R.M. Savant, J.
By the above Petition filed under Article 226 of the Constitution of India, the Petitioners take exception to the Notification dated 30.3.1994 in so far as it purports to prevent the Petitioners from taking Modvat Credit after 30.6.1994 on the basis of a gate pass issued prior to 1.4.1994. The Petitioners also challenge orders/letters dated 20.12.1994 and 6.1.1995 and the communication dated 8.7.1998.
2. The facts necessary to be cited for adjudication of the above Petition can be stated thus :-
A scheme popularly known as Modvat was introduced on 1.3.1986. In terms of the said scheme, the manufacturers were entitled to take credit of duty paid on excisable goods used as inputs. The same was inserted in Chapter V of the Central Excise Rules by which the manufacturers were allowed to take the credit of duty paid on excisable goods used as inputs in or in relation to the manufacture of designated final products. In terms of the requirement the Petitioner company filed a declaration under Rule 57G of the Central Excise Rules in respect of Caustic Soda (final product) and Metal Anodes (inputs). The Petitioners placed an order on 30.09.1992 on Titanor Components Ltd., Rampur, UP for the supply of 198 coated Metal Anodes, the said company after payment of excise duty thereon despatched the said Anodes under their gate pass bearing serial No.25 dated 28.3.1993. The same was sent by the Transport Corporation of India vide Consignment Note No.Y 19682 dated 28.3.1993 and Titanor's delivery challan of even date. It is the case of the Petitioners that they were unable to take delivery of consignment of the said Anodes due to a lockout for a period of about 7 months period which ended in or about May, 1993. It is further the case of the Petitioners that the Petitioners' manufacturing activities recommenced only around July 1993. The Central Government has issued a Notification dated 30.3.1994 in exercise of powers conferred under Rule 57G(2) of the Central Excise Rules inter alia permitting a gate pass issued before 1.4.1994 to be a valid document for the purposes of taking Modvat Credit provided the gate pass was issued before 1.4.1994 and the credit was taken on or before 30.06.1994.
It appears that on 1.4.1994 Rule 52A of the Central Excise Rules was amended and the requirement of a statutory gate pass was replaced by an invoice containing prescribed particulars. As the Petitioners were unable to get their consignment of inputs released due to lockout and the Petitioners activities being at a standstill, the Petitioners agreed to pay to the suppliers of Anodes in installments of Rs.Five Lacs per month. The Petitioners eventually received the delivery of the consignment on or about 3.12.1994. The Petitioners thereafter availed Modvat Credit by passing appropriate entries in the statutory register maintained under the said Acts and the said Rules i.e. RG-23-A and RG-23-A Part II registers. This was done some time in the first week of December 1994. It is the case of the Petitioners that without giving any prior show cause notice, the 3rd Respondent directed the Petitioners to reverse Modvat Credit amounting to Rs.23,85,653/- availed off by them in respect of the said Metal Anodes on the ground that after 30.6.1994 the gate pass issued prior to 1.4.1994 was not a valid document. The Petitioners replied to the directions issued by the 3rd Respondent and explained that credit availment is extended up to 31.12.1994 vide Notification No.21/94 CE(NT) dated 12.5.1994 read with Notification No.30/94N T dated 29.6.1994 and submitted that Modvat Credit ought not to be denied on the ground that the gate pass had been issued prior to 01.04.1994. The said submission of the Petitioner was not accepted and the 3rd Respondent reiterated that the gate pass issued prior to 1.4.1994 was valid only for the purpose of availing Modvat Credit up to 30.06.1994. It appears that 3rd Respondent did not even refer to the Notification dated 29.06.1994 relied upon by the Petitioners. The 3rd Respondent directed the Petitioners to get the credit reversed with immediate effect. The Petitioners accordingly carried out the directives of the Respondents by reversing the credit under protest.
