Research › Search › Judgment

Madhya Pradesh High Court · body

2000 DIGILAW 1345 (MP)

Primo Pick N. Pack Ltd. v. Union Of India (Uoi)

2000-12-15

DIPAK MISRA

body2000
ORDER Dipak Misra, J. 1. The petitioner is a Limited Company having its Registered Office at 1346, Napier Town, Jabalpur. It is engaged in manufacturing and marketing of HDPE/PP Woven Sacks/Tapes/Fabrics. It is a medium scale unit having its factory at Plot No. A-3, Growth Centre, Maneri, Tahsil Niwas in the District of Mandla. The Company commenced its commercial production with effect from 21-1-1986. According to the petitioner the basic (raw materials) inputs used in the manufacture of HDPE/PP Tapes/Fabrics/Sacks in the HDPE/PP/LDPE granules which is an organic compound commonly known as plastic. The product manufactured by the Company is an article of plastic which is an excisable commodity classified under Chapter 39 of the Central Excise and Tariff Act, 1985. Keeping in view the nature of product the petitioner-company represented to the Assistant Collector, Central Excise giving details of the product and requested him to classify the same under Chapter 39 for the purpose of payment of Excise Duty. The Assistant Collector did not accept the petitioner's request and asked it to submit classification of HDPE/PP Tapes/Fabrics/Sacks as an article of textile under Chapter headings 54 and 63, respectively. Since the rate of duty under the two headings were different and also Modvat Credit facility was available only to articles of plastic, the petitioner-company vide its representation dated 8-5-1986 requested the Assistant Collector to ascertain the exact nature of the produce and give it a proper classification and till such time the petitioner agreed to be assessed provisionally as per the classification made by the Department. The aforesaid representation has been brought on record as Annexure P-l. The Departmental Authorities got the sample collected and the same was forwarded to the Chemical Examiner, Central Excise Revenue, Central Laboratory, New Delhi for ascertaining the classification. The Excise Department took no action to give proper classification to the product manufactured by the petitioner-company and insisted upon payment of duty under the head of "Textiles'. On 26-5-1986 the petitioner-company sent a reminder to the Department seeking its clarification on the point of classification of the product, along with Modvat benefit. Instead of taking action on the petitioner's representation the Excise Department assessed the petitioner-company to payment of Excise Duty under the Chapters 54 and 63 of the Act. As the assessment was illegal the petitioner protested against the same. However, the petitioner paid the duty under Chapters 54 and 63 under protest. Instead of taking action on the petitioner's representation the Excise Department assessed the petitioner-company to payment of Excise Duty under the Chapters 54 and 63 of the Act. As the assessment was illegal the petitioner protested against the same. However, the petitioner paid the duty under Chapters 54 and 63 under protest. Copy of letter of protest dated 12-6-1986 has been brought on record as Annexure P-4. 2. It has been averred in the writ petition that the erroneous classification and intransigent attitude of Excise Authorities put the petitioner to great disadvantage and he could not avail the credit of duty paid on inputs (raw materials) and continued to pay duty on finished products as Textile articles. However, to avoid any conflict the petitioner continued to pay duty and also did not claim credit on inputs as provided under Rule 57 A of the Central Excise Rules, 1944 for Modvat credit, since the same was not applicable to textile articles. It has also been pleaded that the Modvat was introduced in March, 1986 by Central Government with a view to avoid the effect of duties in excisable commodities. The scheme permits credit of duty paid on excisable goods used in relation to the manufacture of final products. For proper implementation of the scheme, a new part as in Chapter V of the Central Excise Rules, 1944 was inserted by Notification dated 1-3-1986. The provisions of Chapter AA apply only to those finished products classifiable under any heading of the Chapters which are notified by the Central Government. Articles falling under Chapter 39 were covered under the Modvat scheme whereas articles under Chapters 54 and 63 were not declared entitled for the said benefit. As provided under Rule 57G of the Central Excise Rules, 1944 a manufacturer intending to avail Modvat must send an intimation to the concerned Assistant Collector about the articles on which he proposes to have Modvat Credit. After obtaining an acknowledgement of the intimation he can start availing Modvat facilities. The Rule 57H of the Excise Rules, 1944 contains transitional provision as regards Modvat. The said Rule was amended by Notification No. 20/89 by which Clause (ii) in Sub-rule (1) of Rule 57H was deleted. The effect of the amendment was that credit was allowed only in respect of inputs lying in stock immediately before the filing of declaration but received after 1-3-1987. The said Rule was amended by Notification No. 20/89 by which Clause (ii) in Sub-rule (1) of Rule 57H was deleted. The