Duracell (India) Pvt. Ltd. Vs. Commissioner of Central Excise - Court Judgment

Excerpt:
1. the issue involved in this appeal filed by m/s. dura cell (india) pvt. ltd. and remanded by the hon,ble supreme court is whether modvat credit available to them after the period of six months from the date of payment of duty on the imported goods.2.1 shri p. shah. learned advocate, mentioned that the appellants have imported certain goods under bills of entries and availed modvat credit of the duty as under: 2.2 he, further, mentioned that the tribunal vide final order no.a/48/2001/nb dated 15.12.2000, had allowed the modvat credit in respect of bill of entry no. 108476. he submitted that the date of issue of document in case of imported goods should be the date when the goods were given out of charge order and received in the factory and not the date of bill of entry; that it has been held by the tribunal in bullows paint equipment pvt. ltd. v. cce, mumbai vi, [2001 (138) elt 1098(t)] that "the phrase "issued" does not qualify the named document viz.bs/e. there is a good reason for this. a manufacturer would issue an invoice along with physical movement of the goods.... the date of filing of the b/e has no relevance to the physical movement of the goods covered thereunder. the bill of entry after filing would be assessed. then, if necessary, on examination of the goods, the duty would be paid and goods would be physically cleared. where the customs have certain queries or where the importers have some difficulties in establishing the claim as to the importability of the goods, there would be a period of several weeks before the goods are physically cleared. it may happen that the goods are seized by the department and in such a situation, the clearance can be effected only after the adjudication is over. thus where a bill of entry is filed there is no certainty that the goods would be received in the users' factory within the period prescribed in sub-rule (5) of rule 57 g...." he mentioned that the tribunal, therefore, held that "the claim made by shri jain that the claim made by shri jain that the framers of the rule had deliberately not made by shri jain that the framers of the rule had deliberately not made the date of issue of the b/es to be the relevant date as correct. thus the bar imposed would not be attracted where the goods are received under the cover of bill of entry." 2.3 the learned advocate also relied upon the decision in the case of hamco mining & smelting co. ltd. v. c.c.e. & c.c.e. & c., surat, [2001 (45) rlt 958 (cegat)] wherein it has been held that "it would be reasonable to say that the "date of issue" in the case goods imported and cleared thereafter for home consumption can not be earlier than the date on which the importer can reasonably expect that the goods come into his hands soon. that would be the date on which the goods are passed out of customs charge." the learned advocate thus contended that date of payment of duty, in the case of bill of entry can not be regarded as the date of issue of bill of entry for the purpose of rule 57 g of the central excise rules, 1944; that as there is no date us issue in respect of bill of entry, the condition of taking modvat credit within six months of issue of duty paying document is not applicable in respect of goods received under a bill of entry. reliance has been placed on the decision in phoenix industries ltd. v. cce, meerut, [2001 (131) elt 82(t)] and tamil nadu petroproducts ltd. v.cce, chennai. 2003(56) rlt 675 (cegat) 3. finally, the learned advocate submitted that no penalty is imposable on the appellants as they had taken credit after filing the declaration and complying with the provisions of law and there is no mensrea on their part. reliance has been placed on the decision in osram surya (p) ltd. v. cce, indore, 2002-taxindiaonline-64-sc-cx, wherein the supreme court had set aside the penalty.4. countering the arguments, shri virag gupta, learned departmental representative, submitted that law is very clear as sub-rule (5) of rule 57g of the central excise rules provides that "credit shall also not be taken by the manufacturer after six months of the date of issue of any document specified in sub-rule (3); that sub-rule (3) of rule specifically mentions bill of entry as one of the document for availing the credit and as such it cannot be claimed that the said provisions of six months restriction is not applicable in the case of the goods imported by bill of entry. the central board of excise and customs has clarified, under circular no. 275/109/96-cx dated 26.11.1996, that "the period of six months should be computed from the date of payment of duty" in case of imported inputs; that this circular has been confirmed by the tribunal in the case of cce