TaxTMI 
TaxTMI 
2007 (1) TMI 94
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....the Tariff Act is 16% ad valorem. There is no exemption as such to the manufacture from the payment of duty on manufacture of sulphuric acid when removed. 3. Under general exemption No. 66 issued under Sub-Section (1) of Section 5A of the Central Excise Act, 1944, by the Central Government the relevant provision reads as under :- "Exemption and effective rates of basic excise duty for specified goods of Chapters 9 to 96. - In exercise of the powers conferred by sub-section (1) of Section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column (3) of the Table below or specified in column (3) of the said Table read with the concerned List appended hereto, as the case may be, and falling within the Chapter, heading No. Or sub-heading No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), specified in the corresponding entry in column (2) of the said Table,- (a) from so much of the duty of excise specified thereon under the First Schedule (he....
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....ts whether directly or indirectly and whether contained in the said final products or not, the manufacturer shall, unless the provisions of sub-rule (9) are complied with, pay an amount equal to eight per cent of the price (excluding sales tax and other taxes, if any, payable on such goods) of the second category of final products charged by the manufacturer for the sale of such goods at the time of their clearance from the factory. (2) The amount mentioned in sub-rule (1) shall be paid by the manufacturer by adjustment in the credit account maintained under sub-Rule (7) of Rule 57G or in the accounts maintained under Rule 9 or sub-Rule 173G and if such adjustment is not possible for any reason, the amount shall be paid in cash by the manufacturer availing of credit under Rule 57A. (3) The provisions of sub-rule (1) shall not apply to final products falling under Chapter 50 to 63 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). (4) The provisions of sub-rule (1) shall also not apply to - (a) Articles of plastics falling within Chapter 39; (b) Tyres of a kind used on animal drawn vehicles or handcarts and their tubes, falling within Chapter 40....
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....d as a bye product of the activity of the smelter plant is passed on to sulphuric acid plant and thereafter the sulphuric acid is produced by the chemical process in the acid plant. In other words, the sulphuric acid is not product of the same plant where the zinc and lead are being manufactured. 7. The question relates to availing of Modvat credit in respect of Duties paid on the inputs used in smelter. 8. So far as the product of smelter is concerned, there is no dispute that the same are chargeable to duty and inputs used therein are eligible for availing Modvat credit. 9. With reference to condition No. 5 subject to which the sulphuric acid has been subjected to nil date of duty refers to Central Excise Removal of Goods at Concessional Rate of Duty for Manufacture of Excess Goods Rules, 2001. A perusal of the Rules of 2001 clearly indicates that these exemptions are available to a manufacturer, who intends to receive the special goods of the notification at a concessional rate of duty for use in his manufacturing activity, he can acquire such product on payment of concessional rate of duty for his own purposes. In other words, the Rules of 2001 extends the benefit of e....
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....envisaged for manufacturer X in respect of such goods manufactured by him. 12. In the backdrop of aforesaid provisions the Revenue contends that to the extent sulphuric acid is ultimately cleared by the petitioner to the manufacturer of fertilizers on payment of nil duty in terms of Exemption No. 66, on receipt of application counter signed by the competent authority in terms of Rule 2001, the petitioner is engaged in manufacture of goods which are partly liable to excise duty and partly liable to nil rate of duty on removal from factory of the petitioner to the factory of fertilizers producer. Therefore, in terms of Rule 57CC Sub-Rule (9) he is required to maintain a separate account of using of inputs used in relation to manufacture of sulphuric acid cleared to fertilizers manufacturers and inputs used in other products which are chargeable to duty and in case the petitioner has not maintained the registers in terms of sub-rule (9) of Rule 57CC, he is liable to pay 8% of duty on the removals of sulphuric acid in terms of Rule 57CC. 13. On the other hand, it is contended by the learned counsel for the petitioner that at the very outset the inputs were received and used in th....
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....he same on the very same day, his right to avail Modvat credit on such date is not effected by happening of contingency in future, on which results in applicability of nil rate of Duty. Therefore, he contends that as on the date the petitioner had received inputs, he was engaged in the manufacture of zinc lead and sulphuric acid. This is without prejudice to first contention. As on the date when all the three types the goods were chargeable to duty and no exemption was available to the manufacturer as such on the commodity manufactured by him nor the duty was chargeable at that time at the nil rate. The chargeability to Duty also remain unaffected when goods are manufactured and sold or removed from factory in ordinary course. It is only in case sulphuric acid is sold to a manufacturer of fertilizer and the goods are received by such manufacturer on submission of his application counter signed by authorized officer in terms of Rules of 2001. In short become entitled to avail Modvat credit, at given point of time attached with no illegality and invalidity, at the relevant time, no exemption as envisaged was attached to availability of Modvat credit when inputs were received by the p....
