TaxTMI 
TaxTMI 
1996 (3) TMI 508
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....ciate the case it is necessary for us to deal with the brief statement of facts pertaining to the instant case. 3. The appellant company carries on business of manufacturing motor vehicles falling under sub-headings of the Chapter 87 of the Central Excise Tariff Act, 1985. The appellant company also manufactures internal combustion engines of motor vehicles, Shovels and Cranes and Steel Ingots and Steel Castings. The appellants are entitled to avail of Modvat facility in respect of the inputs used by them in or in relation to the manufacture of the said final pro- ducts. There are various common inputs like steel sheets, bars, billets, copper and brass sheets and strips, paints, chemicals and components which are used by them in or in relation to the manufacture of their final products. At the time of receipt or issue of the said common inputs, it is not possible for the appellants to identify the final products in which the same would be used. Hence, they found it impossible to maintain separate RG 23A Part II Register for each final product. In view of this practical difficultly they requested the Collector of Central Excise to permit them to maintain the said Register un....
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....pterwise, there was or could be no contravention of Modvat Rules. It was alternatively stated that even assuming that the goods cleared for home consumption were not similar products, the appellant company was entitled to the refund of Modvat Credit attributable to inputs used in the manufacture of the said exported motor vehicles and the assessments were all still provisional and necessary adjustments should be made. 7.  After hearing the appellants the Assistant Collector concerned had accepted the appellants' contention and following the judgment of the Supreme Court in the case of Nat Steel Equipment Private Limited v. Collector of Central Excise reported in 1988 (34) E.L.T. 8 held that utilisation of Modvat Credit relating to motor vehicles exported for clearance for home consumption, was proper and dropped the proceedings. 8. The matter was taken up in appeal before the Collector (Appeals) by the Department and the impugned order was passed. Ld. Collector of Central Excise (Appeals) by an order dated February 23, 1994 held that credit in respect of inputs used in the manufacture of motor vehicles exported falling under sub-heading Nos. 8706.20 and 8706.40, cou....
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....ported motor vehicles did not cease to be motor vehicles simply because bodies had to be built thereon. It was also contended that the finding that the body-building was a process of manufacture is not correct. In this connection, he pointed out that subsequently it was introduced by Chapter Note 3 in the Central Excise Tariff Act that body-building amounts to manufacture. But for the said fiction subsequently introduced by Chapter Note 3, no manufacture of goods was involved in body-building. 12. It was further contended that even assuming that the motor vehicles cleared for home consumption and the exportable goods thereof, were not `similar products', the Collector should have held that the appellant company was entitled to the refund of Modvat Credit and in that event, no demand could be made from them. 13. It was also contended before us that the finding of the learned Collector (Appeals) that the question of refund was not an issue before him on the ground that appellants had not filed any such claim, is not correct. It was contended that since the Collector had permitted the appellants to maintain the Modvat account chapterwise and since no loss of revenue wa....
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....any reason, such adjustment is not possible, by refund to the manufacturer subject to such safeguards, conditions and limitations. He also pointed out that the rule specifies that the refund is governed by the provisions of Section 11B. In such circumstances, he contended that the appellant company has not filed any refund claim in this behalf and the claim of refund cannot be considered by the Collector (Appeals) or the Assistant Collector concerned since the same was beyond the period of limitation. He, further, contended that the Tribunal and the other authorities functioning under the Act are statutory authorities and they cannot go beyond the Statute and grant a refund. In this connection, he relied upon the decision of the Supreme Court in the case of Doaba Co-operative Sugar Mills reported in 1988 (37) E.L.T. 478 (SC). Therefore, he stated that the inputs used in the final products cleared for export under bond and the products cleared for home consumption are not similar products and he further stated that since no refund application was filed in this behalf in time and since refund is governed by Section 11B of the Central Excises and Salt Act, 1944 the refund cannot be gr....
