M/S. AMRIT PAPERversusCOMMISSIONER OF CENTRAL EXCISE, LUDHIANA

A                        M/S. AMRIT PAPER
                                v.
             COMMISSIONER OF CENTRAL EXCISE, LUDHIANA

                                   JULY 25, 2006

B                  [ARIJIT PASA VAT AND S.H. KAPADIA, JJ.]


          Central Excise Rules, 1944-Rule 57C-Notification No. 612000-CE-
    Assessee is not entitled to Modvat credit of duty if the final product is exempt
C   from duty-On facts, assessee had availed of the Modvat credit al the time of
    the clearance of the goods-Thereafter, suo moto reversed credit and paid
     the duty--./ts claim for refund of modvat-credit was allowed-It again filed
    refund claim on the ground that final product was exempt from duty, which
     was rejected--Correctness of-Held. assessee was not entitled to exemption,
D    hence refund claim was rightly rejected.

          By virtue of Notification No. 6/2000-CE, the product manufactured
    by assessee was exempt from payment of duty during the month of March,
    2000. The assessee, in March, 2000 availed the credit and also cleared the
    goods at nil rate of duty under the said Notification. Thereafter, it suo
E   moto reversed the credit to avail the exemption and subsequently paid the
    duty for March 2000 and also filed refund claim in respect of the credit
    reversed by it. The Assistant Commissioner allowed the claim of refund.
    Appellant thereafter preferred a refund claim contending that it was
    entitled to benefit on the said Notification. The Assistant Commissioner
F   and Appellate Authority rejected the claim of refund. Tribunal also
    dismissed the appeal.

          In appeal to this Court, assessee-appellant contended that the
    Tribunal was not justified in holding that the entitlement to exemption
    under the Notification in question was dependent upon whether the
G   assessee had availed Mod vat credit of input duty under the Central Excise
    Rules, 1944.

          Dismissing the appeal, the Court

        HELD: I. Rule 57C of Central Excise Rules, 1944 provides in
H   mandatory and categorical terms that no credit of the specified duty paid
                                          144
        AMRIT PAPER v. COMMR. OF CENTRAL EXCISE, LUDHIANA [PASAYAT, J.]   J 45

on the inputs used in the manufacture of a final product shall be allowed        A
if the final product is exempt from the whole of the duty of excise leviable
thereon or is chargeable to nil rate of duty. The manufacturer had availed
of the credit at the time of the clearance of the goods and had suo moto
reversed it to avail the exemption later on almost after 15 months when it
claimed refund of modvat-credit, hence it was not entitled to exemption.         B
                                                                    1150-F-GJ

     lchalkaranji Machine Centre Pvt. Ltd. v. Collector of Central Excise,
Pune (2004) (174) E.L.T. 417 SC, relied on.

     Orissa Extrusions v. Collector of Central Excise Bhubaneswar, (2000)
115 E.L.T. 30 SC, overruled.                                                     c
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4891 of2005.

     From the Final Order No. A/82/05-NB/SM, dated 10.1.2005 of the
Customs, Excise & Service Tax Appellate Trfuunal, New Delhi in Appeal
No. E/2318/04-NB(S).                                                             D
      C. Harishankar, P. Mohapatra, S. Sunil and Neeru Vaid for the Appellant.

     A. Subba Rao, Ajay Sharma, Shipla Singh, B.K. Prasad and P.
Parmeswaran for the Respondent.
                                                                                 E
      The Judgment of the Court was delivered by

     ARIJIT PASAYAT, J. Challenge in this appeal filed under Section
35L of the Central Excise Act, 1944 (in short the 'Act') is to the legality of
judgment rendered by the Customs, Excise and Service Tax Appellate Tribunal,
New Delhi (in short the 'Tribunal').                                             F
      The controversy lies within a very narrow compass.

