V.K. Agrawal, Member (T)
1. The issue involved in this appeal filed by M/s. Maruti Udyog Ltd. is whether the Waste and Scrap generated during the manufacture of body panels for fuel Efficient Motor Vehicles, is leviable to excise duty.
2.1 Briefly stated the facts are that the Appellants manufacture, inter alia, fuel, efficient motor vehicles. For the manufacture of body panels, they imported cold-rolled (CR) steel sheets. They were availing exemption in respect of these C.R. sheets under Notification No. 522/86-Cus., dated 31-12-1986 which granted partial exemption of basic customs duty and whole of the additional customs duty to the imported C.R. sheets and steel blanks when used in accordance with the provisions of Section 65 of the Customs Act for the manufacture of the body panels of the fuel efficient motor cars or vans of engine capacity not exceeding 1000 cc. The notification was subject to the condition that nothing contained in the notification shall apply to the Waste or refuse arising in the course of the manufacture of the body panels and the importer undertakes to pay the whole of the duty of customs on all such waste or refuse cleared for home consumption.
2.2 On a representation from the Appellants, the Central Government issued three ad hoc exemption Orders dated 11-5-87, 2-11-87 and 6-7-1988 under Section 25(2) of the Customs Act providing partial exemption to steel waste and scrap lying in the Bonded warehouse in respect of basic customs duty and full exemption in respect of auxiliary duty of customs and additional duty of customs under Section 3 of the Customs Tariff Act subject to the condition that MUL shall dispose of the Waste and Scrap to M/s. Metal Scrap Trade Corporation Ltd.
2.3 A show cause notice dated 26-12-90 was issued to M/s. Maruti Udyog Ltd. (MUL) for demanding duty of excise on waste and scrap cleared for home consumption during the period from 1987-88 to 1988-89. The Collector, Central Excise, under Order No. 31/91, dated 4-10-91, confirmed the demand of excise duty amounting to Rs. 35,48,354/- and imposed a penalty of Rs. 50,000/- holding that waste and scrap was liable to excise duty and extended period of limitation was invocable as the impugned goods were cleared by them without filing any classification list and issuing gate passes and without maintaining any statutory records. On appeal filed by Maruti Udyog Ltd., the Appellate Tribunal vide Final Order No. E/2311/93-B1, dated 30-8-93, remanded the matter to the Adjudicating Authority observing as under :-
“But we notice that the Notification Nos. 54/86 and 171/88 and the ad hoc exemption order issued by the Government under Section 25 of the Customs Act are conditional notifications. It is required to be verified, as to whether the appellant had disposed of the aforesaid waste and scrap to M/s. Metal Scrap Trade Corporation Ltd., and documentary evidence has to be verified by the Assistant Collector, in this regard, as laid down in the order. The Notification No. 171/88 also lays down that the levy or duty issued exempted provided the credit of such duty had not been taken under Rule 56A or 57A of the Central Excise Rules, 1944. The learned Advocate had pointed out that no credit had been taken by them. But the learned Collector has not given any finding on this aspect of the matter. Therefore, in the fitness of things it is just and proper that the matter is remanded for de novo consideration. The learned Collector shall examine the entire issue, including the plea of time-bar de novo after granting the appellants full opportunity to place any evidence may choose to put forth their case.”
3. The Commissioner, Central Excise, under the impugned Order dated 14-1-98, confirmed the demand of excise duty amounting to Rs. 35,48,354/- and imposed a penalty of Rs. 1 lakh on the Appellants, holding that excise duty is leviable on waste and scrap and placed reliance on the decision of the Supreme Court delivered in May, 1963; that the waste and scrap was sold to private parties instead of to M/s. Metal Scrap Trade Corporation Ltd. as was required under the ad hoc Orders; that the assessee’s plea that they had not availed of Modvat credit is not relevant to the demand of duty; that, however, they had not availed of the Modvat credit of the duty; that extended period of limitation was invocable as the documents on which they were clearing the impugned goods were never brought to the notice of the Department at any stage; that no duty was paid at the time of import as the conditions were not satisfied by the assessee.
