Case Law Details
Till and until both the credit earned and the product on which the credit is earned are lawfully utilized, it cannot be said that the credit has been lawfully and completely utilized; of course, the utilization of credit and utilization of input may not necessarily be in relation to one and the same final product; it can be in relation to two different dutiable final products.
CASE LAWS DETAILS
DECIDED BY: CESTAT, PRINCIPAL BENCH, NEW DELHI, IN THE CASE OF: Ranbaxy Laboratories Ltd. Vs. Commissioner of Central Excise, APPEAL NO: Excise Appeal No. 282 of 2007, DECIDED ON April 30, 2010
FACTS
The appellants are engaged in manufacture of medicament classifiable ; under Chapter 29 and 30 of the First Schedule of the Central Excise Tariff Act, 1985, having their unit located in the state of Himachal Pradesh. The appellants undertook expansion programme at their factory in order to avail benefit of the exemption of duty liability on the finished goods under Notification No. 50/2003-CE dated 10.06.2003 and, therefore, filed their declaration in that regard on 10.01.2005. and on that day the appellants had with them some of the inputs in stock, which were procured prior to that day, and they were either lying in the store or contained in the goods in the / manufacturing process or contained in the finished goods in stock.
It is the case of the appellants that in March 2005, they-had already reversed, under protest, the credit of Rs. 3 crore which was earned prior to 10.01.2005 and which was not utilized prior to 1.01.2005, and as regards the inputs in the stock, on that day, the credit taken in respect of duty paid thereon, the same was already utilized prior to 10.01.2005, and therefore the same could not be denied to them, nor can be ordered to be reversed.
It is the case of the department that as per the Cenvat Credit Rules, the credit in respect of the duty paid on the. inputs is admissible provided it is availed and utilized in or in relation to the manufacture of final goods which are not exempt from payment of duty. Therefore a show cause notice dated 21.11.2005 came to be issued to the appellants in relation to Such stock of inputs available with them on which cenvat credit of Rs. 7,69,52,504/- was sough to be wrongly availed.
HELD
It is settled law that one cannot pick and choose one or two sentences from a judgement and label them as the ratio of the decision, ignoring the context in which they are Used, nor such sentences can be taken as a pronouncement of law on a appoint which was neither for consideration before the Court nor factually for consideration with reference to the issue that is determined under the judgement. The ratio has to be carved out from’% the facts of the case, the points which arise for determination and the decision thereon. The observations made in the process of consideration of the issue for determination have to be read in the context of the issue and the facts of that case. De hors the facts and the issue arising for consideration, the decision cannot be held to be laying down the law on unrelated points. The decision of the Apex Court in Dai Ichi Karkaria case cannot be held to lay down a law on the point in issue in the matter in-hand. It was a decision in relation to the valuation of the product wherein the dispute was whether the excise duty on raw material if modified could it be included in the cost of the final excisable product. Observations therein cannot be read and understood de hors the said issue.
There cannot be any dispute that there is no one to one relationship between the input on which credit is earned and the final product for which credit so earned is utilized for payment of duty; however, at the same time it cannot be forgotten that the credit can be lawfully earned only on those inputs which are to be used in dutiable and non-exempted final product. This is abundantly clear from Rule 6(1) of the Cenvat Credit Rules 2004. In fact, the very fact of absence of co-relation between the inputs on which the credit is earned and the final product in respect of which, while paying duty, such credit can be utilized, establishes that till and until the input on which credit is earned is used in or in relation to manufacture of the final dutiable product and the credit earned thereon is utilized for payment of duty in relation to the duty payable on the final dutiable product, the process of utilization of credit is not complete. The scheme of Modvat or Cenvat, which provides for the facility of availing credit in respect of the duty incurred on raw materials to be utilized in the manufacture of the dutiable final product, clearly requires proper utilization of such credit in accordance with the provisions of law, otherwise availment of such credit would be rendered unlawful. To avail the credit lawfully, the “raw material, on which the same is sought to be availed, must be utilized in use manufacture of final dutiable product and the credit earned thereon should also be utilized for payment of duty on the final product. Till and until both the credit earned and the product on which the credit is earned are lawfully utilized, it cannot be said that the credit has been lawfully and completely utilized Of course, the utilization of credit and utilization of input may not necessarily be in relation to one and the same final product’ It can be in relation to two different dutiable final products. However, till and until there is such complete utilization of the input and the credit, there can be no lawful availment and utilization of the credit.
