ORDER
R. Jayaraman, Member (T)
1. This appeal is directed against the order of the Collector (Appeals) bearing No. V-2(32)/373/88, dated 15-6-1988 upholding the order of the Assistant Collector dated 23-12-1987 confirming the demands for recovery of the following amounts and also directing payment of amount of Rs. 1,41,314.73, wrongly transferred to RG-23A Part II.
(i) Show Cause Notice No. RV/MODVAT/86/1038, dated 26-11-1986 for Rs. 22,12,608.58.
(ii) Show Cause Notice No. RV/MODVAT/86/1043, dated 28-11-1986 for Rs. 7,47,278.98.
(iii) Show Cause Notice No. RV/MOD VAT/86/249, dated 5-3-1987 for Rs. 11,92,866.08.
2. Shri Shroff, appearing for the appellants, recounting the facts of the case stated as below:
3. The appellants were availing proforma credit under Rule 56A in respect of inputs on Tissue Paper, Maplitho paper, printing paper etc. used in the manufacture of finished products duplicating and carbon paper. When MOD VAT was introduced on 1-3-1986, the scheme was not extended to this final product paper classifiable on Chapter. However, they were eligible for availing MOD VAT facility in respect of other items falling under Chapters 32,37,38,39 and 96. Accordingly, they applied for availing MOD-VAT facility in respect of the aforesaid goods, which was granted by the department. However, in respect of paper classifiable under Chapter 48, they continued to avail of Rule 56A benefit, since the same was available to them. By a communication dated 29-8-1986 the Range Supdt. informed the appellants inviting their attention to Sub-rule (9) of Rule 56A, whereunder the manufacturer availing credit of duty on inputs under Rule 57A cannot avail of facility under Rule 56A. In this letter the Range Supdt. has presumed that the facilities under Rules 56A and 57A cannot be permitted simultaneously and requested the appellants to take remedial steps at once. The appellants sent a reply that they are functioning within the perimeters of the said sub-rule. Subsequently, they received a show cause notice dated 26-11-1986 from the Supdt. demanding recovery of Rs. 22,12,608.58 from the appellants in respect of the period covering from May 86 to Oct 86. Thereafter another show cause notice dated 28-11-1986 was received from the Range Supdt. demanding recovery of a sum of Rs. 7,47,278.98 covering the proforma credit taken during the period Mar. 86 to Apr. 86. The third show cause notice dated 5-3-1987 was received from the Range Supdt. demanding the recovery to the extent of Rs. 11,92,866.08 being the amount debited against Central Excise duty from an amount of Rs 13,34,180.81 being the alleged irregular credit taken during Nov. 86 to Feb. 87. Subsequently, a fourth show cause notice was received dated 13-8-1987, whereunder an amount of Rs. 1,41,314.73 being the amount, which was lying balance in RG-23 and which was wrongly transferred to RG-23A on the application of the appellants was demanded. Shri Shroff indicated that all the aforesaid four show cause notices were adjudicated by the Assistant Collector and confirmed the demands made in the show cause notices. Thereupon, the appellants went before the Collector (Appeals), which has been rejected. Hence the appeal before the Tribunal.
4. Arguing on the merits of the appeal, Shri Shroff contended that the main point covered by all the show cause notices adjudicated upon by the Assistant Collector and confirmed by the Collector (Appeals) relates to Sub-rule (9) of Rule 56A prior to amendment by Notification No. 117/87, dated 15-4-1987 read as below:
“(9) Nothing contained in this Rule shall apply to a manufacturer availing of the credit of the duty paid on the inputs under Rule 57A.”
