1. This is an appeal arising out of and directed against the order-in-Appeal No. B-599-510/PN 79-80/83 dated 15-3-1983 passed by the Collector of Central Excise (Appeals), Bombay. By this order, the Collector (Appeals) had allowed only partial relief to the appellants.
The facts of the case, briefly stated, are that the appellants manufacture, inter alia, motor vehicles falling under Central Excise Tariff Item No. 34. For this purpose, they used duty-paid parts and accessories of motor vehicles falling under Item No. 34-A CET. They work under the procedure prescribed in Rule 56-A of the Central Excise Rules, 1944 which permits taking proforma credit of the duty-paid on component parts and raw materials used in the manufacture of specified excisable goods and availment of the said proforma credit towards payment of the excise duty payable on the finished excisable goods for the manufacture of which the duty paid components and raw materials have been used. During the period from 1-8-1980 to 31-3-1982, the appellants took proforma credit of duty amounting to Rs. 2,65,091.91, which had already been paid on non-specified motor vehicles parts falling under Tariff Item No. 68 of the CET invoking the provisions of Central Excise Notification No. 166/79 dated 19-4-1979 as amended by Notification No. 187/79 dated 10-5-1979. Out of this amount, they utilised proforma credit of Rs. 2,46,983.35 during the aforesaid period for payment of duty on finished motor vehicles falling under Item 44 CET. As on 1-8-1980, they had also a balance of proforma credit of Rs. 63,302.44 lying to their RG 23 Part II Account prescribed under Rule 56-A. The Assistant Collector of Central Excise, Pune took the view that since Notification No. 166/79 was rescinded by Notification No.113/80 dated 19-6-1980 which came into force on and from 1-8-1980, the proforma credit taken by the appellants during the period 1-8-1980 to 31-3-1982, as also the balance lying in their proforma credit account as on 1-8-1980, were not availble to them for the purpose of paying duty on the finished products. The Assistant Collector held that the permission conveyed by the Assistant Collector's letter dated 1-9-1980 for availment of the proforma credit procedure was clearly relatable to Notification No. 166/79 and that, therefore, the permission itself was limited to the scope of the subject Notification. Once this Notification was rescinded on 1-8-1980, the appellants could not have continued availment of the proforma credit procedure in terms of the permission dated 1-9-1980 which was with reference to Notification No.166/79. He also held that there was suppression of facts on the appellant's part and that, therefore, the Department had the benefit of the extended period of 5 years for the recovery of the wrongly availed-of credit. In the result, he passed orders disallowing the availment of the credit of Rs. 2,65,091.91 taken by the appellants during the period 1-8-1980 to 31-3-1982 and further ordered that the amount lying in the appellant's RG 23 account as on 1-8-1980 would lapse. He further ordered the recovery of Rs. 2,46,983.35 being the amount of the proforma credit utilised by the appellants during the aforesaid period without proper authority. The Appellate Collector, in his order, now under challenge before us, held that the appellants' argument that the permission granted under Rule 56-A would continue even though the Notification with reference to which the permission was granted had been rescinded and replaced by a fresh Notification granting the same facility was not tenable. He further held that it was the duty of the appellants to obtain afresh permission for availment of the proforma credit procedure. Consequently, he upheld the Assistant Collector's order except to the extent that he held that there was no suppression on the part of the appellants and that the appellants were liable to pay duty only for a period of six months from the date of issue of the Show Cause Notice. It is against this order that the appellants have come in appeal before us. The appeal was heard on 16-12-1983. Shri B.P. Bidichandani, Consultant, appeared on behalf of the appellants and Shri N.K. Pattekar, J.D.R., on behalf of the respondent.
2. Shri B.P. Bidichandani, after briefly narrating the facts of the case, submitted that the permission conveyed by the Assistant Collector, Pune by his letter F. No. V(34A) 30-26/79 dated the 1st September, 1980, allowed the appellants to avail themselves, w.e.f.
13-3-1979 of the proforma credit of the central excise duty paid on non-specified parts and accessories of motor vehicles and tractors including trailers brought by the appellants from outside for use in the manufacture of motor vehicles and tractors including trailers in their factory. The permission was granted under Rule 56A of the Central Excise Rules and in terms of Central Excise Notifications- This permission letter did not contain anything to the effect that it was to be operative onlyupto 1-8-1980. On 1-8-1980, all Notifications including Notification No. 166/79 providing for the "set-off" procedure were rescinded by the Government of India by issue of Notification No.113/80 dated 19-6-1980 which came into force from 1-8-1980. Shri Bidichandani, the learned Consultant, drew our attention to Notification No. 118/80 dated 19-7-1980 by which the Central Excise (7th Amendment) Rules, 1980 were notified and these were to come into force on 1-8-1980. It was submitted that the appellants continued to avail of the proforma credit facility because of this Notification. It was submitted that the view taken by the lower authorities that since Notification No. 166/79 was rescinded, the appellants should not have availed of the proforma credit procedure without obtaining a fresh permission was not correct, particularly in view of the rescission of all set-off Notifications (including Notification No. 166/79) and their replacement by the proforma credit procedure. Even when the Assistant Collector wrote to them on 1-9-1980, Notification No. 166/79 had been rescinded and if the appellants had been told about the Departmental view in good time, they could have availed of the procedure of movement of the non-specified parts and accessories of motor vehicles without payment of duty in-bond under Chapter X Procedure. In any view of the matter, by allowing the appellants the continued facility of availment of Rule 56-A procedure, there would be no loss of revenue.