There cannot be any dispute that there is no one to one relationship between the input on which credit is earned and the final product for which credit so earned is utilized for payment of duty; however, at the same time it cannot be forgotten that the credit can be lawfully earned only on those inputs which are to be used in dutiable and non-exempted final product. This is abundantly clear from Rule 6(1) of the Cenvat Credit Rules 2004. In fact, the very fact of absence of co-relation between the inputs on which the credit is earned and the final product in respect of which, while paying duty, such credit can be utilized, establishes that till and until the input on which credit is earned is used in or in relation to manufacture of the final dutiable product and the credit earned thereon is utilized for payment of duty in relation to the duty payable on the final dutiable product, the process of utilization of credit is (not complete. The scheme of Modvat or Cenvat, which provides for the facility of availing credit in respect of the duty incurred on raw materials to be utilized in the manufacture of the dutiable final product, clearly requires proper utilization of such credit in accordance with the provisions of law, otherwise availment of such credit would be rendered unlawful. To avail the credit lawfully, the “raw material, on which the same is sought to be availed, must be utilized in the manufacture of final dutiable product and the credit earned thereon should also be utilized for payment of duty on the final product. Till and until both the credit earned and the product on which the credit is earned are lawfully utilized, it cannot be said that the credit has been lawfully and completely utilized of course, the utilization of credit and utilization of input may not necessarily be in relation to one and the same final product’ It can be in relation to two different dutiable final products. However, till and until there is such complete utilization of the input and the credit, there can be no lawful availment and utilization of the credit.
RELEVANT EXTRACTS:
13. Upon hearing at length the learned Advocates and the representatives for the parties and on perusal of the records placed before us, the following points arise for our consideration:-
(i) Whether the cenvat credit availed on the inputs being in stock on the day the” assessee opts for exemption from payment of duty under Notification No. 50/03 dated 10.06.2003 is required to be reversed?
(ii) Whether the above issue already stands answered and concluded by the decisions of the Larger Bench in Ashok Iron and HMT cases?
(iii) Whether an exemption notification should specifically provide for non availability of cenvat credit facility in relation to the duty paid on inputs which are to be utilized in the goods availing the exemption benefit under such notification?
(iv) Whether the goods cleared for export under bond cannot be considered as the exempted goods, and that therefore, the I manufacturer thereof are entitled to avail the cenvat credit in respect of duty paid on the inputs utilised in manufacture of such final goods, and that whether the appellants are entitled for the rebate as sought to be contended?
(v) Whether in the facts and circumstances of the case, the quantification of duty has been correctly done or not?
14. In case the issue, which is sought to be raised in the matter, had been subject matter of deliberation and decision by any Larger Bench, certainly it would be binding upon us. It is therefore necessary to ascertain whether the issue sought to be raised in the matter already stands answered and concluded by the decisions of the Larger Bench in Ashok Iron case and in HMT case.
15. In Ashok Iron case as is evident from para 3 of the order therein, the issue which was considered was whether the credit availed and utilized under the modvat scheme during the period when the final products were dutiable was required to be reversed when subsequently the final product was exempted from duty liability. At the outset, it is to be noted that this is not the issue which arises for consideration in the matter in hand. In the case in hand, the issue relates to the credit remaining in stock on the day the assessee opts for manufacture of exempted final products on account of non- utilization of the inputs on which such credit was earned by the assessee and not relating to a matter where the credit so earned has already been utilized while the final products were dutiable and not exempted.
16. It is pertinent to note that the Larger Bench after taking note of the a decision of the Apex Court in Dai Ichi Karkaria case held that the Apex v Court therein did not find favour with the submission that the credit so earned is a contingent .credit, that it could be disallowed under certain circumstances, that the manufacturer does not have indefeasible right or title to it, that the credit of excise duty on raw materials in the register maintained for modvat purposes is only a book entry and the same can be utilized later on for payment of excise duty on excisable product and that it gets matured when the excisable product is removed from the factory and the stage for payment of excise duty thereon is reached. Having observed so, it was recorded by Larger Bench that the nature of the credit for excise duty paid on raw material was explained by the Apex Court in Dai Ichi Karkaria case in para 17 of its decision. Further, the Larger Bench while observing that the decisions in the matter of CCE, Meerut vs. Modi Rubber reported in 2001 (133) ELT 515, CCE, Jaipur vs. Raghuvar (India) Ltd., reported in 2000 (118) ELT 311, Chandrapur Magnet Wires (P) Ltd., (supra), CCE, Vadodara vs. Dhiren Chemicals reported in 2002 (139) ELT 3 which were relied upon by the learned DR did not relate to the issue which was referred for the decision, held thus:-
“We find that none of these decisions relates to the issue with which we are concerned. We are not informed that a later decision of the Supreme Court has taken a different view from Dai Ichi Karkaria Limited case. In view of the above, we are bound by the dictum laid down by the Supreme Court in Dai Ichi Karkaria Limited, Since the issue is now covered directly by the by a 4ecisibn of the Apex Court, j we found it not necessary to place the matter before a Bench of 7 if Members even though a Bench in 5 Members has taken a contra view . In other words, the Larger Bench in Ashok Iron did not decide any point of law, except holding that the issue referred for its decision has been already decided by the dictum laid down by the Apex Court in Dai Ichi ; Karkaria case.
