1. The present appeal is against the Order-in-Original No. 20-MP/ Commissioner/ 2002 dated 22.1.2002 passed by the Commissioner of Central Excise, Patna, vide which he has confirmed the demand of duty of Rs. 5,95,236.00 (Rupees fifty lakh ninety-five thousand two hundred and thirty six) against the appellants by disallowing them the benefit of the CENVAT Credit in respect of Glass Bottles and Plastic Crates lying in their factory as on 1.4.2000. In addition, the Commissioner has also imposed personal penalty of Rs. 20.00 lakh (Rupees twenty lakh) on the appellants.
2. The appellants are engaged in the manufacture of Aerated Water and Fruit Pulp Based Drinks classifiable under Chapter 22 of the Central Excise Tariff Act, 1985. Prior to 1.4.2000, the appellants were not entitled to avail any Credit of Duty paid on the Glass Bottles and Plastic Crates used in the manufacture of Aerated Waters in terms of the provisions of Rule 57B(2)(iv) and as such, no Credit was being availed by them. With effect from 1.4.2000, the MODVAT Scheme was replaced by CENVAT Scheme and the MODVAT provisions were replaced by a new set of Rules from 57AA to 57AK. With the introduction of the said Rules, the appellants became entitled to the CENVAT Credit of Duty paid on the Glass Bottles and Plastic Crates, inasmuch as the definition of inputs as contained in Rule 57AA specifically included the packaging materials. There is no dispute about the legal position of availing of credit in respect of bottles and crates with effect from 1.4.2000. The dispute in the present appeal relates to the appellants' claim of credit in respect of the bottles and crates which were lying in their factory on 1.4.2000, either as such or in the shape of the final product or in the shape of under-process goods.
3. As per facts on record, the appellants vide their letter dated 30.10.2000 addressed to the Assistant Commissioner of Central Excise Division, Muzaffarpur, claimed the benefit of Credit of Rs. 37,24,475.79 in respect: of bottles and Rs. 13,70,759.98 (Rupees thirteen lakh seventy thousand seven hundred fifty-nine and paise ninety-eight) in respect of the plastic crates which were lying in stock as on 1.4.2000. On the same day, they made entry of the said Credit in their RG-23A Part-III Register. The Deputy Commissioner of Central Excise, Muzaffarpur, considered the above declaration of the appellants and vide its letter dated 24.1.2001, allowed the appellants to take the CEVNAT Credit of the duties paid on the said inputs lying in stock on 1.4.2000, subject to production of evidence showing payment of Central Excise Duty on the same. Subsequently, on 30.1.2001, the appellants placed all the invoices before the authorities. However, the Deputy Commisioner vide his subsequent letter dated 15.5.2001 intimated the appellants that they were not eligible for CENVAT Credit inasmuch as the inputs were brought to their factory on or before 28.2.2000. The appellants filed an appeal against the said letter of the Deputy Commissioner, which was dismissed by the Commissioner(Appeals) as infructuous, vide its Order dated 31.1.2000. The appeal thereagainst was also rejected by the Tribunal vide its Order dated 16.12.2002.
4. Thereafter, the appellants were issued a show cause notice dated 11.9.2001 proposing to disallow the CENVAT Credit so taken by them on the ground that the inputs were received in the appellants' factory prior to 1.4.2000 and as such, they were not entitled to take the Credit in respect of the same. The notice accordingly proposed disallowance of the Credit along with the confirmation of interest and imposition of penalty. The said notice culminated into the impugned Order passed by the Commissioner of Central Excise, Patna. Hence the present appeal.
5. Shri S.K. Bagaria, learned Advocate for the appellants has challenged the impugned Order on various grounds. It is his contention that the Credit having been allowed by the Deputy Commissioner vide his letter dated 24.1.2001, it was not open to the Revenue to disallow the same subsequently by way of a separate adjudication proceedings initiated under show cause notice dated 11.9.2001. Shri Bagaria, learned Advocate submits that the said communication dated 24.1.2001 by the Deputy Commissioner was not appealed against by the Revenue and as such, had attained the finality. The same acted as estoppel against the Revenue to initiate the fresh proceedings against the appellants on the same grounds. He submits that the Commissioner has erred in holding that the said letter was not an order, but was merely a decision taken by the Deputy Commissioner in his administrative capacity. The said letter was written by the Deputy Commisioner after hearing the appellants in person and as such, submits the learned Advocate, the same has to be treated as an Order.
