Case: Collector of Central Excise, Meerut Vs. Modi Rubber Limited

The respondent herein is manufacturer of tyres, tubes and flaps. The respondent was availing thecredit of duty on inputs viz. Synthetic rubber, carbon black and rubber processing chemicals. Thecredit on those inputs to the tune of Rs. 62,or the period86 and Rs. 5,or the period1984 to February1986 utilised in respect of tyres, tubes and flaps cleared at nil rate of duty wasunder protest, presumably at the instance of Excise Authorities. Later, the respondent claimed refund thereof. The case of the respondent was that the Notification No. 95/79 (as amended from time to time) nowhere prescribed that thecredit of duty paid on the inputs was available only in relation tooutputs. The respondent contended that the relevant notification did not envisage any link between inputs and outputs. By a reasoned order datedthe Assistant Collector of Central Excise,rejected the assessees claim for refund. He held that the assessee was not entitled to avail of the benefit ofcredit on the inputs used in the manufacture of final products i.e. tyres, tubes and flaps which were cleared at nil rate of duty. The Assistant Collector concluded that thecredit was correctlyby the assessee and, therefore, the question of refund did not arise. In this context, the following crucial finding in the order of the Assistant Collector deserves to be noted for the proper appreciation of the core issue involved :the present case, on examination of record, it is noticed that during the relevant period (for which refund has been preferred), the final product, namely, tyres, tubes and flaps were cleared by the party at nil rate of duty as the same were cleared as original equipment or ADV."e appeal filed by the assessee against the said order was allowed by the Collector (Appeals) based on the Tribunals decision in Vikrant case (supra). Aggrievednt filed an appeal before CEGAT. Theby the impugned order, rejected the appeal, after quoting in extenso its earlier order in Vikrant. In that case,the Tribunal while construing the Notification No. 95/79 held that thedid not have any condition that there should be nexus between the inputs and outputs. According to the Tribunal,only question that can arise while examining the question of eligibility to this notification is whether the inputs described in column (3) have been used in the outputs described in columnTribunal further observedthe learned JDRs argument that goods mentioned in column (5) (final products) are only those which pay duty is not supported by the wording of theNo condition regarding payment of duty is contained anywhere in thehe correctness of this view taken by the CEGAT is being assailed in this appeal.

Reasoning:
interpretation of the Notification No. 95/83 does not present any difficulty. The Notification provides for exemption of excisable goods described in column (5) of the Table (extracted supra), referred to as final products. The extent and amplitude of exemption is set out in clear terms. The exemption is to the extent of duty of excise already paid on the goods of the description specified in column (3) of the Table, that is to say, on inputs. Proviso I in explicit terms enjoins that the inputs specified in column (3) of the Table should have been used in the manufacture of final products specified in corresponding entry in column (5). What is exempted is "so much of the duty of excise leviable thereon". The expression thereon is referable to excisable goods described in column (5) known as final products. The extentwhich it is exempted is limited to the duty of excise leviable and already paid on the goods of the description specified in column (3) known as inputs. In other words, the duty paid on the inputs is adjusted against the duty payable on the final products manufactured out of the said inputs and the balance only is liable to be paid on the finished products. Thus, the excise duty payable on the final products or outputs has inextricable nexus with the duty paid on inputs for which the credit of duty is allowed in accordance with the procedure laid down in. The exemptionpresupposes that the duty is otherwise payable on the finished products specified therein. There is no question of applying thisto the finished products (in this case tyres, tubes and flaps) if they are not subjected to anyis contended that the omission of clause (ii) of the proviso contained in the earlier Notification No. 95/79 is significant. It is pointed out that the extent of exemption was in restricted terms as it was made clear that it could not exceed the amount of duty paid on the inputs. That clause having been removed in 1983, the exemption should be construed widely and without regard to the question whether the inputs go into the manufacture of dutiable orfinished products. We find it difficult to accept this contention. The omission of provision similar to clause (ii) of the proviso to Notification No. 95/79 does