bhopal v. orient paper mills, [2001 (134) elt 774 (t)].5. the learned senior departmental representative, further, distinguished the decisions relied upon by the learned advocate for the appellants by submitting that in hamco mining & smelting case neither the decision of the larger bench of the tribunal in the case of kusum ingots & alloys ltd. v. cce indore [2000 (39) rlt 440 (cegat-lb)] nor the board's circular were discussed; that moreover the decision has been given on the basis of hypothetical reasoning that dealy could be there in the clearance of goods after payment of duty; that in phoenix industries case again decision of the larger bench and board's circular had not been considered; that further the decision gives the specific reasons on account of which there was delay in the clearance of goods by the customs; that no such reasons have been advanced in the present matter. he mentioned that in respect of bill of entry nos 108208 and 108210 the gate passes by the container corporation of india, custodian of the goods, for the clearance had been issued on 17.6.98 and no explanation has been tendered by the appellants as to why the goods were cleared from icd on 30.12.98. he also mentioned that in bullows paint equipment case also the decision of the larger bench and circular have not been considered and in any case that decision has been rendered by a single member bench which is not binding on a division bench. he also mentioned that penalty is imposable on the appellants as they had taken modvat credit wrongly; that it is apparent from para and 6 of the decision in the case of osram surya that the provisions restricting the modvat credit was only introduced and in view of this the penalty was set aside; that it has been held by the larger bench of the tribunal in the case of cce v. avis electronics [2000 (117) elt 571] that "when a particular thing is directed to be performed in a manner prescribed by rules, it should be performed in that manner itself and not otherwise." in reply the learned advocate mentioned that board's circular takes a view which is totally different from sub-rule 5 of rule 57g of the central excise rules.6. we have considered the submissions of both the sides. sub-rule 3 of rule 57 g of the central excise rules, 1944 provides that no modvat credit shall be taken by the manufacturer unless the inputs are received in the factory under the cover of various documents mentioned in the rules. one of the document mentioned in the rule in triplicate copy of bill of entry or duplicate copy of bill of entry generated on electronics date interchange system installed in any customs or central excise commissionerate. further, sub rule 5 of rule 57 g provided that credit shall also not be taken by the manufacturer after six months or the date of issue of any documents specified in sub-rule (3). it is thus apparent that a manufacturer can take the credit of the duty paid on inputs under rule 57 a only when the inputs are received in the factory under the cover of any of the specified document and the credit it taken within six months of the date of issue of any document. the larger bench of the tribunal has considered these provisions in the case of kusum ingots and alloys ltd. v. cc indore, [2000 (39) rlt 440] wherein it has been held that the manufacturers are not entitled to take credit of duty beyond a period of six months from the date of duty paying documents even though they were issued prior to the amendment made by notification no. 58/96-ce (nt) dated 29.6.96. in the light of specific provisions made in the central excise rules and the decision of the larger bench of the tribunal, it cannot be claimed by anybody that this limit of six months does not apply to bill of entry as the same is not issued in the way in which the invoice or a certificate is issued. the word 'issue' has been defined in the new oxford dictionary of english as a verb as under : as per law lexicon by justice t p mukherjee, the dictionary meaning of the word 'issue' is "the act of sending out, put into circulation, deliver with authority or delivery". thus it cannot be said that the bill of entry which is a specific duty paying document under sub rule (3) of rule 57 g is not issue and, therefore, provisions of sub rule (5) of rule 57 g will not apply. as rightly pointed out by the learned departmental representative in none of the decisions relied upon by the learned advocate and on account of which the hon'ble supreme court has remanded the matter, the decision of the larger bench of the tribunal has been referred to. in bullows paint equipment case, the decision of the larger bench was not brought to the notice of the learned single member who has come to the conclusion that the sub rule (5) does not apply to the goods