VIMAL ALLOYS (P) LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) This petition has been filed to quash orders Annexures P1 to P3 issued by the Collector, Central Excise, Chandigarh and the Commissioner, Central Excise, Chandigarh, prescribing the procedure for availing Modvat credit on certain inputs used in the manufacture of steel ingots by A.R.C./Induction Furnace Units. Petitioner-M/s Vimal Alloys (P) Ltd. and twenty-six others have pleaded that they are Private and Public Limited Companies incorporated under the Companies Act, 1956 and partnership firms and they are engaged in the business of purchase, production, manufacture and sale of iron and steel goods and other types of ferrous and non ferrous metals. According to the petitioners, they hold excise licenses under the Central Excise and Salt Act, 1944. The, petitioners have also stated that they purchase duty paid raw material which is used in the manufacture of duty paid final products such as legal ingots and steel castings etc. The petitioners have referred to the provisions contained in the Central Excise Tariff Rules and have stated that the Modvat Credit Scheme framed by the Government is aimed at neutralising/limiting the effect of duty incidents on the cost of excisable commodities which are used as inputs in the manufacture of some other exciseable commodities. As per this scheme, the duty paid exciseable goods (inputs) which are normally described as raw material are brought in the manufacturing premises of the petitioners and on manufacture of exciseable or other goods the petitioners avail credit of exercise duty, special excise duty and countervailing duty and such credit is utilised for the payment of excise duty on the finished exciseable goods. The petitioners have further stated that although the provisions contained in Rules 57-A to 57-J are a complete Code unto themselves and the petitioners have been complying with the provisions thereof, respondent No. 2 has issued trade notices Annexures P1, P2 and P3 in the purported exercise of powers under Rule 233 of 1944 Rules and these notices clearly go beyond the provisions contained in the Rules and are, therefore, ultra vires the Rules. The petitioners say that the Induction Furnace Owners Association has represented before the Commissioner, Central Excise and Customs, Chandigarh, but, no action has been taken for withdrawing these notices compelling them to seek intervention of this Court to quash the impugned notices.

(2.) Shri O.P. Loyal, Senior Advocate, appearing for the petitioners vehemently argued that once the procedure for availing the Modvat Credit has been prescribed by the statutory rules, it is not within the jurisdiction of respondent No. 2 to issue administrative orders in the form of trade notices laying down more stringent conditions for availing the Modvat Credit, Shri Goyal argued that under Rule 233, respondent No. 2 is possessed with limited jurisdiction to issue instructions to supplement the rules but he is not empowered to issue administrative orders which go beyond the scope of the Statue. Learned counsel submitted that the procedure prescribed by respondent No. 2 has made manufacturing operations of the petitioners impossible and, therefore, these trade notices deserve to be quashed as being arbitrary and ultra vires of the provisions of the rules. Shri Goyal placed reliance on Universal Cables Ltd, Satna v. Union of lndia, 1977 1 ELT 92, Associated Film Industries Ltd v. D.R. Kohli, 1980 6 ELT 107, Mama Drinks Production Ltd. v. Assistant Collector, 1987 30 ELT 224and Union of India v. Oswal Woolen Ltd., 1984 18 ELT 284.

(3.) We have given our thoughtful consideration to the submissions of Shri Goyal but do not find any merit in them. Rules 57-A to 57-J have been inserted in the 1944 Rules through various notifications issued by the Government of India in exercise of its rule making power under the 1944 Act. Rule 233 is also a part of the scheme of 1944 Rules. Rule 57-A lays down that Chapter relating to Modvat Credit shall apply to such finished exciseable goods as may, be notified by the Central Government for the purpose of allowing credit of any duty of excise or the additional duty under Section 7 of the Customs Tariff Act, 1975. Rule 57-B speaks of credit of duty in respect of inputs obtained from small scale manufacturers. Rule 57-C says that credit of duty is not to be allowed if final products are exempt from the whole of the duty of excise livable thereon. Rule 57-D says that credit of duty is not to be denied or varied in certain circumstances specified therein. Rule 57-E relates to adjustment in duty credit. Rule 57-F provides the manner of utilisation of the inputs and the credit-allowed in respect of duty paid thereon. Rule 57-G lays down the procedure which is required to be observed by the manufacturer. The other rules of this Chapter are not relevant for the purposes of this case and, therefore, reference to them is being avoided. Rule 233 empowers the Central Board of Excise and Customs, Collectors and Assistant Collectors to issue written instructions providing for supplemental matter. Rule 57-G and Rule 233 which have direct bearing on the issue raised in this writ petition are re-produced below :-