SHASUN PHARMA LTD. Vs. CCE

JUDGEMENT

(1.) THESE appeals arise out of Order -in -Appeal No. 56/98(TRY) dated 5.6.1996 passed by the Commissioner of Customs and Central Excise (Appeals), Trichy by which the Commissioner has partially allowed the appeal of the assessee.

(2.) THE brief facts of the case are that the assessee -appellants were engaged in the manufacture of bulk drugs viz. Analgin and its intermediate products falling under Chapter 29 of the CETA 1985 and got registered vide Registration Certificate No. 4/93 with the concerned Range Officer. They were availing the benefit of Modvat Credit under Rule 57A of the CE Rules, 1944. They stopped their manufacturing activities and voluntarily surrendered their Registration Certificate (RC for short) to the Range Officer on 14.12.94 vide their letter No. SPL:CEX:94 -95 dated 14.12.94 and their premises were leased out to their main unit viz. M/s Shasun Chemicals and Drugs Ltd. and endorsement for the manufacture of Analgin and its intermediate products in the premises of M/s Shasun Chemicals and Drugs Ltd. was made in the Registration Certificate No. 18/92 of M/s Shasun Chemicals and Drugs Ltd. on the same day itself i.e. 14.12.1994. Further, at the time of stopping their manufacturing activities there was no stock of inputs and finished products either in the form of semi -finished or finished goods available with the assessee. Though the assessee has surrendered the RC they had not surrendered the Central Excise records even on insistence from the Range Officer, vide Range Officer's OC No. 2703/94 and they retained the records with them for audit by AG Accounts (CERA) and even after auditing, they did not surrender the RG 23A Part II and made debit entries towards the wrong credit as well as duty confirmed in the order in original passed by the Assistant Commissioner for Rs 1,52,074.66 from the closing balance of Rs. 23,04,221.78. The balance credit at the time of surrender of the RC as noted above was Rs. 23,04,221.78. Thus the balance left after the debit entry which was made subsequent to the surrender of RC was Rs. 21,52,147.12. The RC was cancelled on 15.12.96. However, with effect from 1.3.97 Sub -rule 17(b) of Rule 57F was introduced by which the credit of specified duty lying un -utilized as on 1.3.97 with the manufacturer of the bulk drugs falling under chapter 28 or 29 shall lapse and shall not be allowed to be utilised for payment of duty on any excisable goods whether cleared for home consumption or for export. By the Order -in -Original the original authority directed that an amount of Rs. 1,52,074.66 adjusted in their lapsed credit of duty lying in RG 23A Part II account was required to be paid in cash inasmuch as the assessee had surrendered the Registration Certificate and leased out their premises to M/s Shasun Chemicals and Drugs Ltd. and endorsement for the manufacture of Analgin and its intermediate products in the premises of M/s Shasun Chemicals and Drugs were made on the same day i.e. 14.12.94 as noted above on which day the balance of Rs. 23,04,221.78 which was laying in RG 23A Part II got automatically lapsed. Moreover, no credit was available with effect from 1.3.97 by virtue of Notification No. 6/97 -CE (NT) dated 1.3.97 which incorporated Rule 57F(17)(b). In the impugned Order -in -Appeal, the Commissioner (Appeals) after considering the appeal filed by the assessee allowed their player to debit of Rs. 1,52,074.66 holding that the assessee had already debited the same sum as duty demanded on account of irregular availment of credit prior to 1.3.97 i.e. the date on which Rule 57F(17)(b) was amended. He has held that even though they had surrendered the RC on 14.12.94, the law does not debar the assessee from utilizing the said credit up to 28.2.97. He has also held that in terms of the amended rule ibid, no such credit was available for utilization with effect from 1.3.97 and thus the credit utilized prior to 1.3.97 was in order. He has however, further held that assessee cannot utilize the lapsed credit with effect from 1.3.97 against future demands that may be confirmed against them by taking a ground that the credit of Rs. 21,52,147.12 was earned by them prior to the introduction of Sub -rule 17(b) of Rule 57F ibid as the credit lapsed with effect from 1.3.97. Aggrieved by the above decision of the Commissioner (Appeals) the Department as well as the assessee have come in appeal. The assessee have also filed a cross objection against the appeal filed by we Department. In the cross objection they have taken the following ground:

(3.) SHRI K. Sankararaman, learned Counsel appearing for the assessee -respondents/appellants reiterated the above ground and submitted that in the instant case, credit was earned by the assessee -respondents/ appellants much before the introduction of Rule 57F(17)(b). He has further submitted that Commissioner (Appeals) has erred in deciding the appeal based on the date of surrender of the Registration Certificate and it should have been done on the basis of the cancellation of the same and they should be permitted to re -open and revive the RG 23A Part II account. He has also invited our attention to the judgment of the Hon'ble Apex Court in the case of Samtel India Ld. v. CCE, Jaipur, 2003 (ELT) 14 (SC) wherein it was held that right to credit became absolute when the input was used in the manufacture of the final product.