1. This is an appeal directed against the order of the Collector of Cen. Ex. (Appeals) bearing No. V-2(85)106/R/88 R. 496/PN/89 dated 11-9-1989.
2. The brief facts for the purpose of disposal of the appeal can be stated as below: The appellants are the manufacturers of stators and rotors. They are importing CRNGO sheets. Part of this sheets were supplied to M/s.
Kelvinator of India Limited. M/s. Kelvinator of India availing of proforma credit in respect of the duty paid on the sheets and utilising the said sheets in the manufacture of laminations. Even the laminations were cleared on payment of duty on the basis of the value worked out on costing inclusive of raw materials and labour charges. The duty paid sheets and laminations received by the appellants for use in the manufacture of stators and rotors was under Rule 56A of the Central Excise Rules and credit of the duty on sheets and laminations was taken in the proforma account. This was the position upto 1-3-1986 when in the 1986 Budget, the modvat scheme was introduced. Consequent on the introduction of the modvat benefit, the appellants filed a declaration for availment of modvat credit in respect of the duty paid on laminations by filing a declaration on 18-4-1986 and then onwards they started availing modvat credit on duty paid laminations received from M/s. Kelvinator of India Ltd. 3. In respect of the laminations received during the period from 30-12-1985 to 24-3-1986, proforma credit of duty paid on the laminations so received was taken as per the details of duty indicated in the relevant gate passes. However, in respect of the laminations, differential duty to the extent of Rs. 58,927.80 was paid by M/s.
Kelvinator of India Ltd. by debiting the amount in PLA on 22-10-1986.
Consequent on such payment, the Central Excise Department, Faridabad, having jurisdiction over M/s. Kelvinator of India Ltd. had issued a certificate of payment of the aforesaid differential duty paid and on that basis the appellants took the proforma credit of the differential duty as per the proviso to Rule 56A. Since they had already opted to modvat credit by filing the declaration on 18-4-1986, they approached the Assistant Collector for transfer of the proforma credit in respect of the differential duty paid and lying in the proforma credit to their modvat account. This was objected to by the Department by issue of a show cause notice and in the adjudication proceedings held by the Assistant Collector, the contention of the appellants was accepted by the Assistant Collector and accordingly, he allowed the transfer of the credit under Rule 57H(3) to the modvat account. Against this order, the Department went in appeal before the Collector of Central Excise (Appeals). The Collector (Appeals) held that in terms of provisions of Rule 56A(9), they were not entitled to the benefit of Rule 56A, since the appellants had already filed the declaration under Rule 57G for availing modvat credit on 18-4-1986. In view of the provisions of Rule 56A(9), they were not entitled to the benefit of the proforma credit for differential duty under Rule 56A, though the differential duty was paid on 22-10-1986 in respect of the goods cleared during the period from 30-12-1985 to 24-3-1986. On this reason, he allowed the appeal of the Department. The present appeal is against the aforesaid order of the Collector (Appeals).
4. Shri Kalve, the learned Consultant on behalf of the appellants referring to the memorandum of appeal argued as below: Rule 57H(3) permits transfer of credit of duty paid on inputs and lying unutilised in the RG-23 maintained under Rule 56A before the commencement of Rule 57A. The appellants had a balance of Rs. 3,313.12 in the proforma account and on the basis of the application for transfer of this credit lying under proforma account, the aforesaid amount was transferred to the modvat account. When the differential duty payment certificate was received from the input manufacturers by the appellants, the appellants had rightly sought for transfer of this balance from the proforma account to Modvat account, since the duty payment related to goods received by them during the period from 30-12-1985 to 24-3-1986. This is not a case where On the strength of the differential duty payment certificate, they have straightaway taken the credit in Modvat account. They have taken this credit in the proforma account and sought for transfer of this amount lying in the proforma account to modvat account. It is also not a case, where credit in respect of these inputs received during the aforesaid period was simultaneously availed of both under modvat scheme as well as proforma account scheme.
Rule 56A(9) debars a manufacturer availing of proforma credit and modvat benefit simultaneously in respect of the duty paid on the same inputs. In this case, admittedly, they have not sought for simultaneous benefit in respect of inputs received after the filing of declaration under the modvat scheme. The differential duty paid was only in respect of the inputs received by them during the period when they were under proforma scheme. Moreover, there are specific provisions for demanding duty both under Rule 56A(5) and Rule 57-I. No such demands have been issued and hence mere filing of the appeal by the Department under the direction of the Collector under Sec.
35E, would not make the demand payable and the same is not enforceable. He also contended that Rule 56A(9) provided that a manufacturer availing of Rule 57A procedure cannot simultaneously avail of the benefit under Rule 56A. But this blanket denial has been removed by substitution of erstwhile Rule 56A(9), effective from 15-4-1987. In this case, the Assistant Collector has passed the order on 27-10-1987 on which date the revised Rule 56A(9) was only available and not the erstwhile Rule 56A(9). He, therefore, contended that the Assistant Collector, having been convinced that the credit of duty paid on laminations received during the period from 30-12-1985 to 24-3-1986 was not taken under Rule 57A and hence it can be correctly taken under Rule 56A, and such a credit taken under Rule 56A could be transferred to modvat account.
5. Heard Shri Arya, the Departmental Representative. He contended that the order of the Assistant Collector allowing the appellants to take the credit of the amount of differential duty in the proforma account is not consistent with Rule 56A because of the specific bar envisaged under sub-rule (9) of Rule 56A, wherein it is specifically laid down that - "Nothing contained in this rule shall apply to a manufacturer availing the credit of duty paid on the inputs under Rule 57A".
