2004 (97) ECC 378 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Chennai

Shri S.L. Peeran, Member (J) and Shri Jeet Ram Kait, Member (T)

India Japan Lighting Ltd.

Versus

CCE, Chennai

Appeal No. E/633/2002/Md

[Arising out of Order-in-Appeal No. 109/2002 (M-II) dated 30.8.2002 passed by the Commissioner of Central Excise (Appeals), Chennai]

Final Order No. 462/2004, dt. 8.6.2004, Certified on 14.6.2004

Additional duty

100% EOU -- Assessee contended that manufacturer cleared the goods to DTA in terms of Notification No. 2/95-CE dt. 4.1.1995, taking full credit of duty, later on reverse the excess credit to the amount equal to the additional duty of custom leviable in terms of Notification No. 5/94-CE (NT), dt. 1.3.1994 superseded by Notification No. 21/99-CE (NT) dt. 28.2.1999 -- Tribunal held that the question of restricting the benefit to the additional duty actually paid under Section 3 of the CTA, does not arise because there is no payment of additional duty of customs and what was paid was only central excise duty -- Section 3 of Customs Tariff Act. r/w Rule 57B(1) of Central Excise Act and Additional Duty of Excise (Goods of Special Importance) Act, 1957 and Section 2(23) of the Customs Act.

Appeal allowed

PRESENT :

Shri R. Swaminathan, Adv. for the appellant.

Smt. Bhagyadevi, SDR for the respondent.

Cases Cited :

1. CCE, Meerut v. Weston Electronics Ltd., 1997 (95) ELT 624............................. [Para 5]

2. Innovative Tech Pack Ltd. v. CCE, New Delhi-III, 2000(122) ELT 94................... [Para 6]

3. Kundalia Industries v. CCE, Delhi, 2001 (127) ELT 151..................................... [Para 6]

4. Maruti Udyog Ltd. v. CCE, New Delhi in Appeal No. E/1972/2002-NB(DB) decided on 27.12.2002 [Paras 3, 5 & 6]

5. Maruti Udyog Ltd. in Appeal No. E/1459/2003-NBC, dated 17.11.2003................ [Para 6]

6. Vikram Ispat v. CCE, Mumbai, 2000 (120) ELT 800 (Tri-LB) (Followed)... [Paras 3, 5 & 6]

Per : Jeet Ram Kait (Oral)

M/s India Japan Lighting Ltd., the appellants herein, challenge the Order-in-Appeal No. 109/2002(M-II) dated 30.8.2002 passed by the Commissioner of Central Excise (Appeals), Chennai), by which the Commissioner has upheld the order of the original authority and rejected the appeal filed by the appellants. The original authority held that the benefit of Modvat Credit is admissible only to the extent of the additional duty of Customs actually paid and not leviable on the goods.

2. The brief facts of the case are that the appellants are engaged in the manufacture of Automotive Lighting Equipment such as Lamps, rear combination lamps, licence plate lamps room lamps, front signal lamps etc. all falling under chapter 85 of the CETA, 1985. They avail Cenvat Credit/Modvat Credit on the inputs viz. Phoenix brand bulbs supplied by M/s Maruti Udyog Ltd. (M/s MUL) and used in the manufacture of their final products meant for M/s MUL. The Phoenix brand bulbs are purchased by M/s MUL from M/s Phoenix Lamps India Ltd. which is a 100% EOU situated at Noida Export Processing Zone,. Noida; These bulbs were cleared by M/s Phoenix Lamps India Ltd. under DTA clearance procedure in terms of Notification No. 2/95-CE dated 4.1.95. It was noticed by the department that the appellants had availed credit of full duty amount shown in the invoice of M/s MUL as Basic Excise duty. The Basic excise duty shown in the invoice of M/s MUL included all the customs duties paid by M/s Phoenix under Notification No. 2/95-CE dated 4.1.95. M/s MUL have passed on Modvat/Cenvat Credit of the entire amount of duty paid on the Hologem Lamps purchased from M/s Phoenix India Ltd. including the basic customs duty, surcharge SAD etc. instead of the amount equal to the additional duty of customs paid on the goods by M/s Phoenix and supplied to M/s MUL. It was in this circumstances show cause notice was issued to the appellants proposing to disallow the wrongly availed credit of Rs. 12,86,915 under Rule 57I/57AH of the (sic) and also to impose penalty under Rule 173Q and the show cause notice culminated in the order of adjudication passed by the original authority wherein he has held that the appellants are eligible to the credit of duty equal to the Additional duty of Customs paid and not Additional duty of Customs leviable. The lower appellate authority agreed with the view taken by the original authority and rejected the appeal filed by the appellants. Aggrieved by the said order of the lower appellate authority, the appellants have filed this appeal.