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....ctors (other than tractors of heading No. 87.09)   15% 87.02 8702.00 Public-transport type passenger motor vehicles   25% 87.03 8703.00 Motor cars and other motor vehicles principally desinged for the transport of persons (other than those of heading No. 87.02), including station wagons and racing cars   35% 87.04 8704.00 Motor vehicles for the transport of goods   25% 87.05 8705.00 Special purpose motor vehicles, other than those principally designed for the transport of persons or goods (for example, breakdown lorries, crane lorries, fire-fighting vehicles, concrete mixer lorries, road sweeper lorries, spraying lorries, mobile workshops, mobile radiological units)   25% 87.06 Chassis fitted with engines, for the motor vehicles of heading Nos. 87.01 to 87.05 8706.10 - For the vehicles of heading No. 87.01 15% 8706.20 - For the vehicles of heading No. 87.02 25% 8706.30 - For the vehicles of heading No. 87.03 35% 8706.40 - For the vehicles of heading No. 87.04 25% 8706.5....
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....r motor vehicles (87.02) and motor vehicles for transport of goods (87.04). 20. The decision relied upon by the learned Advocate reported in 1988 (34) E.L.T. 8 does not apply to the facts of this case. In that particular case, their lordships were dealing with the domestic electrical appliances. In that decision at para 7 their Lordships of the Supreme Court held as follows :- "7. We agree that it is not necessary to be a domestic electrical appliance that it must be actually used in the home or the house. It must be of a kind which is generally used for household purposes. It appears to us that the types of items concerned in this appeal are generally used for household purposes and that is sufficiently good test for classification in the light of the explanation to Tariff Item No. 33C." 21. In that particular case, it was only held that the goods in question could be used generally for domestic purposes. But it is not necessary that it must be actually used in the house. But a chassis fitted with the engines will not be used generally as a motor vehicle for transport of goods or motor car for transport of persons or as a tractor and therefore, it cannot be....
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....uctors; (iii) 1994 (72) E.L.T. 367 (Tribunal) in the case of Amar Poly Fabs (P) Ltd. v. Collector of Central Excise, Chandigarh. It was held in the abovesaid decisions that Modvat Scheme dispenses with one-to-one correlation and quantumwise accountal of the inputs contained in the final product. Hence, when the input is common for different final products, and all the final products are covered by the Notification issued under Rule 57A and such final products are cleared on payment of duty and not exempted, credit of duty paid on the common input can be utilised towards payment of duty on any of the final products covered by the declaration filed under Rule 57G. No quantumwise accountal of input for each final product or apportioning the duty credit for clearance of each of the dutiable final product is contemplated either under Rule 57F(3) or under Rule 57G(3). 25. These principles are well settled. But the point which is to be determined in this case is once if we come to the conclusion that the goods exported under bond are not similar goods as dealt with while dealing with the Issue No. (1), whether the demand itself is sustainable or not? 26. In orde....
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....her it is by adjustment of Modvat against duty payable on similar products cleared for home consumption, or by way of cash refund, the Modvat relief is to be returned to the manufacturer with regard to the goods which are exported. It has not been denied in the show cause notice that the goods concerned have been exported. The only issue raised is that the sub-headings have not been specified, and that the self-same goods are not cleared for home consumption. Since the rules provide for refund even when there is no adjustment possible, it is submitted that the demand of duty is not justified. It is also pertinent to note that all the assessments are still provisional and that there is no final adjustment of any duty in this regard so far. As on date provisional assessments cover the period mentioned in the show cause notice. Therefore, if there is any procedural requirement for availing of claims for adjustment, the same can be internally done within the department for the purposes of satisfying the relevant procedural conditions. Since the Notification for availment of Modvat clearly stipulates that relief is to be availed of against clearance of finished products which are covere....
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....m which the goods are exported is situated together with the Bill of Lading or Shipping Bill or Export Application duly certified by the customs authorities to the effect that goods have in fact been exported. 6.  The refund shall be allowed only in those circumstances where a manufacturer is not in a position to utilise the credit of the duty allowed under rule 57A against goods exported during the quarter to which the claim relates. 7.  The application for refund together with the proof of due exportation and the relevant extracts of Form RG 23A in original are lodged with the Assistant Collector of Central Excise before the expiry of the period specified in section 11B of the Central Excises and Salt Act, 1944 (1 of 1944). 8.  The refund of excise duty shall be allowed by the said Assistant Collector of Central Excise." 29. A perusal of the abovesaid Notification goes to show that the refund is subject to the provisions of Section 11B. Therefore, there is a specific method which is provided under the Scheme of the Act for claiming that amount i.e. by way of refund and this refund is governed by Section 11B of the C.E.S.A. If there is a particular ....
