PUSHPAMAN FORGINGS Vs. COMMISSIONER OF CENTRAL EXCISE,

JUDGEMENT

(1.) THE appellant is engaged in the manufacture forged products of steel falling under chapter 73 of the Central Excise Tariff Act. They have been availing credit of duty paid on the inputs used in or in relation to the manufacture of final forged products of steel specified under notification 5/94 CE (NT) dated 1.3.94. They availed of the credit of paid on such inputs for payment of excise duty on the final products under 57F of the Rules. Normally, the appellants manufactured the final products on the basis of the orders placed by its customers who are industrial customers, and manufactured by them hence the products were tailer -made. Amongst its customers, the appellants have as their customer the Defence Department of the Government of India. Whenever the appellant supplies the goods to the Defence Department, for such manufactured goods they do not pay any duty. This is because of notification 4/97 dated 1.3.1997, which fixes the duty at nil rate subject to the following procedure under Chapter X of the Central Excise Rules. The facts of the case therefore are that at the time when the appellant took credit of the inputs for manufacturing the final products, certain category thereof suffered duty at the time of removal and in respect of another category of goods which were sold to the defence department, for this category of goods sold did not suffer duty. Under the circumstances, the provisions of Rules 57C and 57CC of the Modvat Credit Rules come into play. The submission of the appellant before the authorities below was that in terms of Rule 57CC of the Rules, they reversed the modvat credit to the extent of inputs used in the manufacture of final products. The contention of the department is that they must pay 8% of the sale price of the products. A Show Cause Notice dated 2.6.98 was issued to the appellants demanding payment of Rs. 5,64.897/ - under Rules 57I and 57CC of the Central Excise Rules read with Section 11A of the Central Excise Act. The appellant objected to it. The Order -in -Original and Order -in -Appeal were passed by both authorities below rejecting the contention raised by the assessee. Hence the present appeal.

(2.) LD . counsel for the appellant contended before us that in terms of the Central Excise Rules and the decision of the Tribunal in Dharamsi Morarjee Chemical Co. Ltd. v. CCE and C Jaipur reported in 2001 (44) RLT 441 whereunder in the similar situation the Tribunal accepted the similar contentions raised by the assessee. The argument made before us by the appellant is that the amount demanded by the department cannot be treated as modvat credit in terms of a circular issued by the Ministry of Finance letter issued in file No. B -42/1/96 -TRU dated 27.9.96 reflected in Bombay Collectorate Trade Notice No. 70/96 dated 14.10.96 vide file No. V(30)1/GE/T/96 PT -I issued by Mumbai Collectorate where it was indicated as follows.

(3.) THE contention raised by the assessee before us is that the amount demanded under Rule 57CC is not a duty. Therefore there is no machinery for collecting the amount sought to be demanded provided under the Act and Rules. Ld. counsel specifically says that Section 11A of the Central Excise act deals with the recovery of duty only. It is not duty here. It is also emphasised that under the Board circular it is specifically stated that it is not modvat credit which is sought to be recovered. That is being indicated in the said Ministry of Finance's letter that it is not modvat credit which is sought to be claimed from the assessee. Once that is the position as explained above, the contention raised by the assessee before us is that such an amount of money cannot be claimed or sought to be recovered from them. Ld. DR reiterated the grounds.