5. It was the submission of Shri Shroff that this bar contained in Sub-rule (9) was not applicable to the appellants because they were not availing of the MOD VAT credit under Rule 57A in respect of the very same inputs for which they have taken proforma credit. He contended that the inputs for which they had availed of MOD VAT facility were for totally different inputs used in totally different finished product and not in respect of paper. Hence they were not availing of the proforma credit under Rule 56A in respect of the very same inputs for which they had availed of MOD VAT benefit. Elaborating on the scheme of MODVAT introduced in 1986, Shri Shroff pointed out that, even according to the Finance Minister’s speech MOD VAT facility was a revenue neutral exercise and was not intended as revenue benefit to the manufacturers. It was mainly to reduce or eliminate the cascading effects of the input taxation. Since the MOD-VAT was sought to be introduced by stages, benefit under Rule 56A was also continued. Hence the obvious intention was to permit proforma credit facility in respect of those inputs and finished products, which are not covered by the MODVAT facility introduced in 1986 Budget. Judged from this intention it is abundantly clear that the bar specified in Sub-rule (9) of Rule 56A prior to amendment cannot be said to totally preclude a manufacturer from availing of the proforma credit in respect of those inputs not covered by the MODVAT scheme. Shri Shroff submitted that the short point to be decided is whether under Sub-rule (9) of Rule 56A, as it existed prior to amendment on 15-4-1987, did bar an assessee from availing of proforma credit under Rule 56A during the same time when he had opted for MODVAT credit in respect of totally different inputs used in different final products. According to him, on this short point the interpretation given by the department is wholly violative of the intention of the legislature. He strongly urged that only in respect of the same inputs covered by MODVAT scheme, if the manufacturer seeks to simultaneously avail of the credit under Rule 56A, bar is applicable. Sub-rule (9) itself refers to the credit of the duty paid on inputs (emphasise supplied by the learned Advocate). He argued that the credit of duty paid on the inputs under Rule 56A refers to credit of the very same inputs under Rule 57A. The next contention of Shri Shroff was that in 1987 Budget, Chapter 48 was deleted from Rule 56A when it was included in MODVAT. This also brings out the invention.
6. The next submission made by the learned Advocate was that the subsequent amendment of Sub-rule (9) of Rule 56A clearly spelt out the intention. The sub-rule as amended reads as below:
“No credit of duty paid on any material, component parts or finished product shall be allowed under this rule if credit of duty paid on such material, component parts or finished product has been taken under Rule 57A.”
This amended rule is only clarificatory in nature and bring out the intention more dearly. Hence even during the period prior to 15-4-87 since they have not taken the credit of duty paid on the same material under Rule 57A, they are nor precluded from availing of the proforma credit under Rule 56A. In this context he placed reliance on the decision of the South Regional Bench of this Tribunal reported in 1988 (38) ELT page 369 Collector of Central Excise v. Indian Aluminium, wherein the Tribunal have taken a view that in regard to explanation to Rule 57G which was amended by Notification 196/86, dated 14-3-1986, the said amendment was held to be clarificatory nature. The same approach should be adopted in this case as well. The learned Advocate also cited the decision reported in 1988 (37) ELT page 291, while urging that when there are more than one interpretations possible, that interpretation in favour of the assessee should be adopted.
7. Next coming to the time-bar issue of the demands, Shri Shroff argued that in some of the show cause notices extended period of five years has been applied invoking proviso to Section 11(a). Elaborating on this Shri Shroff observed that in regard to the first show cause notice issued on 26-11-1986 which covers the period from May 86 to Oct. 86, the credit taken during the period upto 25 May 86 was barred by limitation of time, since it was beyond six months. The show cause notice alleges that the letter from the assessee stating that they are working within the parameters of Sub-rule (9) is as a wilful mis-statement or suppression of facts. This allegation is wholly untenable. The letter from the Supdt. referring to Sub-rule (9) of Rule 56A was only in the nature of raising a presumption as seen from the wording of the letter itself. That letter indicates that it is presumed that both benefits cannot be availed of simultaneously. The assessee have replied that they are working within the perimeters of Sub-rule (9) of Rule 56A under the bona fide belief that according to their interpretation they can avail of proforma credit in respect of inputs not covered by MODVAT scheme. Hence such a reply cannot be taken to be a wilful mis-statement or suppression of facts for invoking the extended period. However, the counsel fairly conceded that this plea of time-bar was not taken in their reply to the show cause notice, before the Assistant Collector or before the Collector (Appeals). Again in the case ot second show cause notice dated 28-11-1986 the same allegation of wilful mis-statement and suppression of facts on the same ground has been made, though it is not correct. The entire demand covered by this show cause notice dated 28-11-1986 covering the period from Mar. 86 to Apr. 86 is barred by time. However, as regards to the third show cause notice dated 5-3-1987 it is conceded by the counsel the demand is within the time of six months. Even in this S.C.N., allegation of wilful mis-statement or suppression of facts has been made. As regards the fourth show cause notice dated 13-8-1987 Shri Shroff submitted that the show cause notice though seeks recovery of the wrong transfer of the credit balance lying in the RG-23 proforma account to RG-23A MOD VAT account, it is in effect recovery of the credit taken during the period Nov. to Feb. 87. This is evident from the third show cause notice dated 5-3-1987 itself where the total amount of credit taken during Nov. 86 to Feb. 87 has been shown as 13,34,180.81. As against this only an amount of Rs. 11,92,866.08 representing the amount adjusted against the Central Excise Duty was demanded. Hence in this case also since the amount sought to be recovered relates to the credit taken during the period prior to six months, this demand time-barred.
