C. Satapathy, Member (Technical)
1. The appellants manufacture Sanitary Napkins falling under sub-heading 4818.10/5601.10 which were liable to duty at the rate of 8% upto 29/02/2000. At the end of dated 29/02/2000, the appellants had stock of finished goods valued of Rs. 6,69,839/-. Sanitary Napkins were completely exempted from duty under Notification No. 7/2000 dtd. 01/03/2000. The stock of Sanitary Napkins lying in stock at the end of 29/02/2000 was cleared on or after 01/03/2000 without payment of duty claiming benefit of Notification No. 7/2000 dtd. 01/03/2000. The issue involved in this appeal relates to demand of duty on such clearances. The Assistant Commissioner has confirmed a demand of Rs. 39,458/- on such clearances on the ground that these were liable to duty at the rate of 4.8% on a clearance value of Rs. 2,13,244/- and at the rate of 6.4% on the subsequent clearance value of Rs. 4,56,595/- being the rates prevailing at the time these goods were manufactured in terms of Notification No. 9/99-CE dtd. 28/02/1999.
2. The Commissioner (Appeals) has upheld the order of the Assistant Commissioner but curiously states that the issue before him is whether modvat credit on inputs used in the manufacture of final product cleared at nil rate of duty is admissible or not. He refers to the Allahabad High Court decision in the case of Super Cassette Industries Ltd. v. C.C.E. - 1997 (94) E.L.T. 302 (All. H.C.) which is on the subject of duty credit on inputs used in exempted products.
3. We fail to understand when the original Adjudicating authority deals with the issue of dutiability of the finished goods, how the Commissioner (Appeals) deals with totally different issue of admissibility of input duty credit and yet upholds the order passed by the original Adjudicating authority. We, therefore, proceed to decide on the ground on which the original Adjudicating authority has confirmed the demand.
4. Shri T. Vishwanathan, learned Advocate for the appellants draws our attention to the decision of the Apex Court in the case of Wallace Flour Mills Company Ltd. v. C.C.E. - 1989 (44) E.L.T. 598 (S.C.) and states that the rate of duty as prevalent on the date of removal is applicable in terms of the said decision. He also draws our attention to Board's Circular No. 5/90-CX-1 dtd. 20/02/1990 which also refers to the decision of the Apex Court cited above and withdraws its earlier instructions of 1979 and 1983. The learned Advocate states that according to this circular of the Board, the duty is applicable as prevailing on the date of clearances which was nil in the instant case and therefore, the demand cannot be sustained.
5. Shri. M.K. Gupta, learned Jt. C.D.R. appearing for the Department fairly states that the Show Cause Notice has been wrongly issued by applying the decision of the Apex Court in the case of CCE, Hyderabad v. Vazir Sultan Tobacco Ltd. - 1996 (83) E.L.T. 3 (S.C.) which related to lapse of levy of special excise duty.
6. After hearing rival submissions and perusal of case records, we find that the order passed by the Commissioner (Appeals) cannot be sustained as it deals with an entirely different issue and not the one dealt with by the Original Adjudicating authority. We also find that the impugned order in original passed by the Assistant Commissioner cannot be sustained in view of the Apex Court decision in the case of Wallace Flour Mills Company Ltd. as well as Board's specific instructions dtd. 20/02/1990 requiring duty to be charged at the rate prevailing on the date of removal. In the instant case, on the date of removal the goods were chargeable to nil duty and hence the question of demanding duty on the same does not arise.
7. Accordingly, the impugned orders passed by the lower authorities are set aside and appeal is allowed. The stay application also stands disposed off.
(Pronounced in Court)