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....of the matter, this argument of the learned Advocate cannot be accepted. Hence the impugned order is in accordance with law. Learned Collector (Appeals) by virtue of the impugned order has remitted the case back to the Assistant Collector concerned to calculate the amount of demand of duty on the basis of credit taken by the appellant company herein. He has remanded the matter to the A.C. for the purpose of correct determination of the amount of credit taken and utilised wrongly. Thus we find no infirmity in the order of the Collector (Appeals). Accordingly, this appeal is dismissed. 31. [Contra per : P.C. Jain, Member (T)]. - I have carefully perused the judgment proposed by my learned brother Shri T.P. Nambiar, Judicial Member, but I regret, with respect, that I am unable to agree with the conclusion reached therein. Hence this dissenting order. I will not recapitulate the facts since these have already been set out by the learned brother in his order. 32. Issue involved is whether the demand raised against the Appellant for wrong utilisation of Modvat credit on inputs used in manufacture of goods exported is sustainable or not. Lower appellate authority has....
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....ategorisation. Now the position is different. Therefore, the observation of the Hon'ble Supreme Court with regard to word "similar" would not be applicable to the present Tariff. 35. I have carefully considered the pleas of both sides. Word "similar" has not been defined in Rule 57F or under the Central Excise Rules, 1944, nor is it defined under the Central Excises and Salt Act, 1944. This word, therefore, has to be understood in its ordinary sense. Modvat rules, forming part of the Central Excise Rules, 1944, have to be applied to the vast variety of excisable goods classified under the Central Excise Tariff under various Chapters, headings and sub-headings. Further classification of excisable goods has to be determined with reference to the various Section Notes, Chapter Notes and the general statutory Rules of Interpretation as given in Central Excise Tariff Act, 1985. Detailed classification with reference to the Central Excise Tariff Act, 1985 and the statutory `notes' and rules of interpretation is only for the purpose of determining the rate of duty applicable on any excisable goods manufactured and intended to be cleared on payment of duty. Those Chapter notes, Sec....
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.... well known case of Darshan Singh Pavitar Singh v. Union of India [1988 (34) E.L.T. 631] and later in a L.P.A. in the matter of Union of India v. Darshan Singh Pavitar Singh [1990 (47) E.L.T. 531], has held that there is no manufacture of a `motor vehicle' when a body is built on a duty-paid chassis because it was motor vehicle earlier and is a motor vehicle later. It is to circumvent such decisions, as a matter of policy, that the Chapter Note 3 of Chapter 87 appears to have been introduced and a legal fiction was created. Such a legal fiction, as held earlier, has to be only for the purpose of determining the rate of duty in terms of the Central Excise Tariff Act, 1985 and not for the purpose of Modvat Rule 57F(3). I, therefore, hold that the very foundation of demand is untenable. It is liable to be set aside on this ground and I order accordingly. 36.4 If the test of `similarity' is the same heading/sub-heading of the article, it would have been far easier for the rule-makers to use the expression "final products falling under the same heading sub-heading as that of final products cleared for exports" in the proviso to Rule 57F(3) and express their intention clearly. Si....
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.... safeguards, conditions and limitations as may be specified by the Central Government which in exercise of that power has issued a Notification No. 85/87-C.E., dated 1-3-1987 reproduced in para 28 of learned Brother's proposed order. Learned JDR further submits that one of the conditions (No. 7) of that Notification is that refund of Modvat credit is subject to the provisions of time limit under Section 11B of the Central Excises and Salt Act. A statutory authority, submits the learned JDR, has no power to go beyond such a statutory time limit for refund, as held by the Hon'ble Supreme Court in the case of Doaba Co-operative Sugar Mills (supra). Question of grant of refund at this stage, submits the learned JDR, does not arise when the time limit of six months as laid down in Section 11B read with the Notification No. 85/87-C.E., dated 1-3-1987 is long past now. 39. Learned Advocate Shri Bajoria submits that the Appellants have not applied for refund and so the question of time limitation would not arise. He has taken this plea of accrual of refund to them to resist the demand raised by the department for the reason that no loss of revenue has been caused or no extra benefi....
