ORDER
P.G. Chacko, Member (J)
1. M/s. Autolite (India) Limited [in short, M/s. Autolite] are manufacturers of automobile head-lamps falling under Chapter Sub-Heading (CSH) 8512.00 of the Schedule to the Central Excise Tariff Act, 1985. One of the main components of their product is glass lens obtained by a moulding process involving the use of moulds consisting of Dies, Plungers and Rings. A complete mould for glass falls under CSH 8480.10 and parts thereof are classifiable under CSH 8480.90. Under Notification No. 67/95-CE., dated 16-3-95, the Central Government exempted from duty of excise, capital goods as defined in Rule 57Q of the Central Excise Rules, 1944 manufactured in a factory and used within the factory of production. During 1-4-1995 – 6-2-98, M/s. Autolite manufactured Dies, Plungers and Rings and cleared the same out of their factory under invoices for captive consumption without payment of duty, claiming exemption under the above Notification. The department detected this activity and investigated the matter. During the course of investigations, M/s. Autolite paid an amount of Rs. 25 Lakhs towards duty on the clearances. On the basis of the investigative findings, the department, invoking the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944, issued show cause notice (SCN) dated 24-9-99 for recovering duty from the company and imposing penalties on the company and its Director, Sh. M.P. Gupta. The SCN was contested by the noticees on classification of the goods, valuation of the goods and quantification of the demand and also on the ground of limitation. The Jurisdictional Commissioner, after examining the parties’ contentions in detail and analysing the evidence in the case, passed the following order :-
“(I) I confirm the demand of CE duty Rs. 1,22,71,810/- (Rupees one crore twenty two lakh seventy one thousand eight hundred & ten only) under rule 9(2) read with Section 11A(2) against M/s. Autolite India Ltd., Jaipur. I also appropriate an amount of Rs. 25 lacs, already deposited to the Govt. account which will be adjusted against the above confirmed demand.
(II) I also impose a penalty of Rs. 63,34,476/- (Rupees Sixty three lakh thirty four thousand four hundred and seventy six only) equal to the duty evaded from 28-9-96 to 19-12-97 under Section 11AC on M/s. Autolite India Ltd., Jaipur. (III) I also direct them to pay appropriate interest on the demand of CE duty of Rs. 63,34,476/- (Rupees Sixty three lakh thirty four thousand four hundred and seventy six only) pertaining to period 28-9-96 to 19-12-97 under Section 11AB of the Act. (IV) I also impose a penalty of Rs. 75,00,000/- (Rupees Seventy five lacs only) under Rule 9(2), 52A, 173Q, 209 & 226 of Central Excise Rules, 1944 on them. (V) I also impose a penalty of Rs. 20,00,000/- (Rupees Twenty lacs only) on Shri M.P. Gupta, Director of the Company under Rule 209A of Central Excise Rules, 1944." The above order is under challenge in the appeals, E/2175/2000 and E/2176/2000 filed by M/s. Autolite and Sh. M.P. Gupta respectively. 2. Examined the impugned order, grounds of the appeals, and other records. Heard both sides.
3. Ld. Advocate Shri V. Lakshmikumaran reiterated the grounds except Ground-B stated in the appeal memoranda. He placed strong reliance on the Tribunal’s decision in Monica Electronics v. CCE, New Delhi [2000 (123) E.L.T. 1047 (Tribunal) = 2000 (39) RLT 312] in support of the appelants’ plea that Rules 57-S(8) to 57-S(10) could have been resorted to by them ( in the event of the benefit of the Notification not being admissible to them) so that there could have been only a revenue neutral situation resulting from payment of duty on the goods in question. In the context of arguing further on limitation, the Counsel relied on the Tribunal’s Larger Bench decision in Jay Yuhshin Ltd. v. CCE, New Delhi [2000 (119) E.L.T. 718 Ld. SDK Sh. K.K. Goel reiterated the findings of the adjudicating authority.
4.1 We have carefully considered the submissions. The classification dispute in respect of the goods viz. Dies, Plungers and Rings manufactured by M/s. Autolite and removed out of their factory without payment of duty to lens manufacturers at Firozabad during 1-4-95 to 6-2-98 has not been pressed before us by the appellants’ Counsel. We, therefore, uphold, at the outset, the decision of the Commissioner classifying the above goods as parts of moulds under CSH 8480.90.
