1. Petitioner firm manufactures biscuits and confectionery in its unit located at Gangyal, Jammu and is duly registered with the Excise Authority under the provisions of Central Excise Act, 1944. The goods Manufactured by the petitioner-firm, are subject to excise duty. In the financial year 1995-96, petitioner purchased, a generating set for its unit after payment of excise duty which was one of the components of purchase money. In the said financial year i.e. 1995-96, the petitioner was entitled to avail Modvat benefit under rules framed under the Excise Act. Under the Modvat Scheme, the benefit of excise duty was available to the manufacturers of excisable goods in the following three manner.
(a) One relates to specified raw material used in the manufacture of specified final Excisable Product and is specified out in para (AA) containing provisions of Rules 57-A to 57(d) of Central Excise Rules, 1944.
(b) Second type relates to money credit governed by the provision of Rule 57-K to 57-P (Part AAA) of Central Excise rules, 1944.
(c) Third type relates to credit of duty paid of specified capital goods used in the factory for the manufacture of specified final product. The credit of excise duty paid on capital goods is adjusted against the excise duty payable on the specified excisable final products is governed by (part AAAA) containing the provisions of Rules 57Q to 57-U of the Central Excise Rule, 1944.
In the next financial year, the petitioner availed exemption benefit in terms of Notification No. 1 of 1993 dated 28.2.1993 where under small scale manufacturer is entitled to general exemption from payment of excise duty upto to aggregate value not exceeding 30 lacs on or after 1st day of April in the financial year. Under the modvat Scheme, the excise duty paid on raw material is adjusted towards the final duty assessed on the finished products. Petitioner paid an amount of Rs. 53,610/- as excise duty on the purchase of generating set in the financial year 1995-96. The generating set is covered under the Modvat Scheme under Tariff Heading 85.02 read with specified goods under Rule 57Q of central Excise Rules, 1944, Credit of excise paid on generating set, was taken in March, 1996 as capital goods after due compliance of formalities under rules but did not utilise the said credit n the said financial year thought it was reflected in the books of accounts during said financial year. With effect from the close of financial year commencing 1.4.1996, petitioner availed general exemption on Small Scale Industrial Unit under Notification No. 1 of 1993 dated 28.2.1993. In the month of October, 1996, the petitioner utilized/set off the credit benefit of excise duty paid on the generating set against excise duty payable on the final excisable products i.e., biscuits etc.
2. Respondent-4 on the interpretation of rules, issued a show cause notice to the petitioner denying the benefit of credit of Rs. 53,610 against the Gen set on the ground of having lapsed in the next financial year on account of petitioner's availing general exemption under Notification No. 1 of 1993. According to respondents, petitioner was not entitled to the benefit of Modvat Scheme as also general exemption in the same financial year. After reply to the show cause notice furnished by the petitioner, respondent-4 raised and confirmed a demand against the petitioner in respect to the amount of excise duty for which credit was taken by the petitioner. The demand was confirmed by its order dated 29.8.1997. And also imposed penalty of Rs. 5000/- under rule 173-O(1)(bb). This order was challenged before the Commissioner, Central Excise, Chandigarh i.e. respondent-3 by the petitioner, who accepted the appeal and set aside the order or respondent-4 vide his order dated 21.5.1999. This order became subject matter of challenge before the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi, who reversed the order of the Commissioner and restored the order of respondent-4 vide its judgement dated 24.4.2000. It is this order of the Tribunal, which is under challenge before this court in the present writ petition.
3. It is admitted position that the petitioner was entitled to Modvat benefit and consequential credit of excise duty paid on the purchase of generating set in the financial year 1995-96. The purchase of generating set is also undisputed. The entry in respect to the payment of excise duty on the purchase of generating set i.e. on the capital, is duly reflected in books of accounts at the time of purchase. It is also indisputed that no credit was taken of excise duty paid on the purchase of generating set during the financial year 1995-96 and entry remained in the books till September, 1996. It is also acknowledged position that in the financial year 1996-97 commencing from April, 1996, petitioner opted for general exemption in terms of Notification 1 of 1993, where under the petitioner was entitled to the total exemption from payment of excise duty upto clearance of 30.00 lacs of its finished goods/final product. The only controversy is, whether Modvat benefit on capital goods available to the petitioner in the year 1995-96, can be utilised in the next financial year, when he also opted for general exemption.
4. Mr. Sharma, learned counsel appearing for respondents submits that petitioner was entitled to Modvat benefit or general exemption. He did not avail Modvat benefit in the year 1995-96 when the generating set was purchased and allowed the same to lapse as is evident from the entries in the books of the petitioner where same was shown as balance upto September, 1996. In the financial year 1996-97, the petitioner opted for general exemption under Notification No. 1 of 1993. His contention is that in the year 1996-97, the petitioner opted out of Modvat Scheme and therefor, was not entitled to claim benefit of Modvat in that year after availing general exemption, Credit claimed by the petitioner, is impermissible and hence demand raised by respondent-4 is in accordance with law.
5. Mr. M.P. Gupta, learned counsel for the petitioner relies upon rule 57(R) and claims that this rule is independent rule and once a person is entitled to the Modvat benefit, same cannot be taken away merely because he has opted for general exemption. The benefit accrued to the petitioner under law can be availed at any time. Rule 57(R) of the Rules framed under the Excise Act, is reproduced as under :-
"Rule 57R: Credit of duty not be allowed or denied or varied in certain circumstances and adjustment in duty credit : (1) Credit of the specified duty on the capital goods (other than those cleared either to the unit in free trade Zone to hundred percent export oriented undertaking or to a unit in an Electronic Hardware Technology Park) shall not be allowed if such capital goods are used exclusively for production of final product which is exempt from the whole of the duty of excise leviable thereon (other than a final product which is exempt from whole of the duty of excise leviable thereon under any notification where exemption granted based upon the value or quantity of clearance made in a financial year) chargeable to nil rate of duty:
Provided that the credit shall also not be allowed in respect of the components spare parts and accessories of such capital goods which are used for said purposes.