received alongwith bill of entry. we respectfully do not agree with the finding in the said decision in view of the fact that bill of entry is one of the specified duty paying document mentioned in sub-rule (3) and in view of the decision of the larger bench of the tribunal. in the case of phoenix industries ltd., the facts are different as after the payment of duty, the importer was prevented by the customs department to get the goods released on account of objection raised by the asstt. commissioner (cargo) and the goods were released by the customs department only in june, 1995 though the duty was paid in february, 1995. in view of these facts, the credit taken by the appellants on 7.9.95 was found to be in order. the appellants herein have not advanced any reason as to why after the payment of duty on 16.6.98 and gate passes issued by the custodian of the goods on 17.6.98, they had not taken the delivery of the impugned inputs and brought the same into their factory. accordingly, the ratio of the decision in the case of phoenix industries ltd. is not applicable to the fact of the present matter. in hamco mining & smelting co. ltd. the tribunal has not held that the bar of six months for taking the modvat credit does not apply to imported inputs. the tribunal in that case has held that "it would be reasonable to say that the "date of issue" in the case of goods imported and cleared thereafter for home consumption can not be earlier than the date on which the importer can reasonably expert; that the goods come into his hands soon. that would be the date on which the goods are passed out of customs charge". in the present matter, it is not the case of the appellants that customs charge order was made only on or around 30.12.98. accordingly the decision in hamco mining case also does not help the appellants at all.7. we also observe that while remanding the matter, the hon'ble supreme court in it order dated 13.1.03 has also mentioned that the board has issued clarification by circular dated 26.11.96. as mentioned by the learned senior departmental representative, as per the said circular in the case of imported inputs, the period of six months has to be computed from the date of payment of duty. we also observe that the appellants have not rebutted the statement made by the learned department representative that the gate passes were issued on 17.6.98.they have also not disclosed the reasons why the goods were received by them in their factory only on 30.12.98. in view of this, we hold that the provisions of sub-rule (5) of rule 57 g are applicable to the imported inputs also. as in the present matters, the credit has been taken beyond the period of six months both from the date of payment of duty and date of issue of gate passes, the appellants are not eligible to take the credit, coming to the question of penalty, the credit was taken by the appellants in the month of january, 1999 whereas the condition of taking the modvat credit within 6 months from the date of issue of duty paying documents came into force in 1995, the appellants have thus taken the modvat credit which was not available to them. rule 173 q (1) (bb) of the central excise rules, 1944 clearly provides for imposition of penalty if any manufacturer, producer registered person of warehouse or registered dealer takes credit wrongly. it has been held by the supreme court in the case of zunjarrao bhikaji nagarkar v.union of india [1999 (112) elt 772] that "apart from the offending goods which are liable for confiscation, the person concerned with that shall be liable to penalty up to the amount specified in the rule. it is difficult to accept the argument of the appellant that levy of penalty is discretionary. it is only the amount of penalty which is discretionary. both the things are necessary (1) the goods are liable for confiscation and (2) person concerned is liable to penalty." the learned departmental representative has rightly distinguished the decision in the case of osram surya pvt. ltd. the penalty was set aside in the said decision as the credit was taken in the month of september, 1995 and the goods had been received by them in april, 1995 and the restrictions of six months came into effect on 29.6.95. accordingly, penalty in impassable on the appellants. the total amount of modvat credit wrongly taken by the appellants is more than rs. 9 lakhs and in our view penalty of rs. one lakh is justified. we, therefore, reduce the penalty to rs. one lakh. the appeal is disposed of in the above manner.

Judgment:
1. The issue involved in this appeal filed by M/s. Dura Cell (India) Pvt. Ltd. and remanded by the Hon,ble Supreme Court is whether MODVAT credit available to them after the period of six months from the date of payment of duty on the imported goods.

