Customs, Excise and Gold Tribunal - Delhi
Kamakhya Steels (P) Ltd. vs Cce on 31 August, 2000
Equivalent citations: 2004(92)ECC230, 2000(121)ELT247(TRI-DEL)
ORDER G.A. Brahma Deva, Member (J)
1. "Whether an assessee can avail modvat credit in respect of inputs (Sponge Iron) without filing a declaration" is the issue to be considered by the Larger Bench.
2. The appellants are manufacturers of Iron & Steel Products, (M.S. Ingots). Sponge Iron is one of their inputs. They had filed a modvat declaration indicating various inputs and final outputs but had not included Sponge Iron in their initial declaration because at that time Sponge Iron was exempt from duty and therefore no modvat credit could be claimed. However, with effect from 1.3.92, it became dutiable and, therefore, in respect of the quantities received under valid duty paying documents, they took the modvat credit and availed it for the purpose of paying duty on the declared outputs. However, they inadvertently omitted to file a supplementary declaration amending the one initially filed, to include this item. As soon as this omission was pointed out by the Supdt., they filed a supplementary declaration including Sponge Iron explicitly therein. However, the demands in these two appeals are in relation to periods prior to the date of revised declaration and related to the period when Sponge Iron had not been included in the declaration. It was the plea of the party before the authorities below that there was only a procedural lapse on the part of the assessee in not including the item specifically and since the modvat had been taken with reference to duty paid goods received and utilised in the manufacture of declared output and, therefore, there was substantive compliance with the modvat provisions, the demands should not have been raised and they should not have been penalised. It was also submitted that in the classification list filed by them they had mentioned that they would be availing modvat benefit and alongwith the RT-12 returns also, they had enclosed the list showing the inputs received from manufacturers of Sponge Iron. In other words, the Department was fully aware that they were availing the benefit of modvat on respect of Sponge Iron. The pleas were not accepted and having become unsuccessful before the authorities below, these two appeals were filed.
3. The Hon'ble Vice President who heard the matter referred the issue to the Larger Bench to resolve it observing that there are apparently two schools of thought within the Tribunal--one, represented by the cases cited by the learned Counsel which have taken into account the attendant circumstances and considered such omissions on the merits of the individual case and held that modvat credit was not deniable wherever they were satisfied about the bona fides and substantive compliance with the requirements of the modvat procedure and the second, represented by the case cited by the learned DR in which the declaration has been held to be a substantive requirement and not a procedural or technical one and was considered as not condonable even in the circumstances mentioned therein.
4. Arguing for the appellant, Shri Alok Arora, Ld. Advocate submitted that the basis fact that Sponge Iron has been received under valid duty paying document and utilized in the production of the final product is not in dispute. At the time of filing initial declaration, the Sponge Iron did not figure therein as it was exempted. But inadvertently the party omitted to file a supplementary declaration amending the original declaration when the item became dutiable with effect from 1.3.92. He submits that the dispute relates to the period 1.3.92 onwards and the period 1.3.92 to July 1992 in Appeal No. E/306/95-NB has already been settled under Kar Vivad Samadhan Scheme. Hence, he confined to the period of 12 days in the month of August 1992 in Appeal No. E/1840/95. He submits that in the facts and circumstances there was no reason to doubt bona fides of the appellants and there was no justification to deny the modvat benefit. Declaration is only to enable the department to verify whether input and final products are covered by modvat scheme. Filing of declaration is only procedure compliance and procedure lapse if any should not come in the way of granting substantial justice. In support of his contention he relied upon a scries of decisions of the Tribunal including the decisions referred to in the referring order.
5. On the other hand, Shri Sanjeev Srivastava, Ld. JDR appearing for the Revenue submitted that department was justified in denying the modvat credit since filing of declaration under Rule 57G is a statutory requirement. He said that availment of modvat credit without filing declaration is erroneous and irregular and not condonable lapse or irregularity.
6. Shri A.R. Madhav Rao, Ld. Advocate as an intervener submitted that the question referred to the Larger Bench in the instant case need not be answered and matter be remanded to the Adjudicating Authority to examine the issue afresh in the light of amendment of Rules 57G and 57T as per Notification No. 7/99-CE{NT) dated 9.2.99, and the two Circulars (M.F. DR. Letter F.No. 267/6/92-CX dated 30.1.92 and Circular No. 441/7/99-CX dt. 23.2.99). He referred to the relevant amendment (7/99-CE(NT) dt. 9.2.99) which is as under:--
"7/99-CE(NT), dt, 9.2.1999: In exercise of the powers conferred by Section 37 of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules further to amend the Central Excise Rules, 1944, namely:
1 .(1) These rules may be called the Central Excise (3rd Amendment) Rules, 1944.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Central Excise Rules, 1944,--
(a) in Rule 57G, after Sub-rule (10), the following sub-rule shall be inserted, namely,--
"(11) Credit under Sub-rule (2) shall not be denied on the grounds that-
(i) any of the documents, mentioned in Sub-rule (3) does not contain all the particulars required to be contained therein under these rules, if such document contains details of payment of duty, description of the goods, assessable value, name and address of the factory or warehouse;
(ii) the declaration filed under Sub-rule (1) does not contain all the details required to be contained therein or the manufacturer fails to comply with any other requirements under Sub-rule (1)."
7. He submitted that circulars are binding on the authorities functioning under the statute. Referring to the Circular No. 441 /7/99 dated 23,2.99, he said that Circular was issued to follow certain guidelines in respect of Notification No. 7/99 dated 9.2.99 while considering the admissibility of modvat credit and further it was specified in the circular that guidelines are applicable to the pending cases and the pending cases are to be disposed of accordingly. In this context, he referred to the decision of the Supreme Court in the cases of Mathew M. Thomas v. Commissioner of Income Tax, 1999 (33) RLT 227 (SC): 1999 (111) ELT 4 (SC) wherein it was held that proceedings shall include proceedings at the appellate stage. Particularly, he drew our attention to the para 8 of the said judgment which reads as under:
"8. It is well settled that the word "Proceedings" shall include the proceedings at the appellate stage. It is sufficient to refer to the judgment of this Court in Garikapati Veeraya V.N. Subiah Choudhary and Ors. AIR 1957 SC 540 wherein the Court said at page 553.
(i) That the legal pursuit of a remedy, suit appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceedings".
Hence, we are unable to persuade ourselves to agree with the view expressed by the Full Bench of the High Court in the judgment under appeal that the Circular would apply only to proceedings pending before the Competent Authority".
8. We are not convinced with the arguments advanced on behalf of the Revenue that amended provisions of Circulars referred to above are not applicable to the point in issue. On going through the amendment to Rule 57G particularly with reference to Sub-clause II of 2(a) of 7/99-CE(NT) dated 9.2.99 the Circulars and the case law, we find that matter is required to be re-examined as it was rightly pointed out by the intervener. In the view we have taken, the matter is remanded to the Jurisdictional Assistant Commissioner to examine the admissibility of modvat credit for the period covered under Appeal No. E/1840/95 and to pass an order to accordance with law.
9. Thus, this matter is disposed of in the above terms.