1. This is an appeal to the Tribunal under Section 35B of the Central Excises and Salt Act, 1944 against order-in-appeal Nos. A-248 to 252/BD-99 to 103/83 dated 11.2.1983.
2. The impugned order covers five appeals against five orders dated 30.4.1982, 30.4.1982, 29.4.1981, 4.6.1982 and 29.7.1982 passed by the Asstt. Collr., Valsad Division. The appellants manufacture Epoxy Synthetic Resins and Hardeners which have been classified under Tariff Item No. 15A. For manufacture of Hardeners, Synpol was imported and charged to additional duty of customs equivalent to that under Item 15A CET. They were permitted to avail of proforma credit under Rule 56A in respect of the duty paid on Synpol and used the same when they cleared Synthetic Epoxy Resins. The Assistant Collector considered that such utilisation was not in accord' ance with the provisions of Rule 56A(3)(vi)(a) and issued show cause notices why the credit so utilised during January '76 to December '79 should not be recovered. By the live orders mentioned, he confirmed the demands. Before the Collector (Appeals) it was urged that the department treats Epoxy Resins and hardeners as one goods under item No. 15A, so there should be no difficulty in utilising proforma credit. Since the department has subjected hardeners to the same rate of duty as that applicable to Epoxy resins, it is not open to the department to exclude some of the products at the time of giving benefit of adjustment of credit under rule 56A. In fact, the duty paid on hardeners is far in excess of the amount of credit of duty on Synpol and the balance was made up in cash from the deposit in the personal ledger account. It was also argued that the notices are barred by limitation having been issued after the expiry of the statutory period. The Collector (Appeals) held that strictly speaking, in terms of rule 56A(3)(vi)(a), proforma credit can be used towards payment of duty only on such finished excisable goods in respect of which the duty paid material is used. However, since hardeners are also classified under item ISA, and in the case of composite packs, are cleared along with Epoxy Resins, there is no legal difficulty if credit of duty on Synpol is utilised towards duty on composite packs. However, where the resins are cleared separately, such proforma credit cannot be utilised since it can be used only when hardeners are cleared as such. Having regard to this, he ordered as follows: The appellants shall be entitled to utilise the proforma credit (as a consequence of duty paid on the synpol) towards payment of duty on the composite packs containing epoxy resins and hardeners. In case, there is a still balance in the proforma credit, the same shall be utilised towards payment of duty on the hardeners cleared separately and in the manufacture which synpol was used. In other words, such proforma credit cannot be utilised either towards payment of duty on the clearances of epoxy resins only (i.e., without being accompanied by hardener) and/or hardeners which do not contain synpol. The demands/credits in question shall be recomputed after keeping in view the above directives and if on such exercise, it is observed that the appellants have utilised more proforma credit, the equivalent amount shall he debited in their personal ledger account and simultaneously the same amount credited in the proforraa credit account to enable the appellants to utilise the same in the manner aforesaid.
3. In the present appeal it is contended that the Collector erred in not dealing with the contentions that Rule 56A(3)(v) was not applicable and the show cause notices issued by the Assistant Collector and his orders were invalid. He ought to have held that they were barred by rime. He erred in holding that set off of duty paid on Synpol was not available in respect of clearance of Epoxy Resins, even though Epoxy Resins & hardeners can only be used together and cannot be used separately and were cleared at the same time although in the separate containers. Epoxy Resins and hardeners in the ratio of 10:8 have to be used together in order to get the adhesive properties, even though they were sold in bulk in separate packs, since composite packs of such large containers is not physically feasible and they form one commercial article. Therefore, there is no material difference between Epoxy Resins and hardeners, which are packed in a composite pack, and the Epoxy Resins and hardener packed in separate bulk containers. The Collector has allowed the duty paid on Synpol to be utilised against future clearances of hardeners or composite packs but the appellants having discontinued purchasing Synpol from the market, as they are manufacturing it themselves, it is not possible for them to adjust the credit utilised as a result of the direction of the Collector. They, therefore, seek the following reliefs- (1) the Assistant Collector's order be set aside since Rule 56(3)(v) is inapplicable and/or outside the limitation period and/or otherwise invalid; (2) the original utilisation of the Proforma Credit in RG 23 should not be withdrawn; (3) alternatively, the adjustment or set-off should be allowed against the subsequent clearances of hardeners effected already on payment of duty through PLA instead of against future clearances; (4) order under appeal be modified and/or clarified accordingly and such other relief granted as the Tribunal deems fit.