       Appellant is engaged in the manufacture of paper and paper board
falling in Chapter 48 of the Tariff. Notification No.6/2000-CE dated 1.3.2000
was issued whereby the product manufactured by the appellant was exempted        G
from payment of duty during the month of March, 2000. Appellant availed
credit as well as cleared goods under the said exemption notification.
Thereafter, it suo motu reversed the credit of Rs. I,92,365/- to avail the
exemption. It deposited the duty on 30.8.2000 for the month of March, 2000
and also applied for refund of the Mod vat credit of Rs. I, 92,365/- which was
already reversed by it. The claim of refund was allowed by order dated           H
    146                       SllPREME COURT REPORTS (2006] SUPP. 4 S.C.R.

A   13.12.2001 passed by the Assistant Commissioner. Thereafter, the appellant
    again suo motu reversed the Modvat credit and filed the refund claim on
    12.7.2001 in respect of the duty paid on 30.8.2000 for the month of March,
    2000, claiming benefit under the aforesaid notification No.6/2000-CE. The
    claim for refund was rejected by the Assistant Commissioner. An appeal was
    filed before the Commissioner (Appeals) who also dismissed the appeal. An
B   appeal was filed before the Tribunal, which was dismissed by the Tribunal
    by the impugned judgment.

           Contention of the appellant before the Tribunal was that it had already
    reversed the credit taken during the month of March, 2000 and, therefore, it
C   is entitled for the benefit of Notification and duty paid on 30.8.2000 by it was
    to be refunded. Reliance was placed on a decision of this Court in Orissa
    Extrusions v. Collector of Central Excise, Bhubaneswar, (2000) 115 E.L.T.
    30 (S.C.) where this Court while interpreting the provisions of the Notification
    no.180-CE of 1988 observed that it cannot be held that exemption notification
    will be inapplicable insofar as it is not in accordance with Rule 57C of the
D   Central Excise Rules, 1944 (in short the 'Rules').

           The contention of the Revenue was that the appellant during the month
    of March, 2000 availed the credit and also cleared the goods at nil rate of
    duty under Notification No.6/2000-CE. As the appellant cleared the goods
    and availed the credit therefor, it is not entitled for the benefit of exemption
E   notification. The contention of the Revenue was that thereafter the appellant
    reversed the credit and subsequently paid the duty for the month of March
    2000 and filed the refund claim in respect of the credit reversed by it and the
    refund was allowed. As the appellant availed the benefit of credit in respect
    of the inputs for the month of March 2000, therefore, it is not entitled for
F   benefit of Notification.

          The Tribunal held that the decision relied upon by the appellant was
    not applicable and in any event it having claimed refund and credit which
    was allowed it cannot again ask for exemption from payment of duty and the
    claim for refund of duty was rightly rejected.
G
           In support of the appeal, learned counsel for the appellant submitted
    that the Tribunal was not justified in holding that the entitlement to exemption
    under the Notification in question was dependent upon whether the assessee
    had availed Modvat credit of input duty under Rule 57 A of the Rules. It is
    pointed out that the Notification which was issued in exercise of powers
H   conferred by sub-section (I) of Section 5A of the Act granted exemption in
        AMRIT PAPER 1·. COMMR. OF CENTRAL EXCISE, LUDHIANA [PASA YAT,l]     J47

respect of excisable goods of the description specified in Column {3) of the       A
table read with concerned list appended to the Notification. The exemption
was subject to relevant conditions specified in the Annexure to the Notification
and referred to in the corresponding entry in Column (6) of the table. It is
further pointed out that so far as the item manufactured by the appellant is
concerned, the condition applicable was condition No.15 which reads as             B
follows:

        "15. (I) This exemption shall apply only to the paper and paperboard
        cleared for home consumption from a factory -

             (a) during the period from Ist March 2000 to 3 lst March 2000,
             upto first clearances of an aggregate quantity not exceeding 210      C
             Metric Tonnes; and

             (b) on or after the 1st day of April, 2000, in any subsequent
             financial year, upto first clearances of an aggregate quantity not
             exceeding 2500 Metric Tonnes;
                                                                                   D
        (2) The exemption shall not be applicable to a manufacturer of the
        said goods who avails of the exemption under the notification of the
        Government of India in the Ministry of Finance (Department of
        Revenue) No.8/99-Central Excise, dated the 28th February, 1999
        published in the Gazette vide number G.S.R. 170(E) dated the 28th
        February, 1999, 9/99-Central Excise, dated the 28th February, 1999         E
        published in the Gazette vide Number G.S.R. 17\(E), dated the 28th
        February, 1999, published in the Gazette vide 8/2000-Central Excise,
        dated the 1st March, 2000 and 9/2000-Central Excise, dated the !st
        March, 2000".

