K. Sankararaman, Member (T) -
(1.) M/s. Berger Paints India Ltd. had filed this appeal and the connected Stay Petition to the Special Bench of the Tribunal, New Delhi, aggrieved with the Order-in-Appeal dated 28-2-1985 passed by the Collector of Central Excise (Appeals), Calcutta rejecting their appeal before him and upholding the Order-in-Original dated 16-6-1984 passed by the Assistant Collector of Central Excise, Calcutta-VII Division. It was held in the impugned order that the credit of Central Excise duty taken by the appellants in their RG 23 account in terms of Exemption Notification No. 201/79 dated 4-6-1979 in respect of chlorinated rubber falling under Tariff Item 68 as in force upto 28-2-1982 became inadmissible to them with effect from 1-3-1982, since, from that date, the said product was taken out of the Tariff Item 68 and came to be classified under Item 15A and hence Notification 201/79 which was with reference to input falling under Tariff Item 68 used in the manufacture of excisable goods became inapplicable. The decision of the Assistant Collector that the credit of duty on chlorinated rubber, as in stock as on 1-3-1982 or which was received subsequent to 1-3-1982, which had already been utilised by them in terms of the said notification was recoverable from them was upheld by the Collector (Appeals). Thereby the present appeal.
2: When the appeal, after the rejection of the Stay Petition by the Special Bench C of the Tribunal, was heard by the said Bench, it was transferred to this Bench on the learned Departmental Representative pointing out that the matter falls within the jurisdiction of Regional Bench as it relates to credit in RG 23 with which view the learned Counsel for the appellants also agreed. Accordingly, the appeal was posted for hearing before us when the appellants were represented by S/Shri K.L. Ganguly and Subir Ganguly, learned counsels and the respondent Collector by Shri A. Chaudhury, learned Departmental Representative. It was pointed out by the Bench that the preliminary submissions of the learned Departmental Representative that the appeal actually pertains to Special Bench appeared to be correct. The attention of the learned Counsels was invited to the majority decision of Special Bench of five Members in Collector of Central Excise v. Kashmir Vanaspati reported in 1987 (29) E.L.T. 208. The Counsel, however, felt that the jurisdiction lay with the Regional Bench only and the appeal had actually been heard on the question of jurisdiction by the Special Bench and transferred to the Regional Bench by an order. Retransfer of the appeal again to the Special Bench at this stage would put them to inconvenience, it was urged. A prayer was made that the appeal may be heard and disposed of by us.
3. Though the majority decision of the Special Bench in the Kashmir Vanaspati case clearly laid down that appeals relating to Notification 201/79 matters fall in the jurisdiction of the Special Bench and not with the Regional Bench, taking into account the peculiar facts of this case and the submissions made by the counsels about their inconvenience and difficulties, the matter was taken up with the President of the C.E.G.A.T. In terms of the order received from him vide his letter No. 9/ERB/90-CR dated 28-11-1990, this Bench is disposing of the appeal sitting as a Special Bench.
4. On behalf of the appellants, it was urged by the learned counsels that the stand of the Assistant Collector that chlorinated rubber on which credit of duty paid under Item 68 of the Central Excise Tariff had been taken became non-duty paid due to the said fact and when the item became reclassified under Item 15A with effect from 1-3-1982 it became liable to duty under that item at their end is liable to be quashed. The subject goods were not manufactured by them. They purchased the same from the manufacturer thereof. There could be no provisional assessment at the appellants' end and the plea of time bar still exists and is valid. On merits, the issue is squarely covered by the Special Bench 'C decision in Collector of Central Excise v. Addisons Paints & Chemicals reported in 1990 (45) E.L.T. 662. In that case, chlorinated rubber was lying unutilised with the industrial consumer when the notification was withdrawn. The department's action to levy duty was set aside. It was also argued by the Counsels that reclassification of duty-paid goods at the users' end is not warranted. The duty-paid character of the input is not lost if the credit of duty paid thereon is taken credit of. Reliance was also placed on the Tribunal's decision in Collector of Central Excise, Chandigarh v. Hindustan Wire Products reported in 1985 (19) E.L.T. 141 and another case reported in 1988 (33) E.L.T. 172 (Collector v. Wipro Information Technology - Ed.)
5. Shri M.N. Biswas, learned Senior Departmental Representative defended the decision of the lower authorities. He stated that para 8 of the Notification No. 201/79 is not satisfied in this case. Hence credit cannot be utilised as claimed by the appellant. He distinguished the decision of the Special Bench in the case of Addisons Paints & Chemicals cited by the appellants' counsel. He stated that in that case the inputs in question had been received before 28-2-1982 after which the classification of the product changed from Item 68 to 15A of the Tariff. In the matter before us, part of the goods were received after 1-3-1982 and to this extent, the present case is distinguishable from the Addisons matter. He also submitted that the assessment of the final products at the appellants' end being provisional, the demand is not hit by time bar, as claimed by them. The Assistant Collector's finding to this effect is correct in law. He, therefore, pleaded that the appeal be dismissed upholding the order in appeal under challenge. He also relied upon the decision of the Tribunal in Sandoz (India) Ltd. v. Collector of Central Excise, reported in 1990 (50) E.L.T. 403.