2.1 Shri P. Shah. learned Advocate, mentioned that the Appellants have imported certain goods under bills of entries and availed MODVAT Credit of the duty as under: 2.2 He, further, mentioned that the Tribunal vide Final Order No.A/48/2001/NB dated 15.12.2000, had allowed the MODVAT Credit in respect of Bill of Entry No. 108476. He submitted that the date of issue of document in case of imported goods should be the date when the goods were given out of charge Order and received in the factory and not the date of Bill of Entry; that it has been held by the Tribunal in Bullows Paint Equipment Pvt. Ltd. v. CCE, Mumbai VI, [2001 (138) ELT 1098(T)] that "The Phrase "issued" does not qualify the named document viz.

Bs/E. There is a good reason for this. A manufacturer would issue an invoice along with physical movement of the goods.... The date of filing of the B/E has no relevance to the physical movement of the goods covered thereunder. The Bill of Entry after filing would be assessed. Then, if necessary, on examination of the goods, the duty would be paid and goods would be physically cleared. Where the Customs have certain queries or where the importers have some difficulties in establishing the claim as to the importability of the goods, there would be a period of several weeks before the goods are physically cleared. It may happen that the goods are seized by the Department and in such a situation, the clearance can be effected only after the Adjudication is over. Thus where a Bill of entry is filed there is no certainty that the goods would be received in the users' factory within the period prescribed in sub-Rule (5) of Rule 57 G...." He mentioned that the Tribunal, therefore, held that "the claim made by Shri Jain that the claim made by Shri Jain that the framers of the Rule had deliberately not made by Shri Jain that the framers of the Rule had deliberately not made the date of issue of the B/Es to be the relevant date as correct. Thus the bar imposed would not be attracted where the goods are received under the cover of Bill of Entry." 2.3 The learned advocate also relied upon the decision in the case of Hamco Mining & Smelting Co. Ltd. v. C.C.E. & C.C.E. & C., Surat, [2001 (45) RLT 958 (Cegat)] wherein it has been held that "it would be reasonable to say that the "date of issue" in the case goods imported and cleared thereafter for home consumption can not be earlier than the date on which the importer can reasonably expect that the goods come into his hands soon. That would be the date on which the goods are passed out of Customs charge." The learned Advocate thus contended that date of payment of duty, in the case of Bill of Entry can not be regarded as the date of issue of Bill of Entry for the purpose of Rule 57 G of the central Excise rules, 1944; that as there is no date us issue in respect of Bill of Entry, the condition of taking MODVAT Credit within six months of issue of duty paying document is not applicable in respect of goods received under a Bill of Entry. Reliance has been placed on the decision in Phoenix Industries Ltd. v. CCE, Meerut, [2001 (131) ELT 82(T)] and Tamil Nadu Petroproducts Ltd. v.CCE, Chennai. 2003(56) RLT 675 (CEGAT) 3. Finally, the learned Advocate submitted that no penalty is imposable on the Appellants as they had taken credit after filing the declaration and complying with the provisions of law and there is no mensrea on their part. Reliance has been placed on the decision in Osram Surya (P) Ltd. v. CCE, Indore, 2002-Taxindiaonline-64-SC-CX, wherein the Supreme Court had set aside the penalty.

4. Countering the arguments, Shri Virag Gupta, learned Departmental Representative, submitted that law is very clear as sub-Rule (5) of Rule 57G of the central Excise rules provides that "Credit shall also not be taken by the manufacturer after six months of the date of issue of any document specified in sub-Rule (3); that sub-Rule (3) of Rule specifically mentions Bill of entry as one of the document for availing the Credit and as such it cannot be claimed that the said provisions of six months restriction is not applicable in the case of the goods imported by Bill of entry. The central Board of Excise and Customs has clarified, under Circular No. 275/109/96-CX dated 26.11.1996, that "the period of six months should be computed from the date of payment of duty" in case of imported inputs; that this Circular has been confirmed by the Tribunal in the case of CCE Bhopal v. Orient Paper Mills, [2001 (134) ELT 774 (T)].

