ORDER
S.L. Peeran, Member (J)
1. This appeal arises from Order-in-Appeal No. 67/98 dt. 27.2. 98 passed by Commissioner (Appeals) Chennai confirming the demands in respect of Modvat credit availed by the appellants on the bulk supplies of pesticides “Bovistin” in the form of powder which were repacked and supplied by the appellants in smaller containers on payment of duty by utilising the duty paid on the build “Bovistin” Appellants had filed the classification list in respect of these repacking of pesticides supplied by BASF Ltd and the classification list was approved holding the product to be dutiable as pesticides under chapter sub- heading 3808.10. Therefore the prayer for utilising the Modvat on the duty paid on the bulk pesticides purchased from BASF Ltd was also been allowed and the matter had been fully regularised. There is no dispute on this point. However, after some time, the Department took a view that the repacking of pesticides at that time dies not amount to process of manufacture and the product was not dutiable and hence there was no question of taking credit on Modvat and hence such credits taken was required to be expunged or paid as short levied.
2. Appellants resisted the claim on the ground that the final product cleared by them in smaller packings is dutiable and the duty has been paid on the approved classification list and their Modvat declaration had also been accepted and the credits taken in respect of inputs was accepted on their clearing the goods in smaller packing on payment of duty. Therefore, they contended that changed view is not sustainable as there was no Revenue loss in the matter.
3. However, their pleas were turned down on the mere premise that the process of repacking of pesticides during the relevant period was not process of manufacture, no duty was required to have been paid by the appellants and there is no whisper in the order with regard to refund of the said duty by them on the final product at all. However, the Department is only interested in expunging the Modvat credit.
4. When the matter came up for hearing the stay application, the pleas of the appellants were accepted by the Tribunal and waiver of pre-deposit of entire duty and penalty was granted and the findings recorded by the Tribunal in the stay Order No. 817/98 dt. 11.8.98 in para 5 is extracted as under:-
On careful consideration of the submissions, we notice that appellants had manufactured pesticides by taking Modvat credit on the inputs and had paid duty also on the final product. They have filed Modvat declaration and RT-12 returns and all other statutory documents. If the Department felt that the final product was not dutiable, then they should not have collected the duty and not asked them to follow the statutory procedures. Be that as it may, even in the present case, there is no Revenue implication as the appellants are not seeking refund of their amounts and it is only a book exercise. There is no duty liability to the Department on the appellants’ utilising the Modvat credit or any amounts required to be refunded by them. We prima facie agree with the appellants’ contention and grant waiver of pre-deposit and stay its recovery during pendency of this appeal.
5. Ld. Advocate Shri Krishna Srinivasan submits that this view of the Tribunal expressed prima facie as above has since been accepted by the larger Bench of the judgment rendered in the case of Bansals Auto Parts Industries & S.S. Tins. (P) Ltd v. CCE, New Delhi as reported in 1998 (28) RLT 168 (CEGAT). He points out to para – 20 of the said judgment and submits that the Bench has specifically dealt with this point and therefore prima facie gets confirmed and hence their appeal is required to be allowed.
6. The findings given as at para-20 of the said judgment is extracted here in below:-
20. Surprisingly, in the instant appeals, though the final product has been cleared on payment of duty, by making debits in the accumulated credits, the Department is asking back for credit so availed by the appellants and there is not a whisper of the refund of the duty paid by the appellants on their final product. From the impugned order, I find that demands of duty equivalent to the credit utilized by the appellants have been confirmed against them on the ground that Modvat credit has been wrongly utilized by them. Now, that is the effect of this wrong utilization that the appellants were not entitled to make debit entries in their RG-23A Part (II). Presuming the Department’s stand to be correct, the effect would be that the debit entries made would be reversed in the RG-23A Part (II). This would not effect the final clearances, as they were, undisputedly, entitled to be cleared on payment of duty. Instead, the department has ordered for confirmation of demand of duty against the appellants equivalent to the credit utilised and retaining the duty paid on the final products. It may so happen that the final product has further gone into the manufacture of their item as an input and credit of duty paid on the same has been availed by the second manufacturer as Modvat credit. As such reversal of debit entries made originally would lead to complications and need to be availed. I also note that the appellants had availed credit and utilized the same for payment of duty on their final product. It they would not have adopted this course of action, they would have cleared their final product without payment of duty. So where is the loss of revenue in this transaction.
7. Ld. DR Shri S. Kannan counters the pleas of the Ld. Counsel on the ground that the final product was not dutiable at all on the mere plea that because appellants have chosen to pay duty through inadvertency or on their own understanding that cannot be regularised by granting them Modvat credit which in law they are not entitled to.
8. As regards duty paid wrongly on the final product, the question of adjusting them towards Modvat or refund does not arise as it is governed by a different procedure of refund under Section 11B and also governed by the aspect pertaining to unjust enrichment. He also points out to the findings given by the original authority on this aspect of the matter. He also points out that the Department has not aversed to give refund subject to the aspect of time bar. However, the appellants themselves have not chosen to claim refund or to accept the duties claimed for the final product which is not dutiable.
9. On a careful consideration of the submissions made, we notice that the department initially took the stand that repacking of pesticides amounts to manufacture and had accepted the classification list filed by the appellants and approved the same. They had directed the appellants to follow the excise procedures and had accepted the duty payments. The approval of classification list is done by the concerned jurisdictional Asstt. Commissioner which could have been reviewed by the Commissioner (Appeals). Revenue has not taken such a step but has accepted the point that the final product in the form of repacking of pesticides was goods liable to duty. Therefore, the subsequent acceptance of Modvat declaration and grant of Modvat credit cannot be agitated in the form of taking a different stand that the payments made on final product was not proper and that appellant are required to expunge the Modvat credit. This is precisely what the Tribunal has already expressed prima facie view and also has held in para 20 of the decision in the case of Bansal Auto Industries (supra). We are inclined to confirm our prima facie view and accept the view expressed by the tribunal in case of Bansal Auto Industries. Therefore, respectfully following the same ratio, we set aside the impugned order and allow the appeal.