TaxTMI 
TaxTMI 
1989 (11) TMI 131
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....id ethylene glycol falling under Tariff Item No. 68 of the erstwhile Central Excise Tariff received by the appellant and used in the manufacture. 3. The Notification No.201/79 dated 4-6-1979, mentioned hereinafter, exempted, according to the appellant, all excisable goods on which duty of excise was leviable and in the manufacture of which any goods falling under Tariff Item 68 had been used, from so much of the duty of excise as was equivalent to the duty of excise paid on the inputs. The appellants claimed set-off of duty on ethylene glycol used in the manufacture of polyester fibre under Notification No. 201/79 dated 4-6-1979. In response to the appellant's seeking set-off of the duty paid on ethylene glycol, they received a letter from the Assistant Collector of Central Excise, Ghaziabad, dated 5th August, 1980 by which the Asstt. Collector held that no proforma credit was allowable in respect of ethylene glycol for the following :- (a) Methanol which is not excisable and is cleared without payment of duty; (b) Glycol residual waste which was being destroyed by the appellants by throwing in the field; and (c) Polyester fibre waste which was used in the recovery of DM....
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....hin the factory. Hence, the entire set-off of duty was to be allowed since no part of DMT produced was diverted for any other use other than production of polyester fibre nor was it taken outside the factory. The appellants contended that in case of proforma credit procedure under Rule 56-A of the Central Excise Rules, clarification had been issued by the Collector of Central Excise, under trade notice No. 72-CE/80 dated 19-7-1980 to the effect that proforma credit is permissible even where at an intermediate state of manufacture, a final product which is fully exempt from duty comes into being, provided that the fully exempted product is consumed in the production or manufacture of the finished product. This trade notice categorically states that this clarification would also be applicable to exemption Notification No. 201/79. 8. By an order dated 17-11-1981 the Asstt. Collector held that the appellants were entitled to credit of duty paid on the ethylene glycol only to the extent of the percentage content as determined by the Chief Chemical Engineer, CRCL, New Delhi. The order covered the period from 17-7-1979 to 10-4-1981. 9. As mentioned before, the notification....
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....h arose in the manufacture of excisable products which used the inputs. Hence, it was argued that the duty element in the quantity of glycol which was contained in the glycol residual waste, polyester fibre waste and methanol (by-product) which was non-excisable, did not qualify for credit which could be subsequently used for discharging duty liability on dutiable finished product. The provision contained in Notification No. 102/81 was not available prior to 11-4-1981 it was submitted on behalf of revenue. It was further submitted that the trade notice issued by Pune Collectorate pertained to Rule 56-A only and not to the notification. It was further submitted that the rule the notifications are different enactments and the provisions of one cannot be read into another even after 11-4-1981 and the exemption was only in respect of duty on inputs in the manufacture of excisable goods and their waste, by-product or refuge. It was submitted that since methanol was not excisable, it was not eligible for set-off of duty on the glycol content in its manufacture. On behalf of the appellants, however, it was contended that glycol is used totally in the production of polyester fibre. Methano....
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....f Rule 56A and notification No. 201/79 were pari materia. It appears to us that the provisions of Rule 56A and the Notification No. 201/79 are identical. The relevant provisions of Rule 56A are as follows : "56A(1) . 56A(2) The Collector may, on application made in this behalf and subject to the conditions mentioned in sub-rule (3) and such other conditions as may, from time to time, be prescribed by the Central Government, permit a manufacturer of any excisable goods specified under sub-rule (1) to receive material or component parts of finished product (like Asbestos Cement), on which the duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as the counterrvailing duty), has been paid in his factory for the manufacture of these goods or the more convenient distribution of finished product and allow a credit of the duty already paid on such material or component parts or finished product, as the case may be : Provided that no credit of duty shall be allowed in respect of any material or component parts used in the manufacture of finished excisable goods - (i) If such finished excisable goods produced....
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....able to nil rate of duty or is not mentioned in the declaration referred to in the Appendix to this notification." 19. Central Board of Excise & Customs issued Circular No.6/81-CX.6 dated 31-1-1981, which reads as follows : "Central Excise - Rule 56A - Proforma Credit of duty paid on material/component parts contained in waste, refuse or by-product arising during the process of manufacture - Regarding. A doubt has been raised whether proforma credit of duty paid on material/component parts used in manufacture of the finished excisable goods notified under Rule 56A of the Central Excise Rules, 1944, is to be denied to the extent such material or component parts are contained in any waste, refuse or by-product arising during the process of manufacture of the notified finished excisable goods on the grounds that such waste, refuse or by-product is either fully exempt from duty or not notified under sub-rule (1) of Rule 56A. 2. Since the Government's intention has been not to deny the benefit of proforma credit in such situation, an Explanation has been added to sub-rule (2) of Rule 56A, so as to remove the ambiguity in the rule. Notification No.8/81-C.E., dated 31-1-1....
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..... That position is undisputed. Therefore, it appears that the Tribunal erred when it held that the appellants were not entitled to a part of the credit of duty since ethylene glycol when it interacts with DMT also gives rise to methanol. This construction would frustrate the object of exemption if something which evidently arises out of the interaction. Even prior to amendment to notification No. 201/79 with effect from 11-4-87, the only situation where the credit of the duty paid on the inputs could be denied was only where the final products were wholly exempt from the duty of excise or chargeable to nil rate of duty. In the present case, the excisable goods, namely, polyester fibre were not wholly exempt from duty nor chargeable to nil rate of duty. It cannot be read in the notification that the notification would not be available in case non-excisable goods arise during the course of manufacture. In fact, the Tribunal seems to have erred in not bearing in mind that exemption notification was pressed in service in respect of polyester fibre which is excisable goods and not in respect of methanol which arises as a by-product as a part and parcel of chemical reaction. It appears f....