1. Appeal under Section 35B of the Central Excises and Salt Act, 1944, praying that in the circumstances stated therein, the Tribunal will be pleased to set aside the order of the Collector of Central Excises (Appeals), Madras dated 16-2-1983 in C. No. V/68/319/82.
2. This appeal coming up for orders upon perusing the records and upon hearing the arguments of Shri Jimmy F. Pochkhanawalla, Advocate for the appellant and upon hearing the arguments of Shri S.K. Choudhury, Senior Departmental Representative for the respondent, the Tribunal makes the following order : 3. By his order No. V/68/30/13/82-M.P.I dated 12-10-1982 the Assistant Collector of Central Excise, Hyderabad-II Division, disallowed credit to the extent of Rs. 2,04,327.68 being the balance in the RG 23 account of the appellant-company, the credit being the amount of duty paid on raw materials used in the manufacture and clearance of the chemicals viz. Pyridine (Grade 1 to 5), Alpha Picoline Beta Picoline and Gamma Picoline. In doing so, the Assistant Collector noted that raw materials had been used in the manufacture of both dutiable and non-dutiable finished chemicals and held that Notification No. 201/79 did not provide for credit being allowed in such a situation. He also claimed a sum of Rs. 32,825.94 being the credit already availed of by the appellant firm in this regard. When the matter was agitated before the Collector, Central Excise (Appeals), Madras, he observed that, "in the absence of provision for determination of such ratio on acceptable formula and since the benefit of the Notification is restricted to the finished excisable goods which are dutiable, it must be held that cumulatively, the appellants would not become entitled at all to the benefit of Notification No. 201/79" ; on this basis he confirmed the order of the Assistant Collector and rejected the appeal.
4. Before us the appellant-company reiterates the plea that in terms of the Notification total disallowance of credit for duty paid on raw materials, when the end-products are both dutiable and non-dutiable, is not correct. We find that this view of the notification is correct. The notification does not in terms prohibit credit being given on raw materials in such a situation. In fact it specifically provides that when duty paid raw materials are used in the manufacture of dutiable finished products, credit shall be granted. Following rules of harmonious construction, it is only proper if we interpret the notification as providing for a situation like the present one as well, though it does not set out the manner in which credit could be granted in such cases. We hope that the Government would take suitable steps, if so advised, for modification of the notification to provide for suitable procedures to cover the type of cases as the one under consideration.
5. We have drawn heavily on both the appellants and the Department in working out a procedure for the grant of credit for raw materials in so far as they are used in the manufacture of dutiable finished chemicals.
We find that the following finished products are manufactured by the appellant-firm : - Of these, the first two were dutiable during the period to which the order of the Assistant Collector refers -22-10-1981 to 4-3-1982-and the last two were exempted. (We are informed that since then Alpha Picoline has also been exempted. It so happens however that Pyridine and Beta Picoline are produced together in the reactor; to add to the problem, Alpha Picoline is formed as a part by-product at that time. Similarly, Alpha Picoline and Gunma Picoliao are produced together in the reactor with when Pyridine appears as a by-product. The process of manufacture is such that it is not passible to identify and segregate the products either at the start of the rnanufacturing process or at any intermediary stage, We however, note that at the end of every month, the company strikes a balance sheet as it were of the raw materials used and the finished product finally manufactured taking due account, of such of the products as may be in process. From this data it is possible to work out how much of each raw material is contained in the dutiable finished products and how much in the exempted finished products. The company maintains both the prescribed Centra! Excise records as well as their own. If it is considered necessary, the Collector can always adopt or adapt any of the records already maintained by the company, by way of issue of supplemental instructions, so that the data necessary for the determination in the manner which we propose to indicate can be obtained without any hitch.
6. In the circumstances of the case, we order that on the basis of (he monthly accounting referred to in the last paragraph, the amount of duty paid on the raw materials used in the manufacture of duty paid chemicals actually produced during each month be calculated. However, instead of granting a credit in the RG 23 account at the time of receipt of the raw materials in the factory, credit may be granted at the end of every month on the raw materials calculated as having been used in the manufacture of duty paid chemicals during the month. In so far as the period 22-10-1981 to 4-3-1982 is concerned, the same procedure, namely of monthly accounting, may be adopted ; being action in relation to the past, this will be done on the basis of the records maintained by the appellant company itself.