M. Katju, J.:— This writ petition has been filed for a mandamus directing the respondents to give benefit of exemption from Central Excise Duty to the petitioner under notification dated March 1, 1994 and for quashing the impugned order dated October 1, 2003 [2004 (163) E.L.T 55 (Tri. - Del.)] passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (Annexure 1 to the writ petition) and for declaring that the benefit of Notifications 67/95 and 214/86 would be available to the petitioner.

2. In this case on May 6, 2004 the respondents were granted one month time to file counter affidavit but as yet no counter affidavit has been filed. Hence we are treating the allegations in the petition to be correct. Before setting out the facts of the case we may briefly refer to the issue involved in the present petition.

3. Certain final products of Chapter 39 of the Schedule to the Central Excise Tariff Act are fully exempted from central excise duty under Notification No. 15/94-C.E. dated March 1, 1994. The condition for this exemption is that no mod-vat credit should be availed on the inputs used in manufacturing of these final products. In the present case, the credit had been availed on the inputs but had been reversed subsequently. The issue, therefore, is whether this reversal of credit after availment can satisfy the condition of non-availment of credit under the exemption notification.

4. The petitioner is a company registered under the Indian Companies Act which is engaged in the manufacture of Aqua Mineral Water classifiable under Chapter sub-heading No. 2201.19 (previously under Chapter sub-heading No. 2201.90) of the Schedule to the Central Excise Tariff Act, 1985. Its Unit No. 1 is located at D-18, Sector 3, Noida. The petitioner is also engaged in the manufacture of hot and cold water dispenser, classifiable under Chapter sub-heading No. 8479.19 of the Central Excise Tariff Act. This Unit is at Sector 6, Noida. The petitioner has another Unit being Unit No. 3 for manufacturing Polycarbonate bottle and P P bottles falling under Chapter sub-heading 3923.90 of the Central Excise Tariff Act. This Unit is situate at Sector 59, Noida.

5. The mineral water manufactured by the petitioner is sold directly to the consumers located at Delhi, Noida and other adjoining places. The water is sold packed in polycarbonate/PVC bottles of different capacities of one litre, 12 litres, 24 litres, etc. The petitioner started manufacturing mineral water since December, 1993. It has obtained a registration certificate from the Central Excise Department for the manufacture of the mineral water classifiable under Chapter sub-heading 2201.90 The petitioner filed a declaration under Rule 173B indicating classification of the mineral water manufactured by it. Copies of the declaration for the period in question are collectively annexed as Annexure 2 to the writ petition. In the declaration the petitioner indicated the availment of Notification No. 1/93. Besides it also indicated that the cost of the bottles of capacities 320 ml, 500 ml and 1 litre was included in the cost of mineral water and that in respect of bottles of 12 litres and 24 litres capacity the cost of the same was not included in the value of the mineral water. The petitioner also filed declaration under Rule 173C of the Central Excise Rules indicating the sale price of the mineral water vide Annexure 3 to the writ petition.

6. It is alleged in Paragraph 13 of the writ petition that the petitioner was paying excise duty in respect of mineral water on the basis of the retail price. Subsequently on legal advice the petitioner revised its pattern of paying excise duty on the retail price and started paying duty on the wholesale price vide Annexure 4 to the writ petition. The petitioner also filed Modvat declaration under Rule 57G of the Central Excise Rules indicating the mineral water as the final product and the various raw materials like the plastic granules as the inputs as also the plastic bottles as intermediate product vide Annexure 5 to the writ petition.

7. Upto December, 1995 the petitioner was taking Modvat credit of the duty paid on the granules and was utilising the said credit for payment of duty on the mineral water. The petitioner has been taking credit since proportionate cost of the bottles was included in the price recoverable from the customers.

8. The raw material used for the manufacture of the bottles are polycarbonate or polypropylene or PVC granules. These materials are received at the waiter unit and sent to the bottle Unit for the manufacture of bottles and the same are received back at the water Unit.

9. It is alleged in Paragraph 19 of the writ petition that on October 16, 1997 a team of the Central Excise officers of the Directorate General of Anti-Evasion, New Delhi visited the premises of the aforesaid three units of the petitioner. They recorded the statement of the Directors and other officers of the company vide Annexure 6 to the writ petition. It is alleged in Paragraph 22 of the writ petition that the petitioner voluntarily paid through PLA the amount of Modvat credit of Rs. 9,31,779/- after due intimation to the Central Excise authorities vide Annexure 8 to the writ petition. The petitioner reversed the credit amount of Rs. 1,29,600/- on August 24, 1996 vide Annexure 9 to the writ petition. Hence the total credit reversal was Rs. 10,61,379/-, which is the credit, availed on the granules going into the bottles. Further on December 23, 1997 the petitioner deposited Rs. five lacs under protest with due intimation to the Central Excise authorities vide Annexure 10 to the writ petition.