17. On account of difference in opinion in two Co-ordinate Benches of the CESTAT, the issue which came to be referred to the Larger Bench in HMT case (supra) was whether the input credit taken when the final product was dutiable, and lying in stock or in process or contained in the final product on the day the final product become exempted product needs to be reversed and or is recoverable. The Tribunal taking note of para 17 of the decision of the Apex Court in Dai Ichi case and referring to the decision of the Larger Bench in Ashok Iron (supra) and the decision of the Tribunal in Albert Dabid Limited vs. CCE, Meerut reported in 2003 (161) ELT 443 (Tri.-Del.), Tractors and Farm Equipment Limited vs. CCE, Mumbai 2007 (212) ELT 223 and TAFE Limited (Tractor Division) vs. CCE, Bangalore reported in 2007 (210) ELT 571 (Tri. Bang.) observed that “We find that limited issue is before us to decide as to whether there was any provision in the rules for reversal of the input credit taken and legally utilized, when the final product was dutiable, subsequently becoming exempt”. It was then held that :-
“In the present case, there is no objection of Revenue whatsoever credit taken by the Appellants and its utilization at the clearance of the dutiable final products. So the taking of credit and its utilization were correct The Hon’ble Supreme Court in the case of Dai Ichi Karkaria Ltd. (supra) decided that when the credit was legally taken and utilized, cannot be demanded unless there is specific ‘ provision. It is settled that there is no one to one correlation of J utilization of credit and use of inputs in the Modvat/Cenvat Scheme.
So, it cannot be said that the appellant utilized the credit wrongly with | the provisions of Rule 12 of Rule 2002 equivalent to Rule 571, Rulef; 57AH of Rule 1944 would not apply”.
18. Further, in para 20 of the decision, it was held by the Larger Bench that:-
“On perusal of the rules 6 of Rule 2002 and the corresponding rules, as mentioned above, we are of the view that the appellants had correctly taken the credit and utilization, when the final product was dutiable and there is no requirement to reverse the credit on the find product becoming exempt and such credit cannot be recovered under rule 12 of Rules 2002 comprising of Rule 571 and 57AH of the Rules 1944?. Having held so, the decision of the Tribunal, in Commissioner vs. CNC Commercial Limited reported in 2006 (206) ELT 874, upheld by the Punjab and Haryana High Court in CCE, Chandigarh vs. CNC Commercial Limited reported in 2008 (224) ELT 239 Commissioner of CEx. Chandigarh vs. Saboo Alloys Private Limited reported in 2008 (228) ELT 422 (Tri. Del.), Swastik Textile Engineers Private Limited vs. CCE, Ahmedabad-I reported in 2007 (214) ELT 198, PSL Limited vs. CCE, Visakhapatnam-I reported in 2007 (214) ELT 238 were agreed with and it was held in para 22 of the order that:-
“when the input credit legally taken and utilized on the dutiable final products, the same need not be reversed on the final product becoming exempt subsequently, w.e.f. 9.7.2004?. Evidently, the proposition which has been laid down by the Larger Bench is to the effect that the credit once availed and utilized lawfully, while the final product was dutiable, then there is no need to reverse Such credit on the final product becoming exempted after such lawful utilization of credit. It is also to be noted that Larger Bench, did not consider the effect of sub-rule 3 of Rule 11 of Rules 2004 introduced under the Notification No.10/2007-CE dated 01.03.2007. Perusal of Larger Bench decision therefore, with utmost respect, discloses that though a point of law which was referred for the decision was similar to the one arising for consideration in the matter in hand, what was decided by the Larger Bench was not on the same point. In fact, the Bench proceeded to decide on the facts of the case by merely referring to certain earlier decisions, including para 17 of the judgement of the Supreme Court in Dai Ichi Karkaria case. Apparently, it was so because the credit was found to have been lawfully utilized when the final goods were dutiable and not exempted. This is apparent from the contents of para 20 of the order which reads that” as mentioned above, we are of the view that the appellants had correctly taken the credit and utilized, when the final product was dutiable….”