6. We do not find any force in the above contention of the learned Advocate. The letter dated 24.1.2001 has been placed at page 35 of the paper-book filed by the appellants. It is clear from the scrutiny of the said letter that the same is in the form of a comunication intimating the appellants that they are entitled to take the CENVAT Credit on the inputs in stock held on 1.4.2000 subject to verification of the documents. The same is not in the shape of adjudication and as such, the question of the Revenue filing any appeal thereagainst, does not arise. It is also seen that, subsequently on 15.5.2001, the Deputy Commissioner made a communication to the appellants and intimated them that the Glass Bottles and Plastic Crates brought in their factory prior to 28.2.2000 would not earn MODVAT Credit. The said letter was appealed against by the appellants before the Commissioner(Appeals) who rejected their appeal as infructuous, having been filed against a communication. Thereafter, the appeal was filed before the Tribunal which stands rejected vide Order No. A-103/KOL/2002 dated 16.12.2002 on the ground that the appeal filed by the appellants against a letter dated 15.5.2001 had become infructuous, inasmuch as in response to the said letter, a show cause notice has subsequently been issued to them.
In view of the above position, we do not find any merits in the appellants' contention that the Revenue could not start proceedings by way of a show cause notice. Both the letters dated 24.1.2001 allowing the credit as also 15.5.2001 disallowing the Credit were mere communications, which were not in the shape of appealable orders, as held by the Tribunal in respect of second letter.
7. As regards the appellants' claim on merits, we find that New CENVAT Rules were introduced with effect from 1.4.2000. The same contain Rules 57AA to 57AK. Rule 57AB allows a manufacturer to take Credit in respect of duty paid on any inputs of capital goods received in the factory on or after the first day of April, 2000. (emphas is provided). Further, Rule 57AG(1) relates to the transitional provision and is to the effect that ...(1) Any amount of credit earned by a manufacturer under Rules 57A, 57B or 57Q, as they existed prior to 1st day of April, 2000 and remaining unutilised on that day shall be allowable as CENVAT credit to such manufacturer under these rules, and be allowed in accordance with these rules.
A reading of the Rule 57AB makes it very clear that the same extends the benefit of CENVAT Credit to the inputs received in the factory on or after the first day of April, 2000. Admittedly, the inputs in respect of which the appellant company is claiming the benefit of CENVAT Credit have not been received in their factory on or after the first day of April, 2000. As Such, the Credit cannot be allowed under the said Rule. Similarly, Rule 57AG is to the effect that if the appellant has earned any Credit prior to 1st day of April, 2000 i.e.
the date when the CENVAT Rules were introduced, he will be allowed to transfer the Credit so earned as CENVAT Credit and would be entitled to use the same. In the present case, the appellants had not earned any Credit in respect of the Glass Bottles and the Plastic Crates prior to 1.4.2000 because of the simple reason that such inputs stood excluded from the definition of Inputs' prior to the said date. Inasmuch as no Credit was earned, question of the same being taken as CENVAT Credit, does not arise at all. There is no provision under the New CENVAT Rules allowing the assessee to take the Credit in respect of the inputs lying in their stock as on 1.4.2001, if the same were not entitled to MODVAT Credit prior to the said date and no Credit was earned by the assessee in respect of the said inputs. The reading of the provisions of Rule 57AG relating to the transitional period clearly establishes that only those inputs on which Credit was being availed and which continued to be covered by the new provisions of CENVAT Rules, would be entitled to claim the unutilised MODVAT Credit as CENVAT Credit and to use the same in accordance with New Rules. Inasmuch as the inputs in question were not covered by the provisions of the Scheme of Credit and no Credit stood earned by the appellants, they cannot claim the benefit of Credit under the new set of Rules by contending that the inputs in question were lying in the stock, as there is no Rule allowing them to take Credit in respect of the inputs lying in stock.
8. The appellants have strongly contended that the absence of transitional provisions in respect of inputs lying in stock is irrelevant inasmuch as prior to 1.4.2000 whenever the MODVAT Credit was extended for the first time, the same was available on the inputs lying in stock in terms of the erstwhile Rule 57H and it was never the intention of the Government to exclude the transitional benefits in respect of the stock of inputs lying in their factory. We do not agree with the above contention of the learned Advocate. It is well-settled principle of law that the fiscal statutes have to be interpreted as they stand on the Statute Book and nothing more or less can be added or subtracted therefrom. Inasmuch as there is no rule allowing Credit in respect of stocks, the same cannot be introduced by way of judicial pronouncement on the basis that it was never the intention of the Central Government to exclude such benefits.
