ESSEL PACKAGING LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) This appeal of the assessee challenges the order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Mumbai dated 18th August, 2004. By that order passed on 18th August, 2004 received by the appellants on 23rd September, 2004, the appeal of the appellants was partly allowed. The part that has been held in favour of the appellants is in relation to penalty. The penalty has been reduced from Rs. 10,00,000/- to Rs. 1,00,000/-. However, the substantial relief sought by the appellants assessee came to be denied. The appeal has been admitted by this Court on four substantial questions of law which read as under:--

(2.) The facts necessary for appreciating the arguments of Mr. Shah, learned counsel appearing for the appellants are that the appellants manufacture, inter alia, Multilayer Plastic Laminates Tubes falling under Chapter Nos. 39 and 76 of the Central Excise Tariff Act, 1985 (for short "the Tariff Act"). The appellants rely upon the Import Export Policy 1990-93 under which any supplies made in India/Kandla Free Trade Zone are considered as exports as per paragraph 206 (G) Chapter XVI of the Import Export Policy 1990-93. The appellants rely upon the duty exemption scheme under this policy. The appellants claim to have been the beneficiary of a Special Imprest Licence for import of exempt material for manufacture and supply of products to Kandla Free Trade Zone as per paragraph 204 (G) falling in Chapter XIX of the above Import Export Policy. Having obtained this licence on 18th September, 1991 the appellants rely upon Notification No. 33/90-Central Excise (N.T.), dated 5th September, 1990. The appellants submit that they received an order for supply of 320 lacs tubes to Hindustan Lever Limited at its Unit situated at Kandla Free Trade Zone. The appellants submit that HUL received the final product for home consumption as also for exports. They cleared the goods under bond or on nil rate of duty. The appellants further submit that after complying with the procedure prescribed under the Central Excise Rules, 1944 they availed of the benefit of credit of duly paid on the inputs received by them for being used in or in relation to the manufacture of final product. However, a show cause-cum-demand notice was issued to the appellants dated 1st July, 1991. That called upon the appellants to show cause why credit of duty paid on the inputs, which are used in the manufacture of final product and cleared to Kandla Free Trade Zone from December 1990 to April, 1991 should not be reversed and demanded because the same was not admissible. The Revenue placed reliance upon Rule 57-1 read with Section 11AA(1) (proviso) of the then Central Excise Rules, 1944. The show cause notice, copy of which is at annexure "A" was replied by the appellants on 3rd November, 1991 and they denied all the allegations. There is a further show-cause cum demand notice dated 13th November, 1991 but with similar allegations. The appellants rely upon these notices and which were adjudicated by the Assistant Commissioner of Central Excise. He passed an order on 14/20th October, 1997 confirming the demand of Rs. 25,26,207.66 and Rs. 6,19,987.91 pursuant to the two show cause notices referred to above. The Assistant Commissioner held in the order-in-original that the inputs used in the manufacture of final products were cleared to Kandia Free Trade Zone. However, under the scheme enabling availing of MODVAT credit and prevailing at the relevant time, such credit was not admissible. The clearances were not permitted in terms of the Rule as applicable and when the show cause notices were issued. The amendment to the rule came later on and with effect from 1st March, 1992. The benefit of this amendment cannot be availed of by the appellants-assessee.

(3.) The credit has been reversed pursuant to the order passed by the Assistant Commissioner. The assessee, however, appealed against the order-in-original to the Commissioner of Central Excise (Appeals). He passed an order on 26th May, 1998 rejecting the appeal and agreeing with the Assistant Commissioner that the amendment to Rule 57C was effective from 1st March, 1992. It was not of a clarificatory nature. Hence, it did not have any retrospective effect. Holding thus he dismissed the appeal of the assessee on 26th May 1998.