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....s which are exempted from the whole of the duty of excisable or chargeable on Nil rate of duty. Sub-Rule (2) of Rule 57C inter alia provided that where a manufacturer avails the credit of specified duty on any inputs and he is engaged in manufacture of any final product which is chargeable to duty as well as in the manufacture of any other final product which is exempt from the whole of duty of the excise levied thereon or is chargeable to the nil rate of duty, in the same factory, the provisions of sub-rule (1) shall be deemed to be satisfied only when the provisions of sub-rule (1) or sub-rule (5) or sub-rule (9) of Rule 57CC are complied with, or where goods are exported under bond in terms of the provisions of Rule 13. Rule 57C does not apply to the inputs used as fuel. 18. It may be noticed that Rule 57C was applicable to end product exempted from the payment of duty or chargeable to Nil rate of duty only in case where such product is manufactured in the same factory. 19. Rule 57CC was introduced in 1996 vide notification dated 23rd July, 1996 for the first time. The Rule 57CC was not inhibited by the condition of final product chargeable to the duty as well as not charg....
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....ory. 22. Rule 57G lays down the procedure for availing the Modvat credit. It provides that a manufacturer, who intends to take credit of the duty paid on inputs under Rule 57A or 57B shall file a declaration with the Assistant Commissioner of Central Excise having jurisdiction over his factory, indicating the description of the final products manufactured in his factory and the inputs intended to be used in the said final products and such other information as the said Assistant Commissioner may require, and obtain a dated acknowledgment of the said declaration. Sub-Rule (2) of Rule 57G reads as under :- "(2) A manufacturer who has filed a declaration under sub-rule (1) may, after obtaining the acknowledgment aforesaid, take credit of the duty on the inputs received by him." 23. Sub-Rule (3) further envisages that no credit under sub-rule (2), shall be taken by the manufacturer unless the inputs are received in the factory under the cover of documents specified thereunder. 24. Sub-Rule (6) ordains that the manufacturer may take credit on inputs received in his factory. Sub-Rule (8) requires the manufacturer of final product to submit monthly return indicating the partic....
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....ry and not with reference to any other date. 27. It appears that the combined effect of Sub-Rule (9), sub-Rule (1) of Rule 57CC and the substantive scheme of availing Modvat credit in respect of inputs, the decisive date for the assessee's entitlement to Modvat credit is not postponed to the date of clearance. The operation of Rule 57CC is also to be seen as on the date the manufacturer becomes entitled to avail Modvat credit. It is with reference to said date his obligation to maintain separate inventory about the use of inputs by him can be operated so as to disentitle the manufacturer from availing Modvat credit at all in respect of final product/goods manufactured by him which is exempt from whole Duty or is chargeable to nil rate of duty or is not chargeable to duty at all. Rule 57CC does not speak of adjustment of any duty which is not ultimately paid on the final product on clearance due to certain contingency arising in future. In other words, the availing of Modvat credit is not postponed. When Rule 57CC operates at the time when the assessee claims his entitlement to Modvat credit and state of affairs existing at that time can alone be seen to find out whether the end ....
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....he raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that is becomes available." 30. The aforesaid decision fortifies us in our conclusion and makes it clear beyond doubt that a manufacturer obtains credit of the excise duty paid on inputs to be used by him in production of excisable product on receipt of such inputs by him and once it becomes entitled to avail the Modvat credit, and avails, it cannot be defeated unless otherwise provided by law. 31. As on the date the inputs in question were received by the manufacturer and is commodity in the manufacture of which he was engaged to use, the provision of Rule 57CC were the zinc and lead and sulphuric acid and other commodities. Presently we are not concerned with as on the date. The inputs received the sulphuric acid the final product with which we are concerned was chargeable to duty at the rate of 15%. The manufacturer had not been exempted from payment of duty on his end product no....
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....of its removal from factory premise. In such circum stances, no excise duty becomes payable on end product. Yet Modvat credit availed on inputs used in destroyed goods is not to be recalled. This is also suggestive of the fact the relevant date for considering exemption from duty of the end product in or in relation to which inputs are used is the date of its receipt in factory and condition is its actual use in or in relation to manufacture of end product by the manufacturer. The chargeability to duty or non-chargeability due to exemption or notified nil rate is to be considered at the stage before goods are actually produced but on receipt of inputs intended to be used in manufacture of such goods. That being so ultimate clearance of goods at nil rate due to contingency existing at the time of removal does not affect the entitlement that legally arises long before that date. 34. We are unable to read from General Exemption No. 66 that product of sulphuric acid by the manufacturer of sulphuric acid was exempted from the payment of whole of the duty or was subjected to nil rate of duty or vide under Tariff Act or under the Exemption. It was only on the clearance of the sulphuric....
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....nder Rule 57C(1) of the Central Excise Rules, every manufacturer intending to take credit of the duty paid on inputs shall file a declaration with the Assistant Commissioner of Central Excise having jurisdiction over his factory, indicating the description of the final products manufactured in his factory and the inputs intended to be used in the said final product sand such other information as the said Assistant Commissioner may require, and obtain a dated acknowledgement of the said declaration. Thus, Rule 57C of the Central Excise Rules mandates that no credit of duty paid on the inputs used in the manufacture of final product shall be given if the final product is fully exempt from duty or is chargeable to nil rate of duty. Utilisation of the credit comes after allowing a credit of duty paid on the inputs. If any credit is wrongly taken and then utilised there are provisions in the Modvat scheme under Rule 57-I by which limitation of period has been provided for recovery of the wrong credit initially taken or utilized. According to us, utilisation of the credit is different from taking the Modvat credit if at the time of taking the Modvat credit, products are not exempted. Thu....