Full Judgment
2. The brief facts of the case are that the appellants are engaged in the manufacture of Electric Induction Furnaces falling under sub-heading 8514.00 of the CETA, 1985. They have cleared the goods viz.
Induction Furnace to Central Mechanical Engineering Research Institute, Durgapur and also to Naval Materials Research Labs, Govt. of India, Ministry of Defence, without payment of duty in terms of Notification No. 10/97. The assessee availed benefit of Modvat credit on the inputs which were common for dutiable final products as well as the product cleared at Nil rate of duty and no separate inventory of inputs were maintained for the different categories of Product as required under Rule 57CC of the CER. Show cause notices were thus issued asking the assessee to pay an amount equal to eight per cent of the price (excluding sales taxes and other taxes if any, payable on the goods), in terms of Rule 57CC of the Central Excise Rules, 1944 which culminated in the orders of adjudication against which the party moved the Commissioner (Appeals) and the Commissioner (Appeals) by different orders (pertaining to different periods), rejected the appeals.
Aggrieved by the said orders, the present appeals have been filed. The period of dispute in Appeal No. E/357/2001 is 30-3-99 and in Appeal No.E/40/2002 the period is 28-9-1999.
4. The learned Counsel submitted that there is no provision under the Central Excise Act and the Rules which defines the "amount" and no machinery is provided for recovery "amount" and the rules provide for recovery of duty and interest payable on the duty. They submitted that when there is no provision in the statute for recovery, then this amount of 8% cannot be recovered. They have also cited the Tribunal judgment rendered in the case of Pushpaman Forgings v. CCE, Mumbai-VII, reported in 2002 (149) E.L.T. 490 (Tri.) = 2002 (48) RLT 107 which has relied upon the judgment rendered in the case of Dharmsi Morarjee Chemicals Co. Ltd. v. CCE & CC, Jaipur reported in 2001 (138) E.L.T.164 (Tri.) = 2001 (44) RLT 441 and that of Eternit Everest Ltd. v. UOI reported in 1997 (89) E.LT. 28 which is a Division Bench judgment of the Hon'ble High Court of Judicature, Madras, which held that when there is no specific provision laid down for recovery, then such amount under Section 11D of the Act cannot be recovered.
5. The learned JDR Shri A. Jayachandran, appearing for the Revenue, at the time of hearing of the Stay Petition in the matter on 29-5-2001 had submitted that although the judgments are on the point, however, appeal need not be disposed and may be kept pending to ascertain the further development in the matter.
6. We have considered the rival submissions and gone through the case records and perused the various citations. We note that in terms of the law as it stood at the relevant time, there was no provision under the Central Excise Rules which defined "amount" and what was provided for was recovery of duty and interest payable on duly. Therefore, the case laws cited by the party squarely apply to them. We also note that the Civil Appeal No. 3387 of 2002 filed by the Commissioner of Central Excise, Mumbai against the order in the case of Puspaman Forgings has been dismissed by the Hon'ble Apex Court vide their Order dated 2-9-2002. Further, we note that the Hon'ble Apex Court in the case of Orissa Extractions v. CCE, Bhubaneswar reported in 2000 (115) E.L.T. 30 (S.C.), decided on 3-11-1999 has held that Exemption cannot be denied even if the credit of duty for inputs used in the manufacture of duty free final product has been utilized for payment of duty on other non-exempted goods. We further note that the law has been amended providing for machinery provisions and Explanation I has been inserted under Rule 6 of the Cenvat Credit Rules, 2001, which became effective with effect from 1 July, 2001 and Explanation II has been inserted by Cenvat Credit Rules, 2002 which became effective from 1st March, 2002.
In the present case, the period involved as noted above 30-3-99 and 28-9-1999, that is much before the machinery provision has been incorporated in the Rules. We note that the Hon'ble High Court had allowed the writ petitions of the party in the case of Eternit Everest Ltd. (supra) in the absence of a provision for collecting the amount.
While holding so, the Hon'ble High Court has held that: " ....... we categorically declare that the statutory liability and obligation cast upon the petitioners if they have really been found to have collected any amount from the buyer of any goods in any manner as representing the duty of excise to pay the amount so collected to the credit of the Central Government preserved, protected and kept in tact and is not in a manner interfered with or undermined by this order ...........".
7. In the present case, as noted above, the period of dispute is well before the amendment to Rule 6 of the Cenvat Credit Rules by insertion of Explanation 1 under Rule 6 of Cenvat Credit Rules, 2001 with effect from 1 July, 2001 which reads as under : Explanation I: the amount mentioned in conditions (a) & (b) above (i.e. Rule 6(a) & (b) shall be paid by debiting the CENVAT credit or otherwise.
Rule 6 ibid was further amended by insertion of Explanation II as under by Cenvat Credit Rules, 2002 which became effective with effect from 1 March, 2002 : Explanation II: If the manufacturer fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in Rule 12 for recovery of CENVAT credit wrongly taken.
Further, in the present case, there is no dispute that the goods have been supplied to Institutions prescribed under Notification No.10/97-C.E., dated 1-3-1997. In view of what has been stated above, we do not find any material to sustain the impugned orders. We, therefor, set aside the impugned orders and allow the appeals, with consequential relief if any.
8. The miscellaneous petitions seeking extension of time of stay also stand disposed of accordingly.