8. Finally Shri Shroff pleaded that if the Bench is of the view that the appellants are not entitled to avail of proforma credit under Rule 56A during the period, they would request for reversal of MOD VAT credit taken during the period, but continue to retain the proforma credit under Rule 56A. Shri Shroff urged for consideration of this request by this Bench.
9. Shri Mondal appearing for the department, contended as below:
10. Firstly he took us through the origin of Sub-rule (9) in Rule 56A. He pointed out that simultaneously with the introduction of MOD VAT, Sub-rule (9) of Rule 56A was inducted under Notification 176/86, dated 1-3-1986. The ostensible purpose was while it was to continue the facility under Rule 56A, it was made inapplicable to the manufacturers, who seek to opt for MOD VAT scheme. Sub-rule (9) of Rule 56A before amendment bars the manufacturer from availing of the proforma credit, if he avails of the credit of duty paid on inputs under Rule 57A. This Sub-rule (9) over-rides the other provisions in Rule 56A. Shri Mondal contended that the interpretation given by the department is not violative of the legislative intent. In this context he took us through the Budget Notes reproduced in ECR Volume VI Mar. 86, Bombay Collectorate Trade Notice No. 15/86, dated 10-3-1986 and also the Book-let brought out by the Central Board of Excise and Customs on MODVAT. According to these publications intention of the legislature has also been brought out clearly to the effect that a manufacturer availing of the input benefit under MODVAT scheme cannot be simultaneously permitted to avail of proforma credit under Rule 56A prior to amendment of Sub-rule (9). He also argued that the appellant being reputed manufacturer cannot be unaware of these publications when they were availing of proforma credit under Rule 56A simultaneously while availing of MODVAT credit. In the background of these publications bringing out clearly the purpose and intention of Sub-rule (9) of Rule 56A as it stood then, the appellants should not have availed of the proforma credit, especially when the same was also pointed out by the Range Supdt. He also argued citing the Tribunal’s decision reported in 1986 (26) ELT page 367 Madras that fiscal statute and Notifications are to be read as they were worded and there is no scope for importing intendnient for this interpretation. A plain reading of Sub-rule (9) of Rule 56A prior to amendment totally bars a manufacturer from availing of the proforma credit under Rule 56A. If he avails of the duty paid on the inputs under Rule 57A. Thus he refuted the arguments of the learned Advocate and argued that it is not correct to hold that the intention of the legislature was different from the wording of the Sub-rule (9). He then goes to point out that Sub-rule (9) was amended by Notification No. 117/87, dated 15-4-1987 effective from that date. Hence the appellants cannot claim the benefit of the amended Sub-rule (9) prior to its amendment. Shri Mondal also denied that the amended Sub-rule (9) is of clarificatory nature. This amendment has been presumably carried out because of certain representations from the trade for extending the facility of simultaneous benefit in respect of inputs not covered by MODVAT scheme. In this context, he referred to the Boards clarification contained in their letter No. F. 216/5/86-CS-6, dated 1-7-1986 (Point 14 of clarification). Finally, he referred to the decision of the Tribunal, South Regional Bench, reported in 1988 (38) ELT 358 in the case of Hyderabad Insulated Wires v. Collector of Central Excise, wherein the very same specific issue has been decided in favour of the department. Citing the aforesaid decision of the Tribunal, he stated that me Tribunal has already held that only after the amendment of Sub-rule (9) by Notification No. 117/87, dated 15-4-1987, simultaneous availment of both MODVAT and proforma credit is permissible and prior to that it is not permissible.
11. Shri Mondal, arguing on the time-bar raised by the learned Advocate, contended that this was not pleaded specifically before the adjudicating authority. Even in the appeal before the Collector (Appeals), only with regard to the second show cause notice dated 28-11-1986 the plea of time-bar was raised. Though the Collector (Appeals) has not considered the issue of time-bar in his order, he argued that despite the Supdt. specifically bringing to the appellants’ notice about the provisions of Sub-rule (9) of Rule 56A the appellants gave an evasive reply, which was cryptic and misleading, amounting to suppression of facts and wilful mis-statement. Hence the extended period has been rightly applied. As regards the plea of the appellants for reversing the MODVAT credit taken during the relevant period but allowing retention of the proforma credit, Shri Mondal pleaded that such a request has not been made even when the appellants were alerted by the Range Supdt. pointing out the provisions of Sub-rule (9) of Rule 56A. Hence this request, at this stage, does not merit consideration.
