AI Structured Summary
Not yet generated for this judgment
Judgment
On 18th October, 2016 the appellant company ("the appellants") wrote the following letter to the Assistant Commissioner, Central Excise, Kolkata-V, Commissionerate.
"As you are aware that we have already commenced manufacturing of Corrugated Boxes and Baby Care products at out factory situated at Sahipur, Banganagar, 24-Parganas (South). We may also manufacture other dutiable excisable goods at the said factory premises in terms to come.
In order to discharge excise duty on the said excisable goods, we intend to utilise the credit accumulated under the Money credit Scheme (captured in RG 23B Part II register, duly reflected in the monthly Excise returns under the remarks column). The said money credit was accumulated by us in terms of Notification No. 45/89-CE dated 11.10.1989. The Notification is not existence and therefore, the said money credit balance being vested right, is now sought to be utilised by us against discharge of duty on the said excisable goods.
As a responsible corporate assessee, we remain committed to operate in accordance with the provision of the law. Therefore, we would like to seek your kind approval before embarking on the proposed utilisation of the accumulated money credit balance lying with us so as to avoid any disputes with the department at a later date. You are requested to kindly revert to the proposed utilisation within 15 days from the date of this letter.
We are writing this letter strictly without prejudice to any of our rights and contentions."
On 11th November, 2016 the Assistant Commissioner, Central Excise, Kolkata-V made the following reply: -
"The issue has been thoroughly scrutinised. The erstwhile rule 57K-57P of Central Excise Rules 1944 read with notification 45/89-CE (NT) dated 11/10/1989 prohibits the utilisation of credit in the clearance of any final product, other than the final product in relation to which such inputs were intended to be used in terms of the said scheme".
As we understand from the submission made by Mr. Chatterjee, learned senior counsel appearing for the appellants, the appellants were manufacturing goods under an agreement with the respondents which enabled them to avail of input duty credit (hereafter referred to as Cenvat credit) on similar conditions as in the CENVAT credit Rules 2004.
This is disputed by Mr. Ganguly for the respondents.
The question is whether the appellants were entitled to utilise the unutilised Cenvat credit in the manufacture of a final product other than the final product for which the inputs were utilised?
The appellants who were the writ petitioners want the answer to the question in an affirmative from this court. They are aggrieved by the judgment and order of this court dated 20th June, 2018 passed in WP 29003 (W) of 2016 (M/s. Rasoi Limited & Anr. Vs. Union of India & Others) virtually dismissing the writ application.
Mr. Chatterjee cites the Supreme Court judgement in the case of Collector of Central Excise, Pune Vs. Dai Ichi Karkaria Ltd. reported in 1999 (112) E.L.T. 353 (S.C.) where the Supreme Court on its interpretation of sub-Rule (1) of Rule 57A of the said Rules delivered its judgment, the relevant parts of which are set out herein: -
"It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available." The ratio of this case was approved by the Supreme Cour in the recent decision of Commissioner of Central Excise, Patna Vs. New Swadeshi Sugar Mills reported in 2015(323) ELT 222(S.C.).
Mr. Ganguli for the respondents argued that in the above judgments the notification 45/89-CE (Entry dated 11th October, 1989 was not under consideration. The relevant part of the said notification is as follows: -
"(iii) The quantity of credit utilised for payment of duty on any individual clearance of the said final products shall not exceed rupees one thousand per tonne of vegetable products cleared and the excess credit, if any, available in the credit account shall not be refunded to the manufacturer or adjusted against or utilised for payment of duty on any excisable goods under any other circumstances".
To counter this argument Mr. Chatterjee showed us a decision of a learned single Judge of this court in Rasoi Limited & Anr. Vs. Union of India & Ors. reported in 2004(176) ELT 101(Cal.) which related to the self same notification. Paragraph no. 14 of this judgment is very important and is set out herein below: -
"Regarding the other objection of the respondents as regards relocation of the factory, after going through the provisions contained in Rules 57K to 57P and 174 of the Central Excise Rules, relied upon by Mr. Banerjee, I find that according to those provisions, goods cannot be manufactured without a licence. Those provisions demand that the manufacturing premises are to be specified in the plan while making application for licence. The licence authorises the licence holder to undertake manufacturing operation at the premises mentioned in the registration certificate. If one wants to operate manufacturing process from more than one premise, separate registration is to be made for each of those premises. The object of such separate registration is to ensure proper supervision by the Inspectors for proper accounting of the credit, goods manufactured, assessment of duty, etc. in respect of the goods produced at different places. But scheme granting money-credit did not require that such credit is to be utilised only for the payment of duty by the manufacturer in respect of goods produced at the same unit and not at the different units maintained by the same manufacturer.
Such right really accrues to the asset and it passes to the person who owns such asset. Thus, it is preposterous to suggest that a manufacturer cannot get the credit benefit in respect of the goods manufactured at his different units and such benefit should be limited to the duty payable and the production of the selfsame unit. I, therefore, hold that there is no impediment in getting adjustment of the money credit accrued in respect of the goods manufactured at New Alipore towards duty payable for the goods produced at the Bangannagar factory. It may not be out of place to mention here that both the aforesaid factories are registered and licensed. The aforesaid question is, thus, answered in favour of the petitioner no. 1."
"The second writ application being W.P. No. 983 (W) of 2003, thus, succeeds. Let there be orders in terms of prayers (a) and (b) of the writ application." "No costs."
Therefore, the situation is like this.
The Supreme Court in the case of Dai Ichi Karkaria Ltd on consideration of Rule 57A sub-Rule (1) of the said rules had opined that the unutilised Cenvat credit on the inputs could be utilised for any other final product. This was approved in the New Swadeshi Sugar Mills case by the same court.
This court on consideration of the notification dated 11th October, 1989 had ruled that Cenvat credit could be utilised in any unit of the same manufacturer. It did not lay down any ratio that the two final products could be different. It only said that manufacture could take place in different units of the same manufacture. The above Supreme Court decision on consideration of substantive Rule 57A sub-Rule (1) has pronounced the dicta that Cenvat credit can be utilised for manufacture of any final product of the same manufacturer. But that case was not concerned with the said notification dated 11th October, 1989.
In those circumstances, we are of the opinion that the respondents should consider the request of the appellants made by the letter dated 18th October, 2016 read with the departmental reply dated 11th November, 2016 in a proper proceeding constituted by the respondents, attended by the appellants and the departmental representatives, hearing them, taking into account the above decisions and the observations made above in the judgment and any other decision or decisions cited by the portion by a reasoned order within 4 months of communication of this order.
All points including the nature and scope of the credit available to the appellants are kept open.
The appeal (MAT 1007 of 2018) is disposed of by setting aside the impugned order dated 20th June, 2018.
Urgent certified photo copy of this order, if applied for, be given to the parties.