Prockage Soapery Enterprises Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. the appellant asked for and obtained permission in 1971 to avail of the procedure under rule 56a. this procedure, very briefly permits the manufacturer to take credit of the duty paid on goods used by him in its manufacturing activities, to be utilised by him towards payment of duty on final product in which these goods are utilised. the appellant was granted permission to avail of the procedure in respect of duty paid on soap noodles manufactured by m/s. hindustan lever ltd., bombay which the appellant converted into cakes. it appears that because of difficulties encountered with the department with regard to this procedure, the appellant in november 1982 chose to avail of procedure under rule 56b, by means of which the noodles in question were cleared from the manufacturer's factory in bond without payment of duty. the permission granted under rule 56a subsisted and was not cancelled.2. the modvat scheme incorporated in rules 57 a to 57-1 came into force from 1-3-1986. the appellant made on 5-4-1986 a declaration under rule 57g to avail of the scheme in respect of the same goods. by an application dated 1-1-1987 the appellant asked for transfer of the proforma credit lying to its credit to the modvat account. provision for such transfer is contained in sub-rule (3) of rule 57h as it stood at the relevant time. this transfer was refused by the asst. collector whose order has been confirmed by the collector (appeals) and it is this refusal which is challenged before us.3. sub-rule (3) of rule 57h provides for grant of permission "on an application from a manufacturer who had been immediately before filing declaration under rule 57g, availing of ... (a) a special procedure under rule 56a...". the asst. collector and collector (appeals) have taken the view that the appellant ceased to avail of the 56a procedure from 5-11-1982 from this date and switched over to the procedure rule 56b. the application filed on 1-1-1987 therefore was not filed "immediately before" filing the declaration under rule 57g. this is what the collector (appeals) specifically says. the asst. collector also makes a point that the appellant was availing of the 56b and not 56a procedure.soft beverages v. cce - 1989 (44) e.l.t. 66 and national industrial corporation v. cce - 1993 (68) e.l.t.692 has held that the term "immediately before" occurring in sub-rule (3) of 57h must be considered in the context of the remaining parts of the rule. in the former decision the tribunal has also made a point that the rule must be so considered as to advance legislative intent.there can be little doubt that the object of the modvat procedure was to enlarge, amplify and widen the scope of the procedure contained in 56a referred to as proforma credit scheme. the basic concept that permitting set off of duty paid on materials used for further manufacture continued and, we will repeat, was advanced and enlarged.it is evidently to advance this object that rule 57h was framed. to say in this background that because the appellant did not actively avail of the proforma credit procedure shortly before filing the declaration and therefore must be denied the credit, would be to negate the intention behind the rule.5. indeed, to say that the appellant was not availing the procedure under rule 56a before filing the 57 declaration itself does not appear to be correct. there is no doubt the permission which was granted was subsisting. this is clear from the fact that on 27-2-1986 that appellant debited an amount somewhat in excess of rs. 6.33 lakhs in this account under protest. such debit could have been made unless the procedures were in operation and the account books continued to be kept. the departmental representative is not able to deny that had the appellant received goods before making the 57g declaration, one or more consignments of the noodles on which duty had been paid, it would have been entitled to avail of the credit paid under 56a of the duty so paid. the fact that the appellant did not received goods or take credit under this procedure does not mean that it was availing of it. to say that if the appellant had received two or three consignments involving nominal amount of duty shortly before 57g declaration was filed transferred to credit would be permitted, whereas now it will not be given. the judgment of the supreme court in eicher motors ltd. v. uoi -1999 (106) e.l.t. 3 cited by the appellant that, where a right to credit is vested in a manufacturer it cannot be denied merely by the changes in the procedure, is relevant in this regard.6. we are therefore of the view that there was no reason advanced for denying the transfer of credit to the modvat credit is not valid. the appellant was therefore entitled to the transfer.