12. Shri Shroff contended that Shri Mondal referred only to the Executive Instructions of the Board and Budget Notes, which cannot be construed to bring out the legislate intent and cannot have legal binding.
13. We have carefully considered the submissions made on both the sides and perused the available records.
14. Firstly, we propose to take up the plea regarding admissibility of proforma credit under Rule 56A for the appellants during the period prior to amendment of Sub-rule (9) or Rule 56A. Sub-rule (9) of Rule 56A was introduced for the first time by Notification No. 176-C.E., dated 1-3-1986. By this notification Chapter V Section AA relating to the extension of MODVAT has also been introduced. Sub-rule (9) of Rule 56A as introduced by Notification No. 176 referred to above reads as follows:
“Nothing contained in this rule shall apply to a manufacturer availing of the credit of duty paid on inputs under Rule 57A.”
15. Rule 57A deals with the applicability of the MODVAT credit of duty paid on excisable goods used as inputs notified, which can be utilised for payment of duty in respect of the notified final products. The short point for our consideration is whether a manufacturer, who avails the credit of duty paid on inputs under Rule 57A could simultaneously avail of proforma credit under Rule 56A, in respect of the inputs and final products not covered by the Notification issued under Rule 57A. The argument of Shri Shroff is that interpretation placed by the department on Sub-rule (9) of Rule 56A would be violative of legislature intent behind the introduction of MODVAT scheme. MOD-VAT scheme was introduced by stages and Rule 56A was also allowed to continue and hence whatever is not covered by MODVAT scheme could be availed of under Rule 56A. This is the sum and substance of his main argument. His contention would have been accepted, if there had been no introduction of Sub-rule (9) under Rule 56A simultaneously. The reading of Sub-rule (9) referred to above indicates that the legislature has intended to have two categories of manufacturers, one coming under the purview of Rule 56A and another opting for MOD VAT credit. On this basis Sub-rule (9) puts a total bar on a manufacturer availing of Rule 56A, if he avails of MODVAT credit under Rule 57A. If the interpretation urged by Shri Shroff is to be accepted, the wording of Sub-rule (9) would have been somewhat different. In that case, the wording would have been to the effect that Rule 56A shall not be applicable to a manufacturer availing of the credit of duty paid on the same inputs under Rule 57A. It is not so as it was worded in Sub-rule (9). A plain and simple reading of Sub-rule (9) of Rule 56A clearly indicates that if a manufacturer avails of the credit of duty paid on inputs under Rule 57A, proforma credit under Rule 56A shall not apply. There is no scope for interpretation otherwise nor is there any ambiguity for giving an interpretation in favour of the assessee. Moreover, as has been urged by Shri Mondal, in the matter of interpretation of statute or Notification, plain and straight reading is called for and there is no scope for import of intendment. Even on the intention behind introduction of Sub-rule (9), various communications received from the Board as well as the booklet on MOD VAT clearly point out that prior to the amendment of Sub-rule (9), a manufacturer cannot avail simultaneously both proforma credit and MOD VAT, even if the inputs covered are different. Though we agree with Shri Shroff that executive instructions do not have the force of law, in the absence of any evidence produced by Shri Shroff defining the objective behind introduction of Sub-rule (9) of Rule 56A as laid down in the Parliament, references cited by Shri Mondal cannot be brushed aside.
16. Shri Mondal has also brought to our notice the latest decision of the CEGAT, South Regional Bench, reported in 1988 (38) ELT page 358, wherein the specific issue has been dealt with and that decision is in favour of the revenue. Shri Shroff did not dispute that the facts involved in that case are different from the case of the present appellants. In that decision, the South Regional Bench had held:
“Therefore, on a reading of Sub-rule (9) alongwith its amendment on 15-4-1987 it is clear that there was a total restriction until 15-4-1987 on simultaneous availment of the proforma credit under Rule 56A and MOD VAT under Rule 57A, Therefore, in the present case of the appellant on the above interpretation of the Rule 56A, Sub-rules (8) and (9) the order of the lower authorities barring the appellants from enjoying both the facilities simultaneously is valid till 15-4-1987.”
17. We respectfully agree with the decision of the South Regional Bench and decide the main issue in favour of the revenue.