5. The learned Senior Departmental Representative, further, distinguished the decisions relied upon by the learned Advocate for the Appellants by submitting that in Hamco Mining & Smelting case neither the decision of the Larger Bench of the Tribunal in the case of Kusum Ingots & Alloys Ltd. v. CCE Indore [2000 (39) RLT 440 (Cegat-LB)] nor the Board's Circular were discussed; that moreover the decision has been given on the basis of hypothetical reasoning that dealy could be there in the clearance of goods after payment of duty; that in Phoenix Industries case again decision of the larger Bench and Board's Circular had not been considered; that further the decision gives the specific reasons on account of which there was delay in the clearance of goods by the customs; that no such reasons have been advanced in the present matter. He mentioned that in respect of Bill of Entry Nos 108208 and 108210 the gate passes by the Container Corporation of India, Custodian of the goods, for the clearance had been issued on 17.6.98 and no explanation has been tendered by the Appellants as to why the goods were cleared from ICD on 30.12.98. He also mentioned that in Bullows Paint equipment case also the decision of the Larger Bench and Circular have not been considered and in any case that decision has been rendered by a Single Member Bench which is not binding on a Division Bench. He also mentioned that penalty is imposable on the Appellants as they had taken MODVAT Credit wrongly; that it is apparent from Para and 6 of the decision in the case of Osram Surya that the provisions restricting the MODVAT credit was only introduced and in view of this the penalty was set aside; that it has been held by the Larger Bench of the Tribunal in the case of CCE v. Avis Electronics [2000 (117) ELT 571] that "when a particular thing is directed to be performed in a manner prescribed by Rules, it should be performed in that manner itself and not otherwise." In reply the learned Advocate mentioned that Board's Circular takes a view which is totally different from Sub-Rule 5 of Rule 57G of the Central Excise Rules.

6. We have considered the submissions of both the sides. Sub-Rule 3 of Rule 57 G of the Central Excise Rules, 1944 provides that no MODVAT credit shall be taken by the manufacturer unless the inputs are received in the factory under the cover of various documents mentioned in the Rules. One of the document mentioned in the Rule in triplicate copy of Bill of Entry or duplicate copy of Bill of Entry generated on electronics date interchange system installed in any Customs or Central Excise Commissionerate. Further, sub Rule 5 of Rule 57 G provided that credit shall also not be taken by the manufacturer after six months or the date of issue of any documents specified in sub-Rule (3). It is thus apparent that a manufacturer can take the credit of the duty paid on inputs under Rule 57 A only when the inputs are received in the factory under the cover of any of the specified document and the credit it taken within six months of the date of issue of any document. The Larger Bench of the Tribunal has considered these provisions in the case of Kusum Ingots and Alloys Ltd. v. CC Indore, [2000 (39) RLT 440] wherein it has been held that the manufacturers are not entitled to take credit of duty beyond a period of six months from the date of duty paying documents even though they were issued prior to the amendment made by Notification No. 58/96-CE (NT) dated 29.6.96. In the light of specific provisions made in the Central Excise Rules and the decision of the Larger Bench of the Tribunal, it cannot be claimed by anybody that this limit of six months does not apply to Bill of Entry as the same is not issued in the way in which the invoice or a Certificate is issued. The word 'issue' has been defined in the New Oxford Dictionary of English as a verb as under : As per Law Lexicon by Justice T P Mukherjee, the Dictionary meaning of the word 'issue' is "the Act of sending out, put into circulation, deliver with Authority or delivery". Thus it cannot be said that the Bill of Entry which is a specific duty paying document under sub Rule (3) of Rule 57 G is not issue and, therefore, provisions of sub Rule (5) of Rule 57 G will not apply. As rightly pointed out by the learned Departmental Representative in none of the decisions relied upon by the learned Advocate and on account of which the Hon'ble Supreme Court has remanded the matter, the decision of the Larger Bench of the Tribunal has been referred to. In Bullows Paint Equipment case, the decision of the Larger Bench was not brought to the notice of the