4. Shri A.R. Madhav Rao, learned Advocate, submitted that undis-putedly the C.R. Sheet imported by the Appellants were exempt from the levy of additional duty of customs under Notification No. 522/86-Cus. and there is also no dispute that they have duly fulfilled the conditions of the notification and availed the exemption under the notification. He further submitted that Notifications No. 54/86-C.E., No. 91/88-C.E. and 171/88 prescribed nil rate of duty for waste and scrap if it has arisen from goods falling under sub-heading 72.01 to 72.13, 7301.00, 7302.10, 73.03, 73.04, etc., on which duty of excise or additional duty leviable under Section 3 of the Customs Tariff Act has already been paid and the credit of such duty has not been taken. He mentioned that the Supreme Court, in the case of C.C.E. v. Usha Martin Industries Ltd. – 1997 (94) E.L.T. 460 has held that when the item has been cleared by availing exemption under a particular notification, the same can be said to be an item on which the duty has already been paid; that the Tribunal, following the Supreme Court judgment, have taken the same view in following cases :-
(i) Utkal Automobiles Ltd. v. CCE, 1999 (114) E.L.T. 277 (T) (ii) Maharashtra Steel Industries v. CCE, 1997 (95) E.L.T. 342 (T) (iii) Apeejay Industries Ltd. v. CCE - Final Order Nos. E/6-7/98-B1, dated 24-11-97 [1999 (109) E.L.T. 932 (Tribunal)]. (iv) C.C.E., Pune v. Western Metal Industries - Final Order No. 1033/99-B, dated 23-9-1999.
5. The learned Advocate, thus, contended that in the present case C.R. sheets are to be treated as C.R. Sheets on which additional duty of customs has already been paid and as such waste and scrap would be exempt under the various notifications. He also referred to the following circulars of the Board which clarified that the expression “duty already paid” would also apply when duty paid is nil in terms of an exemption notification :-
(i) Circular No. 125/36/95-CX., dated 15-5-1995
(ii) Circular No. 107/4/92-CX. 3, dated 7-9-92
(iii) Circular No. 345/16/85-TRU, dated 28-7-87
6. The learned Advocate also submitted that the Appellants had disposed of all quantities of waste and scrap through MSTC which is evident from the various certificates given by MSTC : that what was stipulated by ad hoc Orders was the disposal of waste and scrap through MSTC and not sale to MSTC. Finally he submitted that the entire demand is barred by limitation since the Appellants were under the bona fide belief that the Waste and Scrap was exempt from duty in view of various notifications and accordingly they did not file classification list etc., for the same; that their bona fide belief was also supported by the Circulars issued by the Board; that for subsequent period, the Assistant Collector under Adjudication Order dated No. 91/93, dated 27-3-93, has extended the benefit of Notification No. 171/88-C.E. to the Waste and Scrap.
7. Opposing the submissions, Shri Satnam Singh, learned SDR, reiterated the findings of the Commissioner as contained in the impugned order and emphasised that as per condition (iii) specified in Notification No. 522/86-Cus., exemption from customs duty was not available to the Waste or refuse arising in the course of the manufacture of the body panels and importer undertakes to pay the duty of customs on such waste or refuse cleared for home consumption. He submitted that as such waste and scrap was not chargeable to nil rate of duty; that the Appellants have not complied with the conditions specified in the notification. In reply the learned Advocate for the Appellants submitted that a copy of the report dated 28-11-97 of the Deputy Commissioner reporting that the Waste and Scrap was sold to private parties had not been made available to them and further no demand for customs duty has been made from them for violation of the conditions of the customs notification.
