Full Judgment
2.1 Briefly stated the facts are that M/s. Gupta Soaps manufacture detergent powder. They manufactured detergent for M/s. Godrej Soaps Ltd. out of raw materials supplied by M/s. Godrej Soaps Ltd. The detergents so manufactured was exported by M/s. V.A.M. International under bond. The respondents submitted two claims for the quarter January, 1991 to March, 1991 and April to June, 1991 on 22-8-1991 for refund of Modvat credit of the duty paid on inputs which were used in the manufacture of detergent which were exported under Rule 57F(3) of the Central Excise Rules. The Assistant Collector rejected both the refund claims, under order dated 23-3-1993, holding that the transaction between the Respondents and Godraj Soaps Ltd. was not on principal to principal basis as the detergent was manufactured out of the raw materials supplied by Godrej Soaps Ltd. and under the supervision of their inspector and amount of refund was to be paid by the Respondents to Godrej Soaps Ltd.; that M/s. Gupta Soaps were not the real manufacturer but just a hired labour of the raw material supplier; that as per Notification No. 85/87 dated 1-3-1987, only the exporter can claim the refund under Rule 57F (3) and the exporter was other than the respondents.
2.2 On appeal filed by the Respondents, the Collector (Appeals), under the impugned order, set aside the order of the Assistant Collector and allowed the refund, holding that the show cause notice did not allege that Godrej Soaps Ltd. were the manufacturer and the Assistant Collector had gone beyond the notice. The Collector (Appeals) further held that the agreement was on a principal to principal basis as no provision for control or supervision over manufacture of goods by Godrej Soaps was provided for in the agreement which was a contract at arm's length; that job worker had to be considered as manufacturer as held in C.C.E. v. Sonali Enterprises, 1991 (56) E.L.T. 164 (Tribunal).
He also held that Rule 57F(3) does not indicate that manufacturer must export the goods; that the notification relates to refund claim of duty on goods exported; that proviso to Rule 57F(3) specifically provides for refund of the credit to the manufacturer and does not restrict it only to the exports made by the manufacturer himself.
3. Shri Tilak, learned DR submitted that the issue involved in appeal is outside the jurisdiction of the Appellate Tribunal in view of the provisions of proviso C to Section 35B(1) of the Central Excise Act which provides that no appeal shall lie to the Tribunal in respect of goods exported outside India without payment of duty; that it is clear from the copies of the shipping bills that they were availing of DEEC scheme as well as Modvat credit on the indigeneous raw materials which tantamounts to double benefit out of single export consignment which is not allowable; that the respondents had only submitted the xerox copies of the AR4s and shipping bills and in absence of which authenticity of the documents could not be verified by the Department. He, further, submitted that Notification No. 85/87 issued under Rule 57F(3) of the Central Excise Rules, provides that the refund claim should not be submitted more than once in any quarter of a calender year; that as two refund claims had been filed during a single month, conditions of the notifications have not been complied with. He also mentioned that the benefit of Rule 57F(3) is not available to the Respondents as goods were sold by them for house consumption and reliance was placed on the decision in the case of C.C.E. v. Gavs Laboratories (P) Ltd. 1994 (71) E.L.T. 717 (Tribunal). He, finally, submitted that the Collector (Appeals) had allowed the refund claims without going into the merits of the claim.
4. Countering the arguments, Shri Vinay S. Sejpal, learned Chartered Accountant, submitted that under Section 35B(1) of the Act appeal against orders which deal with rebate of duty under Rule 12 or 12A would be lying before Government of India; that in the present case the dispute is with regard to refund of Modvat credit and as such appeal rightly lies with the Tribunal. He, further, submitted that the Revenue had made no allegation regarding double benefit under DEEC and Modvat scheme in the show cause notice and as such new grounds should not be permitted; that all the original documents had been submitted to the Assistant Collector (Bond) and all the relevant documentary evidence were furnished before Asstt. Collector under their letter dated 12-5-1992; that this is a new ground which should not be permitted. He also mentioned that they had complied with the requirements of Notification 85/87 as they had file two different applications for two different quarters of the financial year and both applications were within the prescribed period of six months. He relied upon the decision in the case of Hotline Teletube & Components Ltd. v. C.C.E., Indore -1998 (102) E.L.T. 33 (Tribunal) in which it was held that the conditions prescribed in Clause 2 of the Appendix to Notification No.85/87 is a procedural requirement, the non-fulfilment of which cannot result in denial of the substantive benefit of refund which is conferred under Rule 57F. He also submitted that it is not necessary that the goods should be exported by the manufacturer himself; that what is required is that the goods should be exported out of India. He relied upon the decision in the case of C.C.E., New Delhi v. Bhayana Electronics Industries (P) Ltd. -1994 (74) E.L.T. 905 (Tribunal) wherever it was held that "Rule requires only export of goods and on such export being established, the manufacturer is entitled to refund.