3. A circular came to be issued by the Central Government being No.76/76/94-CX dated 8th November 1994 by which circular the Central Board of Excise and Customs (CBEC) forwarded a copy of Notification No.64-CE (NT) dated 7.11.1994 amending Rule 57H of the said Rules. It was inter alia stated in the said circular that amendment was necessitated to remove the difficulties arising out of the budgetary changes in the year 1994-95 relating to acceptance of an invoice as the proper document for the purposes of Modvat Credit and on account of the issuance of Notification such as Notification No.21/94 and Notification No.32/94. The said circular clarified that the invoice/document issued, inter alia, by a manufacturer from his factory as a valid document for the purposes of allowing Modvat Credit and such invoice should contain the details as referred to in Notification No.15/94 and Notification No.21/94. By the said circular, the Assistant Commissioner was directed to recognize such document if issued by the categories of persons mentioned in the notifications who had got themselves registered under Rule 57GG. It was further clarified that the document prescribed above by the CBEC could be accepted by the Assistant Collector only up to 31.12.1994. The Petitioners considering the said circular dated 8.11.1994 made an application dated 8.11.1996 under Rule 57H(1) to the Assistant Commissioner of Central Excise which came to be rejected by the Assistant Commissioner vide communication dated 8.7.1998 on the ground that admissibility of the Modvat Credit on the basis of gate pass had already been communicated vide the Range Officer's letter dated 6.1.1995. The said letter dated 8.7.1998 is also impugned in the present Petition.
4. It is required to be noted that in the above Writ Petition, the Respondents had filed an Affidavit dated 14.8.1995. In the said affidavit and especially in para 6 thereof it was stated that invoices could be issued furnishing the details of gate passes issued prior to 1.4.94 and in all such cases, credit has been allowed up to 31.12.94. Further in Para 11 of the said affidavit it was stated that the Petitioners should have obtained an invoice from the manufacturer with full details of gate pass when the material was received in their factory as per Notification No.21/94 (NT) as amended by Notification No.30/94 (NT).
In the above Petition an interim order came to be passed on 21.8.1995 granting interim relief in terms of prayer clause (d) of the Petition on condition of the Petitioners furnishing a Bank guarantee in the sum of Rs.23,85,653/- . Against the said interim order, the matter was carried to the Apex Court by the Respondents by way of SLP No.20142/95. In the said SLP, a counter affidavit came to be filed on behalf of the Petitioners which was dated 28.9.1995 and to the said counter affidavit was annexed a copy of the excise invoice issued by the manufacturer of the inputs, which invoice co-related the details mentioned in the gate pass issued by the manufacturer. The Apex Court vacated the said interim order, however, declined to consider whether the subsequently obtained invoice complied with the requirements of the notifications as according to the Apex Court, that was not the basis on which interim order was passed by this Court and this Court had not even considered the said subsequent invoice. The Apex Court clarified that in view of the fact that the above Petition was still pending in this Court, it did not consider it appropriate to say anything on the merits of the case. It appears that the Petitioners have carried out the amendments to the above Petition by incorporating the aforesaid developments which have taken place post filing of the Petition and have also amended the prayer clause accordingly by laying a challenge to the letter dated 8.7.1998. Aggrieved by the said Notification dated 30.3.1994 and the orders/letters dated 20.12.1994 and 6.1.1995 that the Petitioners have filed the present Petition.
5. On behalf of the Respondents affidavit has been on 14.8.1995 wherein, as mentioned earlier in this Judgment, in Paras 6 and 11 the Respondents have stated that the Petitioners would have produced the invoices containing the particulars of gate passes for allowing Modvat Credit . The Respondents have filed further affidavit which is in July 2007 wherein they have stated that since the Petitioners have not submitted the invoice prior to 31.12.1994, because in terms of the circular of the Board time to avail credit was extended up 31.12.1994, the Petitioners were not entitled to the credit.
6. We have heard the learned counsel for the Petitioners Mr.Kapil Moye and the learned counsel for the Respondents Mr. P.S. Jetly.