3. Shri R. Swaminathan, learned Counsel appearing for the appellants submitted that they have received the inputs from M/s MUL and the said supplier has passed on the entire duty of excise paid by them to the appellants and thus they are entitled to take the entire credit as passed on to them by the supplier. He has further submitted that even assuming that the goods were supplied by a 100% EOU in terms of Notification No. 2/95-CE dated 1.4.95, they are entitled to take credit to the extent of Additional Duty of Customs leviable on the goods. In support of his plea he has invited our attention to the Larger Bench judgment in the case of Vikram Ispat v. CCE, Mumbai, 2000 (120) ELT 800 (Tri-LB) and submitted that the issue is covered by the said judgment and prayed for allowing the appeal. He has also filed copies of the order passed by the North Regional Bench in the case of M/s Maruti Udyog Ltd. v. CCE, New Delhi in Appeal No. E/1972/2002-NB(DB) decided on 27.12.2002 and also their subsequent decision in the case of same assessee in Appeal No. E/1459/2003-NBC dated 17.11.2003. In both decisions the North Regional Bench has followed the ratio in the case of Vikram Ispat v. CCE, Mumbai, 2000 (120) ELT 800(Tri-LB). The learned Counsel therefore, prayed for allowing the appeal.

4. Smt Bhagyadevi, learned SDR on the other hand defended the impugned order and submitted that credit admissible has to be restricted to the Additional Duty of Customs actually paid and not leviable, in terms of Notification No. 5/94-CE (NT) dated 1.3.1994, superseded by Notification No. 21/99-CE(NT) dt. 28.2.99. She, therefore, prayed for rejection of the appeal.

5. We have very carefully considered the rival submissions made. We observe that in the instant case the appellants have received Phoenix brand bulbs from M/s MUL for manufacture of final products meant for M/s MUL to whom the Phoenix brand bulbs were supplied by M/s Phoenix Lamps India Ltd. a 100% EOU situated at Noida Export Processing Zone, on payment of duty of excise in terms of Notfn. No. 2/95-CE dt. 4.1.95. The plea of the appellants that the supplies from M/s MUL cannot be treated as supply from 100% EOU cannot be countenanced because, the goods were cleared to the DTA in terms of Notification 2/95-CE dated 4.1.1995. The appellants had initially taken the full credit of duty shown as Basic Excise duty in the invoice of M/s MUL, but later on reversed the excess credit of Rs. 3,28,471, thus restricting the credit to the amount equal to the additional duty of Customs leviable in terms of Notification No. 5/94-CE (NT) dt. 1.3.94, superseded by Notification No. 21/99-CE(NT) dt. 28.2.99 as against the demand of the department that the credit admissible is required to be restricted to the duty which is equal to the additional duty actually paid in terms of Section 3 of the CTA, 1975 and not the additional duty payable. In support of their plea, the appellants have heavily relied upon the Larger Bench judgment in the case of Vikram Ispat v. CCE, Mumbai-III, 2000 (120) ELT 800 (Tribunal-LB), which was followed by the North Regional Bench in the case of M/s Maruti Udyog Ltd. v. CCE, New Delhi in Appeal No. E/1972/2002-NB(DB) decided on 27.12.2002 and also in their subsequent decision in the case of same assessee in Appeal No. E/1459/2003-NBC dated 17.11.2003. We have perused the Larger Bench judgment cited supra. We note that the Larger Bench in the cited case has agreed with the views expressed by the Tribunal in the case of Commissioner of Central Excise, Meerut v. Weston Electronics Ltd., 1997 (95) ELT 624 wherein the Tribunal has held as under:

