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2005 Supreme(SC) 1617
2005(8) Supreme 648
SUPREME COURT OF INDIA
(From Bombay High Court)
S.B. Sinha & P.K. Balasubramanyan, JJ.
M/s. Shree Hari Chemicals Export Ltd. —Appellant
versus
Union of India and Anr. —Respondents
Civil Appeal No. 7534 of 2005
(Arising out of SLP (C) No. 528 of 2005)
Decided on 16-12-2005
Counsel for the Parties :
For the Appellant : Prakash Shah, Jay Savla and Ms. Reena Bagga, Advocates.
For the Respondents : K. Swami and P. Parmeswaran, Advocates.
IMPORTANT POINT
Wrong mentioning of a section would not be a ground to refuse relief to an assessee if he is otherwise entitled thereto.
Headnote:Central Excise Act, 1944—Chapter AA—Modvat Credit—Credit of duty paid on excisable goods used as inputs—Appellant was engaged in manufacture of Hydrochloric Acid & used Naphthalene for this manufacture—Credit under Rule 56A was available on Naphthalene in terms of Notification dated 29-12-1962—Notification No. 177 of 1996 was issued under Rule 57A where by credit on inputs classifiable under Chapter Heading 27 of Tariff Act was not to be available—Between September 1991 to January 1992, appellant availed credit of duty on Naphthalene falling under Chapter 27 of the Act in terms of Rule 57A—Show cause to disallow the credit & penalty—Appellant claimed that it was entitled to credit under Rule 56A—Contention was rejected by Addl. Commissioner of Excise—Commissioner allowed appeal—Tribunal set aside order of Commissioner—Appeal—Wrong mentioning of a section would not be a ground to refuse relief to assessee if he was otherwise entitled thereto—Sub Rule (9) of Rule 56A only debarred taking of credit both under Rule 56A and 57A—If assessee was entitled to credit under Rule 56A it could not be denied—Since it was not sure whether appellant had complied with provisions for taking credit under Rule 56A sub rule (8), matter needed to be referred to Asstt. Commissioner of Excise.
Held : Sub-Rule (9) of Rule 56A of the Rules debars an assessee from taking benefit of one or the other sub-rules of Rule 56A if credit of duty paid on such material, component parts or finished product has been taken under Rule 57A. Thus, the said provision merely debars taking of credit both under Rules 56A and 57A. The Appellant herein although had taken credit as regard input of Naphthalene in terms of Rule 57A, evidently, the same was not applicable in his case. He had, therefore, no other option but to return the same. In that view of the matter, we are of the opinion, that the word ‘taken’ must be understood in its proper perspective. A person cannot take the benefit unless final order of assessment is passed. Only because in his books of accounts entries are made for taking of the credit in terms of one provision of the Rules, the same if ultimately found to be inapplicable and return of the credit is taken effect, we are of the opinion that there cannot be any legal bar in claiming the exemption under another rule. However, we are not sure as to whether the Appellant had complied with the provisions for taking credit in terms of Sub-rule (8) of Rule 56A of the Rules or not if it was not otherwise entitled thereto. For the aforementioned purpose, thus, it is necessary that the claim of the Appellant be considered afresh by the Assistant Commissioner of Excise. (Para 13)
JUDGMENT
S.B. Sinha, J.—Leave granted.
2. The Appellant herein inter alia is engaged in manufacture of Hydrochloric Acid. It falls under Chapter Heading 29 of the First Schedule of the Central Excise Tariff Act, 1985. It uses Naphthalene for the manufacture of Hydrochloric Acid.
3. Chapter AA of the Central Excise Rules, 1944 (for short “the Rules”) provides for credit of duty paid on excisable goods used as inputs (hereinafter referred to as “the Modvat Credit Scheme”). Sub-rule (1) of Rule 57A which was applicable at the relevant time reads as under:
“The provisions of this section shall apply to such finished excisable goods (hereinafter referred to as the “final products”), as the Central Government may, by a notification in the Official Gazette, specify in this behalf, for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975) as may be specified in the said notification (hereinafter referred to as the “specified duty”) paid on the goods used in or in relation to the manufacture of the said final products, (hereinafter referred to as the “inputs”) and for utilizing the credit so allowed towards payments of duty of excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the said notification, subject to the provisions of this section and the conditions and restrictions that may be specified in the notification.”
4. Rule 56A of the Rules, however, provides for the special procedure for movement of duty paid materials or component for use in the manufacture of finished excisable goods. (hereinafter referred to as “the Proforma Credit Scheme”) Sub-rules (8) and (9) of Rule 56A of the Rules, which are material for the purpose of this case, read as under:
“(8) Notwithstanding anything contained elsewhere in this rule or any change in the nomenclature or classification of any goods consequent to the commencement of the Central Excise Tariff Act, 1985 (5 of 1986), the credit of duty paid on any material, component parts or finished product shall be allowed if the credit of duty was allowed in respect of such material, component parts or finished product under this rule immediately before the commencement of the Central Excise Tariff Act, 1985 (5 of 1986).
Provided that no such credit shall apply in respect of any material, component parts or finished product, if such credit was not allowable under this rule immediately before the commencement of the Central Excise Tariff Act, 1985 (5 of 1986).
(9) No credit of duty paid on any material, component parts or finished product shall be allowed under this Rule if credit of duty paid on such material, component parts or finished product has been taken under rule 57A”.
5. Credit under Rule 56A was said to be available on Naphthalene in terms of a notification dated 29-12-1962. However, on or about March, 1986, a notification bearing No. 177 of 1986 was issued under Rule 57A of the Rules stating that the credit on inputs classifiable under Chapter Heading 27 of the Tariff Act would not be available. The Appellant herein during the period September, 1991 to January, 1992 availed the credit of duty amounting to Rs. 2,46,109/- on 1,04,119 kgs. of Naphthalene falling under Chapter 27 of the Tariff Act in terms of Rule 57A. As the said credit facility in terms of the Modvat Credit Scheme was not available in relation to Naphthalene as an input for manufacturing of Hydrochloric acid, a show-cause notice was issued by the Assistant Collector, Central Excise in terms whereof not only the wrong claim made on the part of the Appellant herein as regard credit of input was pointed out, it was also proposed to disallow credit of Rs. 2,46,109/- and a penalty under Rule 173Q of the Rules was proposed to be levied. The Appellant herein did not deny or dispute in view of the aforementioned notification No. 177 of 1986 that it has wrongly claimed credit in terms of Rule 57A but submi