18. Now coming to the plea of time-bar, this has been raised only in respect of the three show cause notices, namely show cause notice dated 26-11-1986,28-11-1986 and 13-8-1987. As regards the show cause notices dated 26-11-1986 and 28-11-1986, an allegation is made in the Annexures that the Range Supdt. pointed out the provisions of Sub-rule (9) of Rule 56A and suggested for remedial action. However, the assessee merely replied that they are functioning within the parameters of the said sub-rule. Hence there is a wilful mis-statement and suppression of facts. The question for our consideration is whether this letter from the appellant, in reply to the Range Supdt.’s letter, could be construed as wilful mis-statement or suppression of facts with an intention to evade payment of duty. This letter from the Range Supdt. dated 29-8-1986 after quoting the provision of Sub-rule (9) of Rule 56A reads as follows:
“In the light of this, where a manufacturer avails of the credit of the duty paid on inputs under Rule 57, then he would not be able to avail the facility under Rule 56A.
It, is therefore presumed that the facilities under Rule 56A and Rule 57A cannot be permitted simultaneously.
You are therefore requested to take remedial steps at once under intimation to this office.”
19. The appellants, in their letter dated 13-9-1986 while thanking the Supdt. for having invited their attention to Sub-rule (9) of Rule 56A, stated as below:
“Kindly note that we are functioning within the perimeters of the said rule.”
This reply from the appellants, .no doubt, is cryptic and somewhat misleading. However, Shri Shroff, while conceding that their reply is not happily worded, contended that they were under the bonafide impression that both the benefits are available, so long as the inputs are different. He also contended that the department themselves are aware of this issue and they were also aware of the fact that the appellants was availing of MODVAT credit and the appellants have not made any request for withdrawal of MODVAT credit. He also contended that the department themselves have issued the demand well in time in regard to the show cause notice dated 5-3-1987. Hence the allegation of suppression is only an after thought to cover up the delay on the part of the department. We find considerable force in the argument of Shri Shroff. It is not the case of the department that the appellants had suppressed of availment of MODVAT credit and proforma credit simultaneously, from the legally prescribed monthly RT-12 returns. From the correspondence, if the department had got an impression that the appellants have withdrawn from the MODVAT facility, they would not have issued the show cause notices subsequently. On perusal of the RT-12 returns and other records, wherein facts are not suppressed the department apparently has issued the show cause notice. In the circumstances, we are unable to subscribe to the allegation made in the show cause notice that because of the appellant reply to the Range Supdt. there is a wilful mis-statement and material suppression of facts with the intend to evade duty. As regards the fourth show cause notice dated 13-8-1987, it is observed that this also relates to the recovery of proforma credit taken during the period November 86 to Feb. 87. In this show cause notice, no allegation of suppression has been made. The show cause notice only indicates that the credit lying in proforma account was erroneously permitted for transfer and hence sought to recover it. Under Sub-rule (5) of Rule 56A, when a credit has been allowed under Sub-rule (2) on account of an error, omission or mis-construction on the part of an officer, the proper officer may, within six months from the date of such credit, serve a notice on the manufacturer or the assessee. Since the amount sought to be recovered also relates to wrong availment of credit because of the bar envisaged under Sub-rule (9) of Rule 56A, notice in this case also should have been issued within a period of six months. The department cannot count the period of limitation from the date on which this credit was wrongly transferred to MODVAT account. In this view of the matter, we agree that the show cause notice dated 13-8-1987 is also barred by time. Thus on the time-bar issue, we hold that the show cause notice dated 26-11-1986 is partly time-barred covering the credit taken during the period prior to 26-5-1986 and is within time in respect of the credit taken thereafter. We also hold that the show cause notices dated 28-11-1986 and 13-8-1987 are totally barred by time, since they have been issued after a period of six months from the date of credit. The show cause notice dated 5-3-1987 is within the time and is fully enforceable. We, therefore, direct that the Department shall quantify the duty recoverable in the light of above decision and enforce recovery thereof.
20. As regards the last plea made by Shri Shroff requesting for permission to reverse the MODVAT credit but retain the proforma credit, such a request should have been raised at least when the Range Supdt. specifically brought to their notice of the provisions of Sub-rule (9) of Rule 56A. There was an opportunity given to them at that stage. The appellants have not obviously availed of that opportunity and were carrying on under a mistaken impression on their own. Such an attitude on the part of the asses-see cannot be condoned and this request therefore does not merit consideration at this stage. We accordingly reject this request.
21. In the result, subject to the modification contained in para 19 above, the appeal filed by the appellants is otherwise rejected.