MADRAS VANASPATI LTD Vs. CCE

JUDGEMENT

(1.) THIS appeal arises from the order in appeal No. 107/96(M) dated 19.4.1996 passed by the Collector (Appeals) confirming the duty demand of Rs. 9,53,041.13 on the ground that Notification 27/87 had been rescinded and that the manufacturer was entitled to utilise the money credit only to the extent of Rs. 7,33,695/ -. The brief facts of the case are that the appellants are engaged in the manufacture of vanaspati (hydrogenated vegetable oil). The Govt. of India in order to encourage the industries who were manufacturing vegetable products by using minor oils had introduced money credit scheme by virtue of Notification 27/87 -CE dated 1.3.1987, issued under Rule 57K of the CE Rules 1944. Pursuant to the said scheme, the appellants were permitted to avail credit of Rs. 1,000/ - per MT of minor oil used by them for manufacture of Vanaspati with regard to payment of duty. This benefit was utilised by them from 1987 onwards. However, by Notification 39/89 dated 25.8.1989, the earlier notification No. 27/87 was rescinded and the appellants were not permitted to avail of the money credit to the tune of Rs. 16,86,736.13 accrued to them as on 25.8.1989 as the department objected to the appellants utilising the money credit as on 25.8.1989. Appellants therefore, filed a writ petition No. 12979/89 before the Madras High Court challenging the action of the department. The Madras High Court by order dated 4.2.1992 allowed the writ petition permitting the appellants to utilise the money credit. The department while granting the relief under the said order however, took an undertaking from the appellants to grant the benefit subject to the outcome of the Writ appeal which they would pursue. However, the said writ appeal filed by the Revenue also was dismissed. The Revenue not being satisfied with the conclusive judgement of the Madras High Court rendered in the Writ Appeal holding that the appellants are entitled to utilise and avail the money credit accrued to them as on 25.8.1989, issued show cause notice dated 19.1.1994 calling upon the appellants to show cause as to why they should not finalise the provisional assessment done in respect of the clearances of the goods i.e. vanaspati effected under AR -1 717/92 -93 dated 24.4.1992 and 174/92 -93 dated 31.12.1992 by regularising the utilisation of credit to the extent of Rs. 3,77,695 (sic should read Rs. 7,33,695) which could not be utilised for the period from 25.8.1989 to 31.10.1989 in respect of 7,33,695 MT vanaspati cleared during the period on payment of full duty @ Rs. 1900 per MT and payment of excessive utilisation of credit to the extent of Rs. 9,53,041.13 by the manufacturer in the account current maintained by them under Rule 9 of the CE Rules and simultaneously granting credit of the said amount into RG 23B Part II maintained under Notification 45/89. In accordance with the Madras High Court Judgements dated 4.2.1997 and 21.7.1992 under Rule 9B and Rule 57P of the CE Rules, 1944 show cause notice was issued to the appellants calling upon them to explain why action proposed to be taken should not be taken under Rule 9B and Rule 57P. The show cause notice clearly indicated the various facts about the appellants filing Writ petition and succeeding before the Single Bench and the background of the Revenue taking undertaking subject to the Revenue filing Writ appeal. The show cause notice indicated that the undertaking taken from the manufacturer without executing a bond under Rule 9B till the outcome of the Writ appeal filed by the department could be treated as partly on provisional basis and in effect the notice alleged clearance of vanaspati effected under AR -1 17/92 -93 dated 24.4.1992 to 174/92 -93 dated 31.12.1992 were provisional under Rule 9B of CE Rules, 1944. Then it proceeded to say that the writ appeal was dismissed by the High Court on 21.7.1992 as it has no substance and also proceeded to say that the department had come to the conclusion that it is not a fit case to go in for SLP and therefore it became necessary to finalise the provisional assessment for the period from 24.4.1992 to 31.12.1992 in respect of the clearances of vanaspati effected under the said AR -1s. The main crux of the show cause notice is that the money credit can be utilised for payment of duty to the extent of Rs. 1000/ - per MT only on RG 23B Part II maintained for the purpose of Notification 45/89 and the balance amount of Rs. 900/ - is required to be paid by them as under the Notification they were required to pay full duty @ Rs. 1900 per MT. In effect the show cause notice stated that the appellants could utilise money credit in terms of Notification 27/87 and 45/89 in terms of its condition No. III on individual clearances of final product only to the extent of Rs. 1000/ - per MT and the excess of it is required to be paid by them and money credit cannot be utilised for adjusting the entire duty liability as per the Notification @ Rs. 1900/ - per MT.

(2.) BY reply dated 17.2.1994 the appellants contested the claim of the department in the show cause notice on the ground that in terms of the Madras High Court judgement in the writ appeal, they are entitled to adjustment of any money credit accrued to them while clearing the final product under Notification 45/89. They contested the departmental claim of undertaking given by them at the time of utilising the money credit in terms of the judgement rendered in the writ petition to enable the department to go in for Writ appeal, cannot be considered as provisional assessment. They stated that the High Court had categorically held that they were entitled to avail the money credit accrued to them and they were entitled to adjust the same @ Rs. 900 per MT apart from claiming the benefit of Rs. 1000/ - per MT as per Notification 45/89. They contested the Revenue's plea that money credit earned by them under both these Notifications issued under the rules cannot be regarded as separate and independent, as incorrect. They stated that both the Notifications 25/87 and 45/89 are independent from each other and were for different purposes. They stated that the money credit which were there in their account can be utilised for clearances made for final product under Notification 45/89 and in this regard relied upon the judgement of the Karnataka High Court in the case of Modern Mills Ltd. wherein on the same point the High Court had clearly clarified that party can utilise the benefit under Notification 45/89 in addition to the accumulated credit accrued to them under Notification 27/87 already earned upto the date when it was rescinded. They stated that the judgement rendered by the Madras High Court in Writ appeal is binding on the department and the question of not giving effect to the judgement by issue of show cause notice does not arise. The pleas were rejected by the AC and the AC held that the undertaking taken by the department at the time of filing the Writ appeal is required to be construed as provisional assessment and therefore held that the appellants cannot take dual benefit of both the Notifications. He held that he was finalising the assessment already resorted to in respect of clearances of vanaspati effected under AR -1 17/92 -93 dated 24.4.1992 to 174/92 -93 dated 31.12.1992 by regularising the utilisation of credit to the extent of Rs. 7,33,695 out of Rs. 16,86,733.13 rightfully earned by them. Further, under Notification dated 27/87 which was outstanding as on 25.8.1989 i.e. the date of rescinding of Notification 27/87 dated 1.3.1987 and which credit could not be utilised during the period from 28(sic).8.1989 to 31.10.1989 in respect of Rs. 7,33,695 MT of vanaspati cleared during the said period he demanded payment of excess utilisation of the credit to the tune of Rs. 9,53,041.13 under Rule 9 of the CE Rules, 1944.

(3.) THE Collector (Appeals) also rejected the appellants' plea that there was no provisional assessment in terms of Rule 9B.