19. Perusal of the decisions in Ashok Iron and HMT would, therefore, apparently disclose that the same did not decide the point which arise for the consideration in the matter in hand. Besides, the decisions therein where arrived at while holding that the point referred for decision stood answered by the decision of the Apex Court in Dai Ichi Karkaria case. Being so, it would be appropriate to scan through the decision of the Apex Court in Dai Ichi Karkaria case in order to ascertain the ratio thereof, the subject matter of the dispute and the issues dealt with, the proposition of law laid down . therein and whether the same answers the issue in the matter in hand.
20. In Dai Ichi Karkaria case the point for determination was whether the excise duty paid on the raw materials should form part of the cost of the excisable product, for the purposes of Section 4(1Xb) of the Companies Act, 1944 read with Rule 6-of the Valuation Rules; The Apex Court has recorded the question for consideration therein in para 2 of the decision in following words: is part of the cost of the raw material the price paid by the manufacturer to its seller, as contended by the Revenue, or is it the price of the raw material less the excise duty thereon, which has been paid by the seller and for which the manufacturer is entitled to credit, under the modvat scheme, to be utilized against the payment of excise duty or products manufactured by him, including the intermediate product, as contended by” ” the manufacturer. Before answering the said point, the Apex Court took note of two decisions, one by the Tribunal and another by the Allahabad High Court, those were relied upon by the Revenue.
21. One of the said two decisions was in the matter of .Collector, C. Ex. vs. INCAB Industries reported in 1990 (45) ELT 342 (Tribunal). Therein, the Tribunal had held that under the modvat scheme, a manufacturer was allowed to utilize the duty paid on the inputs by deducting the same from the . duty payable on the final product, subject to following the procedure prescribed under the Rules and that the same results in reduction in the cost of final product to the extent of the credit but does not automatically reduce the assessable value which is to be determined in accordance with the provisions of Section 4 of the said Act.
22. The second decision was in the matter of Super Cassettes Industries Limited vs. Union of India reported in 1997 (94) ELT 302 (All.). Therein, the Allahabad High Court had held that there was no warrant for the view W the modvat credit once availed’ by making the necessary entries was irrevocable. It was farther held that there could not be final credit until the inputs were used and excise duty on the final product was paid or the inputs were otherwise disposed of.
23. After taking note of the above referred two decisions, and without expressing any dissent from the said two decisions, and after summarizing the submissions by the learned Advocate General, the Apex Court in Dai Ichi Karkaria case observed that “There is no doubt that, were it not for the Modvat Scheme and the credit available on the excise duty paid on the raw materials there under, the excise duty paid on the raw material would be a factor in determining the cost of the excisable product. The question is does the Modvat scheme make a difference?”.
23. Further, after taking into consideration the Rules 57A, 67C, 57D, 57E, 57F, 57G and 571 of the Central Excise Rules, it was observed thus:-
“17. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co- relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The / credit may.be taken against the excise duty on a final product V manufactured on the very daythat it becomes available”.
25. Immediately thereafter in para 18 & 19 of the judgement, the Apex Court held thus:- v “18. It is, therefore, that in the case ‘of Etcher Motors Ltd v. Union of India [1999 (106)JLL/T. 3] this Court said that a credit under the Modvat scheme was “as good as tax paid.”
19. With this in mind, we must now determine whether the excise duty paid on the raw material should form part of the cost of the excisable product for the purposes of Section 4(1 )(b) of the Act read with Rule 6 of the Valuation Rules?”