7. Though various submissions were advanced as regards the challenge to the notification, the principal thrust of the submissions of the learned counsel for the Petitioners was based on the circular dated 8.11.1994 of the Central Board of Excise and Customs. The learned counsel for the Petitioners submitted that in terms of the said circular and by virtue of the powers conferred by Rule 57H of the said Rules, the CBEC prescribed the invoice/document issued by the manufacturer from his factory as a valid document for the purposes of allowing Modvat Credit and since the Petitioners have produced the said invoice containing details of the gate passes issued prior to 1.4.1994, the Petitioners could not be denied the benefit of the said Modvat Credit. The learned counsel for the Petitioners further submitted that since the period was extended up to 31.12.1994 and since the Petitioners had availed of the said Modvat Credit in the first week of December 1994, though the gate passes were dated 28.3.1993, the petitioners cannot be deprived of the said Modvat Credit as the said gate passes can also be said to be a document covered by the said circular dated 8.11.1994.
8. Per contra, it was submitted on behalf of the Respondents that the Petitioners had produced invoice for the first time whilst annexing it to their counter affidavit filed in the Supreme Court and the same was in the year 1996. Since the circular prescribes that such invoice had to be submitted prior to 31.12.1994, the Petitioners, having not complied with the said condition, were therefore not entitled to the benefit of the said Modvat Credit. The learned counsel for the Respondents therefore submitted that there is no merit in the above Petition and the Petitioners are not entitled to any relief.
9. We have given our anxious consideration to the rival contentions addressed by the learned counsel for the parties.
10. The issue, as can be seen, that arises for consideration is, the Petitioners' entitlement for Modvat Credit. The said Excise Rules and especially Rule 57G thereof entitles an assessee to avail of Modvat Credit. The assessee is required to file a declaration under Rule 57G and was entitled to avail of the credit on the basis of the gate pass issued by the manufacturer of the duty paid inputs. The said regime of gate pass was replaced by an invoice containing prescribed information from 1.4.1994. However, it is required to be noted that though the procedure was changed for availing of Modvat Credit, substantive provision remained the same. It is an undisputed position that the Metal Anodes which were the inputs were cleared from the factory of the manufacturer on 28.3.1993 under a statutory gate pass after payment of excise duty. It is the case of the Petitioners that they could not receive the goods on account of the fact that there was a lockout in the Petitioners' factory and that the goods could be received only on 3.12.1994 and the Petitioners have availed of the said Modvat Credit to the extent of 23,85,653/- in the first week of December 1994 itself. It is also not in dispute that prior to availing of the said Modvat Credit the Petitioners had complied the formalities in the form of filing a declaration etc. The impugned directions have been issued against the Petitioners based on the Notification No.16/94(NT) dated 30.3.1994 which inter alia required that where the gate pass issued prior to 1.4.1994, credit must be taken on or before 30.6.1994. It is only on the basis of the said condition that the Petitioners were directed to reverse the credit that they had availed of. The Petitioners therefore sought to challenge the Notification No.16/94 dated 30.3.1994 in so far as it prevents the Petitioners from taking Modvat Credit after 30.6.1994.
