1. This is an appeal under Section 35 of the Central Excises and Salt Act, 1944 filed by M/s Hindustan Lever Ltd. against the orders of the Assistant Collector of Central Excise Division 'F' Bombay dated 20-4-1978 and the Appellate Collector of Central Excise Bombay dated 20-11-1979 under which the appellants' claim for credit of auxiliary excise duty under Rule 56-A paid on optical bleaching agent (Photine 'C') classifiable under item 15-DD has been denied for the payment of duty on manufacture of O.S.A.A. falling under item 15-AA. The grounds for denial are that O.S.A.A. does not carry auxiliary duty of excise and therefore the Assistant Collector and the Appellate Collector have held that the auxiliary duty paid on optical bleaching agent cannot be permitted to be utilised under Rule 56-A for the payment of any duty on O.S.A.A. The appellants have argued that the contentions of the Assistant Collector and the Appellate Collector are not correct. The learned representative Shri C.S. Lodha for the appellants explained that auxiliary duty is collected as a percentage of basic duty. In the present case of optical bleaching agent falling under item 15-DD it is 20% of the effective basic duty. Therefore, when basic duty is nil, he has pointed out that auxiliary duty would also be nil and the recovery of auxiliary duty in such a case would be illegal. The learned representative has contended that by a Notification No. 99/66, dated 17-6-1966 issued under Rule 8 of the Central Excise Rules, the basic duty on optical bleaching agent has been reduced to nil if this is used for the manufacture of organic surface active agent. Therefore, in the appeal under consideration when the basic duty is nil, the auxiliary duty should also be nil and the recovery of auxiliary duty would therefore not be legal. The appellants were using optical bleaching agents falling under Item 15-DD for the manufacture of organic surface active agent classifiable under Item 15-AA, since 1966 onwards and availing of the proforma credit of duty paid on the raw material for the manufacture of the finished goods in terms of Rule 56-A. In 1973, the auxiliary duty was levied for the first time on many items by the Finance Bill, Clause 28. Under Notifications No. 81/73, dated 1-3-1973 and 82/73, dated 1-3-1973 partial exemption was given from the levy of duty. The provisions in the Finance Bill and Finance Act, 1973 were repeated in the Finance Bill and the Act of 1974 and Notification No.54/74, dated 1-3-1974 was issued. Optical bleaching agents falling under Item 14-DD were denied exemption from auxiliary duty under Notification No. 54/74, dated 1-3-1974. However, there was no auxiliary duty on O.S.A.A. The department, however denied the proforma credit of duty paid on optical bleaching agents towards.' payment of duty on O.S.A.A. on the grounds that there was no auxiliary duty on O.S.A.A.Shri Lodha argued that the levy of basic and auxiliary duties of excise is for the purpose of accounting and for the purpose of sharing the revenue between the Centre and the States and they are not relevant for the purpose of Rule 56-A though they are required to be shown separately in R.G. 23 account. The credit of auxiliary duty paid on optical bleaching agent was still standing in the R.G. 23 account of the appellants as this was not allowed to be utilised by the department. In the present appeal, the appellants have, therefore, made a request for permission to utilise the auxiliary duty paid on optical bleaching agents towards the payment of duty leviable on O.S.A.A. Shri Lodha submitted that the position regarding the levy of auxiliary duty was continued in the Finance Acts 1975 and 1976. He reiterated that in the eyes of law, there was no distinction between the basic and auxiliary duties and he referred to the decision of the Delhi High Court in the case of Mody Rubber Ltd. v. Union of India and Ors., 1983 E.L.T. page 24. He drew our attention to para 12 on page 29 of judgment. Referring to Rule 56-A Shri Lodha pointed out that provisions of Sub-rule (3)(vi)(a) permitted the credit of duty allowed in respect of any material to be utilised towards payment of duty on any finished excisable goods. The types of duties were not distinguished for the purpose of Rule 56-A and the credit should be allowed for paying duty on any excisable goods. In this behalf, he referred to 1981 E.L.T. page 547 and para 27 of the judgment. He emphasised that the ratio of the decision was applicable to the grant of credit under Notification No.99/66, dated 17-6-1966. The denial of the proforma credit of auxiliary duty violated Notification No. 99/66, dated 17-6-1966. Shri Lodha has also referred to the provisions of Rule 56-A (vi)(a) as incorporated by Notification No. 4/78, dated 10-1-1978 and submitted that by virtue of this notification the credit of auxiliary duty should be allowed.
