ORDER
P.G. Chacko, Member (J)
1. Brief facts of the case are as follows.
2. The Appellants were engaged in the manufacture and export of Plywood and Block Boards and allied excisable goods falling under Chapter 44 of the Schedule to the Central Excise Tariff Act during the period of the dispute. They were also availing Modvat credit on the inputs used in such manufacture Under Rule 57A of the Central Excise Rules during the sale period. In 1993, they opted to operate under a quantity-based duty exemption entitlement certificate (DEEC) scheme by applying for licence under the said scheme and obtained such licence on 31.12.93 covering 4 inputs namely Timber, Veneers, Phenol, Formaldehyde and Phenol. By the time they obtained the licence, they had already exported their final products in three consignments on 10.4.93,24.6.93 and 8.8.93 under the D.E.E.C. Scheme. At the time of export as above, they had taken Modvat credit on Veneers as inputs used in the manufacture of the exported product, which amounted to Rs. 1,18,972. In February 1994, the Appellants transferred their licence to a third party who imported full quantity of timber /logs as permitted by the said licence. At about the same time, the Appellants reversed the above Modvat credit of Rs. 1,18,972 in their R.G. 23A Part II, which, according to the Appellants, was done under the department’s compulsion. The reversal of Modvat credit was made on 10.10.94 and 11.10.94. The Appellants on 8.4.95, filed a refund application before the jurisdictional Assistant Commissioner of Central Excise Under Section 11-B of the Central Excise Act claiming that they were entitled to take the Modvat credit Under Rule 57A of the Central Excise Rules and was not required to reverse the same in terms of the Notification No. 204/92-Cus., dt.19.5.92 and that the reversal of the Modvat credit happened to be effected at the instance of the department. The Assistant Commissioner rejected the refund claim on the ground that the same was not maintainable Under Section 11B(2) of the Central Excise Act. Against the order of the Assistant Commissioner, the Appellants appealed to the Commissioner (Appeals). The Commissioner (Appeals) held the refund application to be maintainable Under Section 11B(2) of the Act but rejected the same on merits as per the order dated 13.2.98. Hence the present appeal before the Tribunal.
3. The Ld. Consultant has reiterated the grounds of the appeal and submitted that there was absolutely no requirement under Notification No. 204/92-Cus., dt. 19.5.92 that the Modvat credit taken on inputs used for the manufacture of the exported products should be reversed at a later stage after the transfer of the DEEC licence to a third party. In the absence of such condition, Ld. Consultant has submitted, the amount of Modvat credit reversed at the instance of the department in October 1994 ought to have been refunded to the appellants by the Assistant Commissioner by allowing the refund claim which was filed in time by them. He has, in this connection, drawn my attention to the condition No. VI laid down in the above Notification which reads thus:
that where export goods are manufactured availing credit of Central Excise duty or Additional Customs duty, in respect of any of the materials permitted import under the said licence, Under Rule 56A or 57A of Central Excise Rules, 1944, the facility of sale or transfer of materials or the said licence shall not be available.
Ld. Consultant has, therefore, prayed for setting aside the Assistant Commissioner’s order rejecting the refund claim and the order of the Commissioner (Appeals) upholding the Assistant Commissioner’s order.
4. Ld. DR, on the other hand, relied on the above condition No. VI laid down in the Notification and submitted that the Appellants were not entitled to the facility of transfer of the DEEC licence after having availed of Modvat credit on Veneer and used such inputs in the manufacture of final products and having imported the final products Under the licence. He has, therefore, submitted that in order to be able to transfer the DEEC licence to a third party, the Appellants ought to have reversed the credit taken on the Veneers used in the manufacture of the final (exported) product. In this view of the matter, the Ld. DR has submitted that there is nothing wrong in the order of the lower Appellate Authority and therefore the order has to be upheld.
5. It is admitted fact that the appellants took Modvat credit to the extent of Rs. 1,18,972 on Veneers used as inputs in the manufacture of Plywood and other exported final products in terms of Notification No. 204/92-Cus. dt. 19.5.92. It is also not disputed that the licence was transferred by the Appellants to a third party and that such third party wanted to make us of the licence for import of one of the inputs covered by the licence. On a careful examination of the aforesaid condition in the Notification, I note that the Appellants were not entitled to transfer the licence as much as they had manufactured the exported goods after availing the credit of duty in respect of the Veneer which were permitted to be imported under the said licence and which were used in such manufacture. It follows from this restriction that, in order to render the transfer of the licence lawful and regular the Appellants ought to have reversed the input credit taken on Veneers. What the Appellants did was only this. There is nothing on record to show that this reversal was done at the instance of the department. In such a situation, the appellants were not entitled to refund of the duty reversed in their RG.23-A Part II in respect of Veneers. Accordingly, the order passed by the lower Appellate Authority has to be upheld. I, therefore, do not see any merit in this appeal. The appeal is, therefore, dismissed.