11. Though various grounds have been urged for challenging the said Notification, in our view, it is not necessary to go into the said challenges in view of the circular dated 8.11.1994 issued by the CBEC and amendement to Rule 57H of the said Rules. It is required to be noted that by the said Notification dated 16/94 dated 30.3.1994 invoice was prescribed as a document for the purpose of availing of Modvat Credit. By a further Notification No.21/94 dated 12.5.1994 it was prescribed that the invoice should contain particulars mentioned in clauses (a) and (b) therein and it was declared in the said notification that the same would cease to have effect after 30.6.1994. Thereafter by Notification No.30/94 NT dated 29.6.1994, date of 30.6.1994 was substituted by date 31.12.1994. It is pertinent to note that on account of the difficulties arising out of the budgetary changes in 1994-95 in relation to the proper document for the purposes of Modvat Credit and on account of the Notification No.21/94 dated 12.5.1994 and Notification No.15/94 dated 30.3.l994, the CBEC had issued a circular dated 8.11.1994. By the said circular, the CBEC had forwarded a copy of Notification No.64-CE (NT) dated 7.11.1994 amending Rule 57H. The said Rule 57H of the said Rules deals with the transitional provisions. The amendment to the said Rule, inter alia permitted acceptance of an invoice or any document as may be prescribed by the CBEC as a valid document under Rule 57G for the purposes of Modvat Credit. Clauses 4 and 6 of the said Circular are relevant for the purpose of present Petition and are reproduced herein under :-
"Clause-4:-Now therefore by virtue of powers conferred by rule 57H of the Central Excise Rules, 1944, the Central Board of excise and Customs hereby prescribes the invoice/document issued by-
(i) a manufacturer from his factory;
(ii) a manufacturer from his depot;
(iii) a wholesaler distributor/dealer of the manufacturer; or
(iv) an importer from his godown;
as valid document for the purpose of allowing Modvat credit.
Clause 6 :-It is further clarified that the document prescribed above by the Central Board of Excise and Customs should be accepted by the Assistant Collector only upto 31st December, 1994. In other words, any document issued by registered person prior to such registration would be acceptable if he is eligible to issue invoice/document under Notification No.15/94-C. E. (N.T.) and Notification No.21/94-C. E. (N.T.,)"
Therefore as can be seen from the said circular the CBEC prescribed the invoice/document issued by the Manufacturer from his factory and that such invoice should contained details as regards to in Notification No.15/94-C. E (NT) and Notification No.21/94-CE (NT) and the Assistant Collector was directed to accept the said document only upto 31.12.1994 and recognize such document if issued by the category of persons mentioned in the said notifications. Though the Petitioners sought to claim benefit of the said circular and had approached the Assistant Collector vide letter dated 8.11.1996, the said representation of the Petitioners was rejected by the Respondents by letter dated 8.7.1998 in which it has been mentioned that the admissibility of the Modvat credit on the basis of G.P.T. had already been communicated to them vide the range office letter dated 6.1.1995. The reason mentioned in the said letter dated 6.11.1995 of the Respondents is that the gate passes were valid documents only up to 30.6.1994. In our view, the said reply of the Respondents, if considered in the light of the circular dated 8.11.1994, does not stand to reason. As reproduced herein above, by the said circular dated 8.11.1994, the Central Government had prescribed invoice/document issued by the manufacturer from his factory as a valid document for the purpose of allowing Modvat credit. The Petitioners have the said document issued by the manufacturer which document they had annexed to their counter affidavit filed in the Apex Court. Reading of the said invoice, which is now annexed to the above Petition, discloses that the said invoice contains all the particulars regarding details of the gate pass and payment of octroi etc. in respect of the goods which were the inputs. The Respondents have refused the Modvat credit to the Petitioners only on the ground that the same was not produced by the Petitioners prior to 31.12.1994.
In our view, considering the fact that the Petitioners had gate passes which are of the date prior to 1.4.1994 as also considering the fact that the Petitioners have all other contemporaneous material in the form of delivery challan, octroi receipt etc. and the Petitioners availing of the Modvat credit in the first week of December 1994, there can be no doubt that the Petitioners have in fact received the goods in the 1st week of December 1994 and have availed off Modvat credit immediately thereafter. It is not the case of the Respondents that the gate pass produced by the Petitioners did not comply with the requirements of Rule 57G. The Petitioners have sought to be deprived of the Modvat credit only on the ground that the Petitioners have not submitted the invoice prior to 31.12.1994. In our view, considering the material that is on record, merely because the Petitioners have not produced the invoice prior to 31.12.1994 would be taking a highly technical view of the matter and such view, would be unwarranted considering the fact that the circular dated 8.11.1994 has been issued to mitigate the difficulties arising out of budgetary changes taking place in the year 1994-95.
