Shri Jeet Ram Kait

1. This is an appeal filed by M/s. Krebs Biochemical Ltd. who are a 100% Export Oriented Unit (EOU), holding the licence No. 7/93 for manufacture of bulk drugs.

2. Ld. Counsel Shri S.S. Radhakrishnan appearing for appellants submits that this unit was permitted by the Govt. of India to convert into a domestic tariff area as per the Govt. of India, Ministry of Commerce letter dated 30.12.94. For this purpose, duty was demanded on the indigenously acquired capital goods as per demand notice dated 5.6.95 of the Asst. Commissioner of Central Excise, Nellore division and accordingly an amount of Rs. 16,33,355/- was paid under T.R. 6 challan No. 1/95-96 dated 6.6.95. M/s. Krebs Bio-chemicals Ltd. sought for permission from the ACCE to avail modvat credit for the above said amount and their claim was rejected as per Order-in-Original No. 44/95 dated 20.11.95.

3. Aggrieved by this order,they field an appeal to Commissioner of Central Excise (Appeals), Hyderabad who also rejected their appeal vide Order-in-Appeal No. 93/96 (G) (CE) dated 27.11.96 on the following grounds:-

(a) 57Q (2) did not allow the credit to goods received prior to 16.3.95.

(b) Capital Goods Credit came into effect from 1.3.94. Except a few goods, rest were received prior to 1.3.94.

(c) The machinery were used for manufacture of goods which were exempted from duty being 100% Export Oriented Unit.

(d) Under Rule 57T (3) the credit could be allowed on the strength of invoice/Bill of Entry/other document specified under Rule 57G. Since the duty was paid on de-bonding under T.R. 6 challan, credit could not be allowed, T.R. 6 challan being an unspecified document,

(e) No mandatory provision to allow credit on capital goods lying in factory on the date of de-bonding.

(f) The Commissioner (Appeals) held that only the Additional Customs Duty (CVD) paid on the imported goods on de-bonding was alone eligible for capital goods credit. Since the assessee paid only Excise duty on the indigenous goods no Modvat Credit could be allowed in terms of Circular dated 19.3.96 of the Board.

4. Ld. Counsel has further submitted that the lower authorities have denied modvat credit on the ground that T.R. 6 challan is not a specified document for the purpose of payment of duty. Further, they have submitted that sub-rule (2) to Rule 57Q was inserted w.e.f. 16.3.95, when this scheme was expanded, they have since paid duty vide T.R. 6 challan dated 6.6.95, they have rightly claimed the modvat credit on the (SIC) capital goods.

5. The contention of the department that no modvat credit was allowable prior to 16.3.95 since there was no provision under Central Excise Rules for such allowance is patently incorrect in as much as the goods have been debonded and duty has been paid on them vide challan NO. 1/95-96 dated 6.6.95 i.e. to say that after 16.3.95 when this scheme by allowing modvat credit on capital gods was expanded. They further submitted that since the machinery in the 100% EOU was removed on payment of duty on 6.6.95 to the domestic tariff area unit and used by the appellants on being registered under Rule 174 of Central Excise Rules, 1944 on 7.6.95, appellant is eligible for availing the credit in as much as machinery were deemed to have been removed from 100% EOU undertaking and received in domestic tariff area unit only in June 95. They have submitted that since gods have been debonded and duty has been paid under T.R. 6 challan, no invoice can be issued for the goods transferred from 100% EOU to domestic tariff area unit since it does not involve sale. IN this connection, Ld. Counsel has referred to sub-rule (4) of Rule 57(T) which is extracted herein below:-

"Notwithstanding anything contained in Sub-Rule (2) in respect of the capital goods manufactured by a manufacturer in his own factory for the manufacture of final product, credit of duty of Excise on such Capital goods shall be allowed to be taken."

6. In this connection, appellants have relied on the decision of the Tribunal in the case of GABRIEL INDIA LTD. Vs CCE - : 1993 (67) ELT 131 (T). In that case, the assessee had received certain input form M/s. Neha Engineering (P) Ltd. They were not issued Gate Passes at the relevant time and had paid duty under T.R. 6 challan. M/s. Neha Engineering (P) Ltd. had also obtained a certificate from the Range Superintendent to the effect that payment of duty was made under T.R. 6 challan. The Tribunal had held that payment under T.R. 6 challan was correlated to the goods acquired under the invoice consigned to the appellant by the certificate issued by the range Superintendent. Ld. Counsel has relied on the Tribunal judgements in the matter of SUPRABHAT STEEL LTD Vs CCE Patna - 1999 (34) RLT 753 (CEGAT) and CCE Chandigarh Vs. SUD PINES (P) LTD.- 2001 (42) RLT 444 (CEGAT). Ld. Counsel has, therefore, submitted that their claiming modvat credit for the amounts which they have paid as Central Excise duty on the capital goods be held to be correct,and their appeal may be allowed with consequential relief.

7. Ld. DR Shri S. Kannan submit that no invoice has been issued in this case, and therefore as correctly held by the Commissioner (Appeals) and by the AC, since T.R. 6 challan is not a specified document, modvat cannot be allowed on this documents. Shri Kannan also submitted that duty has been paid on the depreciated amount on the date of debonding with regard to goods which were received from 1993 onwards and during this time, no modvat credit scheme was there on capital goods which came only with effect from 1.3.94 and was extended from 16.3.95. He further states that the Board vide their circular No. 185/19/96-CX-dated 19.3.96 has clarified that modvat credit can be allowed to be extent of CVD paid on imported capital gods and this does not talk of capital goods procured form the domestic market which are later debonded.

8. Heard both sides and we are of the considered opinion that appellants are entitled for modvat credit of Rs. 16,33,355/- as the duty was paid on the debonded capital gods vide T.R. 6 challan No. 1/95-96 dated 6.6.95 whereas the modvat credit on capital goods came into effect from 1.3.94 which was further extended on certain other capital goods w.e.f. 16.3.95. Therefore, plea of the department is not accepted.

9. As regards the plea taken by Ld. DR that modvat credit can be allowed to the extent of CVD paid on imported capital gods and no modvat credit can be allowed on indigenously procured capital gods which have been subsequently debonded by the 100% EOU, we find that, in this regard para-3 of CBEC circular No. 185/19/96-CX dated 19.3.96 is very relevant, and the Board after examining the issue has clarified that modvat credit can even be allowed on capital goods procured from the domestic market.

10. As regard the plea taken that T.R. 6 challan is not a specified document for taking modvat credit, the issue squarely is covered by the judgment of Tribunal in the case of GABRIEL INDIA LTD Vs CCE (supra). Respectfully, following the above judgment, we set aside the impugned order and allow the appeal with consequential relief, if any, as per law.

(Dictated and Pronounced in open court)