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....otice, extracts of which have been reproduced in para 27 of the learned Brother's proposed order, they have taken the plea of alternative claim of refund of credit and thus there is no justification for demand. None of the authorities below appear to have dealt with this plea. Objection has been taken now by the learned JDR, in the course of arguments, on the question of limitation of such a claim. This plea of the learned JDR, in my view, is not of much substance in the facts and circumstances of this case being only a procedural requirement, as discussed. The department proposing to deny the first, the first alternative under Rule 57F(3) at a much later date and that issue being still in dispute, cannot take the plea of denying the second alternative only on the question of limitation. As pointed out, limitation is a dispensable requirement in such circumstances. It is appropriate to mention that Revenue's Appeal against Tribunal's judgment in Kothari Chemical (supra) was dismissed by the Apex Court as reported in 1995 (78) E.L.T. 141 (Court-Room Highlights). There is no dispute about any other condition of Notification 85/87. In any case, all other conditions are also procedural....
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....milar would amount to reading the expression similar as identical. This issue has been considered by the Supreme Court in the case of Nat Steel Equipment Private Ltd. which has been considered by both the Members. Shri Bajoria also referred to the Tribunal decision in Krishna Fabricators (P) Ltd. v. Collector of Central Excise, Bangalore reported in 1994 (69) E.L.T. 729. Shri Bajoria submitted that the interpretation on the word, `similar' in the present context adopted by the Learned Technical Member is correct which was the view taken by the Assistant Collector himself. Accordingly, their utilisation of the Credit amount in question is correct. He pleaded that this view may be concurred with. Turning to their alternative plea regarding refund, the learned Senior Counsel stated that they are not actually pressing for refund. This was only their defence against the demand for duty by disallowing the Credit. Their refund claim has been held to be subject to the condition under Section 11B of Central Excises and Salt Act, 1944. In this connection, Shri Bajoria pointed out that a refund claim by them cannot be said to be barred by limitation at all. Refund is to be allowed only if it ....
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....the Hon'ble Judicial Member. As held therein, the refund claim of the appellants is barred by limitation. 45. Shri Bajoria gave a rejoinder to the submissions made by Shri Ghosh that the Chassis exported by them were incomplete articles and that only Motor Vehicles are the complete articles. This is borne out by the fact that Tariff Heading 87.06 covers Chassis fitted with engines for Motor Vehicles of Headings 87.02 to 87.05. Moreover, as pointed out by him, Tariff sub-heading 8707.00 refers to Bodies (including cabs) for the Motor Vehicles of Heading Nos. 87.01 to 87.06. Thus 87.06 also covers Motor Vehicles. That heading actually mentions Chassis fitted with engines for Motor Vehicles of Headings 87.01 to 87.05. Thus Chassis are Motor Vehicles themselves falling under Tariff Heading 87.06. This position has not been taken note of in any of the Orders including the Orders of the two Learned Members who have passed their separate and opposing Orders. Shri Bajoria reiterated his plea that the Order proposed by Learned Technical Member may be concurred with. 46. I have taken note of the arguments advanced before me. I have perused the papers. I have carefully gone th....
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....Chassis cleared for export has to be allowed to be utilised only for payment of duty on Chassis cleared for home consumption, then both the products would be identical and not similar. The word, "similar", has thus been given the meaning "identical" which is not permissible. The fact that Chapter Note 3 of Chapter 87 relied upon by the Collector (Appeals) in the impugned Order provides that the building of a body on a Chassis amounts to manufacture, has been interpreted by him as advancing the case of the appellants rather than of the Revenue as, had the two categories of Motor Vehicles namely (i) Chassis and (ii) Motor Vehicles with a body - been dissimilar and were different goods, there was no need for a special definition in the Chapter Note in question. He has referred to the Judgment of Punjab and Haryana High Court in Darshan Singh Pavitar Singh v. Union of India reported in 1988 (34) E.L.T. 631 which view was upheld in the letters patent appeal. The said Chapter Note had been enacted to get over the problem by creating a legal fiction which will not apply to other provisions like 57F(3). The Learned Technical Member has then noted that if the test of similarity is the same ....