The matter can be looked at from another angle also inasmuch as by the said circular, what is prescribed is a invoice/document and the same has to be submitted to the Assistant Collector prior to 31.12.1994. In the instant case, there is no doubt that the said gate passes were submitted to the Assistant Collector prior to 31.12.1994 and since the gate passes can be said to be "a document" covered by the circular dated 8.11.1994, the Petitioners, in our view, would be entitled to the said Modvat credit on the said basis also.
12. In the light of the aforesaid it is not necessary for us to go into the legality of the said Notification No.16/94 as we are of the view that the Petitioners would be entitled to Modvat credit on the basis of the circular issued by the Central Board of Excise and Customs dated 8.11.1994.
13. In that view of the matter, the impugned orders/letters dated 20.12.1994 and 6.1.1995 and the communication dated 8.7.1998 are set aside. There can be no debate as regards the fact that the said circular would be binding on the authority. A useful reference could be made to the Judgments of the Apex Court in that regard wherein the said issue had come up for consideration. A reference could be made to the judgments in the case of Collector of Central Excise, Meerut vs. Maruti Foam (P) Ltd. reported in (164) E.L.T. 394 (SC) as also in the case of Commissioner of Customs, Culcutta vs. Indian Oil Corporation Ltd. reported in 2004 (165) E.L.T. 257 (SC). Paras 6 and 7 in the case of Maruti Foam (P) Ltd. and Para 12 in the case of Indian Oil Corporation Ltd are relevant which are reproduced herein under:-
"Para 6 :- Learned counsel appearing for the appellant does not dispute that the WPS in question would be covered under Sl.Nos.2, as it originally stood, Sl.No.3 and Sl.No.6 subsequent to the 1989 amendment. However, it is contended that the condition prescribed in respect of Sl.No.3 had not been fulfilled by the respondent inasmuch as the flexible PUF out of which the WPS had resulted , not been subjected to any duty and had been exempted from payment of duty by Notification 217/86. Reliance has been placed on the decision of this Court in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries (2002 (2) SCC 127) in support of this contention.
Para 7 :- It is not in dispute that during the period in question in all these appeals there were circulars in operation issued by the Central Board of Excise and Customs (CBEC) wh
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ich had specifically construed the phrase "already been paid," as occurring in condition 1 against Sl.No.3, to include cases where nil rate of duty had been prescribed. No doubt this was done on the basis of the decision of this Court in Usha Martin (1997 (7) SCC 47). It is also true that the decision in Usha Martin was over-ruled by this Court in the decision of Dhiren Chemical Industries (supra) the Constitution Bench of this Court has made it clear that regardless of the interpretation placed on the aforesaid phrase by the Court, if there were circulars which had been issued by the CBEC which placed a different interpretation upon the pharase, that interpretation would be binding on the Revenue. This view has been reaffirmed in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries, 2002 (143) E.L.T. 19. Therefore the circulars in question issued by the Revenue as long as they were not withdrawn which they were but only in 2002. For the period in question the circulars were operative. The appeals are, accordingly, dismissed albeit for reasons which are different from those expressed by the Tribunal. We make it clear that this decision will not operate to reopen any assessment order nor will any duty already paid become refundable by reason of this Judgment. There will be no order as to costs. Para 12 :-The principles laid down by all these decisions are : (1) Although a circular is not binding on a Court or an assessee, it is not open to the Revenue to raise the contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute. (2) Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. (3) A show cause notice and demand contrary to existing circulars of the Board are ab initio bad. (4) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars." Resultantly the Petitioners would be entitled to Modvat credit in the sum of Rs. 23,85,653/-. Rule is accordingly made absolute to the aforesaid extent with parties to bear their respective costs.