learned Single Member who has come to the conclusion that the sub Rule (5) does not apply to the goods received alongwith Bill of Entry. We respectfully do not agree with the finding in the said decision in view of the fact that Bill of Entry is one of the specified duty paying document mentioned in sub-Rule (3) and in view of the decision of the Larger Bench of the Tribunal. In the case of Phoenix Industries Ltd., the facts are different as after the payment of duty, the importer was prevented by the Customs Department to get the goods released on account of objection raised by the Asstt. Commissioner (Cargo) and the goods were released by the Customs Department only in June, 1995 though the duty was paid in February, 1995. In view of these facts, the credit taken by the Appellants on 7.9.95 was found to be in Order. The Appellants herein have not advanced any reason as to why after the payment of duty on 16.6.98 and gate passes issued by the Custodian of the goods on 17.6.98, they had not taken the delivery of the impugned inputs and brought the same into their factory. Accordingly, the ratio of the decision in the case of Phoenix Industries Ltd. is not applicable to the fact of the present matter. In Hamco Mining & Smelting Co. Ltd. the Tribunal has not held that the bar of six months for taking the MODVAT credit does not apply to imported inputs. The Tribunal in that case has held that "it would be reasonable to say that the "date of issue" in the case of goods imported and cleared thereafter for home consumption can not be earlier than the date on which the importer can reasonably expert; that the goods come into his hands soon. That would be the date on which the goods are passed out of Customs Charge". In the present matter, it is not the case of the Appellants that Customs charge Order was made only on or around 30.12.98. Accordingly the decision in Hamco Mining Case also does not help the Appellants at all.

7. We also observe that while remanding the matter, the Hon'ble Supreme Court in it Order dated 13.1.03 has also mentioned that the Board has issued clarification by Circular dated 26.11.96. As mentioned by the learned Senior Departmental Representative, as per the said Circular in the case of imported inputs, the period of six months has to be computed from the date of payment of duty. We also observe that the Appellants have not rebutted the statement made by the learned Department Representative that the gate passes were issued on 17.6.98.

They have also not disclosed the reasons why the goods were received by them in their factory only on 30.12.98. In view of this, we hold that the provisions of sub-Rule (5) of Rule 57 G are applicable to the imported inputs also. As in the present matters, the credit has been taken beyond the period of six months both from the date of payment of duty and date of issue of gate passes, the Appellants are not eligible to take the credit, Coming to the question of penalty, the credit was taken by the Appellants in the month of January, 1999 whereas the condition of taking the MODVAT credit within 6 months from the date of issue of duty paying documents came into force in 1995, the Appellants have thus taken the MODVAT credit which was not available to them. Rule 173 Q (1) (bb) of the Central Excise Rules, 1944 clearly provides for imposition of penalty if any manufacturer, producer registered person of warehouse or registered dealer takes credit wrongly. It has been held by the Supreme Court in the case of Zunjarrao Bhikaji Nagarkar v.Union of India [1999 (112) ELT 772] that "Apart from the offending goods which are liable for confiscation, the person concerned with that shall be liable to penalty up to the amount specified in the Rule. It is difficult to accept the argument of the Appellant that levy of penalty is discretionary. It is only the amount of penalty which is discretionary. Both the things are necessary (1) the goods are liable for confiscation and (2) person concerned is liable to penalty." The learned Departmental Representative has rightly distinguished the decision in the case of Osram Surya Pvt. Ltd. The penalty was set aside in the said decision as the credit was taken in the month of September, 1995 and the goods had been received by them in April, 1995 and the restrictions of six months came into effect on 29.6.95. Accordingly, penalty in impassable on the Appellants. The total amount of MODVAT credit wrongly taken by the appellants is more than Rs. 9 lakhs and in our view penalty of Rs. One lakh is justified. We, therefore, reduce the penalty to Rs. One lakh. The appeal is disposed of in the above manner.