ORDER
S.S. Sekhon, Member (T)
1. By two show cause notices issued dated 2-3-92 and 30-3-92 it was sought to disallow the credit of duties availed by the Appellate during the period Aug. 1991 to Dec. 1991.The notices were heard by the Asst. Commissioner of C.Excise, Kalyan on 17-11-97 and 25-11-97. No order was passed by the then Asst. Commissioner, the fresh personal hearing was granted on 24.11.99, order-in-original No. 760/99 dated 25.2.2000 dropping the proceedings initiated under said two show cause notices but not allowing Modvat credit of Rs. 6,32,291/- (Rupees Six Lacs thirty two thousand two hundred ninety one only) availed on Caustic Soda & Chlorine used for manufacture of intermediate exempted products which are further used in the manufacturing process of finished dutiable products. The DY. Commissioner of C.Excise, Kalyan has further imposed a penalty of Rs. 5,000/- was imposed. The DY. Commissioner has further disallowed modvat on kraft paper. The restoration of Modvat credit in respect of Caustic Soda & Chlorine to the tune of Rs. 6,32,291/- was not allowed holding that Modvat credit of duty paid on Caustic Soda & Chlorine used for manufacture of intermediate exempted product is treated water, which in turn was used to manufacture steam and the same was used to manufacture electricity. The material period there was no provision in the Modvat Rules to extend Modvat facilities on steam & electricity because they were not within the purview of Modvat Rules at that time. Being aggrieved by the said order-in-original No. 760/99 dated 25.2.2000 for disallowing Modvat credit of Rs. 6,32,291/- Caustic, Soda & Chlorine used in intermediate exempted products which are further used in the manufacture of dutiable final products and imposition of penalties of Rs. 5,000/-. The learned Commissioner of Appeals though set aside the penalty of Rs. 5,000/- imposed under Rule 173Q but did not allow the Modvat credit of Rs. 6,32,291/- on the ground that there is no provision for restoration of Modvat credit in C.Excise Rules 1944. The appellants are required to follow the procedure as prescribed under Section 11 B of the C.Excise Act, 1944 by filing a refund claim which they have not filed, hence Modvat credit of Rs. 6,32,291/- reversed by them is hit by the limitation of the time bar.
2. Heard both sides & considered the issue it is found
a. It is found that reasoning given in the impugned order in appeal that the appellants were required to follow the procedure as prescribed under Section 11B of the Central Excise Act, 1944 by filing a refund claim, which they have not filed, and hence, modvat credit of Rs. 6,32,291/- reversed by them is hit by limitation of time bar is not legally correct. As modvat credit was disallowed the provisions of Section 11B are not applicable and hence the said stand taken by the Commissioner of C.Excise (Appeal)
b. Input Chlorine & Caustic soda used in the manufacture of intermediate product Sodium Hypochlorite and the same is captively used in the manufacture of Rayon yam. The Caustic soda is also used in the Sodium sulphide which is partly captively used in the manufacture of the final product viz. Rayon yarn and partly sold to outside parties on payment of duties.
c. Caustic Soda is also used for demineralisation of water for generation of steam. The steam is used for the manufacture process of finished dutiable products. It is submitted that since steam generated is exempted product, therefore taken the view that appellants are not entitled to credit of duties paid on such inputs is totally erroneous. In the terms of Rule 57D of the C.Excise Rules 1944, the Modvat credit cannot be denied simply because certain exempted intermediate products arise manufacture of final products on which duty of excise is leviable.
d. Relaying upon 1988 (102) ELT 321 (Tribunal) Oriental Carbon & Chemicals Ltd. where it is held Ld Modvat credit available for fuel used in the factory for generation on steam and electricity both of which are treatable as intermediate products which are in turn used for manufacture of final products. The appeal is to be allowed.
e) As regards Modvat credit on the packing material used during the period 6-8-91 to 31-12-91 the Appellants submit that since the matter was disputed they could not avail Modvat credit during that time. The Appellants further submit that there was no restriction as regards time limit for availing the Modvat credit as per prevailing Rule 57A of the C.Excise Rules 1944. Therefore, ground that present rule do not permit for availing Modvat credit is not sustainable in law. We, therefore, be allowed the Modvat credit on the packing material used during 6-8-91 to 31-12-91 cannot be accepted in absence of profit of dispute having been resolved in the favour & in view of Surya Roshini 2002 (142) ELT, 5 SC
3. Appeal therefore partially allowed as regards credit of Rs. 6,32,291/- as regarding Chlorine & Caustic Soda.
4. As regards reversal of Modvat credit of Rs. 6,32,291/- on 01.05.1992 and 20.04.1993, there being no provision for restoration of Modvat credit in Central Excise Act, 1944, appellants were required to follow the procedure as prescribed under Section 11B of Central Excise Act, 1944, by filing a refund claim, which they have not filed, hence the Modvat credit of Rs. 6,32,291/- reversed by them is hit by the limitation time bar. Finally, as the lower authority has not recorded any grounds of having contravened the provisions of Modvat rules, and had allowed the Modvat credit on merits, imposition of a penalty of Rs. 5,000/- under Rule 173Q was legally proper, correct and sustainable.
(Pronounced in Court)