9. The appellants have relied upon the Board's Circular dated 29.8.2000 issued vide letter F. No. 345/2/2000-TRU dated 29.8.2000. The said Circular is to the following effect: Doubts have been expressed whether CENVAT credit in respect of the inputs lying in stock, inputs contained in the finished goods lying in stock and the inputs in process on the date when an SSI unit is required to pay excise duty after crossing the exemption limit of Rs. 100 lakhs is admissible or not. In this context, it is clarified that when the SSI unit clears the goods at nil rate or 5% rate up to an aggregate clearance of Rs. 100 lakhs, it is on the condition that no CENVAT credit is taken on the inputs used in such goods. Once the limit of R. 100 lakhs is over and the unit starts paying full duty, the CENVAT credit is admissible. In the CENVAT scheme also, CENVAT credit can be taken on the inputs on which duty has been paid.
Accordingly, once the embargo, which is applicable because of the SSI exemption notification, is lifted, the SSI unit is eligible to take CENVAT credit in respect of inputs lying in stock, on the inputs contained in the finished goods lying in stock, on the inputs in process. This would apply equally to any other assessee (non-SSI) who begins to pay duty in the middle of the year. For this purpose, it is obligatory on the assessee to quantify the amount of admissible credit on the basis of documentary evidence and records maintained for this purpose.
A reading of the above Circular would reveal that the same is not applicable to the peculiar facts and circumstances of the present case.
The said Circular deals with the situation where an SSI unit crosses the exemption limit of Rs. 100.00 lakh and starts paying duty on its final product thereafter, after availing the benefit of Credit in respect of the inputs. It is in those circumstances that the Board has observed that whatever stocks are being held by the SSI unit on the date of crossing of Rs. 100.00 lakh limit, the CENVAT Credit of Dury paid on the same should be extended to them. Similarly, the later portion of the said Circular, which allows the benefit to non-SSI unit which begins to pay duty in the middle of the year, is of no avail to the appellants, inasmuch as the same deals with the entirely different situation. The appellants have drawn our attention to the Tribunal's decision in the case C.C.E. v. Kandhari Beverages reported in 2002 (48) RLT 919 laying down that the Glass Bottles and Plastic Crates are eligible inputs for the purposes of MODVAT Credit. We are at a loss to understand as to how the above decision would help the appellants inasmuch as the same is in the context of the erstwhile Rule 57A, thus laying down that the Glass Bottles and Plastic Crates were eligible inputs for the purposes of MODVAT Credit, inasmuch as the same were to be considered as packing materials. The said decision was given in the context of the earlier Rule 57A when the Plastic Crates and Glass Bottles did not stand specifically excluded from the definition of inputs in terms of the provisions of Rule 57B(2)(iv). The decision does not relate to the admissibility of Credit in respect of the stocks held on 1.4.2000 when the old MODVAT Credit Scheme was switched over to new CENVAT Scheme.
10. Similarly, we find that the reliance by the appellants on the decision in the case of Jai Drinks Pvt. v. CCE is not applicable, inasmuch as the same deals with the availability of Credit in respect of old and used Glass Bottles lying in stock in the factory in terms of the erstwhile provisions of Rule 57H. Admittedly, the new CENVAT Rules do not contain any rule akin to Rule 57H thus entitling the assessee to claim the Credit. We have already dealt with the appellants' contention that Rule 57H should be considered as being continued on the Statute Book in terms of the Government's intention irrespective of the fact that there is no such rule in the new set of Rules.Dholai Tea Co.
Pvt. Ltd. v. C.C.E. reported in 2002 (52) RLT 472 dealing with the admissiblity of MODVAT Credit in respect of the capital goods, is not applicable, inasmuch as the same relates to an altogether different set of facts and circumstances.
12. As regards the personal penalty of Rs. 20.00 lakh (Rupees twenty lakh) imposed under the provisions of Section 11AC, we find that the appellants have taken the Credit on the basis of the Circular issued by the Board, though such basis was on the wrong interpretation of the said Circular. The Revenue Authorities were also intimated. In fact, at one stage, the Assistant Commissioner also interpreted the said Circular in a manner favourable to the assessee. As such, it cannot be said that there was any mala fide intention on the part of the appellants to avail the inadmissible Credit. In the circumstances, we are of the view that the panalty imposed upon the appellants is not justified. The same is accordingly set aside. In view of the foregoing, we confirm the demand of duty against the appellants along with the interest, but set aside the personal penalty. The appeal is disposed of in above terms.