6. We have considered the submissions of both the sides. We have perused the record as well as the decisions cited. The Collector (Appeals) had stated in his order that the Assistant Collector had given detailed reasons in support of his order which, as observed by him viz. Collector (Appeals), are convincing and in accordance with law. Though he proceeded to reject the appeal, seeing no justification to interfere with the order-in-original appealed against which he felt to be correct both in law and on fact, the grounds on which he decided the matter were actually different from those which weighed with the Assistant Collector. It would be totally erroneous to hold that the inputs become non-duty paid once credit of duty paid thereon is taken in terms of the admissible provisions. Again, the Assistant Collector has reclassified the inputs received by the appellants as inputs for the manufacture of their final products on the ground that they wre lying unutilised after 28-2-1982 and the new classification under Item 15A would be applicable to them. He has applied the provisions of Rule 56A to the case before him though the case of the appellants was for availment of exemption from duty in terms of Notification No. 201/79 dated 4-6-1979. The only ground raised in the show cause notice as to why Central Excise Duty (Specified in the notice) shall not be paid by them is that they were holding a stock of chlorinated rubber in RG 23 Part I on 28-3-1982, on which credit of duty had been taken in terms of Notification No. 201/79 dated 4-6-1979. From 1-3-1982, the Tariff Item for the product changed to 15A (1) and the benefit of Rule 56A was not extended to the said commodity for use in the manufacture of paints and varnishes, as observed by the Assistant Collector. A further quantity of 500 Kg. was received on 23-3-1982 vide Gate Pass dated 26-2-1982. It was, therefore, stated that the total non-duty paid stock was 5815 Kg. out of which the company utilised between 1-3-1982 and 21-4-1982 a total quantity of 5565 Kgs for captive consumption vis-a-vis clearance from non-duty paid stock, as stated in the order-in-original. As correctly pointed out by the appellants the goods cannot be reassessed at their hands, simply because the classification changed from 68 to 15A(1) with the effect from 1-3-1982. The effect of such changes would affect only clearances from the manufacturers' end. Here, the inputs had been cleared from the manufacturers thereof before 28-2-1982 and had been correctly assessed under Item 68. Even the consignment of 500 Kg. which had been received by the appellants on 23-3-1982 had been cleared from the manufacturers on 26-2-1982. Its date of receipt in the factory of the appellants has no bearing on its assessment and the same cannot be reassessed because of the change of classification during the intervening period between the date of clearance from the manufacturers and the date of receipt of the same in the appellants' factory. It is nobody's case that the inputs were removed by the appellants from their factory as such under para 6 of the appendix to the Notification No. 201/79 without being used in the manufacture of excisable goods in which case alone the question of payment of duty on such goods would have arisen. Hence the Assistant Collector was patently in error while demanding duty on the inputs holding them to be non-duty paid. To the extent the Collector (Appeals) held that the said order was correct in law and on fact and declined to interfere with the same, the effect of such a finding is contrary to his reasoning that the appellants were not entitled to the benefit of exemption Notification No. 201/79-CE., dated 4-6-1979. If they were not entitled to the said benefit, the only course open to the department would have been to disallow the credit taken thereon and not to reassess the goods under Item 15A (1).
7. We now turn our attention to the cases referred to by Shri Ganguly, learned Counsel for the appellants. The decision of the Tribunal in Collector of Central Excise v. Addisons Paints & Chemicals Ltd. is directly on this issue. The inputs there included chlorinated rubber which is the input in the present matter. The same had been received prior to 28-2-1982, after having discharged duty liability under Item 68 of the Tariff. The duty so paid was taken as credit. On the quantity of the products unutilised as on 1-3-1982, the credit of duty taken was sought to be reversed by raising a demand. The stand of the department was that the inputs covered by a different Tariff Heading after 1-3-1982 were no longer entitled to the credit they had been enjoying and hence in respect of the goods still to be taken into manufacturing process the credit is inadmissible and whatever had been taken into RG 23 credit was to be recovered. This view was rejected by the Tribunal. This decision is squarely applicable to the present case. Even the contention of the learned Departmental Representative that this case is distinguishable from the present case as part of the inputs were received subsequent to 1-3-1982 when the Tariff classification had changed taking the product out of Item 68 which item alone was eligible for the benefit under Notification No. 201/79 does not appeal to us. The goods in question had paid duty under Item 68 before 1-3-1982. Notification No. 201/79 exempts all excisable goods in the manufacture of which any goods falling under Item No. 68 of the Tariff have been used from the duty leviable thereon as is equivalent to the duty of excise paid on the inputs. The goods fell under Item 68 and discharged the duty liability thereon. It is the duty paid thereunder that determines the eligibility for the benefit of Notification No. 201/79 and not the Tariff Change subsequent to the assessment and clearance at the manufacturers' end. The appellants' counsels have cited the decision of the South Regional Bench in Collector of Central Excise v. Wipro Information Technology in support of their contention that the credit taken cannot be reversed due to subsequent change in the Tariff. In the said case not only was credit of duty paid on inputs taken in the RG 23 account but it was also utilized for payment of duty subsequent to such utilisation of the credit, the final products became exempt from duty and the department wanted to recover the credit so utilised, to the extent of duty corresponding to the inputs which were in stock and which would have been used in the manufacture of fully exempted goods. This stand of the department was negatived by the Tribunals in the said decision. This has no application in the present case. Hence, credit was not utilised before the change of tariff classification, but afterwards. However, the final products remained dutiable unlike in the Wipro case where the final product became exempt from duty. The cause of action for recovery of duty due to alleged wrong utilisation of credit were thus different in the two cases.