26. Complete reading of the entire judgement and in particular para Nos. 15 to 19 of the decision in Dai Ichi Karkaria case, the same discloses that the Hon’ble Supreme Court having noted that but for the modvat scheme and availability of credit in relation to the excise duty paid on raw materials, such excise duty on the raw materials would not have been a factor in determining the cost of the excisable product and proceeded to ascertain the effect of the modvat scheme on the process of determination of asses sable value. Evidently, the observations in para 17 of the said judgement were for the purpose of understanding the effect of the credit to be availed and utilized under the modvat scheme on the process of valuation. It was in that regard it was held that there was no correlation between the credit availed on a particular input and the utilization thereof for the duty payable on manufacture and clearance of the final product. The credit earned on a particular input can be utilized for payment of duty in respect of any final product even though for its manufacture, the input on which the credit has been taken, is not used. There is no one to one relationship between the input in respect of which the credit is availed and final product in respect of which the duty liability is discharged by utilizing the credit so availed on the input. All those observations were Essentially to find out whether the V J duty paid on inputs which gives-rise to credit for utilization thereof for payment of duty on the final product would form part of the cost of the excisable product for the purpose of Section 4(1 Xb) of the said Act read with Rule 6 of the Valuation Rules and not for any other purpose. Observations in para 17 are found to have been made in that limited context and not for any other purpose. This is most relevant factor which does not appear to have been noticed and/or considered in any of the decisions brought to our notice.
27. No decision can be read ignoring the facts of that case and the points which arise for determination in that case. All the observations made in a judgement are to be understood with reference to the context in which they are made. The essence of a decision is to be carved out from the conjoint reading of the facts, the points for consideration and the decision arrived thereon. The observations in a judgement de hors the facts and the points for determination can not be read as it could lead to misreading and misunderstanding of the proposition of law laid down in such decision.
28. The concept of ratio decidendi has been elaborately explained by the Apex Court in the matter of Union of India and Others vs. Dhanwanti Devi and Others reported in (1996) 6 SCC 44. Therein it was ruled thus:-
“It is not everything said by a Judge while giving judgment that constitutes a precedent. The only thing in a Judge’s decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. According to the well-settled theory of precedents, every decision contains three basic postulates – (i) findings of material facts, direct and inferential. An inferential rinding of facts is the inference yrtiich the Judge draws from the direct, or perceptible; facts; (ii) statements of the principles of law applicable to the legal; problems disclosed by the facts; and (iii) judgment based on the ‘ I combined effect of the above. A decision is only an authority for what it actually decides. What is of die essence in a decision is its VJ ratio and’ not} eyejfy observation found therein nor what logically follows from the various observations made in the judgment. Every, /judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there is not intended to be exposition of the whole law, but governed and qualified by the particular facts of die case in which such expressions are to be found. It would, therefore, be not profitable to extract a sentence here and there from the judgement and to build upon it because the essence of the decision is its ratio and not every observation found therein. The enunciation of the reason or principle on which a question before a court has been decided is alone binding as a precedent. The concrete decision alone is binding between the parties to it, but it is the abstract ratio decidendi, ascertained on a consideration of the judgement in relation to the subject-matter of the decision, which alone has the force of law and which, when it is clear what it was, is binding. It is only the principle” laid down in the judgment that is binding law under Article 141 of the Constitution. A deliberate judicial decision arrived at after hearing an argument on a question which arises in the case or is put in issue may constitute a precedent, no matter for what reason, and the precedent by long recognition may mature into rule of stare decisis. It is the rule deductible from the application of law to the facts and circumstances of the case which constitutes its ratio decidendi.
Therefore, in order to understand and appreciate the binding force of a decision it is always necessary to see what were the facts in the case in which the decision was given and what was the point which had to be decided. No judgement can be read as if it is a statute. A word or a clause or a sentence in the judgment cannot be regarded as a full exposition of law. Law cannot afford to be static and therefore, Judges are to employ an intelligent technique in the use of precedents”.
29. In Commissioner of Central Excise, Delhi vs. Allied Air Conditioning Corp. (Regd.) reported in 2006 (202) ELT 209 (SC), the Apex Court ruled that:-
“A judgement should be understood in the light of facts of the case and no more should be read into it then what it actually says. It is neither desirable nor permissible to pick out a word or a sentence from the judgement divorced from the context of the question under consideration and treat it to be complete law decided by this Court. The judgement must be read as a whole and the observations from the judgement have to be considered in the light of the questions which were before this; Court; [See Mehboob Dewood Shaik vs. State of S Maharashtra, 2004 (2) SCC 362],
30. As regards the law of precedent is concerned, Article 141 of the Constitution clearly provides that the law laid down by the Apex Court is binding on all Courts in India, Any decision contrary to the law laid down by the Apex Court cannot have binding force.