"A careful reading of this Notification (177/86-CE) shows that the duty collected is central excise duty and out of this central excise duty, only that portion will be eligible for credit which is equal to the additional duty leviable on like goods under Section 3 of the C.T.A., 1975. Now the issue which needs clarification is whether the credit amount should be arrived at after apportioning the quantum of duty to different components namely, basic excise duty, auxiliary duty and additional duty. We observe that the notification is very clear; that we will have to find out the components of additional excise duty presuming that the goods were imported........We have before us only the central excise duty so in that duty we have to find out as to what should be the quantum of presumed additional duty in the total quantity of central excise duty paid by a 100% E.O.U. Once it is known, we have to allow credit to the extent of additional duty leviable on the goods. The department has mixed up the two issues. They have contended that as no additional duty of customs equivalent to duty leviable, has been paid by the manufacturer, the assessee will not be entitled to any Modvat credit. On careful reading of two notifications referred to above and Section 3 of the Central Excise Act, 1944, we find that credit of additional duty of customs has been permitted only for the purpose of bringing in equity in the case where the inputs were imported on payment of additional duty of customs. In the instant case we do not see any connection between actual payment of additional duty by a 100% E.O.U. because what is paid by a 100% EOU is Central Excise duty. If any Central Excise duty has been paid by a 100% EOU, while selling the goods in Domestic Tariff Area, customer becomes entitled to take Modvat credit and the extent of Modvat credit is determined by Notification No. 177/86. So we have to read notification for measuring the quantum of credit that can be taken out of total central excise duty paid on such goods.

5.1 We further note that the Larger Bench in paras 16 and 17 of their judgment has very elaborately dealt with the identical question as to how to determine the quantum of Modvat Credit available to the manufacturer in respect of the goods procured from a 100% EOU. Paras 16 & 17 are reproduced below for convenience of reference.

"16. Notification No. 2/95-C.E., dated 4.1.95 provides that the goods manufactured and cleared by a 100% E.O.U. to DTA will be exempted from so much of duty of excise as is in excess of the amount calculated at the rate of 50% of each of duty of customs leviable read with any other notification for the time being in force on the like goods produced or manufactured outside India, if imported into India provided that the amount of duty payable shall not be less than the duty of excise leviable on like goods produced or manufactured by the units in Domestic Tariff Area read with any relevant notification. It is, thus, apparent that Notification No. 2/95 provides a minimum limit of the rate of duty which has to be paid by the 100% E.O.U. while clearing the goods to DTA and this limit is provided by the duty of excise leviable on like goods manufactured outside 100% E.O.U. However, if the aggregate of duty of customs leviable on goods cleared by 100% E.O.U is more than the duty of excise leviable on like goods, a 100% E.O.U. has to pay more duty.

The Revenue wants to restrict the availment of Modvat Credit to the components of additional duty of customs paid under Section 3 of the Customs Tariff Act by bringing the fiction that 100% E.O.U. is a place which is not in India and the sale therefrom within India is akin to import into India. We do not find any substance in this view of the Revenue. The clearance of the goods by 100% E.O.U. are not import in terms in which it has been defined under Section 2(23) of the Customs Act, according to which import, with its grammatical and cognet expression means bringing into India from a place outside India. This is also apparent from the fact that when the goods are cleared from 100% E.O.U. to any place in India, central excise duty under Section 3(1) of the Central Excise Act is levied and not the customs duty under the Customs Act. If it is to be regarded as import, then the duty has to be charged under Section 12 of the Customs Act, read with Section 3 of the Customs Tariff Act. The Revenue, it seems is confusing the measure of the tax with the nature of the tax. The nature of the duty levied on the goods from 100% E.O.U. is excise duty and nothing else, whereas for determining the quantum of duty the measure adopted is duty leviable under Customs Act as held by the Supreme Court in many cases referred to above. The method adopted by the law makers in recovering the tax cannot alter its character. Once it is held that the duty paid by the 100% E.O.U. in respect of goods cleared to any place in India is excise duty, the question of dissecting the said duty into different components of basic customs duty, auxiliary duty, additional duty of Customs or any other customs duty does not arise. The proforma of AR-IA on which the reliance was placed by the learned DR, cannot change the legal position that the duty levied on 100% E.O.U. is a duty of excise and not customs duty.