8. In Collector of Central Excise v. Kosan Metal Products -1988 (38) E.L.T. 373, Supreme Court had upheld the decision of the Tribunal to the effect that the classification list having been finalised by the Collectorate having jurisdiction over the factory manufacturing the inputs required by the Kosan Metal Products, the Assistant Collector having jurisdiction over the latter had no authority to reopen the assessments. That was a case where the classification in the originating factory was arguably erroneous and it was sought to be corrected at the hands of the user factory. This was negatived by the Tribunal which decision was upheld by the Supreme Court. In the present case there is no doubt about the correctness of the assessment of the subject inputs at the time it was assessed. The Assistant Collector had no authority to reclassify the goods and demand duty all over again, ignoring in the process even the duty paid originally under Item 68 of the Tariff Act and treating the goods as non-duty paid. The Collector (Appeals) appeared to deviate from this approach and make it a case of wrong availment of credit on account of ineligible inputs. But he had rejected the appeal holding that the Assistant Collector had correctly demanded the duty giving detailed reasons which he felt were convincing and in accordance with law. Accordingly he saw no justification to interfere with the order appealed against which according to him was correct both in law and on fact. Accordingly the order of the Collector (Appeals) is an endorsement of the Asstt. Collector's order which we have held to be untenable. The Assistant Collector's order, as we have analysed earlier, arises from the show cause notice where the only point raised is that the inputs are non-duty paid. We have rejected this approach. Again, we do not find anything in para 8 of the Appendix to Notification No. 201/79 relied upon by Shri Biswas that will disentitle the appellants the benefit of the said notification. Likewise the decision of the Special Bench of the Tribunal in Sandoz (India) Ltd. v. Collector of C. Excise, cited by him, reported in 1990 (50) E.L.T. 503 does not apply to the facts of this case. There, it was held by the Tribunal clarifying their earlier decision in the same matter, reported in 1988 (37) E.L.T. 299 that the benefit of credit of countervailing duty under Item 68 on inputs taken under Notification No. 103/61 was not to be denied by applying Notification 109/80 whereby the procedure set out in Rule 56A was to be followed. Rule 56A, by virtue of Notification 104/79, was made out of bounds for Tariff Item 68 goods, insofar as countervailing duty was concerned. The Tribunal held that the fact that for availment of the exemption under Notification 105/61 the procedure in Rule 56A has to be followed would not mean that the procedure in Rule 56A can have the effect of nullifying or negating the effect of the notification. In the present case, Notification 201/79 continued to be in force and credit of duty paid under Item 68 of the Tariff before 28-2-1982 was taken in the RG 23 account on a quantity of 5215 Kg. of chlorinated rubber which was lying unutilised on 28-2-1982 and a quantity of 500 Kgs. of the said product received afterwards.
9. For the reasons discussed by us accepting the decision of the Special Bench 'C in the Addisons Chemicals & Paints matter, we hold the appellants to be eligible for the benefit claimed by them. In view of the fact that we hold the appellants to be entitled to succeed on merits, we do not feel called upon to decide the point that the Assistant Collector had raised in his order that as the assessment of the product under Item 15A (1) was provisional under Rule 9B of the Central Excise Rules, the question of time bar does not arise. Though the Collector (Appeals) has upheld the order apparently in its entirety, he has not given a finding on this issue of time bar. As, however, the question of time bar has been raised by the appellants in their appeal before us, we would like to observe that any case of wrong availment of credit including under Notification No. 201/79 has to be regulated under Section 11A and if the assessment of the final products manufactured with the inputs in question is provisional, the time limit for issue of demand notice for credit wrongly availed will run from the date of finalisation of the assessment of the final product as per the provisions of Section HA(3)(ii)(b) of Central Excises and Salt Act, 1944. While this will be the legal position, this does not assume importance in the present case, as we hold on merits that the appellants succeed in their appeal. Likewise, we do not express any opinion on the arguments raised in the appeal that the change of classification of chlorinated rubber from Item 68 to Item 15A(1) cannot have effect from 1-3-1982 as the proposal to that effect in the Finance Bill 1982 could not have come into effect before the passing of the Finance Act, 1982 and the Provisional Collection of Taxes Act, 1931 is relevant only for applying higher rates of duty and not to reclassify the goods.
10. For the foregoing reasons, we allow the appeal and set aside the impugned order of the Collector (Appeals) by which he upheld the Order-in-Original of the Assistant Collector. The appellants will be entitled to consequential reliefs.;