effect of the amendment was that credit was allowed only in respect of inputs lying in stock immediately before the filing of declaration but received after 1-3-1987. The said Sub-clause was again inserted by notification dated 25-7-1991 thereby conferring power on the Assistant Collector to allow credit both in respect of inputs lying in stock as well as inputs used in the manufacturing of final product. It is put forth by the petitioner that even though the company was entitled to the benefit of Modvat it could not avail the same on account of erroneous classification made by Excise Authorities. It also sought permission for filing a declaration to avail Modvat benefit, but the same was not allowed by the Department. While the petitioner was paying tax as a law abiding and sincere tax-payer other manufacturers of HDPE Woven Sacks/Tapes/Fabrics from Indore filed a writ petition before the Indore Bench of this Court seeking declaration that HDPE articles are classifiable under Chapter 39 of the Act and not under Chapters 54 and 63. This Court by order dated 7-11-1989 held that the articles are plastic, and therefore, classifiable under Chapter 39. After learning about the said judgment the petitioner filed a classification list classifying the product under Chapter 39 and Modvat declaration under Rule 57G giving the details of the goods manufactured and sought benefit of the credit of duty on inputs under Rule 57A on 18-12-1989. The classification was approved by the Assistant Collector vide his order dated 25-2-1991 by which the products of the petitioner-company were classified under Chapter 39 under different sub-heads and the claim of Modvat in respect thereof was allowed. After obtaining acknowledgement of the declaration on 20-12-1989 the petitioner filed three separate claims before Assistant Collector seeking credit of duty already paid on inputs. The claims which are made under Rule 57H were (i) input lying stock as on 21-12-1989; (ii) on the inputs contained on semi-finished/finished goods lying in stock as on 21-12-1989; and (iii) inputs consumed during the period 1-3-1987 to 20-12-1989. The claim of the petitioner remained pending before the Assistant Collector. The claims which are made under Rule 57H were (i) input lying stock as on 21-12-1989; (ii) on the inputs contained on semi-finished/finished goods lying in stock as on 21-12-1989; and (iii) inputs consumed during the period 1-3-1987 to 20-12-1989. The claim of the petitioner remained pending before the Assistant Collector. On 17-5-1993 a notice was issued to the petitioner to show-cause as to why amount of credit claimed be not restricted to the inputs lying in stock and why the claims for the rest be not rejected as not admissible as per Rule 57H of the Central Excise Rules, 1944. Notice was issued on the ground that on the date of filing of declaration there was no provision for allowing credit of duty in respect of inputs, which have gone into consumption. 3. After receipt of notice to show-cause the petitioner submitted its reply contending that the benefit, which had accrued to it under law was denied on account of the erroneous interpretation on the part of the Department, and hence, he cannot be denied the benefit on the basis of the amendment made in the law at subsequent stage. It also requested the Assistant Collector to look into the provision as it stood on the date of payment on or before 1-3-1987 prior to 5-5-1989. The Assistant Collector vide his order dated 2-8-1993 rejected the petitioner's claim for credit/refund of duty on inputs used in semi-finished/finished goods lying in stock and consumed prior to 20-12-1989. Only the claim for credit in respect of inputs lying in stock immediately before the filing of declaration amounting to Rs. 2,66,814.00 was allowed. The sole ground for rejection was that the amendment of Rule 57H does not permit credit of duty on goods (input) in process or consumed in the manufacture of final product. As averred in the writ petition the claims of other manufacturers for credit of duty on processed and consumed inputs were also rejected by the concerned Assistant Collector. The manufacturers once again approached this Court by way of writ petition assailing the order of Assistant Collector rejecting their claims for credit of duty. This Court construing the various amendments in Rule 57H held that the claim of the petitioners therein cannot be denied, and accordingly, allowed the writ petition directing the Department to allow credit of duty paid on inputs to the petitioner. This Court construing the various amendments in Rule 57H held that the claim of the petitioners therein cannot be denied, and accordingly, allowed the writ petition directing the Department to allow credit of duty paid on inputs to the petitioner. After the judgment delivered by this Court in M.P. No. 724/91 in the case of Gilt Pack Limited v. The Assistant Collector, Central Excise, Indore the petitioner preferred an appeal before the Collector (Appeals), Indore under Section 35A of the Act on the ground that the claims of the petitioner also deserves to be allowed in view of the judgment rendered by the High Court. The Collector (Appeals) by order dated 11-5-1994 rejected the petitioner's claim. Aggrieved by order passed by the Collector (Appeals) the petitioner preferred Writ Petition No. 2789/94 before this Court. At that point of time the petitioner filed an appeal before the CEGAT. As the appeal was pending before the CEGAT the petitioner sought permission to withdraw the writ petition. The writ petition was permitted to be withdrawn with liberty to file fresh writ petition in case fresh cause of action arises. Thereafter, petitioner prosecuted his appeal before CEGAT which interpreted Rule 57H and rejected the claim of the petitioner stating that the declaration was filed on 18-12-1989 and was acknowledged on 21-12-1989 on which date Sub-clause (ii) of Rule 57H(1) was not in force as it was omitted by Notification dated 5-5-1989. 