not, in our view, advance the case of the respondent. Even the words employed in the opening part of the Notification No. 95/83 are sufficient enough to take care of a situation which was provided for expressly in the proviso to Notification No. 95/79. We, therefore, see no force in thisis no difficulty inthat all the inputs were utilised only in the manufacture offinished products because no dutiable tyres and tubes were cleared at all during the relevant period. If so, the respondentderive any benefit under the Notification No. 95/83. The(1) deals with duty exemption on finalis worked out with reference to the duty paid on the inputs by adjusting the input duty against the duty payable on final products. Such adjustment is not possible when no duty at all is payable on the finished product. Input duty relief and the duty payable on finished goods are thusThere is nothing in the notification which enables input duty credit to be maintained and availed of merely because the inputs are used in the manufacture of specified finished products. The further premise is that the finished products are such that are subjected to duty. Any other interpretation would confer an unintended benefit on the assessee. The idea underlying the Notification No. 95/83, as already noted, is to check or minimise the cascading effect of duties which are otherwise payable at various stages. It could not be the underlying intention of notification to grant the relief of duty on inputs as well as the corresponding outputs. Exemption notification cannot be unduly stretched to produce unintended results in derogation of the plain language employedis obvious that in that case, duty wason the entirety of finished product, namely, Horlicks, whether cleared at Rajahmundry factory or despatched to Bangalore factory under a bond. The controversy arose as to the point of time and the quantity in respect of which the input duty credit could be taken. In the instant case, as already noted, no duty was liable to be paid on any part of the finished goods viz. tyres and tubes cleared during the relevant period. The issue of correlation onbasis does not really arise for consideration here. The question of correlation hasimportance where excise duty is payable on part of the goods and no duty is payable on the remaining part. The issue in the present case is quite different, the issue being whether the credit of duty on inputs could be availed of notwithstanding the fact that the inputs were utilised only in the manufacture offinished products. That issue has to be answered against the respondent assessee in the light of the foregoing discussion. The decision in H.M.M. Ltd.(supra) does not come to the aid of the respondent. On the other hand, the underlined portions in the passages extracted supra would indicate that the interpretation placed by the Court on theFar from coming to the aid of the respondent the view expressed by the Delhi High Court makes it clear that the question of utilising the credit on inputs would arise only where the duty is payable on finishedthe reasons aforesaid, we are of the view that the impugned order of the CEGAT is erroneous in law and liable to beon the above dicta, it is possible to contend, as has been contended before us, that the question as to rate of duty is involved in the present case. However, we need not express any opinion on this aspect. Notwithstanding the initial omission on the part of the appellant in invoking the jurisdiction of this Court under, at least by way of abundant caution, the learned Additionalappearing for Union of India did make an oral prayer to treat this appeal as one filed under6 as well. A formal application in this behalf has been filed after the conclusion of the arguments in the case. The respondent has filed a reply opposing the application. We are of the view that in the interests of justice and in order to put an end to thislitigation, we deem it just and proper to allow the application. It is not advisable at this stage after a lapse of six years to reject the appeal as not maintainable and relegate the appellant to the course of seeking remedy by way of reference to the High Court, assuming that the appeal under) does not lie. Incidentally, it may be pointed out that in Commissioner of Central ExciseCustoms v. Venus Castings (P) Ltd.,this Court did allow such application at the time of hearing of appeal. We do not think that there is anything in the decisions of this Court in Steel Authority of India Ltd. v. Collector of Central Exciseand Ferro Alloys Ltd. Corporation v. Collector of Central Excisewhich stands in the way of the application, though belated it is, being allowed. In the first case, the appeal was rejected at the admission stage on the basis of concession and the appeal in the second case was also rejected at the threshold itself. Apparently, no request was ever made to permit the appellant to invoke the jurisdiction of this Court under6 of the Constitution.