     It is again pointed out that in certain other cases, for example, condition   F
No.27 the entry reads as follows:

        "27. If no credit of duty paid, has been taken under Rule 57 A or Rule
        578 or Rule 57Q of the Central Excise Rules, 1944."

      Therefore, even if no credit of duty paid had been taken under Rule          G
57A, 578 or 57Q of the Rules, the exemption was available. Reliance is
placed on a decision of this Court in Orissa Extrusions 's case (supra). It was
held in the said case as follows:

        "Learned counsel for the Revenue drew our attention to Ru le 57C,
        which states that no credit shall be allowed for duty paid on inputs       H
    148                       SUPREME COURT REPORTS [2006] SUPP. 4 S.C.R.

A          used in the manufacture of final products which are exempt from the
           whole of the excise duty leviable thereon or are chargeable to nil rate
           of duty. It would appear that it is for this reason that the said proviso
           was included in the notification so that the provisions of Rule 57C
           wou Id not apply in respect of goods not covered by the items
           specifically mentioned therein. The exemption notification must be
B          assumed to have been consciously so worded and due effect must be
           given •o the assessee thereunder. It cannot be held that the exemption
           notification will be inapplicable insofar as it is not in accordance with
           Rule 57C.

C         Therefore, it is submitted that exemption notification is applicable.

          In response, Mr. A. Subba Rao, learned counsel for the respondent
    submitted that the decision referred to above is not applicable to the facts of
    the case. In any event, Rule 57C cannot be given a go by while interpreting
    the Notification. Otherwise the said provision will become redundant.
D         In order to appreciate the rival submissions, it would be appropriate to
    take note of the observations made by a three-Judge Bench of this Court in
    /chalkaranji Machine Centre Pvt. Ltd. v. Collector of Central Excise, Pune,
    (2004) (174) E.L.T. 417 (S.C.). It was, inter alia, held as follows:

E           "9. Modvat is basically a duty-collecting procedure, which aims at
            allowing relief to a manufacturer on tht! duty element borne by him
            in respect of the inputs used by him. ft was introduced w.ef 1.3.1986.
            The said scheme was regulated under rules 57A to 57J of Central
            Excise Rules, 1944. Rule 57 A entitled a manufacturer to take instant
            credit of the central excise duty paid on the inputs used by him in the
F           manufacture of the finished product, provided that the input and the
            finished product were excisable commodities and fell under any of
            the specified chapters in the tariff schedule. Under rule 57G, every
            manufacturer was required to file a declaration before the jurisdictional
            Assistant Collector, declaring his intention to take Modvat credit after
            paying duty on the inputs. The object behind rule 57 A read with rule
G
            57G dnd rule 57-1 was utilization of credit allowed towards payment
            of duty on any of the final products in relation to manufacture of
            which such inputs were intended to be used in accordance with the
            declaration under Rule 57G. Rule 57-1 referred to consequences of
            taking credit wrongly.
H
AMRITPAPER "· COMMR. OF CENTRAL EXCISE, LUDHIANA [PASAYAT,J.]         J 49

xxx                    xxx                       xxx                         A
13. The above notification envisaged total and partial exemption; it
also categorized the clearances into first clearances and subsequent
clearances; it also categorized manufacturers: into those who took
Modvat credit and those who did not. Those who took Modvat credit
were entitled to only concessional exemption, while whose who did            B
not avail of Modvat credit were entitled to total exemption up to a
specified limit. While individual ceiling limits on clearances were
prescribed, there was an aggregate ceiling limit of Rs.75 lacs, beyond
which normal duty was payable. Therefore, if a manufacturer effected
first clearances of specified goods up to Rs.30 lacs, he could avail the     C
concession on such clearances, but in respect ofsubsequent clearances,
he will get the concession only up to Rs.45 lacs. The basic point is
that those who avail of Modvat credit were entitled to concessional
exemption only, while those who did not avail such credit could get
total exemption up to a specified limit of Rs.15 lacs (as it stood at the
relevant time). Under para (a)(i) of the notification, concession was        D
not admissible where Modvat credit was •wt availed/admissible.