4. Assailing the aforesaid orders it is put forth in the Writ petition that the petitioner's claim for credit of duty has been rejected only on the ground that it had filed its claim on 18-12-1989 after the amendment provision had come into existence. It is contended that the petitioner's right on credit/refund of duty on inputs consumed between 1-3-1987 to 20-12-1989 had been illegally rejected despite the fact that the petitioner-company was representing to the Excise authorities for permission to file classification under Chapter 39 for Modvat facility. On account of erroneous classification given by the authorities themselves, the petitioner-company could not file its declaration and consequently could not claim Modvat. Under such circumstances, the petitioner could not be put under a legal disability and denied credit of duty paid under mistake of law committed by the Excise authorities. It has also been set forth that the duty was paid under protest and that is apparent from various letters and representations. Under such circumstances, the petitioner could not be put under a legal disability and denied credit of duty paid under mistake of law committed by the Excise authorities. It has also been set forth that the duty was paid under protest and that is apparent from various letters and representations. It has been highlighted in the writ petition that in deciding the claim for credit of duty on inputs, the date of filing of declaration is not at all relevant and what is relevant is the period in which the inputs are consumed for which credit are claimed, and hence, provisions which were invoked during that period have to be looked into. It has also been averred that the action of the respondents in refusing credit of duty on inputs consumed between 1-3-1987 to 20-12-1989 also suffers from the vice of discrimination as for the same period the claim of the other manufacturers have been allowed by the concerned Assistant Collector while the same has been disallowed in the case of the petitioner. It has been urged that the benefit of the decision of this Court cannot be denied to the petitioner-company on the specious ground of non-existence of power or provision at the stage of dealing with the application. It is put forth that the petitioner made an application for filing such declaration which was refused by the excise authorities in illegal manner. On these grounds the petitioner has prayed for quashing of impugned orders, namely, Annexures P-15, P-18 & P-20 dated 2-8-1993,11-5-1994 & 9-3-1999, respectively. 5. A return has been filed by the contesting respondents contending, inter alia, that the petitioner had not paid the duty under protest and the charge of erroneous classification is totally incorrect. It is also put forth that if the petitioner was aggrieved by the Department's stand he could have filed an appeal as prescribed under the Central Excise Act. It has been urged that the petitioner had not challenged the classification duly declared by the petitioner and approved by the Department, and hence, cannot be permitted to challenge after a lapse of 10 years. It has also been set forth that the petitioner's claim under Rule 57H was rejected as the said provision had been amended during the material time. 6. After filing of the return a petition has been filed for taking additional documents on record. It has also been set forth that the petitioner's claim under Rule 57H was rejected as the said provision had been amended during the material time. 6. After filing of the return a petition has been filed for taking additional documents on record. The petitioner has brought on record the order passed in S.L.P. preferred by the Union of India before the Hon'ble Supreme Court against the decisions in the writ petitions. 7. I have heard Mr. V.K. Tankha, learned Senior Counsel for the petitioner, and Mr. R.S. Patel, learned Standing Counsel for the Union of India. 