- (1.) These two references have been called by this Court in different reference petition arising out of the common final order of the learned Customs, Excise & Gold (Control) Appellate Tribunal deciding three appeals, on the following question of law :- "Whether in the facts and circumstances of the case, the Modvat credit on captive consumption of inputs can be availed by the assessee when it has fulfilled the conditions of payment of Excise Duty under S. 3A of the Central Excise Act when the goods were removed from the re-rolling Mill manufacturing inputs to forging factory under an invoice by making payment of the invoice price by a cheque in separate account though both the Factories are owned by the same person?"
(2.) The question is said to be arising, on account of interpretation of Notification No. 58/97-C.E., which reads as under :- "Iron and steel - Goods notified for purposes of credit of duty under Modvat - In exercise of the powers conferred by sub-rule (6) of Rule 57A of the Central Excise Rules, 1944, the Central Government hereby declares the following inputs and the final products falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) namely :- 2. The Central Government further declares that the duty of excise under the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the said Act), shall be deemed to have been paid hereinafter referred to as deemed duty), on the inputs declared herein and the same shall be equivalent to the amount calculated at the rate of twelve percent of the price, as declared by the manufacturer, in the invoice accompanying the said inputs (hereinafter referred to as invoice price), and credit of the deemed duty so determined shall be allowed to the manufacturer of the final products. 3 The credit of deemed duty allowed in respect of the said inputs shall be utilised only towards payment of duty of excise leviable under the said Central Excise Act on the said final products : Provided that the credit of deemed duty in respect of inputs cleared for export under bond shall be allowed to be utilised towards payment of duty of excise on any final products cleared for home consumption or for export, on payment of duty and where for any reason such adjustment is not possible by refund to the manufacturer subject to such safeguards, conditions and limitations as may be specified by the Central Government in the Official Gazette. Provided further that no such refund of credit of deemed duty shall be allowed if the manufacturer avails of drawback allowed under the Customs and Central Excise Duties (Drawback) Rules 1971, or claims rebate of duty under Rule 12 in respect of such duty. 4 The provisions of this notification shall apply to only those inputs which have been received directly by the manufacturer of the final products from the factory of the manufacturer of the said inputs under the cover of an invoice declaring that the appropriate duty of excise has been paid on such inputs under the provisions of Section 3A of the said Act. 5 The provisions of this notification shall not apply to inputs where the manufacturer of the said inputs has not declared the invoice price of the said inputs correctly in the documents issued at the time of their clearance from his factory. 6 This notification shall come into effect on and from the 1st day of September, 1997. Explanation. - For the purpose of this notification, "invoice price" means the price charged by the manufacturer of inputs and indicated in the invoice accompanying the said inputs, the payment for which is made directly by the manufacturer of the final products to the manufacturer of the said inputs by cheque drawn on his own bank account or by bank draft or by bankers' cheque."
(3.) The facts bereft of unnecessary details are, that the assessee M/s. Shivagrico Implements Ltd., SIL for short, was availing the benefit of Modvat credit in respect of re-rolled non alloy steel products, bars, flats, angles etc. classified under sub-heading no. 7214.90 of the Central Excise Tariff, manufactured in their re-rolling mills, when used in the manufacture of their final products- agricultural implements i.e. packaxe, pawarah, railway beaters etc., classifiable under Chapter 82 and 84 of the Central Excise, in their forging division. However, the benefit of deemed Modvat credit at 12 percent of the price of the input, available under the Notification No. 58/97, was sought to be denied by the Department, on the ground, that they did not fulfil the conditions, subject to which the benefit of deemed Modvat credit was available, under the said notification. Thereupon the controversy arose, and the two authorities below found the assessee to be not entitled to the credit, while the learned Tribunal set aside those orders, and found that the benefit of Modvat credit could not be denied to the assessee, solely on the ground, that the duty paid inputs were captively used in manufacture of dutiable final products. It was not disputed that the price as declared by SIL in their invoices issued for captive consumption was the same as was declared in the invoice for outside sale.;