14. In the present case, as found by the Adjudicating Authority and
the Tribunal, Modvat credit was not availed/admissible. In respect of
cast iron and castings, Modvat credit was inadmissible as both these
inputs were exempted, whereas in case of steel bars, the manufacturer        E
did not avail of Modvat credit. Therefore, the appellants were not
entitled to clear the final products at concessional rate of duty. Lastly,
without reversing the credit, the appellants cleared the final products
at the concessional rate of duty, in breach of the above notification,
in favour of their sister concern and consequently, the said sister          F
concern was not entitled to the benefit of higher credit which was
admissible to manufacturers who bought goods as their inputs from
small scale industrial units (appellants herein).

 15. It was argued on behalf of the appellants that they had availed of
the Modvat credit as they had not withdrawn the declaration filed by G
them with the department. That, there was no willful suppression as
the department was aware, on the basis of their accounts, about the
appellants not availing the Modvat credit and, therefore, the department
had erred in invoking the proviso to Section 11 A in relation to the
extended period for demanding excise duty. We do not find merit in H
    150                       SUPREME COURT REPORTS [2006] SCPP. 4 S.C.R.

A           the above arguments. The appellants never opted out of the Modvat
            scheme. They partly cleared the final products by paying duty at
            concessional rate without utilizing the credit in the payment of duty
            on final product and partly on the basis of credit which was not
            admissible. It is important to note that the underlying object behind
            the notification was to utilize the credit against payment of duty on
B           the final product. In the circumstances, the demand for differential
            duty, penalty and confiscation subject to payment of redemption fine
            is valid and justified."

                                                            (italics for emphasis)
c         As rightly submitted by learned counsel for the respondent the provisions
    of Rule 57C would be rendered nugatory and redundant if the interpretation
    as suggested by learned counsel for the appellant is accepted. It would mean
    that primacy has to be given to the Notification over the statutory provisions
    contained in Rule 57C.
D
          Rule 57C reads as follows:

            ''57C. Credit of duty not to be allowed iffinal products are exempt.-

            No credit of the specified duty paid on the inputs used in the
E           manufacture of a final product (other than those cleared either to a
            unit in a Free Trade Zone or to a hundred per cent Export-Oriented
            Unit) shall be allowed if the final product is exempt from the whole
            of the duty of excise leviable thereon or is chargeable to nil rate of
            duty."

F       It provides in mandatory and categorical terms that no credit of the
  specified duty paid on the inputs used in the manufacture of a final product
  (of the enumerated categories) shall be allowed if the final product is exempt
  from the whole of the duty of excise leviable thereon or is chargeable to nil
  rate of duty. Moreover on the facts of the case it is found that the manufacturer
  had availed of the credit at the time of the clearance of the goods and had
G suo moto reversed it to avail the exemption later on almost after 11 months
  when it claimed refund of modvat-credit, hence it was not entitled to
  exemption. Undisputedly factual position is so.

          Moreover, on the facts of the case, it is found that the manufacturer had
H availed of the credit at the time of the clearance of the goods and had suo
    molll reversed it to avail the exemption later on almost after 15 months when
             AMRJT PAPER v. COMMR. OF CENTRAL EXCISE, LUDHIANA [PASAYAT,J]     151

     it claimed refund of Modvat credit, hence it was not entitled to exemption.      A
           Though the decision in Orissa Extrusions 's case (supra) supports the

--   stand taken by the appellant, but in view of what has been stated by a three-
     Judge Bench in lchalkaranji 's case (supra) the decision does not lay down
     the correct position in law. In that view of the matter, the present appeal is
     sans merit and is dismissed. No costs.                                           B
     D.G.                                                       Appeal dismissed.