4. Shri Pooran explained that Hardener is an essential ingredient of a composite adhesive, the other one being Epoxy Resin. Hardener is not a specified excisable product and would be assessable under T.I. 68 but is paying duty under T.I. ISA because it is used only with the Resin assessable under T.I. 15A. The proforma credit for duty on Synpol used in Hardener was being availed of in respect of both ingredients for five years, when five show cause notices under Rule 56A(3)(v) covering periods (1) January- December, '76, (2) January-December, '77, (3) January-July '78, (4) March '79 only and (5) September/October/Dec. '79 covering in at Rs. 2O,73,74O.53P were issued. Ultimately, duty/spl.
duty amounting to Rs. 5,68,847.0 in respect of periods January-December '76, January-July '78 and 'March 79 were alone confirmed. The Appellate Collector directed entitlement to utilise balance credit on clearances of Hardeners in which Synpol was used, but the department is insisting that it should, be utilised in respect of future clearances of hardeners which are not there as Synpol is no longer brought from outside. The credit is not in dispute and there was also no question of wilful mis-statement to invoke the five year time limit under Rule 56A, hence any one of the following courses may be ordered: (a) hold that adjustment against resins was proper in view of composite nature and for future the appellants will not claim adjustment against resins; (b) cancel the demand as time barred as Rule 56A(3)(v) cited by the Assistant Collector was net appilcable as also 56A(3)(ii) cited by the Collector, being beyond 6 months; (c) grant cash refund in terms of the provisions of the fifth proviso to Rule 56A(2); or (d) clarify that clearances of hardeners, in which Synpol was used, made after the period in question when duty was paid be taken into account for adjustment of credit and the duty paid in excess be refunded to the appellants.
5. For the Department, Shri Pattekar pointed out that the demand. was reduced from over Rs. 20 lakhs to just Rs. 5.6 lakhs. In terms of Rule 56A(3)(vi)(a) the duty paid on Synpol used in manufacture of hardener could only be adjusted against duty payable on this and not on the Epoxy Resin and there was no error or omission in this case. Sub-clause (v) of Rule 56A(3) was applicable as there is no time limit and the credit was wrongly utilised. He would not, however, clarify why no "demand", as contemplated in Rule 56A(3)(v), was issued but a "show cause notice", as contemplated in Rule 56A(5)(i), was issued by the Assistant Collector; and how this could be reconciled with the order of the Collector (Appeals) making Rule 56A(5)(ii), which provides for recalculation after issue of such a notice, applicable to the instant case.
6. We have given careful thought to this matter. So far as the request for clarification of the order under appeal is concerned, the Tribunal is hardly the appropriate forum. Either the Collector (Appeals) or the competent executive authority may be requested to do this. The Collector (Appeals) has also held that it was incorrect to allow credit of duty on Synpol to be used against clearance of Epoxy Resin in which it was not used and this is technically or legally sound. On the other hand, since admittedly, the argument that Hardener plus Epoxy Resin, even cleared separately, are one composite product, has not been accepted by the department for purposes of Rule 56A, the justification for assessing the Hardener under T.I. ISA, as Synthetic Resin, when in fact it is not covered but is assessable under T.I. 68, shows inexplicable inconsistency. In fact, had the assessment of Hardener been made under T.I. 68, then there could possibly have been no question of allowing any proforma credit, under Rule 56 A. of the countervailing duty paid under T.I. 15A on Synpol, when used in the manufacture of such Hardener. Whether the appellant has gained at the expense of revenue bay obtaining set-off in this manner, or has paid more duty than would have been recovered, had no proforma credit been given on Synpol and duty been realised in full under T.I. 68 on Hardener, is, at this juncture, academic.
7. As regards the demand being time barred, this contention was taken before the Collector (Appeals) but unfortunately in his order there is no finding on this ground. The reason for this omission is not clear and it may be that the Appellant did not press this ground. However, the learned Advocate contended before us that he had not given up this ground and as a matter of fact he referred to the order wherein the Collector (Appeals) also states that that was one of the grounds urged.
In the memorandum before us, a speciflc ground regarding bar of limitation has also been raised. The Appellate authority, in our opinion, ought to have considered this, ground and recorded his finding on the plea of limitation. Since we did not have the benefit of his views, we set aside his order and refer the case back to the Collector (Appeals) for considering the question of limitation and then to pass an appropriate order in accordance with law. This may be done within three months from the date of communication of this order.