4.2 M/s. Autolite had, admittedly, no facility in their factory for manufacture of glass lenses. They manufactured Dies, Plungers and Rings in their factory and removed the same without payment of duty to lens-manufacturers at Firozabad through their Branch Office there. The said lens-manufacturers manufactured glass lenses, using moulds assembled from the above parts, and cleared such lenses, on payment of duty, to M/s. Autolite and the latter took Modvat credit of such duty and availed the same for payment of duty on their final product. These facts have been admitted by Sh. M.P. Gupta and other functionaries of the company whose statements were recorded by Central Excise Officers under Section 14 of the Central Excise Act. Thus it has been clearly proved by the department that the goods removed from the factory of M/s. Autolite without payment of duty were not captively consumed by them and, therefore, such goods were not exempted from duty under Notification No. 67/95-C.E. The Commissioner’s finding on the duty liability in respect of such goods has only to be sustained.
4.3 On the valuation issue, we find that it is the value declared by M/s. Autolite themselves on their invoice issued at the time of removal of the goods from the factory that has been adopted by the Commissioner. Ld. Counsel has argued that the price shown on invoice No. 743, dated 26-9-97 cannot be accepted as correct value of the goods cleared from the factory over a period of time. His further reasoning is that the goods covered by the said invoice had not been manufactured for captive consumption at all and that its price was inclusive of cost of development of tools for its own manufacture. We are not impressed by these arguments. The prices shown in the invoices issued for removal of the goods were correct and reliable prices inasmuch as the same were declared by the party with the intention of availing total exemption from payment of duty under a Notification. All the goods in question were admittedly cleared out of the factory. Such clearance was only for home consumption and not for captive consumption. Therefore, Id. Counsel’s submission that the goods covered by invoice No. 743 had not been manufactured for captive consumption and hence its price could not be adoptable as value of goods cleared for captive consumption does not reflect a prudent reasoning. Moreover, as found by the Commissioner, M/s. Autolite themselves had cleared and sold like goods to M/s. Anushikha Autolite, Jaipur at the same price as, or even higher price than, the price declared in the aforesaid invoice No. 743, dated 26-9-97. This finding of the adjudicating authority has not been challenged in the present appeals. For these reasons, we hold that the Commissioner has correctly valued the goods under Rule 6(b){i) of the valuation Rules on the basis of the price declared by the assessees themselves in their invoices.
4.4 As regards quantification of duty, we observe that the demand had been raised on the goods cleared from the factory under cover of 108 challans. The appellants have submitted a statement (as Annexure-7 to the appeals) prepared on the basis of the said challans resumed by the Central Excise Officers. According to the statement, 162 dies and 212 plungers were removed from their factory to Firozabad during the entire period of dispute; 137 dies and 167 plungers were returned to the factory; and, out of the goods so returned, 15 dies and 2 plungers were for destruction and the remaining dies and plungers were for repairs. The appellants have relied on the above statement to support their contention that the quantity of goods actually manufactured and cleared from the factory is much less than that of the goods on which duty has been confirmed. The appellants have a further grievance that the Commissioner demanded duty doubly on the goods removed from the factory from December 1996 to December 1997 – firstly on the basis of the production record of the factory and then on the basis of the invoices. The appellants’ contention is that the production of the period April to October 1996 was recorded in RGI register from December 1996 only and the goods were removed from the factory during December 1996 to December 1997. They complain that their “work-in-progress (WIP) report” resumed by the officers has been treated as “work completion report” by the Commissioner and the unfinished goods entered in the WIP report has been treated as finished goods for charging duty. They have further submitted that all the goods shown in the WIP report for the period upto 31-10-1996 also figure in the computerized WIP of November 1996. It appears to us that the Commissioner has not applied his mind to the above contentions of the assessee which require to be examined on merits by the adjudicating authority so as to obviate any double demand of duty on the same goods.
4.5 There has been forceful arguments by both sides on the question of time bar. Ld. Advocate has argurd that there was no reason for the department to invoke the extended period of limitation by attributing to the assessee any wilful intent to evade payment of duty inasmuch as there would have been only a revenue neutral situation even if duty had been paid as demanded on the parts of glass moulds. He has explained “the revenue neutral situation” by quoting from para (F.3) of the appeal memo thus :-
“Going by the facts, admitted in the show cause notice, the lens manufacturing factory was entitled to avail Modvat credit on the moulds and dies cleared from the factory of the appellant. The credit so availed could have been utilized for payment of duty on the glass lens brought to the appellant in the form of Modvat credit to be utilized for payment of duty on the final product. The entire exercise of payment of duty on the moulds and dies is Revenue Neutral and has not resulted in any loss to the exchequer. The appellants have also not gained, in any manner, by removal of goods without payment of duty.”