10. Thereafter a show cause notice dated April 13, 1998 was issued to the petitioner vide Annexure 11 to the writ petition to which the petitioner filed a detailed reply dated November 27, 1998 vide Annexure 12 to the writ petition. In this reply the petitioner contended that the benefit of Notification No. 15/94-CE is admissible as inputs credit was reversed. Apart from that, the petitioner also claimed the benefit of Notification Nos. 67/95 and 214/86. However, the Commissioner of Central Excise passed an order dated October 31, 2001 against the petitioner vide Annexure 13 to the writ petition.

11. Aggrieved the petitioner filed an appeal before the Appellate Tribunal before whom the petitioner also filed a detailed synopsis vide Annexure 14 to the writ petition. However, the Tribunal by order dated October 1, 2003 decided against the petitioner. The petitioner has submitted that the order of the Tribunal is incorrect in law and deserves to be set aside.

12. On the facts of the case we are of the opinion that this petition deserves to be allowed. The facts of the case show that the Modvat credit taken on the inputs was reversed by the petitioner. Since the reversal of Modvat credit has been done by the petitioner hence in our opinion it has to be treated that no credit was taken by the petitioner on the inputs, namely PVC granules used in the manufacture of PVC/PP bottles as contemplated under the Notification No. 15/94-C.E., dated March 1, 1994.

13. The undisputed facts of the case are that the petitioners have reversed Modvat credit on the entire inputs amounting to Rs. 10,61,379/-.

14. In fact the show cause notice issued to the petitioner specifically records that the petitioner has reversed the credit on PVC granules, which are used in the manufacture of PP Bottles.

15. The appellate Tribunal has disallowed the benefit of Notification No. 15/1994-CE, dated March 1, 1994 (supra) holding that the credit was not reversed by the petitioner prior to clearance/removal of the goods.

16. The question as to whether manufacturer can be treated as not having taken credit on the inputs used in the manufacture of final product, even though it was originally taken but subsequently reversed, has been decided by a five Member Bench of the Tribunal in the case of Franco Italian Company Pvt. v. CCE, 2000 (120) E.L.T 792. The aforesaid five members Bench of the Tribunal after taking into account the ratio laid down by the Supreme Court in the case of Chandrapur Magnet Wire (P) Ltd. v. CC, Nagpur, 1996 (81) E.L.T 3 has held as under:—

“6. Drawing similar analogy we consider that subject to the reversal of Modvat credit taken with regard to the inputs which were utilised in the manufacture of duty free goods, the manufacturer could avail of the Modvat credit as well as full duty exemption under applicable small scale exemption notification with regard to some specified goods. Reference is answered accordingly.

7. As a result the impugned order-in-appeal dated January 28, 1999 passed by the Central Excise is set aside and the appeal of Franco Italian Company (supra) is allowed subject to the conditions that Modvat credit taken of the duty paid on the inputs which were utilised in the manufacture of duty free goods, is reversed.”

17. In view of the above decision we are of the opinion that reversal of Modvat credit amounts to non-taking of credit on the inputs. Hence the benefit has to be given of the notification granting exemption/rate of duty on the final product since the reversal of the credit on the input was done at the Tribunal's stage.

18. The Tribunal while passing the impugned order dated October 1, 2003 [2004 (163) E.L.T 55 (Tri. - Del.)] has not referred to the larger Bench decision of the Tribunal and other binding decisions. In Chandrapur Magnet Wire Limited v. Collector Centra! Excise, 1996 (81) E.L.T 3 the Supreme Court has held:—

“If debit entry is permissible to be made, the credit entry for duties paid on the inputs utilised in manufacture of final exempted product will stand deleted in the account of the assessee. In such a situation it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of final exempted product under Rule 57-A. In other words the claim of exemption of duty on the disputed goods cannot be denied on the plea that the assessee has taken credit of duty paid on the inputs used in manufacture of these goods.”

19. The Tribunal while passing the impugned order dated October 1, 2003 instead of following the principles of law and the ratio of the decision of the Supreme Court in Chandrapur Magnet Wires Ltd. (supra) and also the decision of the larger five Members Bench of the Tribunal in the case of Franco Italian Company (P) Limited (supra) and other larger bench decision in the case of ICON Pharma and Surgical (P) Ltd. - 2000 (40) RLT 918 has held that reversal on inputs credit should have been done before removal of the bottles. In our opinion the Tribunal has completely misunderstood the decision in the case of Chandrapur Magnet Wires Ltd. (supra) in which the Supreme Court has quoted the Circular issued by the Ministry of Finance, being Circular No. 22/8/86, dated April 10, 1986. In Para 5 of the said Circular it was mentioned that the duty paid in the inputs used should be debited, before removal of such exempted final products. Since the Circular in that case required reversal of the credit before removal of the final product, hence the Supreme Court interpreting the said circular has mentioned that they see no reason why the assessee cannot make debit entry before removal of exempted final products.