Credit of the specified duty allowed in respect of any capital goods shall be denied or varied on the ground that any intermediate products have come into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty.
Provided that such intermediate products are specified as final products. Anx. To rule 57Q.
(3) No credit of the specified duty paid on the capital good shall be allowed if such capital goods are acquired by a manufacturer on lease hire-purchase, loan or by any other transaction other than direct purchase, whereby the property in the said capital goods is not transferred to such manufacturer.
(4) If specified duty paid on any capital goods, in respect of which credit has been allowed under rule 57Q is varied subsequently due to any reason resulting in payment of refund to, or recovery of more duty from the manufacturer or importer, as the case may be, of such capital goods, the credit allowed shall be varied accordingly by adjustment in the credit account maintained under sub-rule (5) of rule 57 'T' or in the accounts maintained under rule 9 or sub rule (1) of rule 173G if such adjustment is not possible for any reason, by cash recovery from or, as the case may be, refund to the manufacturer availing of credit under rule 57Q.
(5) No credit of the specified duty paid on the capital goods shall be allowed, if such manufacturer claims depreciation under section 32 of the Income Tax Act, 1961 (43 of 1961 on that party of value of capital goods which represent the amount of specified duty paid on such capital goods."
6. The Commissioner, who set aside the order of respondent-4, considered the scope of this rule in his order dated 21.5.1999 and accepted the contention of the petitioner. The Commissioner also relied upon the decision of the Tribunal in case of CCE v. National Trading Company, reported as 1996 (83) ELT 636(T). Mr. Gupta also relied upon the same decision before this court. The Tribunal while setting aside the order of the Commissioner, did not consider the scope of Rule 57(R) and 57(T) relied upon by the Commissioner. The Tribunal relied upon the judgment of the Allahabad High Court in case Super Cassettes Industries Limited v. Union of India, reported as 1997 (94) ELT 302 and set aside the order of the Commissioner on that count.
7. My attention has been drawn to Circular No. 199/33/96-CX dated 23.4.1996 issued by Central Board of Excise and Customs (Department of Revenue), Government of India, Ministry of Finance, New Delhi whereby a clarification was made in respect to time limit for availment of MODVAT Credit. This Circular reads as under :-
"Notification No. 28/95-CE(NT) dated 29.6.95 was issued whereby Rule 57G was amended providing that the manufacturer is allowed to take credit of duty paid on inputs within six months of the date of issuance of any of the duty paying documents as prescribed under Rule 57G of the Central Excise Rules.
2. Representations have been received from the Trade as to whether the aforesaid time limit of six months will also apply in respect of MODVAT Credit to be availed on capital goods, as in the case of capital goods it may not be always possible to avail the credit within six months from the date of issuance of the documents.
3. The matter has been examined by the Board in consultation with Ministry of Law it is hereby clarified that the time limit of six months as prescribed under second proviso to Rule 57G will not apply to availment of credit on capital goods under Rule 57T of the Central Excise Rule, 1944."
8. The above circular was applicable for the period the petitioners have been made liable to pay duty under the impugned judgment of the Tribunal. This circular clearly lays down that the time limit of six months will not apply for MODVAT Credit to be availed on the capital goods. Admittedly, the Gen set is a capital good for which MODVAT Credit was availed by the petitioners in the next financial year. Therefore, this circular has the application to the facts of the present case. Now the question would arise, whether the petitioners are entitled to benefit of the circular issued by the Central Board of Excise and Customs (Department of Revenue) Government of India, Ministry of Finance. The Apex Court considered the question of application of the circulars/guidelines issued by Central Board of excise and Customs, Ministry of Finance and benefit accrued there-from, in case Collector of Central Excise, Vadodara v. Dhiren Chemical Industries, reported as 2002 (143) ELT 19 (SC) and held :
"The issue involved in these appeal is covered by the decision of a Constitution Bench in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries, 2002 (2) SCC 127. The Constitution Bench interpreted the phrase " on which the appropriate amount of duty of excise has already be
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en paid" in favour of the Revenue. However, it held that, regardless of the interpretation placed by it on that phrase, if there were circulars which had been issued by the Central Board of Excise and Customs which placed a different interpretation upon that phrase, that interpretation would be binding on the Revenue. It is not disputed that there are circulars issued by the Central Board of Excise and Customs which place a different interpretation upon that phrase and which apply to the facts of these two appeals. For that reason, these appeals are dismissed. No order as to costs." 9. In view of the judgment of the Apex Court, circular issued by the Central Board of Excise and Customs have a binding force and the revenue is also bound by the same irrespective of different interpretations even by the Apex Court. 10. From the above, it appears that the Tribunal has wrongly interpreted the rules and deprived the petitioners of the benefit of MODVAT Credit on capital goods. 11. This petition is accordingly allowed. The order of the Tribunal impugned in this petition dated 24.4.2000 is hereby set aside and that of Commissioner (Appeals) C.E. & Customs, Chandigarh dated 27.5.1999 restored, Petitioners are accordingly held entitled to benefit of MODVAT Credit of Rs. 53,610/- availed by it in respect to Gen set (capital good) for the period 1995-96.