ORDER
V.P. Gulati, Member (T)
1. This reference application arises out of the order of the Tribunal bearing No. 181/1989, dated 3-4-1989. The appeal before the Tribunal was directed against the order of the Collector of Central Excise, Hyderabad under which the learned Collector had ordered for reversal of the Modvat Credit of Rs. 2,03,441.73 which was taken as deemed Modvat Credit and was still available in RG 23 Part I account when Modvat facility for deemed Modvat was withdrawn. The same had been utilised by the respondents for payment of duty in respect of steel ingots, runners and risers manufactured by them and cleared after the said date of withdrawal of deemed Modvat Credit facility. The Tribunal followed the ratio of its earlier order and held that the respondents were eligible to utilise this Modvat Credit and the reasons adopted by the Tribunal in that order are reproduced below for convenience of reference.
What Rule 57F(3) provides is that the credit of duty allowed in respect of any input can be utilised towards payment of duty on any of the final products in or in relation to the manufacture of which such inputs are used. A plain reading of the rule, when considered in the background of the objective of the Modvat Scheme viz. to provide instant credit for the manufactures and to avoid cascading effect of taxation on input in relation to the final product, it will be clear that this Rule in terms will not be a bar for utilisation of amount of credit which may accumulate because of a situation where the duty on the final product is less than the duty on the inputs for payment of duty on the same final product. This conclusion is also supported by the admitted position that for the purpose of modvat credit scheme, there is no one-to-one co-relationship of input and final product for the purpose of utilisation of credit.
2. The learned Collector of Central Excise, Hyderabad, the applicant before us has urged the following question of law in this regard:
(1) Whether in the facts and circumstances of the case, the Customs, Excise and Gold (Control) Appellate Tribunal was correct in allowing the appeal.
(2) Whether in the facts and circumstances of the case, the Customs, Excise and Gold (Control) Appellate Tribunal, should have held that the word “Such Inputs” appearing in Rule 57F(3) read with para (2) or the deemed credit order dated 7-4-1986, issued under Rule 57G(2) indicates that the deemed credit facility should be restricted to the said final products which can be said to have been manufactured out of “the inputs” referred to in the very beginning of para (2) or the deemed credit order. In the said deemed credit order dated 7-4-1986, the words used are “the inputs” and not “any inputs”. Therefore the word, “such inputs” appearing at the later part or the deemed credit order dated 7-4-1986 refers to “the inputs” which has a specifying or particularising effect as opposed to the indefinite article, “a” or “an”. Therefore, the word “such inputs” used in the deemed credit order dated 7-4-1986 does not imply to be interpreted as meaning “all” irrespective of the context in which the same has been used. Though, the word “such” may mean ‘identical or like or similar or same depending upon the context in which it is used, undoubtedly, in the present context, the word “such” used in the deemed credit order dated 7-4-1986 can by its wider import would refer or imply to the “same” inputs on which deemed credit has been taken and utilised for the manufacture of the final products go to avail the deemed credit facility and nothing else. The deemed credit could have been utilised for payment of duty only on clearance of finished products manufactured out of these inputs, for which deemed credit facilities were available. This credit could not be utilised towards payment of duty of finished goods which were not made from such inputs.
3. The learned DR for the department adopted the reasoning given in the reference application and pleaded that the respondents had utilised the deemed Modvat Credit taken in respect of steel scraps purchased by them before the date when the Notification withdrawing the benefit of deemed Modvat Credit facility was issued and had an outstanding credit of Rs. 2,03,441.73 available in their book on the date of withdrawal of facility as above. He pleaded that the ingots etc. manufactured after that date did not utilise input in respect of which Modvat Credit was taken. Therefore, the question of utilising the outstanding credit for payment of duty towards the finished product would not arise. He pleaded that as urged in the reference application, the deemed Modvat Credit could not be utilised for payment of duty on the clearances made after the date of withdrawal in respect of the finished goods not manufactured out of the inputs for which deemed Modvat Credit facility had been withdrawn. He in this context cited the decision reported in 1991 (54) E.L.T. 355.
4. Shri Venkataraman, the learned Counsel for the respondents pleaded that as the Tribunal had followed its earlier decision while giving relief to the respondents and since the earlier order had not been challenged by the authorities, the law can be said to have been settled by the earlier ruling. He cited the following case laws in support of his plea :-
(1) 1994(71)E.L.T.T,47&48.
(2) 1989 (41) E.L.T. 181 – Sawottam Ispat v. CCE.
(3) 1993 (22) E.T.R. 334 in the case of Rama Cables & Wires Ltd. v. CCE, New Delhi.
(4) 1993 (65) E.L.T. 95 (Tribunal), Somani Steels v. CCE.
(5) 1993 (21) E.T.R. 520, CCE, Bombay v. Nisha Conductors.
5. We have considered the pleas made by both the sides. We observe that there is no dispute that when deemed Modvat Credit was taken, the same had been correctly taken and there is no dispute that utilisation of this credit till the time when deemed Modvat Credit facility was withdrawn was correct. It is not the plea of the Revenue that in the Notification under which the deemed Modvat Credit facility was withdrawn there is any stipulation that any Modvat Credit taken earlier would lapse. The question therefore to be considered is whether the Modvat Credit already taken was correctly taken and whether the same can be utilised for payment of duty in respect of final notified excisable goods manufactured subsequent to the Notification out of other duty paid scrap. The Modvat Scheme provides for certain degree of flexibility in regard to taking Modvat Credit and its utilisation. As soon as inputs are received, the assessee’s eligibility to Modvat Credit is established subject to the requirement of other rules under Rules 57A and 57G. It is not the case of the Revenue that the respondents were in any way otherwise not eligible for the benefit of Modvat Credit. This deemed credit on the inputs which was taken had become part of a pool of credit taken on the inputs from time to time and out of this the assessee could draw the amount for setting off against the duty required to be paid for the specified notified finished product declared under Rule 57G of the Central Excise Rules, 1944. As pointed out in the order of the Tribunal there is no one-to-one correlation envisaged in the rules for Modvat purposes and all that the rules envisage is that once Modvat Credit has been correctly taken the same can be utilised in respect of the finished excisable goods for which the inputs credit in question is permissible. If that be the position the credit which was originally taken would be available for payment of duty in respect of the notified finished product. It is not a pre-condition for utilisation of Modvat Credit that the inputs for which Modvat Credit was taken should be contained in the finished product towards which the credit is used for discharging the duty liability. In view of the above, we hold that no case has been made out by the Revenue. The case law cited by the Revenue is distinguishable. The appeal is therefore dismissed.