17. The question then arises is how to determine the quantum of Modvat credit available to the manufacturer in respect of the goods procured from a 100% EOU. The only method, which we feel, is available to the Revenue is as suggested by the learned Counsel, i.e., ascertain firstly the additional duty of customs leviable on like goods, if imported into India from outside India; ascertain the actual amount of duty paid by the 100% E.O.U. on the goods cleared to any part in India under Notification No. 2/95; after ascertaining these two elements, the Modvat credit has to be allowed to the manufacturer on the basis of the first proviso to Notification No. 5/94-C.E. As per first proviso to this Notification, credit shall be restricted to the extent of duty which is equal to the additional duty leviable on like goods. If the additional duty is less than the actual duty paid on the inputs cleared from 100% E.O.U., the manufacturer in India shall be eligible only for the credit equivalent to the additional customs duty. On the other hand if the duty actually paid by 100% E.O.U. on inputs cleared by them is less than the additional duty of customs payable on like goods the manufacturer shall be eligible only to the extent of actual duty paid by 100% E.O.U. The reading of first proviso to Notification No. 5/94 does not indicate at all that the credit of specified duty shall be restricted to the components of additional customs duty actually paid by 100% E.O.U. as excise duty. Had this been the intention of the Govt., the proviso would not have been termed in the present term. In that situation, the proviso should have provided that the credit of specified duty shall be restricted to the extent of portion of excise duty which is equivalent to the additional duty of Customs paid by the 100% EOU. The phrase "equivalent to the duties of excise specified under (i) & (ii) above paid on such inputs" refers to the payment of (a) duty of excise under the Central Excise Act, and (b) additional duty of excise under the Additional Duties of Excise (Textiles and Textile Articles) Act. If the Additional Customs duty leviable on like goods includes any other excise duty, such as duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Modvat Credit will not be available in respect of such duty".

6. It will be seen from the above judgment, that it directly applies to the facts of the present case, because what is paid by the 100% EOU is Central Excise duty while selling the goods in the DTA in terms of Notfn. 2/95-CE dt. 4.1.95 and the appellants, became entitled to take Modvat Credit to the extent of Modvat Credit as determined by the restriction imposed vide first proviso to Notfn. 5/94, superseded by Notfn. 21/99 read with Explanation (2) to Rule 57B (1) i.e. the appellants are entitled to take credit of the duty amount equivalent to the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975, with the restriction that if the additional duty i.e. less than the actual duty paid, on the inputs cleared from the 100% EOU, then the appellants shall be eligible only for the credit equivalent to the additional customs duty leviable. The Revenue wanted to restrict the credit to the additional duty of customs duty actually paid. In fact, as noted above what is paid is only Excise duty and not additional duty of Customs under Section 3 of the CTA, 1975 and what the law requires is that the benefit should be restricted to the additional duty leviable. This aspect of the matter has been carefully taken note of by the Larger Bench in the cited judgment wherein it is held that "The reading of the first proviso to Notfn. 5/94 does not indicate at all that the credit of specified duty shall be restricted to the components of additional customs duty actually paid by 100% EOU as excise duty". Further, the question of restricting the benefit to the additional duty actually paid (emphasis supplied by us) under Section 3 of the CTA, 1975 does not arise because there is no payment of Additional duty of Customs and what was paid was only Central Excise duty. We are, therefore, of the considered opinion that the issue is no longer res integra as the issue has already been settled by the Larger Bench judgment cited supra and judicial discipline requires that we follow the law laid down by the Larger Bench unless contrary judgment by a higher judicial forum is cited before us. Further, we note that the Larger Bench judgment in the case of Vikram Ispat v. CCE (supra) has been followed by the North Regional Bench of the Tribunal in the case of Innovative Tech Pack Ltd. v. CCE, New Delhi-III, 2000 (122) ELT 94 and also in the case of Kundalia Industries v. CCE, Delhi, 2001 (127) ELT 151. We further note that in identical cases, the North Regional Bench of the Tribunal in the case of M/s Maruti Udyog Ltd. in Appeal No. E/1972/2002-CE decided on 27.12.2000 (sic) 27.12.2002 and also in their subsequent decision in the case of Maruti Udyog Ltd. in Appeal No. E/1459/2003-NBC decided on 17.11.2003 have followed the ratio of the decision of the Larger Bench (supra). Therefore, following the ratio laid down by the Larger Bench in the cited case, we hold that the impugned order is not legal and proper and set aside the impugned order and allow the appeal with consequential relief if any.

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