COMMISSIONER OF CENTRAL EXCISE Vs. TEXMO INDUSTRIES

JUDGEMENT

(1.) ONE of these appeals is by the assessee and the other by the Revenue. The assessee, during the material period, was engaged in the manufacture of submersible pumps (water pumps) which were exempt from payment of duty under Notification No. 4/97 -CE dated 01.03.1997. These pumps were manufactured from rough castings which were manufactured out of pig iron and foundry chemicals (inputs). About 80% of the rough castings production was cleared for home -consumption on payment of duty and the rest was captively consumed in the manufacture of pumps. The assessee was not maintaining separate accounts in respect of inputs used in the manufacture of 'rough castings' cleared on payment of duty and those used in the manufacture of 'rough castings' captively consumed in the manufacture of pumps which were cleared without payment of duty in terms of the above Notification. A dispute arose between them and the department as to whether, under Rule 57CC of the Central Excise Rules, 1944, they should pay 8% of the price of the pumps which were cleared without payment of duty during the material period (01.09.1996 - 31.03.1997) or 8% of the price of the 'rough castings' which were captively consumed in the manufacture of such pumps. In the impugned order, learned Commissioner (Appeals) held that the assessee was not required to pay 8% of the price of the pumps and were only required to pay 8% of the price of the castings captively consumed in the manufacture of pumps. This decision is under challenge in the Revenue's appeal.

(2.) ON an earlier occasion, arguments of both sides were heard on the above issue and case law cited by them was considered and the matter was referred to Larger Bench vide Miscellaneous Order No. 368/2006 dated 11.07.2006. The Larger Bench has since rendered its decision holding that the castings and not the pumps were to be treated as the final product for the purpose of Rule 57CC vide Texmo Industries v. Commissioner of Central Excise, Coimbatore 2007 -TIOL -144 -CESTAT -DEL -LB). The decision of the lower appellate authority is in accordance with the view taken by the Larger Bench. In the result, the Revenue's appeal gets dismissed.

(3.) DURING the period 01.09.1996 to 05.11.1996, the assessee had paid under Rule 57CC a sum of over Rs. 12 lakhs towards 8% of the value of the pumps cleared from their factory and subsequently realised that they were required to pay only 8% of the value of the castings captively consumed in the manufacture of such pumps amounting to Rs. 1,59,428/ -. The difference between the two amounts was Rs. 11,06,343, which was taken as Modvat credit on 06.11.1996 and this credit was utilised by them on the strength of the permission granted by the jurisdictional Assistant Commissioner. All this was before the issue of the subject show -cause notice. On the above facts, learned Commissioner (Appeals) observed, the impugned order, that the above credit -taking would be subject to the time -bar provisions of Section 11B. It is this part of the order of the Commissioner (Appeals) that is under challenge in the assessee's appeal before us. After hearing both sides and considering their submissions, we have found that there was no proposal in the show -cause notice to make any recovery of duty equivalent to the Modvat credit taken and utilised by the assessee. Had there been such a proposal in the show -cause notice, the Revenue would have challenged the appellate Commissioner's order on this count also. Therefore, in our view, it was not necessary for the Commissioner (Appeals) to record any observation to the effect that the credit -taking would be subject to the time -bar provisions of Section 11B and that, if the assessee had taken the credit after six months from the relevant date, the same was required to be reversed. The assessee's grievance against such observation is well -founded. Hence, we allow their appeal by directing that the last three sentences of para 10 of the appellate Commissioner's order be deleted.