K. Sankararaman, Member (T)

1. The Miscellaneous Applications and two Stay Applications filed by the Applicants involve a common issue and are taken up together after hearing common arguments by the learned consultant Shri Gopal Prasad on their behalf and by Shri N.K. Mandal, learned Departmental Representative on behalf of the respondent Collector.

2. Miscellaneous Application 106/93 filed on 8-6-1993 is for the early hearing of the Stay Petition. This is allowed and the case posted accordingly.

3. Miscellaneous Applications 184/93 and 185/93 filed on 8-9-1993 contain the plea that the Stay Petitions filed by them may be heard by this Bench notwithstanding the fact that the amounts demanded in terms of the two impugned orders of the Collector of Central Excise have already been recovered by the departmental authorities by debit to their RG 23A Part II Account. Copy of the order dated 6-9-1993 passed by the Honourable Orissa High Court passed on the petition filed by the present applicants before as has been enclosed with the applications. The High Court has observed that the action of the Superintendent of Central Excise, debiting the amount in question from their account will not stand as a bar for the Tribunal to consider their Stay Application and pass appropriate orders thereon.

4. Shri Gopal Prasad, learned Consultant submitted that the two impugned orders of the Collector disallowing Modvat Credit amounting to Rs. 38,37,776/- and Rs. 8,67,985/- have proceeded on a wrong understanding of Rule 57C of the Central Excise Rules, 1944. The said Rule provides that no credit shall be allowed if the final product is exempt from the whole of the duty of excise or' chargeable to nil rate of duty. In their case, their final product is neither exempt from duty wholly nor chargeable to nil rate of duty. They clear their goods free of duty under Rule 191B to another manufacturer who produced the goods which were exported under bond. It has been held conclusively that the removals without payment of duty under a bond do not mean that the goods are wholly exempt from duty or chargeable to nil rate of duty. He relied upon the following decisions : -

(1) MANU/DE/0137/1980 : 1981 (8) E.L.T. 642 (Del.) - Hindustan Aluminium Corporation Ltd. v. Superintendent, Central Excise

(2) Order No. 668-69/92-WRB (Tribunal), dated 29-4-1992 - Collector of Central Excise, Bombay - II v. Indian Aluminium Co. Ltd.

(3) Instructions of the Ministry of Finance, Department of Revenue and Insurance, F. No. 211/2/73-CX. 6, dated 3-4-1975 enclosing Ministry of Law, Justice and Company Affairs U.O.No. 24476/74 Advice (B), dated 29-10-1974.

[Circular No. 10/75 CX. 6]

Shri Gopal Prasad strongly pleaded that these authorities would clearly support their case. He added that without prejudice to their contention as above and assuming, purely for the sake of argument, that it was a case of modvat credit not available to them, the demand under Rule 57-1 was not permissible as the same applies to credit taken on account of error, omission or misconstruction, or misstatement, collusion or suppression of facts. Only under these circumstances Rule 57-1 would come into play. The present case is not falling under the said provision.

5. The learned Consultant then referred to the judgment of the Honourable Patna High Court in Rohtas Industries v. Superintendent of Central Excise reported in MANU/BH/0144/1973 : AIR 1973 Patna 446 holding that the proper Officer cannot make the debit entries in the accounts. The Act/Rules do not give him such a power. This judgment has been followed by the Tribunal in the following cases :

(1) Steel Authority of India v. Collector of Central Excise - MANU/CE/0095/1992 : 1992 (62) E.L.T. 827

(2) Collector of Central Excise, Jaipur v. J.K. Industries - Order No. E/418/92-D, dated 25-9-1992 (Unreported)

The department was directed to reverse the debit made in the RG 23A Part II account. The Honourable Bombay High Court in Mahindra & Mahindra Ltd.