration of the submissions and the evidence on record, we find that inputs as well as the finished products are specified products under Rule 57A. We also observe that requisite declaration was filed in respect of the inputs under Rule 57G. The only point of dispute is that the goods were exported under DEEC Scheme. We observe that Rule 57F provides for the manner of utilisation of the inputs and the credit taken. On scrutiny of this Rule we find that Rule 57F(3)(a) provides that the final product for which Modvat credit of duty has been claimed on the inputs can be exported under Bond. In the instant case, the goods were exported under Bond. Now whether the import of the material as replenishment in the exported goods permits taking of Modvat or not is a phenomenon subsequent to the export of the goods in question. In the instant case, we are concerned with the export of the goods which is the phenomenon precedent to the import of replenishment material and therefore, the relevant provisions applicable to the replenishment of the material cannot be imported into the Modvat Rules. The two situation are different. We therefore, agree with the findings of the ld. Collector(Appeals) holding that Modvat credit of inputs was correctly taken by the assessee in so far as the export of the finished product under Bond in the present case is concerned. We therefore, uphold the findings of the ld. Collector (Appeals) in this regard.
7. In so far as the use of phosphoric acid is concerned, we find that phosphoric acid is used for purification. Thus it is used in the process of manufacture of finished product (soap). Since it is an input and is used in the process of manufacture of soap, therefore, Modvat credit has correctly been allowed by the ld. Collector (Appeals) on phosphoric acid and we uphold his view.
8. In so far as caustic soda lye is concerned, we find that the respondents have not produced any duty paying document and therefore, Modvat credit has rightly been denied on caustic soda lye.
The appeal is therefore, disposed of in the above terms.