From the above account of the plea of “revenue neutrality”, we note that, even according to the appellants, one of the factors contributing to the revenue neutral situation is that Modvat credit of any duty paid by them on Dies, Plungers and Rings would be taken by the lens – manufacturers at Firozabad and utilized for payment of duty by the latter on glass lenses cleared to the former. In Jay Yuhshin’s case (supra), the Tribunal’s Larger Bench, in settling the question whether availability of the benefit of Modvat credit to create a revenue-neutral situation would be sufficient ground for disproving an allegation of intention to evade duty, laid down as under :-
“(c) With particular reference to Modvat scheme (which has occasioned this reference) it has to be shown that the Revenue neutral situation comes about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee’s manufactured goods;”
Since, in the instant case, the revenue neutral situation as visualized by the appellants depends on the eventuality of the lens-manufacturers of Firozabad taking Modvat credit on the goods cleared to them by the appellants, the above Larger Bench ruling works against the appellants. Above all, the admitted fact that the Firozabad parties cleared glass lenses to the appellants on actual payment of duty would also deal a blow to the revenue neurality plea.
4.6 Yet another argument of the Counsel, advanced in the context of pleading revenue neutrality, is that the Dies, Plungers and Rings could have been sent outside the appellants’ factory in accordance with Rules 57-S (8) to (10) without payment of duty, in which event the appellants could have debited the duty in the inputs credit account and credited the equivalent amount in the capital good’s credit account. We have to reject this argument as well, following the view recorded by the Larger Bench in para 13(a) and (b) of its judgment as under :-
(a) Revenue neutrality being a question of fact, the same is to be established in the facts of each case and not merely by showing the availability of an alternate scheme;
(b) Where the scheme opted for by the assessee is found to have been misused (in contradistinction to mere deviation or failure to observe all the conditions) the existence of an alternate scheme would not be an acceptable defence;
M/s. Autolite, by removing parts of moulds out of their factory without payment of duty under invoices for captive consumption with intent to enjoy the benefit of exemption under Notification No. 67/95-C.E., misused the scheme of exemption. Therefore the plea of existence of an alternative scheme under Rule 57-S(8) to (10) would not constitute valid defence vis-a-vis the department’s allegation of ‘intent to evade payment of duty’. In view of this position, the Tribunal’s decision in Monica Electronics (supra) appears to be of no avail to the appellants.
4.7 Unlike M/s. Autolite (India) Limited, M/s. Monica Electronics had taken prior permission of the jurisdictional Commissioner for removing moulds (apparently procured from the market), under Sub-rule (8) of Rule 57-S, without payment of duty to a job-worker for manufacture of TV cabinets according to their (M/s. Monica’s) specifications. The question arose as to whether it was open to M/s. Monica Electronics (colour TV manufacturers) to take Modvat credit on the moulds and utilize the same for payment of duty on their final product. The Commissioner said ‘no’ after recording a finding that M/s. Showpla India Ltd., to whom the moulds had been supplied for the purpose of manufacture of TV cabinets., were not a ‘job-worker’ and consequently the provisions of Sub-rule (8) etc. were not applicable. The Tribunal rejected the Commissioner’s view and held that M/s. Showpla India Ltd. were a job-worker for M/s. Monica Electronics and Sub-rules (8) to (10) were applicable. It also allowed the Modvat credit in question. But the question before us in the present case and in the present context is not whether the Firozabad parties were job-workers for the appellants or not. We shall assume, for the moment, that they had worked as “job-workers” within the meaning of this expression occurring in Sub-rule (8) ibid. But the fact remains that the conditional scheme of Sub-rules (8) to (10) still would not have been operational for the appellants for want of fulfilment of its conditions. Any removal of moulds and dies (without payment of duty) to any job-
worker under Sub-rule (8) could have been made only with the permission of the Commissioner and subject to such terms and conditions and limitations as he might impose. The Sub-rule required the appellants to apply for the Commissioner’s permission, if they wanted to work under the scheme. Un-disputedly, they have not even satisfied the initial condition, thereby rendering the scheme itself unworkable for them. Existence of such a scheme (unworkable for the appellants) on the statute book can hardly be a valid basis for a revenue neutrality plea in answer to the department’s allegation of ‘intent to evade payment of duty’. As held in Jay Yuhshin (supra), revenue neutrality is a question of fact. The appellants have not succeeded in proving this fact.