20. In the present case for the purposes of claiming the benefit of the Notification No. 15/94-C.E., dated March 1, 1994 neither any circular has been issued nor the said circular of 1986 has been made applicable in the notification, which has been issued in 1994.

21. Hence in our opinion the Tribunal was not justified in taking a view that reversal of the credit having been made by the petitioner after removal of the final products the petitioner was not entitled to the benefit of Notification No. 15/94-C.E., dated March 1, 1994.

22. This view of the Tribunal is in our opinion patently erroneous and contrary to the decision of the five Member Larger Bench of the Tribunal as well as three member bench of the Tribunal, and is also contrary to the ratio of the decision of the Supreme Court in the case of Chandrapur Magnet Wire (supra).

23. In fact the decision of the five Member Larger Bench of the Tribunal in. Franco Italian Company (supra) was followed by three Member Bench of the Appellate Tribunal in the case of ICON Pharma and Surgical (P) Ltd., 2000 (40) RLT 918.

24. The Tribunal again in a three Member Bench decision in the case of Tube Investment of India, Final Order No. 795/2002, wherein the specific issue was whether the reversal of credit subsequent to removal of goods, was fetal to the extension of benefits of the notification considered the matter at length. The majority decision upheld the argument of the assessee therein and held that reversal of credit subsequent to the clearance of exempted product is in line with the ratio of the Supreme Court judgment laid down in Chandrapur Magnet Wires Co. (supra).

25. Thus all the Division Benches of the Tribunal have been following the larger Bench decision and have taken a consistent view that reversal of the credit can be made even subsequent to the clearance of the final products. The impugned order dated October 1, 2003 appears to be the only order which is contrary to the consistent view taken so far.

26. In another case of High Line Pen v. CCE Final Order No. 359/2003-NBA, dated July 24, 2003 [2003 (158) E.L.T 168 (Tri.)] the appellate Tribunal again took a view that reversal of credit should be done for availing the benefits of the notification and the time of reversal was not material.

27. The Tribunal in the case of Kitply Industries Limited Eastern Bench at Calcutta, 2001 (130) E.L.T 236 has again held that reversal of credit would amount to no credit being taken. Hence the assessee was entitled to the benefit of notification. The Appellate Tribunal followed the decision in the case of Chandrapur Magnet (supra). The Appellate Tribunal Southern Bench in the case of Bharat Earth Limited v. CCE, Bangalore, 2001 (136) E.L.T 225 again applying the ratio of the Supreme Court judgment in the case of Chandrapur Magnet Wires Company (supra) held that reversal of credit was sufficient for availing the benefits of the notification. In fact the Tribunal has directed the assessee therein to reverse the credit. In other words, the credit was directed to be reversed at the Tribunal stage.

28. The aforesaid decision of the Tribunal has followed the ratio of the decision of the Supreme Court in the case of Chandrapur Magnet Wires (supra).

29. In these circumstances the order of the Tribunal dated October 1, 2003 in so far as it relates to denial of the benefit of Notification No. 15/1994-CE is liable to be, and is hereby, set aside. The petitioner is thus entitled to the benefit of the said Notification No. 15/1994-CE, dated March 1, 2004 and reversal of Modvat credit on the inputs namely PVC granules used in the manufacture of PVC/PP bottles, which have been admittedly reversed by the petitioner, even though after clearance of the final product.

30. In view of the above decision the writ petition is allowed and the demand of duty and penalty created by order dated October 30, 2001 and confirmed by the Tribunal is set aside. Any amount already deposited by the petitioner shall be refunded to the petitioner forthwith with interest at 10% per annum from the date of deposit to the date of refund, and this refund must be made within two months from today. The petitioner is also entitled for any consequential benefits.

31. We may mention that we are passing the direction for interest since interest is the normal accretion on capital.

32. Often there is misconception about interest. Interest is not a penalty or punishment at all. For instance, if A had to pay a certain sum of money to B at a particular time, but he pays it after a delay of several years, the result will be that the money remained with A and he would have earned interest thereon by investing it somewhere. Had he paid that amount at the time when it was payable then B would have invested it somewhere and earned interest thereon. Hence, if a person has illegally retained some amount of money then he should ordinarily be directed to pay not only the principal amount but also the interest earned thereon.

33. Money doubles every six years (because of compound interest). Rs. hundred in the year 1990 would become Rs. two hundred in the year 1996 and it will become Rs. 400 in the year 2002. Hence, if A had to pay B a sum of rupees 100 in the year 1990 and he pays that amount only in the year 2002, the result will be that A has pocketed Rs. 300 with himself. This clearly cannot be justified because had he paid that amount to B in the year 1990, B would be having Rs. 400 in the year 2002 instead of having only Rs. 100/-. Hence, ordinarily interest should always be awarded whenever any amount is detained or realized by someone, otherwise the person receiving the amount after considerable delay would be losing the entire interest thereon which will be pocketed by the person who managed the delay, it is for this reason that we have ordered for payment of interest alongwith the amount realized as export pass fee.