The practice of merchant exporter lifting goods from the premises of manufacturer after executing necessary bond is well established. Merely because merchant exporter exported the goods would not mean that goods in fact have not been exported in accordance with rules relating to export. "He also mentioned that the Department has relied upon the decision in the case of GAVs Laboratories, supra. But for subsequent export of goods through merchant exporter, the Tribunal allowed them the benefit of Rule 57F(3) to GAVs Laboratories Pvt. Ltd. in the case reported in 1997 (92) E.L.T. 696 (Tribunal) (C.C.E., New Delhi v. Gavs Laboratories Pvt. Ltd.). Finally he mentioned that the ground of appeal that respondents had claimed refund of full Modvat credit instead of pro rata utilisation of the inputs for export is absolutely baseless and contrary to provisions of Rule 57F(3) which clearly enumerates that the Modvat credit which cannot be utilised is permitted to be claimed as refund.
5. We have considered the submissions of both the sides. Proviso to Rule 57F(3) of the Central Excise Rules provides for refund of amount of Modvat credit if the final products are exported under bond. The proviso is reproduced below: "Provided that the credit of specified duty in respect of inputs used in the final products cleared for export under bond or used in the intermediate products cleared for export in accordance with Sub-rule (2) shall be allowed to be utilised towards payment of duty of excise on similar final products cleared for home consumption or for export on payment of duty and, where for any reason, such adjustment is not possible, by refund to the manufacturer subject to such safeguards, conditions and limitations as may be specified by Central Government in the Official Gazette." 6. The facts which are not disputed are that the goods were manufactured by the Respondents; duty paying nature of the inputs; the fact of the export of final goods under Bond executed by the Respondents and that the goods were exported by M/s. V.A.M.International. We observe that the show cause notice for denying the refund was issued to the Respondents on the ground that M/s. Gupta Soaps had not exported the goods themselves and as per Rule the manufacturer who avails Modvat should himself export the goods to get the benefit of refund. The grounds of appeal now contained in Memorandum of appeal such as availing of two benefits under DEEC and Modvat credit, submission of xerox copies of documents and claiming refund of entire amount of Modvat credit were not raised in the show cause notice. The Department cannot file the appeal on completely new points which were not raised in the show cause notice. The Revenue cannot make out a completely new case at the appeal stage. We also observe that it does not flow from the language of the proviso to Rule 57F(3) that the manufacturer, who is availing the Modvat credit of duty paid on inputs used in or in relation to the manufacture of final goods which are exported, should himself export the goods. The requirement of the said proviso is that the 'products are cleared for export under bond'. The fact of export under bond, as mentioned earlier also, has not been disputed by the Revenue and accordingly the benefit of the proviso cannot be denied to the Appellants merely because the goods were exported by merchant exporter. This was the view held by the Tribunal in Bhayana Electronics Industries (P) Ltd., supra. The Tribunal has rightly held in that case that "The practice of merchant exporters lifting goods from the premises of manufacturer after executing necessary bond is well established. Merely because AR 4 forms indicate consignee name as that of merchant exporter would not mean goods have been (cleared) for home consumption particularly in view of the facturm of export of these goods not being denied." The Appellate Tribunal, in that case, "find no warrant for reading into Rule 57F(3) something that is not there." The ratio of the decision in the case of Gavs Laboratories - 1994 (71) E.L.T. 717 is not applicable as in that case the manufacturer was a supporting manufacturer as embodied in the DEEC scheme. In the present matter the Revenue has only mentioned that they were availing DEEC scheme but has not contended that the Respondents were supporting manufacturer under DEEC scheme. Further in the case of C.C.E. v. Gavs Laboratories Pvt. Ltd. - 1997 (92) E.L.T.696, the Appellate Tribunal, on similar facts, held that the Rule 57F(3) of the Central Excise Rules is applicable as the goods exported were manufactured by the respondents therein and the refund claim was preferred within time limit and the respondents were not in a position to utilise the credit of duty allowed under Rule 57A.,In the instant case also the Respondents are not in a position to utilise the credit of duty, paid on inputs used in or in relation to the manufacture of goods exported, towards payment of duty on similar final products cleared for home consumption as they were within the exemption limit under Notification No. 175/86-C.E., dated 1-3-1986. The Trade Notice No. 163/1988, dated 12-12-1988 issued by C.C.E., Bombay-1, also clarified that if the assessees want to avail Modvat credit of duty paid on inputs used in the manufacture of goods exported, such credit can be refunded if adjustment is not possible subject to the condition that the assessee maintained separate account right from raw material stage to the final product stage for export production as well as for home consumption. The Revenue has not made any allegation that the accounts were not maintained. No doubt the Respondents have submitted two refund claims in one quarter, the benefit of refund of Modvat credit cannot be denied for procedural lapse as held by the Appellate Tribunal in the case of Hotline Teletube & Components Ltd., supra.
Further, the claims have been reportedly filed by them within the time limit of six months specified in Section 11B of the Central Excise Act.
There is no force also in Revenue's submission that the Tribunal has no jurisdiction to hear this appeal in view of proviso (b) to Section 35B(1) of the Central Excise Act. Proviso (b) excludes the appeals in respect of rebate of duty on goods exported outside India. The issue involved in present appeal is not rebate of duty of excise on goods exported or on excisable materials used in the manufacture of those goods. The issue involved in present appeal is regarding availability of refund of Modvat credit which has already been availed of by the Respondents under Rule 57A and which they were not in a position to utilise towards payment of duty on final products manufactured by them as per provisions of Rule 57F(3). The Appeals regarding these provisions have not been excluded from the jurisdiction of the Appellate Tribunal. In view of these facts and circumstances, we do not find any reason to interfere with the impugned order and reject the appeal filed by the Revenue.