4.8 It is a categorical finding of the Commissioner that the goods viz. Dies, Plungers and Rings were cleared from the appellants’ factory during the period of dispute, not for captive consumption but for home consumption. It has also been found that the appellants’ factory had no facility for manufacturing glass lenses. There is no effective challenge to these findings, in these appeals. Admittedly, the appellants had made the clearances without payment of duty under cover of invoices meant for captive consumption availing the benefit of exemption under the above Notification. They were aware of the fact that the benefit of the Notification was available only to goods removed for captive consumption and not to goods cleared for home consumption. In the circumstances, it could very well be inferred that M/s. Autolite’s act of showing the goods in the invoices as for captive consumption for the purpose of availing exemption under the Notification, while removing the goods for home consumption, constituted wilful mis-statement and suppression of facts attracting invocation of the proviso to Section 11A(1) of the Central Excise Act. They were, indeed, removing the goods clandestinely from their factory to the Firozabad parties in the pretext of clearing the same for captive consumption. The Commissioner has rightly decided the limitation issue.
4.9 In view of the above conduct of the assessee, penalty is liable to be imposed on them under Section 11 AC of the Act, the quantum of which will depend upon the quantum of duty to be correctly recovered from the assessee. We note that a cumulative penalty of Rs. 75 lacs has been imposed on the assessee by the adjudicating authority under Rules 9(2), 52A, 173Q, 209 and 226 of the Central Excise Rules, without giving any rulewise breakup of the amount. It is also noted that, for any period from 28-9-1996, any penal liability under Rules 173Q and 209 is subject to the provisions of Section 11AC. The period of dispute in these appeals is 1-4-1995 to 28-2-1998. It is not clear from the Commissioner’s order as to whether he has had regard to the above limiting factor while determining the quantum of penalty to be imposed on the assessee under the aforesaid rules. He has also not stated sufficient grounds in clear terms for imposing penalties on the assessee under the said rules.
Sh. M.P. Gupta, Director of the assessee-company, has been held to have been in full knowledge of the company’s activity in question. However, there is no finding that he was looking after the day-to-day affairs of the company or dealing with the goods in question. Therefore, in our view, the Commissioner’s decision to impose personal penalty on Sh. Gupta is not
supported by adequate findings against him.
5. In view of our findings recorded above, we pass the following order :-
(a) The Commissioner's decision on classification of the dies, plungers and rings manufactured by M/s. Autolite and removed from their factory to Firozabad during the period of dispute is upheld; (b) We hold that the Commissioner has valued the goods on a legally and factually correct basis; (c) The demand of duty is not time-barred; (d) As the quantification of demand is not correct, we set aside the demand and remand the matter to the Commissioner for re-quantification in terms of this order; (e) In view of our order regarding the quantum of demand, we set aside the penalty imposed under Section 11 AC and direct that the quantum of the penalty be re-determined by the Commissioner having regard to the quantum of duty which may be found, on requantification, to have been evaded by the assessee from 28-9-96; (f) The penalty of Rs. 75 lacs imposed on the assessee is set aside. The adjudicating authority will decide this aspect afresh in terms of this order; (g) The penalty of Rs. 20 lacs imposed on Sh. M.P. Gupta, Director of M/s. Autolite, is set aside. 6. Appeal No. E/2175/2000-B is rejected on classification, valuation and limitation issues and allowed, by remand, for re-quantification of demand of duty and interest thereon and re-determination of penalties. Appeal No.E/2176/2000-B is allowed. Sd/- (P.G. Chacko) Member (J) Dated 13-8-2001 V.K. Agrawal, Member (T) 7. I have the opportunity of going through the Order as recorded by the learned Member (Judicial). However, I am not in agreement with him that plea of existence of an alternative scheme under Rule 57S(8) to (10) would not constitute valid defence for the following reasons.