8. We have considered the submissions of both the sides. It is well settled law that nil payment of duty is also payment of appropriate rate of duty. This was the judgment of the Apex Court in the case of Usha Martin Industries, supra. The Appellate Tribunal in the case of Maharashtra Steel Industries, (supra), held that the benefit of Notification No. 208/83-C.E. could not be denied only on the ground that the goods had been cleared by the manufacturer at nil duty gate passes. Further, the Appellate Tribunal in the case of Apeejay Industries Ltd. v. CCE, (supra), has held that “the fact that goods were removed without payment of duty under a valid exemption would not mean that burden of payment of duty as leviable has not been discharged. Nil duty in these cases was duty at the appropriate rate and it is that duty which has been paid.” Notification No. 54/86-C.E., dated 10-2-86 provided ‘nil’ rate of duty in respect of waste and scrap provided that such waste and scrap have arisen from specified goods on which duty of excise, under Section 3 of the Central Excise Act or, as the case may be, the additional duty leviable under Section 3 of the Customs Tariff Act has already been paid, but the credit of such duty has not been taken. The waste and scrap was similarly chargeable to nil rate of duty under subsequent Notification Nos. 91/88-C.E., dated 1-3-88 and 171/88-C.E., dated 13-5-98. There is no dispute that the impugned waste and scrap have arisen from the goods specified in the notifications and the credit of the duty has not been taken under Rule 56A or Rule 57A of the Central Excise Rules.
9. The only condition remained to be satisfied for the availment of exemption under any of these notifications is that the duty of excise or additional duty of customs has been paid on such specified goods. Notification No. 522/86-Cus., dated 31-12-1986 exempts the imported steel sheets and blanks falling within Chapter 72 or 73 of the First Schedule to the Customs Tariff Act when used in accordance with the provisions of Section 65 of the Customs Act for the manufacture of body panels of fuel efficient motor car or fuel efficient van, of engine capacity not exceeding 1000 cubic centimetres from :-
(a) so much of basic customs duty as is in excess of 25% ad valorem :
subject to the conditions, namely :-
(i) that the importer produces certificates from competent officers to the effect that the goods are being imported under a programme duly approved by the Ministry of Industry for the manufacture of body panels of such motor cars or vans
(ii) that the importer produces a certificate within specified time from jurisdictional Assistant Collector, Central Excise to the effect that the imported goods had been used in the manufacture of body panels which, in turn, have also been used in the manufacture of under cars or vans; and
(iii) that nothing contained in this notification shall apply to the waste or refuse arising in the course of the manufacture of the said body panels of such motor cars or vans, and that the importer undertakes to pay the whole of the duty of customs on all such waste or refuse cleared for home consumption.
10. It is not the case of the Revenue that imported C.R. sheets were not used in the manufacture of body panels or the requisite certificates were not produced or body panels have not been used in the manufacture of fuel efficient cars. The show cause notice for demanding the excise duty on Waste and Scrap was issued only on the ground that since the exemption contained in Notification No. 54/86 and subsequent notification was not available as they had not paid duty on the imported cold-rolled sheets. In view of the settled law that payment of nil rate of duty also amounts to payment of duty, the benefit of these notification exempting waste and scrap from payment of excise duty is not deniable to the appellants. The third condition stipulated in Notification No. 522/86-Cus. cannot be said not to have been complied with since the said condition only mentions that nothing contained in Notification No. 522/86-Cus. shall apply to the waste and refuse and the importer undertakes to pay the duty of customs on waste or refuse. It is not the charge in show cause notice that the Appellants had not undertaken to pay customs duty on waste and scrap. Further by issuing ad hoc Orders Customs duty was also exempted on waste and scrap subject to certain conditions. They have produced the certificates from M/s. Metal Scrap Trade Corporation Ltd. to the effects that waste and scrap was sold through the corporation only. The Commissioner, in the impugned order, has not referred to such certificates. He has relied upon a report dated 28-11-97 of the Dy. Commissioner which had not been disclosed to the Appellants. It is mentioned in the impugned order that according to report the waste and scrap was sold to private parties whereas it was required to be sold to M.S.T.C The said report is silent about the submissions of the Appellants that the waste and scrap was sold through M.S.T.C. Accordingly we are of the view that the Appellants are eligible to avail of the Notification No. 54/86, 91/88 or 171/88 at the relevant time in respect of impugned waste and scrap and as such the order is set aside and appeal is allowed without considering the aspect of time-limit.