Commissioner of Central Excise v. Customs, Excise & Gold (Control) Appellate Tribunal South Regional Bench

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 08.01.2008CORAM:THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANandTHE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMANR.C.P.NO.23 OF 2000Commissioner of Central ExciseCoimbatore. .. Petitioner versus1. Customs, Excise & Gold (Control) Appellate Tribunal South Regional Bench Shastri Bhavan Annexe Chennai.2. M/s.Elgi Ultra Industries Limited Chenniampalayam, Avanashi Road Arasur Post, Coimbatore. .. RespondentsThe name of second respondenthas been amended as above from "M/s.Elgi Polytex Limited" as per order dated 3.9.2000in R.C.M.P.No.16 of 2001. Reference Case Petition against the Reference Order No.112/99dated 15.10.1999 E/REF/166/98 in E/2401/97 on the file of Customs,Excise & Gold (Control) Appellate Tribunal, South Regional Bench,Chennai. For Petitioner : Mr.T.S.Sivagnanam,SCCGFor Respondents: Mr.Raghul Balaji (R2) https://hcservices.ecourts.gov.in/hcservices/ ORDER(Order of the Court was made by CHITRA VENKATARAMAN,J.)This is a petition filed by the Revenue under Section 35-H ofthe Central Excise Act, 1944, to direct the first respondentTribunal to state the case on the following question of law set outin the petition for its opinion:"Whether the Hon'ble Tribunal is correct inordering for extension of Modvat benefit to theassessee who have not followed a procedure andhave not filed any declaration under Rule 57G ofthe Central Excise Rules, 1944?"2. The assessee engaged in the manufacture of Drip IrrigationSystem claimed exemption in respect of the HDPE/LDPE pipes clearedduring the period 1.10.1995 to 4.3.1996, used in manufacture of DripIrrigation System. The contention of Revenue is that in the courseof inspection of the Departmental officials at the unit of theassessee on 5.3.1996, it was found that the HDPE and LDPE pipes weremanufactured and cleared by the assessee in the guise of parts ofdrip irrigation system. The pipes were classifiable under ChapterHeading 3917 of the Central Excise Tariff Act, 1985. They are partsof general use and not meant for use solely and principally withDrip Irrigation System and hence not exempt from payment of dutyas parts of the Drip Irrigation System. Drip Irrigation System andparts fall under Heading 84.24 exempt from duty in terms of NOMNo.56/95 CE dated 16.3.1995. The Revenue's contention is that thesaid pipes manufactured were not exempt items. The Revenue viewedthat since the assessee cleared the HDPE/LDPE Pipes along with otherbought out items and used in the assembly of the Drip IrrigationSystem at the site of the customer, the exemption from duty was notavailable. However, concessional rate as per Notification 1/93 wasapplied resulting in a demand of Rs.39,70,085/- and allowed theassessee to avail the MODVAT credit of duty pass on the inputs usedin the manufacture of the said pipes. The assessee preferred appealbefore the Customs Excise and Gold (Control) Appellate Tribunalagainst the duty levied and the Revenue also preferred an appeal onextending the MODVAT credit, on the view that the assessee was notentitled to have the benefit of MODVAT credit in the absence of anydeclaration filed in accordance with the provisions of the Act. Itis stated that the appeal filed by the assessee as against theclassification issued has not reached finality. However, the appealpreferred by the Revenue before the Customs, Excise and Gold(Control) Appellate Tribunal was dismissed by applying the decision https://hcservices.ecourts.gov.in/hcservices/ of the Supreme Court in the case of M/S.FORMICA INDIA DIVISION Vs.COLLECTOR OF CENTRAL EXCISE reported in 1995 (77) ELT 511 (SC) thatthe assessee was entitled to have the benefit of MODVAT credit underRule 57-G. Aggrieved by the same, the Revenue preferred ReferenceApplication before the first respondent Tribunal to refer the matterto the High Court on the following question of law:"Whether the Hon'ble Tribunal is