8. It has been submitted by the learned Advocate for the Appellants that had the Appellants not availed of exemption under Notification No. 67/95, they would have been required to pay the central excise duty on the impugned goods and would have taken the Capital Goods Credit under Rule 57Q and thereafter they could have sent the Moulds and Dies to their job workers in accordance with Rule 57-S(8) without payment of any duty or reversal of Modvat credit. The learned Counsel has thus contended that the entire exercise of payment of duty on the Dies, Plungers, and Rings would have been a Revenue neutral exercise inasmuch as they would have paid duty on the one hand and taken the Credit on the other hand. Rule 57-S(8) provides that a manufacturer may remove Moulds and Dies without payment of duty to a job worker for the production of goods on his behalf and according to his specification with the permission of the Commissioner. Rule 57-S(9) provides that the permission shall be given on the undertaking that the said Moulds and Dies would be brought within a period of 3 months from the date of their removal or such extended period as the Commissioner may permit. Rule 57-S(10) provides that if the said Moulds and Dies are not received back within a period of 3 months from the date of removal or extended period, duty shall be paid equal to the Credit taken on the said Moulds and Dies. It is not in dispute that the impugned goods have been sent to the job workers at Firozabad for getting the glass lenses manufactured. Certainly the appellants did not take the permission of the Commissioner before sending the impugned goods under Rule 57-S(8) as they had sent the same by treating as exempted under Notification No. 67/95-C.E. I am of the view that the matter should go back to the Commissioner to ascertain as to whether the impugned goods which were sent to the job workers at Ferozabad have been received back or not. If the Moulds and Dies have been received back, the question of charging duty on them will not arise in view of the provisions of Rule 57-S(8) to 57-S(10). Certainly, the duty will be chargeable in respect of goods which have not been received back by the Appellants. Larger Bench of the Tribunal in the case of Jay Yuhshin Ltd. v. CCE, New Delhi, 2000 (119) E.L.T. 718 has held that with reference to Modvat Scheme it has to be shown that the Revenue neutral situation comes about in relation to the Credit available to the Assessee himself and not by way of availability of Credit to the buyer of the assessee’s manufactured goods. In the present matter the Revenue neutral situation is in respect of the Appellants themselves and not in respect of their buyers. In the case referred to the Larger Bench in Jay Yuhshin Ltd. availability of Credit was to the buyer and not to the Assessee himself.
Sd/-
(V.K. Agrawal)
Member (T)
Dated 10-1- 2002
DIFFERENCE OF OPINION
9. Whether, as held by Member (Judicial), the assessee has failed to prove Revenue neutrality on the strength of the Tribunal’s Larger Bench decision in Jay’ Yuhshin Ltd v. C.C.E., New Delhi [2000 (119) E.L.T. 718] in the context of challenging the demand of duty as time-barred;
OR
Whether, as held by Member (Technical), the assessee has succeeded in proving Revenue neutrality in the aforesaid manner and context.
10. Whether, as held by Member (Judicial), the assessee was not entitled to the benefit of the provisions of Rule 57S(8) to (10) in the facts and circumstances of the case;
OR
Whether, as held by Member (Technical), the assessee was entitled to the aforesaid provisions in the facts and circumstances of the case
and, if so, whether the matter requires to be remanded to the Commissioner for the purpose stated in para-8 of the order.
Sd/- Sd/-
(V.K. Agrawal) (P.G. Chako)
Member (T) Member (J)
11. K.K. Bhatia, Member (T) – A difference of opinion has arisen between the two Id. Members of the Tribunal. Consequently, the above questions are referred to me for resolving the difference. The facts involved in the dispute are set out in details in the above orders recorded by the two ld. Members and the same need not be repeated here. I have heard Sh. A.R. Madhav Rao, Advocate for the appellants and Sh. R.D. Negi, SDR for the respondents. I have carefully considered the submissions made before me by both the sides. It is really difficult to comprehend as to how one can claim protection under the provisions of Rule 57-S(6) for the year 1996-97 and under Rule 57-S(8) to Rule 57-S(10) for the year 1997-98, when none of the conditions prescribed under these rules are satisfied or complied with by the appellants. Rule 57-S itself is captioned – “Manner of utilization of the capital goods and the credit allowed in respect of duty paid thereon.” In the present case, the appellants have not declared dies, plungers and rings manufactured by them as capital goods under Rule 56Q and they have not paid any duty on them. They have cleared them without payment of duty by claiming to avail the exemption under Notification No. 67/95-C.E., dt. 16-3-95 which exempted the capital goods as defined in Rule 57Q manufactured in a factory and used within the factory of production. They availed the exemption with full knowledge that such goods were being supplied to other manufacturers; that they were not being consumed captively and that they did not have any facility to manufacture lenses for which such dies, plungers and rings were meant. Since the goods were not subjected to any payment of duty, the question of taking Modvat credit of the duty paid on them and sending them out to the job worker would not arise. The provisions of Rule 57-S(6) are appended below :-
“(6). Notwithstanding anything contained in Sub-rule (1), a manufacturer may, with the permission of the Commissioner of Central Excise and subject to such terms and conditions and limitations as he may impose, remove the moulds and dies, without payment of duty, to a job worker for the purpose of production of goods on his behalf and according to his specifications :
Provided that the goods so manufactured and the said moulds dies are returned to the factory of the manufacturer, who supplied the moulds and dies, within a period of three months from the date of their receipt or such extended period as the Commissioner of Central Excise may permit:
Provided further that where such moulds and dies are not received back within a period of three months from the date of removal of such moulds and dies or within such extended period as the Commissioner of Central Excise may permit, duty shall be paid equivalent to the credit taken on the said moulds and dies.”