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....tial treatment does not appear to be justified. If the reference between the vehicles can be ignored and they be treated as similar if they fall under the same Tariff Sub-heading, then there is no reason why such differences cannot be ignored if they fall in the same Chapter and if all of them are Motor Vehicles as per the Tariff Entry and if they are treated as Motor Vehicles for Registration as such by the Road Transport Authority. Hence I agree with the reasoning of the Learned Technical Member on this issue. 48. On the second issue of refund which is an alternative plea advanced by the appellants if it is held that they were not eligible to use the Credit in the manner for payment of duty on their clearances for home consumption. I agree with the view expressed by the Learned Technical Member for the reasons spelt out by him and the additional reasons spelt out hereunder. No doubt, statutory authorities are bound by the time-limits prescribed under the Statute. Refund of duty under Section 11B is for refunds claimed by a manufacturer of the duty paid by him. The refund under Rule 57F(3) is an exceptional benefit where a manufacturer is to be granted refund of duty paid,....
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....the Government in the Gazette. The Notification so issued by the Government is No. 85/87-C.E., dated 1-3-1987 which has been extracted in his Order. Three paragraphs of the Appendix to the said Notification are relevant. These are paragraphs 2, 6 and 7. These are extracted below :- "2. The claims for such refund are submitted not more than once in any quarter in a calendar year. 6. The refund shall be allowed only in those circumstances where a manufacturer is not in position to utilise the credit of the duty allowed under rule 57A against goods exported during the quarter to which the claim relates. 7. The application for refund together with the proof of due exportation and the relevant extracts of Form RG23A in original are lodged with the Assistant Collector of Central Excise before the expiry of the period specified in section 11B of the Central Excises and Salt Act, 1944 (1 of 1944)." 49. Section 11B is referred to in para 7. It is laid down that the application for refund is to be lodged with the Assistant Collector before the expiry of the period specified in Section 11B of the Central Excises and Salt Act, 1944. Para 2, however, contains a condition that t....
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....llector (Appeals) set aside the Assistant Collector's Order, they have moved the present appeal. Opinion is divided between the two Members on this issue and the matter will reach a conclusion only when the final decision is taken as to whether Credit could or could not be utilised for payment of duty on final products cleared for home consumption. Before that stage, refund will be premature. Hence I am of the view that the period of limitation has not started to run and can be said to commence only when utilisation of Credit for payment of duty in this manner indicated in Rule 57F(3) is ruled out finally. For this reason, I hold that the second alternative of refund cannot be denied to them on the ground of limitation. 51. It was argued by Shri Bajoria, learned Senior Advocate that they are not claiming refund in cash but that ground is advanced only to defend themselves against the demand. The said plea did not find favour with Learned Judicial Member who observed that if there is a specific mode for claiming refund then that particular mode should have been followed and it is no answer to say that since they are entitled for the refund, the demand itself is not justified....
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....easier solution by a different approach within the provisions of Rules 57C and 57F(3) itself without reference to its proviso at all. 54. The proposition that goods cleared for export under bond without payment of duty are neither chargeable to nil rate of duty nor wholly exempt from duty was urged and accepted by this Bench in the case of Orissa Synthetics v. Collector of Central Excise, Bhubaneswar reported in 1995 (77) E.L.T. 330. I was a party to that decision. The Bench followed the Honourable Delhi High Court Judgment in M/s. Hindustan Aluminium Corporation Ltd. v. Superintendent of Central Excise reported in 1981 (8) E.L.T. 642 which took such a view with reference to the corresponding and analogous provisions of Rule 56A under the Proforma Credit Scheme. The Bench also took note of the instructions of the Government contained in letter F. No. 211/2/73-CX. 6, dated 3-4-1975 (Circular 10/75-CX. 6), issued in consultation with the Ministry of Law. Relevant extracts of the latter's advice are reporduced below :- "7. Clause (i) of the proviso to sub-rule (2) of rule 56A, as referred to above, refers to the inapplicability of proforma credit to finished products w....