It is an admitted fact that the appellants, during the period when the differential duty payment was made and the payment certificate was received by the appellants, were availing of the credit of the duty paid on the inputs under Rule 57A and hence the question of giving credit in the proforma account for the amount of differential duty does not arise because of the specific bar envisaged under Rule 56A(9). He also referred to the provisions for transfer of credit from proforma account to modvat account as laid down under sub-rule (3)(vi)(a) of Rule 56A, whereunder it is clearly laid down that - "the credit of duty allowed in respect of any material or component parts, and lying unutilised with a manufacturer immediately before obtaining the dated acknowledgement of the declaration made under Rule 57G, may be transferred to his account in form RG-23".
Admittedly, in this case, a declaration has already been filed under Rule 57G as early as on 18-4-1986 and whatever credit in the proforma account lying in balance was also transferred to the modvat account with the permission of the proper officer as envisaged under sub-rule 3 (vi)(a) of Rule 56A. This is also evident from the appeal memorandum para 9 thereof, wherein the appellants have clearly indicated that they had a balance of Rs. 3,313.12 before the introduction of the Modvat Rules and the appellants applied to the Collector for permission to transfer the credit lying in proforma credit to modvat account and permission has already been granted and the aforesaid amount was transferred. In view of the admitted factual position, transfer of the credit for the differential duty paid much after the filing of declaration under Rule 57G is not legally sustainable and this cannot be construed as the amount lying in balance in the proforma account prior to the date of declaration filed by the appellants under Rule 57G. He, therefore, contended that the order of the Assistant Collector permitting availing of proforma credit as also transfer of proforma credit of the differential duty amount from the proforma account to modvat account is not legally correct and the Collector (Appeals) has rightly set aside the said order.
6. After hearing both the sides, we observe that the appeal falls within a short compass and the issues can be identified as below :- (i) Whether credit can be taken in the proforma account in respect of the differential duty paid subsequently on the inputs received by the appellants during the period from 30-12-1985 to 24-3-1986 in respect of which initially credit was taken on the basis of the duty particulars indicated on the Gate Passes; (ii) Whether the transfer of the credit from the proforma account to the modvat account in respect of the differential duty as permitted by the Assistant Col- lector is legally sustainable.
7. We would like to deal with both the issues from a different angle, which has not been considered by the authorities below strictly in terms of the provisions of Rule 56A. For this purpose, we consider it necessary to reproduce the relevant proviso (5) to sub-rule (2) of Rule 56A, as below: "provided also that if the duty paid on such material or component parts (of which credit has been allowed under this sub-rule) be varied subsequently due to any reason resulting in payment of refund to, or recovery of more duty from, the manufacturer or importer, as the case may be, of such material or component parts, the credit allowed, shall be varied accordingly by adjustment in the credit account maintained under sub-rule (3) or in the account-current maintained under sub-rule (1) of Rule 9 or Rule 173G(1) or, if such adjustment be not possible for any reason, by cash recovery from or, as the case may be, refund to the manufacturer availing of the procedure contained in this rule. (emphasis supplied).
8. From the above, it is clear that wherever, the duty initially paid on the inputs of which credit has already been allowed is, varied subsequently due to any reason resulting in payment of refund or recovery of more duty from the manufacturer/importer of the inputs, the credit initially allowed shall be varied - (a) by adjustment in the credit account maintained under sub-rule (3) i.e. RG 23A; or (b) in the account-current maintained under sub-rule (1) of Rule 9 or Rule 173G(1) i.e. PLA; or (c) if such adjustment is not possible for any reason by cash recovery from or, as the case may be, refund to the manufacturer availing of the procedure.
Thus, at the time when the differential duty was paid consequent upon the demand, the appellants have admittedly closed their proforma account maintained under sub-rule (3) of Rule 56A, by transferring whatever balance lying to the modvat credit and they had also started availing of modvat credit by filing the declaration under Rule 57G.Hence, the first alternative prescribed under proviso (5) to sub-rule (2) of Rule 56A is necessarily required to be ruled out. All the same, it is not the case of the department that there was no account current being operated under Rule 173G(1) in the case of the appellants. Hence, the appellants are entitled to get the credit in the PLA maintained under Rule 173G(1). Thus, even if it is held that credit cannot be taken in proforma account in respect of the differential duty paid subsequently, such a credit is required to be given in the PLA account.
The question of granting cash refund is also provided in the said proviso and it will arise only where such adjustment is not possible either in RG 23 account or in PLA. In view of this specific provision available in Rule 56A itself, we hold that if credit for differential duty paid subsequently cannot be given in the proforma account because of its closure, it would still be available by way of credit in PLA.Hence, the whole exercise of taking initial credit in RG 23 (proforma) account and that too after its closure and thereafter transfer to modvat account in terms of Rule 57H, is redundant and is not called for.
9. Thus, though technically, the order passed by the Asstt. Collector could be construed to be not in accordance with the Rule 56A(9), we hold that the appellants are otherwise entitled to take the credit of the differential duty paid on inputs straightaway in the PLA.Accordingly, we direct the authorities below to allow the appellants to take credit in respect of the differential duty to the extent of Rs. 58,927.80 in the PLA and correspondingly make the debit in the RG-23A - Modvat Account to the same extent.