12. In this case, the appellants have not taken any permission for removal of the goods therefore, the question of that authority imposing any
terms, conditions and limitations subject to which such goods could be removed without payment of duty would not arise. Consequently, the goods could be removed only on payment of duty. Further, there is no evidence that the goods were returned to them within a period of three months as provided under the first proviso to the above rule. During the course of hearing, on specific query, the ld. Counsel for the appellants was not able to indicate from the table annexed by the party with their appeal-the precise date even in a single case when such item was sent out to the job worker and when it was returned to them. In terms of the provisos to this rule also therefore the appellants are liable to pay duty on such goods.
13. Just how important it is to strictly follow the conditions prescribed under a rule to claim the benefit under the provisions of such rule is evident from the two latest judgments of the Hon’ble Supreme Court. The first one is in the case of Osram Surya (P) Limited v. C.C.E. – 2002 (142) E.L.T. 5 (S.C.). This judgment relates to interpretation of the second proviso to Rule 57G of Central Excise Rules, 1944. Prior to the introduction of second proviso to Rule 57G i.e. prior to 29-6-95 a manufacturer was entitled to avail the said credit at any time without there being a limitation on such availment. On 29-6-95, second proviso to Rule 57G was introduced by substituting the then existing proviso and the newly introduced proviso read thus: “Provided further that the manufacturer shall not take credit after six months of the date of issue of any of the documents specified in the first proviso to this sub-rule.” The appellants before the Apex Court who had received the inputs for the manufacture of their products, had taken credit under the Modvat Scheme, admittedly, six months after the date of issue of the documents specified in the said proviso to Rule 57G. Therefore, the said credit was disallowed by the authorities. The appellants contended that the benefit of the credit which had accrued to them prior to the introduction of the second proviso to the said rules cannot be taken away by introduction of a limitation because it was vested right accrued to them prior to the coming into force of the second proviso to the rule. One of the appellants before the Apex Court even contended that six months period contemplated under the newly introduced proviso expired in its case on 30-6-95 i.e. a day after the introduction of the new proviso, therefore, it had no opportunity of availing the credit which was otherwise due to it. Consequently, the introduction of the proviso amounted to cancelling the credit itself. The Apex Court in their judgment however, held that in our opinion the language of the proviso concerned is unambiguous. It specifically states that a manufacturer cannot take credit after six months from the date of issue of any of the documents specified in the first proviso to the said sub-rule. A plain reading of this sub-rule clearly shows that it applies to those cases where a manufacturer is seeking to take credit after the introduction of the rule and to cases where the manufacturer is seeking to do so after a period of six months from the date when the manufacturer received the inputs. Consequently, the Apex Court held that Modvat credit in this case was not admissible and rejected the appeal of the appellants.