correct inordering for extension of Modvat benefit to theassessee who have not followed a procedure and havenot filed any declaration under Rule 57G of theCentral Excise Rules, 1944."3. The first respondent-Tribunal dismissed the said applicationin Reference Order No.112/99 dated 15.10.1999 holding that the orderin appeal was passed following the decision of the Supreme Court inM/S.FORMICA INDIA DIVISION Vs. COLLECTOR OF CENTRAL EXCISE reportedin 1995 (77) ELT 511 (SC). Hence, no referable question of lawarose. The aggrieved Revenue has filed the Reference Case Petitionseeking a direction to the Tribunal to state the case on thequestion of law referred to above.4. Learned Senior Counsel for Central Government appearing forthe Revenue submitted that the decision of the Supreme Court in thecase of M/S.FORMICA INDIA DIVISION Vs. COLLECTOR OF CENTRAL EXCISEreported in 1995 (77) ELT 511 (SC) has no relevance to the facts ofthe case. He submitted that the items manufactured namely, pipes,cannot be called as parts of Drip Irrigation System, and consideringthe capability of the general use, the question of exempting theitems did not arise. Further, when the assessee had not followedthe procedure of filing the declaration under Section 57-G of theCentral Excise Rules, 1944, the question of ordering the MODVATbenefit did not arise in this case.5. Per contra, learned counsel appearing for the secondrespondent relied on a decision of this Court in the case ofCOMMISSIONER OF CENTRAL EXCISE, SALEM VS. M/S.CHEMPLAST SANMARLIMITED, METTUR DAM reported in (2005) 2 MLJ 253. In the saiddecision, after referring to the decision of the Apex Court inM/S.FORMICA INDIA DIVISION Vs. COLLECTOR OF CENTRAL EXCISE reportedin 1995 (77) ELT 511 (SC), the Division Bench of this Court took theview that MODVAT credit could not be denied to the assessee on amere technical ground that the procedure prescribed for availment ofcredit had not been followed at the material time. This Court held:"Rule 56-A relating to set off of duty is a pre-cursor to the Modvat Scheme, both of which are https://hcservices.ecourts.gov.in/hcservices/ schemes intended to obviate cascading effect ofduty paid at various intermediate stages. "This Court held that since the assessee was claiming exemption andat that point of time, it was not possible for the assessee to havecomplied with the procedural requirements for availing MODVATcredit, it was not open to the Department to deny the MODVAT crediton the technical ground that the procedure prescribed for availmentof credit had not been followed at the material time.It may be noted that the only limited question that arose forconsideration before the Tribunal was whether the assessee would beentitled to the benefit of MODVAT credit when the assessee had notfollowed the procedure under Section 54-G. Admittedly, the questionof dutiability has been in issue and the consistent case of theassessee is that it is part of the Drip Irrigation System. Whateverbe the merit of the contention on this point, when the veryliability was denied and when the assessee had paid the duty underprotest, the assessee could not ordinarily comply with therequirement of Rule 56-A at the first instance itself. Hence,rightly the Tribunal confirmed the view of the Commissioner,following the decision of the Apex Court. The situation in thepresent case is no different from the one that prevailed in thedecided case of the Supreme Court referred to by the Tribunal. Inthe circumstances, we do not find any referable question of law todirect the Tribunal to state a case to this Court. Hence, theReference Case Petition stands dismissed. uskSd/-Asst. Registrar./true copy/Sub Asst. Registrar.To:1. The Customs, Excise & Gold (Control) Appellate Tribunal South Regional Bench Shastri Bhavan Annexe Chennai. https://hcservices.ecourts.gov.in/hcservices/

2. The Commissioner of Central Excise Coimbatore.1 cc to Mr.T.S.Sivagnanam, Advocate, SR.18341 cc to Mr.Satish Parasaran, Advocate, SR.1772bv (co)dv/5.2.R.C.P.No.23 of 2000