8. To appreciate the factual scenario it is apposite to refer to the decision rendered in the case of Raj Pack Well Ltd. v. Union of India - 1990 (50) E.L.T. 201 (M.P.) wherein a Division Bench of this Court held as under : - "In the result we hold that HDPE strips or tapes fall under the Head 39.20, sub-heading 39.20.32 of the Central Excise Tariff Act and not under 54.06, sub-heading 5406.90. Similarly the HDPE sacks fall into Heading 39.23, subheading 39.23.90. Consequently the petition filed by the petitioners are allowed. The order impugned passed by the Assistant Collector Central Excise, Indore Division and that of the Collector (CE) Appeals, New Delhi are quashed. The respondents are directed to classify the goods accordingly. No other points pertaining to other issues were raised before us during the course of the arguments. There shall be no order as to costs." From the aforesaid enunciation of law it becomes graphically clear that HDPE strips fall under a different heading and the industries dealing with the same is entitled to Modvat facility. Mr. No other points pertaining to other issues were raised before us during the course of the arguments. There shall be no order as to costs." From the aforesaid enunciation of law it becomes graphically clear that HDPE strips fall under a different heading and the industries dealing with the same is entitled to Modvat facility. Mr. Tankha, learned Senior Counsel, has drawn the attention of this Court to the decision rendered in the case of Gilt Pack Ltd. v. Assistant Collector of Central Excise, Indore, 1994 (69) E.L.T. 222 (M.P.) wherein it has been held as under : - "Rule 57H has two limbs one pertains to such inputs as are lying in stock or are received in the factory after filing the declaration made under Rule 57G and the second limb of the rule pertains to those inputs which are used in the manufacture of final products and which are cleared from the factory on or after 1st March, 1987 provided that no credit has been taken by the manufacturer in respect of such inputs under any other Rule or Notification or that the final products of such inputs are dutiable. A bare reading of the aforesaid two provisions shows that a manufacturer is entitled to get credit on the inputs which are lying in stock or are received in the factory after filing the declaration and also on such inputs which are already used in the manufacture of the final products and those final products are cleared from the factory on or after 1st March, 1987. As such when an argument is advanced that the inputs are not available for verification as they are not lying in stock, acceptance of such an argument would result in making the provision of second clause of Rule 57H nugatory. In the instant case the manufacturers have submitted the details of the inputs used by them for the manufacturer of the goods which were cleared by the Central Excise Authorities on 1-3-1987 and thereafter, till filing of the declaration. As there is no time limit for filing tlte declaration and there being no definition of the words "immediately before filing the declaration" it should be held that if the declaration is filed by the manufacturers claiming the credit, that declaration has to be considered in the light of the record available with the Central Excise Autliorities. As there is no time limit for filing tlte declaration and there being no definition of the words "immediately before filing the declaration" it should be held that if the declaration is filed by the manufacturers claiming the credit, that declaration has to be considered in the light of the record available with the Central Excise Autliorities. The order of the Assistant Collector is, therefore, quashed to that extent. Instead it is directed that the credit for the inputs used for manufacturing goods cleared from the factory on 1st March, 1987 and thereafter shall be given to the petitioners. As a sufficiently long period has already elapsed, we further direct that the credit for the inputs as contained in Sub-clause (ii) of Rule 57H of the Rules shall be given to the petitioners on the strength of their declaration and the details of the inputs filed by them after taking an undertaking from the petitioners that in case on verification if any part of the statement is found to be factually incorrect, they shall be liable to repay the sum. The verification has to be made on the basis of the record which is already with the Department and which may also be available with the manufacturers. The verification may be completed within a period of one month from the date of this order."(quoted from the placitum) (Emphasis supplied) 9. Submission of Mr. Tankha, learned Senior Counsel for the petitioner, is that the petitioner in the aforesaid case was conferred the benefit of the credit under the earlier notification. The grievance of the petitioner is that the benefit of the aforesaid judgment has not been given to him. The learned Counsel has drawn the attention of this Court to the order passed by the Collector (Appeals) who has rejected the prayer by observing that by notification No. 20/89 dated 5-5-1989 the Rule 57H was further amended by which Clause (ii) was deleted. The learned Counsel has drawn the attention of this Court to the order passed by the Collector (Appeals) who has rejected the prayer by observing that by notification No. 20/89 dated 5-5-1989 the Rule 57H was further amended by which Clause (ii) was deleted. After referring to said deletion the appellate authority concluded that the Assistant Collector Central Excise can allow the credit of duty paid on the inputs received by the manufacturer immediately before the date of declaration provided that such inputs are lying on stock as on such date of declaration and as the petitioner gave declaration on 21-12-1989 after deletion of Clause (ii) under Rule 57 he was only entitled to the credit in respect of the inputs