14. The second judgment is in the case of C.C.E. v. Rallis India Limited – 2002 (142) E.L.T. 19 (S.C.). In this case, the subject matter for consideration was the benefit under Notification No. 270/77, dated 20-8-77. This notification provided exemption to Sodium Hydrosulphite upto a quantity not exceeding 150 MT cleared by the manufacturer for home consumption during any financial year provided that the exemption under the notification was not available to a manufacturer whose total production of Soduim Hydrosulphite exceeded 360 MT during the financial year in which clearance was made. The respondents who manufactured Sodium Hydrosulphite during the financial year 1979-80 had paid duty of excise on 323.651 MT. They realised at the end of the financial year that their production of this commodity in the financial year 1979-80 was less than 360 MT. Claiming the benefit of the above notification they filed a refund claim of duty paid on 150 MT. The application for refund was filed on 16-7-1980 which was rejected on the grounds of time bar by the Assistant Collector but on appeal the same was allowed by the Collector (Appeals). The Revenue filed an appeal before the CEGAT but without success. Hence the appeal before the Supreme Court. It was pleaded before the Apex Court on behalf of the respondents that it was only at the end of the financial year that the party could get to know as to what was its production during the financial year and lodging the claim for refund could only be made thereafter hence the period of limitation will start only then. The Apex Court in their judgement observed that there was considerable force in the submission of the respondents that it was possible only as on 31st March, 1980 the last day of the financial year, that the party would get to know whether its production had exceeded 360 MT or not. If the production had not exceeded 360 MT then it was entitled to claim a refund of excise duty which had been paid in respect of 150 MT which had been cleared by it. The Apex Court in their judgment, however, observed – But the rule under which application for refund was made did not provide the period of limitation is to be computed from the end of the financial year. They observed that the plain and unambiguous words of Rule 11 read with Rule 173J were that the period of limitation commenced form the date of payment or date of adjustment. But since the party had filed application for refund only on 15-7-80 in respect of the period viz. 25-4-1979 to 29-7-1979 in respect of which the refund was claimed, the same was time-bar. They observed that the Collector of Central Excise as well CEGAT erred in coming to the conclusion that the period of limitation would commence from the end of the financial year. The period of limitation was to be determined with reference to the language of Rule 11 read with Rule 173J and was not be influenced by the provisions of the notification dt. 20-6-1977. The notification was a reason for the respondents to apply for refund but the period of limitation had to be determined as per the terms of the said Rule 11 read with Rule 173J. Consequently, the Hon’ble Supreme Court allowed the appeal of the Revenue.
15. The above judgments of the Supreme Court clearly show that the provisions of a Rule have to be strictly followed to claim the benefit of such Rule. Since in this case the appellants have not followed any provision of the Rules, they are not entitled to get such benefit. Coming to the plea of Revenue neutrality, suffice it to say that this benefit would be available only when it is held that the appellants are entitled to exemption from payment of duty or benefit of Modvat credit. Since on examination of the merits of the case, it is held that no such benefit is liable to accrue to them, the question of Revenue neutrality does not arise. With due respect, if go by the dictum laid in the order of ld. Member (T), no manufacturer will pay any duty on the moulds and dies manufactured by him, no one will seek any permission from the Commissioner when sending them out to his job worker; and if taken, no one will adhere to the terms, conditions and limitations as that authority may impose, in the name of revenue neutrality. Surely, such is neither the import of this principle nor the purport of the rules under consideration. In the result, I agree with the view held by Learned Member (Judicial) that the assessee was not entitled to the provision of Rule 57S (8) to (10). In the facts and circumstances of the case, they have failed to prove that Revenue neutrality in the context of challenging the demand of duty as time-barred.
16. The matter will now go back to the original Bench for passing the final order on the appeal.
Sd/-
(K.K. Bhatia)
Member (])
Dated : 28-5-2002
MAJORITY ORDER
17. As per majority, the following Order is passed :
(a) The Commissioner's decision on classification of the dies, plungers and rings manufactured by the Appellants and removed from their factory to Firozabad is upheld;
(b) The Commissioner has valued the goods on a legally and factually correct basis;
(c) The demand of duty is not time barred;
(d) As the quantification of demand is not correct, the demand of duty is set aside and matter is remanded to the Commissioner for re-quantification in terms of this Order;
(e) The penalty imposed under Section 11 AC is also set aside and matter is remanded to the Commissioner to redetermine the quantum of penalty having regard to the quantum of duty which may be found on re-quantification to have been evaded by the assessee from 28-9-96;
(f) The penalty of Rs. 75 lakhs imposed on the Appellants is set aside. The Adjudicating Authority will decide this aspect afresh in terms of this Order;
(g) The penalty of Rs. 20 lakhs imposed on Shri M.P. Gupta, Director of M/s. Autolite is set aside.
(h) Appeal No. E/2175/2000-B is rejected on classification, valuation and limitation issues and is allowed by remand for re-quantification of demand of duty and interest thereon and re-determination of penalties.
(i) Appeal No. E/2176/2000-B is allowed.
'Sd/- Sd/-
(P.G. Chacko) (V.K. Agrawal)
Member (J) Member (T)
Dated : 27-8-2002 Dated : 27-8-2002