Judgment:
1. The appellant asked for and obtained permission in 1971 to avail of the procedure under Rule 56A. This procedure, very briefly permits the manufacturer to take credit of the duty paid on goods used by him in its manufacturing activities, to be utilised by him towards payment of duty on final product in which these goods are utilised. The appellant was granted permission to avail of the procedure in respect of duty paid on soap noodles manufactured by M/s. Hindustan Lever Ltd., Bombay which the appellant converted into cakes. It appears that because of difficulties encountered with the department with regard to this procedure, the appellant in November 1982 chose to avail of procedure under Rule 56B, by means of which the noodles in question were cleared from the manufacturer's factory in bond without payment of duty. The permission granted under Rule 56A subsisted and was not cancelled.

2. The Modvat scheme incorporated in Rules 57 A to 57-1 came into force from 1-3-1986. The appellant made on 5-4-1986 a declaration under Rule 57G to avail of the scheme in respect of the same goods. By an application dated 1-1-1987 the appellant asked for transfer of the proforma credit lying to its credit to the Modvat account. Provision for such transfer is contained in Sub-rule (3) of rule 57H as it stood at the relevant time. This transfer was refused by the Asst. Collector whose order has been confirmed by the Collector (Appeals) and it is this refusal which is challenged before us.

3. Sub-rule (3) of Rule 57H provides for grant of permission "on an application from a manufacturer who had been immediately before filing declaration under Rule 57G, availing of ... (a) a special procedure under Rule 56A...". The Asst. Collector and Collector (Appeals) have taken the view that the appellant ceased to avail of the 56A procedure from 5-11-1982 from this date and switched over to the procedure Rule 56B. The application filed on 1-1-1987 therefore was not filed "immediately before" filing the declaration under Rule 57G. This is what the Collector (Appeals) specifically says. The Asst. Collector also makes a point that the appellant was availing of the 56B and not 56A procedure.Soft Beverages v. CCE - 1989 (44) E.L.T. 66 and National Industrial Corporation v. CCE - 1993 (68) E.L.T.692 has held that the term "immediately before" occurring in Sub-rule (3) of 57H must be considered in the context of the remaining parts of the rule. In the former decision the Tribunal has also made a point that the rule must be so considered as to advance legislative intent.

There can be little doubt that the object of the Modvat procedure was to enlarge, amplify and widen the scope of the procedure contained in 56A referred to as proforma credit scheme. The basic concept that permitting set off of duty paid on materials used for further manufacture continued and, we will repeat, was advanced and enlarged.

It is evidently to advance this object that Rule 57H was framed. To say in this background that because the appellant did not actively avail of the proforma credit procedure shortly before filing the declaration and therefore must be denied the credit, would be to negate the intention behind the rule.

5. Indeed, to say that the appellant was not availing the procedure under Rule 56A before filing the 57 declaration itself does not appear to be correct. There is no doubt the permission which was granted was subsisting. This is clear from the fact that on 27-2-1986 that appellant debited an amount somewhat in excess of Rs. 6.33 lakhs in this account under protest. Such debit could have been made unless the procedures were in operation and the account books continued to be kept. The departmental representative is not able to deny that had the appellant received goods before making the 57G declaration, one or more consignments of the noodles on which duty had been paid, it would have been entitled to avail of the credit paid under 56A of the duty so paid. The fact that the appellant did not received goods or take credit under this procedure does not mean that it was availing of it. To say that if the appellant had received two or three consignments involving nominal amount of duty shortly before 57G declaration was filed transferred to credit would be permitted, whereas now it will not be given. The judgment of the Supreme Court in Eicher Motors Ltd. v. UOI -1999 (106) E.L.T. 3 cited by the appellant that, where a right to credit is vested in a manufacturer it cannot be denied merely by the changes in the procedure, is relevant in this regard.

6. We are therefore of the view that there was no reason advanced for denying the transfer of credit to the Modvat credit is not valid. The appellant was therefore entitled to the transfer.