ORDER
U.L. Bhat, J. (President)
1. The appellant is absent inspite of notice of hearing. We heard Shri Murugappan, the learned JDR and perused the papers.
2. The appellant has a factory at Kottayam, manufacturing Automotive tubes and other rubber products falling under Chapter 40 of the Central Excise Tariff, using various duty paid inputs supplied by SSI units as well as other units. Appellant was availing notional higher credit of duty in respect of inputs purchased from SSI units under Rule 57B of the Central Excise Rules, 1944 read with Notification No. 175/86, dated 1-3-1986 on basic excise duty as well as special excise duty. The Superintendent of Central Excise issued show cause notice dated 30-8-1988 requiring the appellant to show cause why the higher notional credit should not be held to be inadmissible in respect of special excise duty. The appellant resisted the notice. However the Assistant Commissioner confirmed the notice and directed the appellant to pay Rs. 1,110.95. This order has been conformed by the Collector (Appeals) against which the present appeal is filed.
3. The relevant provision in Notification No. 175/86 is contained in Clause (5), which reads as under :
Notwithstanding the exemption contained in this notification in respect of the specified goods which are subjected to concessional rate of duty (other than those specified goods which are wholly exempted from the duty of excise leviable thereon), under this notification, and received on or after the 1st day of April, 1988 in a factory where such goods are used as inputs in or in relation to the manufacture of final products in terms of the provisions of Section AA of Chapter V of the said rules, the credit in respect of such inputs shall be allowed under Rule 57B of the said rules, at the rate of duty applicable under this notification plus an amount calculated at the rate of 5% ad valorem, or at the rate of duty otherwise applicable but for this notification, whichever is less.
4. This clause has come up for consideration before Single Member Benches of the Tribunal. The earlier decision was one rendered by one of us [Shri K. Sankararaman, Member (T)] in Reckitt & Caiman of India Ltd. v. Collector of Central Excise reported in 1992 (62) E.L.T. 148 where it has been held that exemption under notification is applicable to basic excise duty and not special excise duty and therefore clause (5) is not applicable to special excise duty. The same view was reiterated by the same member in Sarada Service Corporation v. Collector of Central Excise, reported in 1992 (62) E.L.T. 173. However, another single Bench, after referring to the decision in case of Sarada Service Corporation took a different view in Collector of Central Excise v. Eimco Elecon (India) Ltd. reported in 1993 (66) E.L.T. 444. Admittedly the inputs used by the appellant have suffered basic excise duty as well as special excise duty. Both these duties are specified for the purpose of Rule 57A of the Central Excise Rules. The Notification is in relation to grant of exemption to first clearance of specified goods upto a particular value and concessional duty on subsequent clearances upto a particular value. Clause (5) is in the nature of exception to the general purport of the notification. Clause (5) relates to specified goods which are subject to Concessional rate of duty as distinguished from goods enjoying total exemption. If such goods are received on or after 1-4-1988 in a factory where they are used as inputs in terms of the Modvat rules, the credit in respect of such inputs shall be allowed under Rule 57B at the rates stipulated in clause (5) According to Rule 57B, credit of specified duty on inputs may, in a case where the duty on inputs has been paid under a notification issued under Sub-rule (1) of the Rule 8(1) of the rules or Section 5A of the Act, as the case may be, exempting such inputs from a part of the duty leviable thereon on the basis of value of clearances of such inputs during any specified period, be allowed at the rate otherwise applicable to such inputs but for the said notification. According to proviso to Rule 57B me rule is applicable only if the notification provides for grant of credit in respect of such inputs at such higher rates as may be specified therein. According to clause (5) of the notification credit in respect of inputs shall be allowed under Rule 57B at the rate of duty applicable under the notification plus the amount calculated at the rate of 5% ad valorem or at the rate of duty otherwise applicable, but for the notification whichever is less. Clause (5) of the notification relates to notional credit to be availed by the manufacturer of the finished product. The higher credit is restricted under clause (5) to two alternatives, viz.:
(i) duty under the notification plus an amount calculated at the rate of 5% ad valorem and (ii) the rate of duty otherwise applicable, but for the notification.
What is significant in Clause (5) is that it applies only to the basic excise duty and not the special excise duty. In other words, the method of reckoning and the quantum to be taken credit of under Clause (5) relates only to basic excise duty and not special excise duty. The two decisions in Reckitt & Colman of India Ltd., and Sarada Service Corporation follow the correct understanding of clause (5) of the notification. We find that the view adopted in paragraph 4 of the order in Eimco Elecon (India ) Ltd., is not in accordance with the provisions in clause (5) of the Notification, as correctly understood.
5. We, therefore, hold that notional credit can be taken only on basic excise duty and for the purpose of notional credit special excise duty cannot be taken into consideration. In other words the correct procedure is to reckon the notional basic excise duty first and then add to it the special excise duty actually paid. Credit is to be taken of the sum total of the two amounts. We, therefore, hold that the view taken by the lower authorities is correct. The appeal is dismissed.