lying on stock but was not entitled for the period 1-3-1987 to 5-5-1989 as there was no declaration and as during that period he has distinguished the decision rendered in the case of Gilt Pack Ltd. (supra) on the ground that in the aforesaid case declaration was filed on 12-12-1988 when Clause (ii) of Rule 57H was in force. The second appellate authority, the Customs, Excise and Gold (Control) Appellate Tribunal confirmed the order passed by the Collector (Appeals) on the ground that no credit of duty under Modvat scheme had accrued in the account of assessee as no account has been maintained. The Tribunal also distinguished the decision rendered in the case of Gilt Pack Ltd. (supra) on the ground that the Rule 57H is to be interpreted on the date of filing of declaration and in the instant case as Sub-clause (ii) was not on the statute book on the date of filing of declaration as it was amended on 5-5-1989. The Tribunal further took note of the fact that the declaration was filed on 18-12-1989 and was acknowledged on 21-12-1989, and therefore, the benefit of Rule 57H was not available to the appellants therein. 10. Supporting the aforesaid orders Mr. R.S. Patel, learned Standing Counsel for the Union of India, has placed reliance on the decision rendered in the case of Collector of Central Excise, Kanpur v. Flock (India) Pvt. Ltd. - 2000 (120) E.L.T. 285 (S.C.) wherein the Apex Court held as under : - "10. 10. Supporting the aforesaid orders Mr. R.S. Patel, learned Standing Counsel for the Union of India, has placed reliance on the decision rendered in the case of Collector of Central Excise, Kanpur v. Flock (India) Pvt. Ltd. - 2000 (120) E.L.T. 285 (S.C.) wherein the Apex Court held as under : - "10. Coming to the question that is raised there is little scope for doubt that in a case where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the statutory right of filing an appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing his order. If this position is accepted then the provision for adjudication in the Act and the Rules, the provision for appeal in the Act and the Rules will lose their relevance and the entire exercise will be rendered redundant. This position in our view, will run counter to the scheme of the Act and will introduce an element of uncertainty in the entire process of levy and collection of excise duty. Such a position cannot, be countenanced. The view taken by us also gain support from the provision in subrule (3) of Rule 11 wherein it is laid down that where as a result of any order passed in appeal or revision under the Act, refund of any duty becomes due to any person, the proper officer, may refund the amount to such person without his having to make any claim in that behalf. The provision indicates the importance attached to an order of the appellate or revisional authority under the Act therefore, an order which is appealable under the Act is not challenged then the order is not liable to be questioned and the matter is not to be reopened in a proceeding for refund which if we may term it so is in the nature of execution of a decree/order. In the case at hand it was specifically mentioned in the order of the Assistant Collector (Appeals) if so advised." Submission of Mr. Patel is that as the petitioner had not preferred any appeal and had deposited the money in question he cannot seek adjustment at the present stage. In the case at hand it was specifically mentioned in the order of the Assistant Collector (Appeals) if so advised." Submission of Mr. Patel is that as the petitioner had not preferred any appeal and had deposited the money in question he cannot seek adjustment at the present stage. Ordinarily the submission of learned Standing Counsel for Union of India would have been acceptable but the fact of the instant case are quite different. The law laid down in the case of Flock India Ltd. (supra) is quite distinguishable inasmuch as in the said case the assessee had questioned the order by filing a refund claim on the ground that adjudicating authority had committed an error in passing the earlier order. In the present case, such a situation does not arise. On the contrary, this Court on earlier occasion has already expressed its opinion with regard to classification and the other assessees have availed the benefit. The petitioner has been denied the benefit solely on the ground that he had filed the application after the rule in question was amended. It is not disputed by the authorities that the petitioner had deposited the amount, and therefore, the rule which was invoked at the time of deposit would come into play. That apart, verification can be made on the basis of record which is already with the Department and which is also available with the manufacturer. In my considered view the denial of the benefit to the petitioner would amount to travesty of justice. 11. Resultantly, the writ petition is allowed and the orders passed vide, Annexures P-15, P-18 and P-20 are quashed and it is directed that the competent authority shall verify the records and pass appropriate orders in consonance with the law laid down in the case of Gilt Pack Ltd. (supra) within a period of three months. In the peculiar facts and circumstances of the case there shall be no order as to costs.