31. Considering the law relating to precedent and ratio decidendi as has been explained by the Apex Court in Dhanwanri Devi and Allied Air Conditioning Corp. cases and applying the same to the decision in Dai Ichi Karkaria case, it would at once be clear that the said decision is not on the point in issue in the case in hand. The decision was essentially in relation to the aspect of valuation and while arriving at the finding in relation to the issue which arose for consideration in the said matter, the Apex Court had taken note of various provisions of law including the provisions relating to the modvat credit scheme and the effect thereof on the aspect of valuation. The decision does not deal with the issue as to whether the credit availed on the inputs used in manufacture of the final product for which the assessee opts for exemption under exemption Notification needs to be reversed or not. No decision can be understood by picking up few sentences or even paras from here and there in the decision. Every word and sentence in a decision has to be read in the context in which it is used. The law in this regard is well settled.
32. It is settled law that one cannot pick and choose one or two sentences from a judgement and label them as the ratio of the decision, ignoring the context in which they are Used, nor such sentences can be taken as a pronouncement of law on a point which was neither for consideration before the Court nor factually £ro$ej for consideration with reference to the issue that is determined under the judgement. The ratio has to be carved out from’% the facts of the case, the points which arise for determination and the decision thereon. The observations made in the process of consideration of the issue for determination have to be read in the context of the issue and the facts of that case. De hors the facts and the issue arising for consideration, the decision cannot be held to be laying down the law on unrelated points. The decision of the Apex Court in Dai Ichi Karkaria case cannot be held to lay down a law on the point in issue in the matter in-hand. It was a decision in relation to the valuation of the product wherein the dispute was whether the excise duty on raw material if modified could it be included in the cost of the final excisable product. Observations therein cannot be read and understood de hors the said issue.
33. It is to be noted that the observations in para 17 of the decision of the Apex Court in Dai Ichi case is neither on the issue relating to the credit in stock on the day the final product becomes exempted nor the said observations were made are in any way related to the said issue, nor it can be said to be the law laid down on the point in issue. In Mohandas Issardas vs. A.N. Sattanarhan, Collector of Customs reported in 2000 (125) ELT 206, the Bombay High Court while dealing exhaustively the point relating to the concept of “obiter dictum”, quoted, with approval, the following extract from Law of Halsbury’s Law Vol. 19 at page 251, wherein it Was stated thus:-
“It may be laid down as a general rule that- that part alone of a decision of a court of law is binding upon courts of the co-ordinate jurisdiction and inferior courts which consists of the enunciation of r the reason or principle upon which the question before the court has / really been determined. This underlying principle which informs the authoritative element of a precedent is often tenned the ratio decidendi. Statements which are not necessary to the decision, which go beyond the occasion and lay down a rule that is unnecessary for the purpose in hand (usually termed dicta) have no binding authority on another court, though they may have some merely persuasive efficacy”.
34, The point which arose before the Apex Court in Dai Ichi’s case while dealing with the main issue of valuation was pertaining to the effect of modvat scheme on the process of valuation. Certainly while dealing with any such issue, the observation in para 17 would be binding. But, the same cannot be held to lay down the law relating to a point totally unconnected with the issue and the point dealt with by the Apex Court in the said decision.
35. There cannot be any dispute that there is no one to one relationship between the input on which credit is earned and the final product for which credit so earned is utilized for payment of duty; however, at the same time it cannot be forgotten that the credit can be lawfully earned only on those inputs which are to be used in dutiable and non-exempted final product. This is abundantly clear from Rule 6(1) of the Cenvat Credit Rules 2004. In fact, the very fact of absence of co-relation between the inputs on which the credit is earned and the final product in respect of which, while paying duty, such credit can be utilized, establishes that till and until the input on which credit is earned is used in or in relation to manufacture of the final dutiable product and the credit earned thereon is utilized for payment of duty in relation to the duty payable on the final dutiable product, the process of utilization of credit is (not complete. The scheme of Modvat or Cenvat, which provides for the facility of availing credit in respect of the duty incurred on raw materials to be utilized in the manufacture of the dutiable final product, clearly requires proper utilization of such credit in accordance with the provisions of law, otherwise availment of such credit would be rendered unlawful. [To avail the credit lawfully, the “raw material, on which the same is sought to be availed, must be utilized in use manufacture of final dutiable product and tjie’credit earned thereon should also be utilized for payment of duty on the final product. [Till and until both the credit earned and the product on which the credit is earned are lawfully utilized, it cannot be said that the credit has been lawfully and completely utilized^ Of course, the utilization of credit and utilization of input may not necessarily be in relation to one and the same final product’ It can be in relation to two different dutiable final products. However, till and until there is such complete utilization of the input and the credit, there can be no lawful availment and utilization of the credit.