2. Shri N.K. Pattekar for the department has opposed the submission He has argued that basic and auxiliary duties are separate and the utilisation of credit of auxiliary duty cannot be permitted towards payment of basic duty. He, further, submitted that Rule 56-A was not merely a procedural rule as contended by the appellants. It has penal provisions also and in this behalf he drew our attention to Rule 56-A (3)(v) under which the department could make a claim for payment of duty on goods which are not accounted for. by the manufacturer. There are penal provisions also in the same rule. The departmental representative therefore submitted that the orders of the Assistant Collector and the Appellate Collector were correct. Since no auxiliary duty was chargeable on O.S;A.A. which was .the finished product the credit of auxiliary duty paid on optical bleaching agent which was the raw-material cannot be allowed. The credit of auxiliary duty had remained outstanding in the account of the appellants and now they were to take benefit of Notification No. 4/78, dated 10-1-1978. This was not permissible. He, therefore, submitted that the appeal be dismissed.
3. Shri Lodha in reply has argued that R.G. 23, Part II did not have separate columns for showing basic duty and auxiliary duty at the time when auxiliary duties were levied under the Finance Bill of 1973. The duties were required to be shown separately in 1975. As submitted by him earlier, this was only an accounting requirement, and it could not come in the way of grant of proforma credit as claimed in the appeal.
For this reason, he submitted that the company's appeal be allowed.
4. We have examined the submissions on both the sides. We find that auxiliary duties are also the duties of excise and the provisions of the Central Excise Rules are applicable to them in all respects. For this purpose the credit of auxiliary duty of optical bleaching agent has been correctly allowed The department's refusal to allow this credit to be utilised for payment of basic duty on O.S.A.A. has no legal force. In fact, after issue of Notification No. 4/78, dated 10-1-1978 under which Sub-clause (c) has been added to Rule 56-A(3), there is no doubt that the credit of auxiliary duty can be permitted to be utilised towards the payment of the duty on any finished excisable goods Applying the provisions of the aforesaid law to the facts under examination it would imply that the credit of auxiliary duty on Photine 'C', optical bleaching agent, is permissible for payment of basic duty on O.S.A.A. The above views should decide the issue. However, before we conclude we have to examine one important issue raised by the appellants. The learned representative has submitted that under Notification No. 99/66, dated 17-6-1966, the basic duty on optical bleaching agent has been reduced to nil and therefore the auxiliary duty thereon would also be nil. Therefore, to give proper meaning to this notification, it is necessary that the proforma credit of auxiliary duty he allowed to be utilised for payment of duty on O.S.A.A. We observe that this argument is falacious. The Notification No. 99/66, dated 17-6-1966 grants exemption from payment of duty to optical bleaching agent only on the condition that the same is used for the manufacture of O.S.A A Thereforp when the optical bleaching agent leaves the factory of production the clearance is not taken in terms of Notification No. 99/66, dated 17-6-1966 hut the duty is paid and the appellants take proforma credit of the duty thus paid on optical bleaching agent. Notification No. 99/66, dated 17-6-1966 is not thus applicable to the optical bleaching agent in the hands of the appellant The levy of basic duty and auxiliary duty is therefore quite in order and they cannot provide any argument to the appellant for deciding the issue in their favour as contended. However, as we observed above, this position is not relevant for deciding the matter under appeal. As held by us above, the credi is available but in view of these circumstances, we set aside the orders of the Assistant Collector of Central Excise Division 'F' and the Appellate Collector or of CentralExise and direct that the amount of proforma credit of auxiliary duty paid on optical bleaching agent be allowed to be utilised for payment of basic duty on O.S.A.A. manufactured by the appellants. This appeal is thus allowed.