BOMBAY DYEING & MFG. CO. LTD. Vs. CCE

JUDGEMENT

(1.) HEARD both sides. Shri M.H. Patil, learned Advocate appearing for the appellants states that the appellants manufactured fabrics which they cleared without payment of duty to their job workers for conversion to made up goods which are cleared without payment of duty for export under bond. A small portion of such made ups are not exported due to reasons like cancellation of export orders and these are diverted for sale in the domestic market. The appellants have paid duty on the fabrics as well as made ups subsequently. It is the case of the appellants that they are entitled to duty exemption on fabrics under Notification No. 67/95 treating clearances to the job workers as captive use. In view of the specific condition in the said notification that the inputs manufactured in a factory should be used within the factory of production in or in relation to the manufacture of final products, the claim of the appellants to exemption under the said notification cannot be allowed. The second claim of the appellants is that the duty paid on fabrics is modvatable against duty payable on the made ups. Shri Patil claims that the additional excise duty paid on the fabrics is also modvatable against additional duty payable on Chindies and Ra arising in the course of manufacture of made ups. He also states that though the procedure for availing modvat credit has not been followed on account of the fact that the goods were initially cleared for export and the duty on both fabrics and made ups has been paid subsequently on diversion to the domestic market, the appellants are still entitled to credit in view of the Tribunal's earlier decision in the case of Bharat Wagon & Engg. v. CCE Patna -, 2001 (44) RLT 557 (CEGAT -Kol.) :, 2001 (98) ECR 172 (T), in which following the decision of the Apex Court in the case of Formica India Division v. Collector of CE -, 1995 (77) ELT 511 (SC), it has been held [in Bharat Wagon (Supra)] that on duty being demanded on the goods cleared under exemption notification, duty demanded to be adjusted by allowing modvat credit of duty paid on inputs, though prescribed procedure for availing modvat credit was not followed. He also states that this decision of the Tribunal has been subsequently followed in the case of Ajay Industrial Corporation v. CCE, Meerut -, 2002 (51) RLT 165 (CEGAT -Del. :, 2002 (104) ECR 1083 (T)). He also draws support from the observation of the Apex Court in para 63 of its decision in the case of ITW Signode India Ltd. v. Collector of CE -2003 (158) ELT 403 (SC) :, 2003 (111) ECR 783 (SC). He also cites the decision of the Apex Court in the following two cases in which adjustment of duty paid on the finished goods has been allowed: - -

(2.) SHRI A.K. Saxena, Learned J.D.R. supports the orders passed by the lower authorities on the ground that there is no provision in the rules to allow modvat credit in a situation where duty was not paid at the time of clearance and the procedure including documentation requirement was not adhered to.