The Commissioner of Central Vs. Neogen Chemicals - Court Judgment

Excerpt:
1. the revenue appeal is directed against the order-in-appeal, whereby the order of the adjudicating authority was set aside. in the adjudication order, the claim of the respondents for modvat credit of rs. 62,037.25 was rejected and the demand for that amount was confirmed. consequent to the order of the commissioner (appeals) against the revenue, revenue has filed the instant appeal challenging the order of the commissioner (appeals).2. the respondents cleared certain finished goods from their factory without payment of duty by following the procedure prescribed under rule 191bb of central excise rules, for further use in the manufacture of drugs, to be eventually exported by the customer (m/s. bdh pharmaceuticals) under the deec scheme. the respondents had taken modvat credit under rule 57a of the duty paid on the indigenous inputs used in the manufacture of said finished goods cleared under rule 191bb. following the instructions contained in trade notice no.46/b.iii/gen(24)94 dated 28/06/94 issued by bombay iii commissionerate, which is based on board's instructions contained in circular no.33/33/94-cx.8 dated 04/05/94, it was claimed by the departmental authorities that :- "modvat credit is not admissible on indigenous raw materials used for manufacture of final products under rule 191bb in cases where raw materials are imported later as an replenishment and used for manufacture of goods for domestic market".3. the commissioner (appeals) placed reliance on the order of the tribunal in the case of reliance industries ltd., v. cce, bombay reported in 1995 (78) elt 595 (tri.) wherein it has been held that, the instructions contained in the said trade notice do not have any legal backing. besides, the tribunal had held that, the goods cleared for export under bond without payment of duty in terms of provisions of rule 191b/191bb cannot be considered as "goods exempt from the payment of duty or chargeable to nil rate of duty". the revenue's appeal only mentions that the said order in the case of reliance industries ltd., is under challenge through a reference application, which is pending before the bombay high court. no other worthwhile grounds have been pleaded in the appeal to challenge the impugned order.4. heard both sides and considered the rival submissions. i note that there is no bar in the modvat credit rules to deny credit in respect of duty paid on inputs received for manufacture of finished goods on which the duty is payable. the attempt to deny the credit on the ground that the clearances are made without payment of duty under rule 191bb are without basis for the reasons that, such clearances do not come within the category of goods "removed without payment of duly or cleared at nil rate of duty". the ground that a reference application is pending against the tribunal decision in the case of reliance industries ltd., (supra) is also not a very convincing ground.5. considering the above position, the revenue's appeal is liable to be rejected and, is so, rejected.

Judgment:
1. The revenue appeal is directed against the order-in-appeal, whereby the order of the adjudicating authority was set aside. In the adjudication order, the claim of the respondents for modvat credit of Rs. 62,037.25 was rejected and the demand for that amount was confirmed. Consequent to the order of the Commissioner (Appeals) against the revenue, revenue has filed the instant appeal challenging the order of the Commissioner (Appeals).

2. The respondents cleared certain finished goods from their factory without payment of duty by following the procedure prescribed under Rule 191BB of Central Excise Rules, for further use in the manufacture of drugs, to be eventually exported by the customer (M/s. BDH Pharmaceuticals) under the DEEC scheme. The respondents had taken modvat credit under Rule 57A of the duty paid on the indigenous inputs used in the manufacture of said finished goods cleared under Rule 191BB. Following the instructions contained in Trade Notice No.46/B.III/Gen(24)94 dated 28/06/94 issued by Bombay III Commissionerate, which is based on Board's instructions contained in Circular No.33/33/94-CX.8 dated 04/05/94, it was claimed by the departmental authorities that :- "Modvat credit is not admissible on indigenous raw materials used for manufacture of final products under Rule 191BB in cases where raw materials are imported later as an replenishment and used for manufacture of goods for domestic market".

3. The Commissioner (Appeals) placed reliance on the order of the Tribunal in the case of Reliance Industries Ltd., v. CCE, Bombay reported in 1995 (78) ELT 595 (Tri.) wherein it has been held that, the instructions contained in the said Trade Notice do not have any legal backing. Besides, the Tribunal had held that, the goods cleared for export under bond without payment of duty in terms of provisions of Rule 191B/191BB cannot be considered as "goods exempt from the payment of duty or chargeable to nil rate of duty". The revenue's appeal only mentions that the said order in the case of Reliance Industries Ltd., is under challenge through a reference application, which is pending before the Bombay High Court. No other worthwhile grounds have been pleaded in the appeal to challenge the impugned order.

4. Heard both sides and considered the rival submissions. I note that there is no bar in the modvat credit rules to deny credit in respect of duty paid on inputs received for manufacture of finished goods on which the duty is payable. The attempt to deny the credit on the ground that the clearances are made without payment of duty under Rule 191BB are without basis for the reasons that, such clearances do not come within the category of goods "removed without payment of duly or cleared at nil rate of duty". The ground that a reference application is pending against the Tribunal decision in the case of Reliance Industries Ltd., (supra) is also not a very convincing ground.

5. Considering the above position, the revenue's appeal is liable to be rejected and, is so, rejected.