3. Shri Pattekar, the learned Departmental Representative, drew our attention to Rule 56-A of the Central Excise Rules providing for a special procedure for movement of duty-paid materials or component parts for use in the manufacture of finished excisable goods. In particular, he drew our attention to Clause (ii) (b) of the first proviso to Sub-rule (2) of Rule 56-A which reads as follows :- "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- (ii) Unless- (a) duty has been paid for such material or component parts under the same item as the finished excisable goods, or, (b) remission or adjustment of duty paid for such material or component parts has been specifically sanctioned by the Central Government." With the rescinding of Notification No. 166/79, the sanction of the Central Government stood withdrawn and unless the appellants applied for fresh permission in terms of the new Notification, they should not have continued to avail of the proforma credit procedure.
4. In reply, Shri Bidichandani submitted that, though Notification No.166/79 was rescinded, it must be remembered that Rule 56-A stood amended on 1-8-1980 by Notification No. 118/80 dated 19-7-1980. Motor vehicles falling under Item No. 34 of the Central Excise Tariff were specified under Rule 56-A both before and after 1-8-1980. The appellants had continued to follow all the prescribed procedures by way of submission of timely intimations about the receipt of duty-paid motor vehicle parts to the proper Officer, submission of RT 12 monthly returns, etc.
5. We have carefully considered the submissions of both sides.
Notification No. 166/79 exempts all excisable goods on which duty of excise is payable and in the manufacture of which parts and accessories of motor vehicles and tractors, including trailers, falling under Item No. 34-A of the CET, have been used, from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the said parts and accessories. The Notification was expressly made inapplicable to 15 specified parts which were the items specifically enumerated in Item No. 34-A of the CET with the enactment of the Finance Bill of 1979. In other words, the Notification applied to parts and accessories of motor vehicles falling under Item No. 34A other than the 15 items specifically enumerated. These non-specified parts and accessories continued to be under Item 34A till 10-5-1979 when the Finance Bill of 1979 came into force as an Act of Parliament. On the same date, i e. 10-5-1979 Notification No. 187/79, was issued by the Central Government which, inter alia, substituted the expression "Item No. 34-A", with the expression "Item No. 68" in Notification No.166/79. This change was, apparently because, with the enactment of the Finance Bill, the non-specified parts which fell under Item No. 34-A, came within the purview of Item 68 with effect from 10-5-1979. Now, the Department's case is that Notification No. 166/79 was rescinded on 1-8-1980 by Notification No. 113/80. Therefore, the sanction conveyed to the appellants by the Assistant Collector, Pune, in his letter dated 1-9-1980, which was with reference to Notification Nos. 110/79, 166/79 and 187/79 lapsed on 31-7-1980 and the appellants should have sought permission to continue to avail of the proforma credit procedure. Since they did not do so, the continued availment of the procedure was not in order and the amount lying to their credit in the proforma credit account as on 1-8-1980 was also not available for being utilised towards payment of duty on finished motor vehicles.
6. Now, Notification No. 201/79 dated 4-6-1979, which, among others, has been relied upon by the appellants, exempted all excisable goods (which would naturally include motor vehicles falling under Item No.34), on which excise duty was leviable and in the manufacture of which any goods falling under Item No. 68 of the CET (referred to for the sake of convenience as "inputs") had been used, from so much of the duty of excise leviable thereon as was equivalent to the duty of excise already paid on the "inputs". This exemption was subject to 2 provisos, the first of which was that the procedure set out in the appendix to the Notification was followed and the 2nd being that the Notification was not applicable to finished excisable goods which were exempted from the whole of the excise duty leviable thereon or were chargeable to nil rate of duty. The procedure prescribed in the appendix to the Notification was substantially the same as is to be found in Rule 56-A.One could, therefore, reasonably take the view that if there had been substantial compliance with the procedure prescribed in the Appendix to Notification No. 201/79 dated 4-6-1979, the appellants would not be debarred from availing themselves of the proforma credit procedure even after Notification No. 166/79 was rescinded on 1-8-1980. It is to be noted that motor vehicles falling under Item No. 34 were specified in the list of goods to which the proforma credit procedure was applicable under Rule 56-A all along during the relevant period both prior and subsequent to 8-8-1980. On the question whether there was substantial compliance with the prescribed procedure, we note that the Appellate Collector has recorded a definite finding that "credit was taken and utilised under valid permission of the proper authority, after filing the D3 intimation to the proper officer, credits have been taken in RG 23 Part II the RT 12 returns have been finally assessed for the material period". It, therefore, appears that there had been substantial compliance with the procedure. It was because of this that the Appellate Collector had further held that there was no suppression of facts on the part of the appellants. We are of the view that the sanction of the Central Government for remission or adjustment of duty paid on parts and accessories of motor vehicles contained in Notification No. 166/79, continued to be operative and valid by virtue of Notification No. 201/79, dated 4-6-1979 even after Notification No.166/79 was rescinded on 1-8-1980. In the circumstances, we allow the appeal and direct that the consequential relief shall be granted to the appellants within 3 months from the date of communication of this order.