Customs, Excise and Gold Tribunal - Tamil Nadu
Suryalata Spinning Mills Ltd. vs Commr. Of C. Ex. on 17 March, 1999
Equivalent citations: 1999(65)ECC625, 1999ECR760(TRI.-CHENNAI), 1999(111)ELT158(TRI-CHENNAI)
ORDER V.K. Ashtana, Member (T)
1. This is an appeal against Order-in-Original No. 14/97-C.E., dated 28-11-1997 passed by Commissioner of Central Excise, wherein, he has ordered recovery of credit held inadmissible under Rule 57U for Rs. 40,34,531 /- and also imposed a penalty of Rs. 5 lakhs on the appellants.
2. Heard Shri Vijayaraghavan, learned Consultant for the appellants and Shri Sankaravadivelu, learned JDR for the Revenue.
3. Learned Consultant submits that the issue arose out of show cause notice dated 28-4-1995 covering the period October, 1994 to March, 1995 which raises three issues :-
(a) Denial of Modvat credit due to lack of intimation under Rule 57T(2) as it then existed.
(b) Denial of credit on number of specified items as they do not conform to the definition of capital goods under Rule 57Q.
(c) Levy of penalty for the above infirmities.
4. Learned Consultant took us through the history of the evolution of Rule 57T(2) from May, 1994 onwards. He submitted that from May, 1994 onwards and till 1-3-1997 (which covers the period involved in this appeal) the rule prescribed that after the receipt of the capital goods the assessee shall file an intimation before the range Superintendent in the prescribed proforma. He submits that prior to May, 1994 the rule had provided that on receipt of such intimation a verification may be caused by the Superintendent, but for the period in question in this appeal the provision regarding such verification no longer existed. He further submitted that there was a proviso to this rule itself that even when there is a non-intimation or a delayed, intimation, on sufficient cause being shown, the Assistant Commissioner can condone. He further submitted that with effect from 2-6-1998 the intimation itself has been done away with under Rule 57T(4).
5. Coming to the facts of the case on this issue, learned Consultant submitted that the only ground made out in the show cause notice was that no intimation was given under Rule 57T(2). However, he submits that within a few days of the receipt of the capital goods, a declaration under Rule 57T was filed with the Assistant Commissioner having jurisdiction and a copy thereof was also given to the range Superintendent. The Office of the Assistant Commissioner acknowledged the said communication and also forwarded a copy thereof to the range Superintendent. He showed as evidence the declaration as on page 88 of the paper book, wherein, declaration for 3 capital goods as specified therein has been filed on 31-10-1994 after the goods were received on 11-10-1994. There are a number of other such declarations on record in the paper book from page 86 to page 189. Learned Consultant submits that since the copies of these declarations were received by the range Superintendent from both the sources i.e. from the assessee and Assistant Commissioner and the same were received by him within a few days of the receipt of the capital goods, therefore, there is substantive compliance of the intimation required to be filed under Rule 57T(2) and the range Superintendent was in a position to cause any verification, if he so thought it fit. Merely because the declaration is not exactly in the same proforma, does not mean that there is no substantive compliance of Rule 57T(2). In this connection he cited the decision in the case of Commissioner of Wealth Tax v. Sharvan Kumar Sivarup & Sons etc. etc. reported in 1995 (56) ECR 425 (S.C.)/ wherein, it has been held that procedural requirements contained in a rule of taxation is attracted to all pending cases. He submitted that Rule 57T(2) being a procedural rule and not a substantive rule in the Modvat scheme, therefore, even the deletion of the intimation w.e.f. 2-6-1998 would apply to this appeal which is still pending in view of the decision of the Supreme Court.
6. With respect to the availability of Modvat credit on the specified goods sought to be denied in the show cause notice, learned Consultant submits that he is under instructions, to press his claim only for the following items in view of the relevant case law cited against each of these items as follows:-
(i) Boiler and Parts :- Applying the ratio of CCE v. Triveni Engg. Works Ltd. reported in 1997 (96) E.L.T. 655 (Tribunal)
(ii) Voltage Stabilizer:- Applying the ratio of CCE v. Shanti Synthetics Ltd. reported in 1998 (97) E.L.T. 533 (Tribunal).
(iii) Air Compressor :- Applying the ratio of Bell Granito Ceramica Ltd. v. CCE reported in 1999 (105) E.L.T. 487 (Tribunal).
(iv) Control Panels :- Applying the ratio of Hindustan Composites Ltd. v. CCE reported in 1998 (100) E.L.T. 150 (Tribunal) and Jindal Polyester v. CCE reported in 1998 (100) E.L.T. 48 (Tribunal) and Birla Ericson Opticals Ltd. v. CCE reported in 1998 (100) E.L.T. 498 (Tribunal)
(v) Transformer:- Applying the ratio of Nahar Spinning Mills Ltd. v. CCE reported in 1998 (97) E.L.T. 127 (Tribunal) and Shri Gobind Mills Ltd. v. CCE reported in 1998 (101) E.L.T. 162 (Tribunal) and Birla Ericson Opticals Ltd. v. CCE reported in 1998 (100) E.L.T. 498 (Tribunal).
(vi) Carding Machine (Exacta Card) :- Learned Consultant submits that the machine was received by them on 19-2-1995 which date is not disputed. Therefore, the receipt is after the issue of Notification No. 60/94-C.E.(NT), dated 21-10-1994 and according to this on this carding machine Modvat credit is available under Rule 57Q as amended by this notification. This has been upheld in the case of CCE v. Singaravelar Spinning Mills Ltd. reported in 1998 (28) RLT 872 (CEGAT), which follows the case of CCE v. M.M. Forgings Ltd. as reported in 1997 (89) E.L.T. 617 (Tribunal).
7. Learned Consultant submits that in view of the aforesaid submissions penalty is also not leviable and in any case the Order-in-Original impugned does not give any reasons as to why penalty has been imposed.
8. Learned JDR Shri Sankaravadivelu submits that a distinction has to be made between the provisions of a rule under Central Excise Rules from Trade Notices or Public Notices issued by the Commissionerates. While the latter are certainly procedural requirements of an administrative nature, the requirements under the rule has got statutory backing and it cannot be said that such requirements can be waived as being only procedural. In this connection he submits the case of Indian Aluminium Company reported in 1991 (55) E.L.T. 454 (S.C.). He also cites the case of Reckitt and Cohnan Co., Ltd, reported in 1994 (72) E.L.T. 114. Since the intimation have not been submitted in the prescribed proforma, infact not at all submitted as what is submitted is a declaration, therefore, there is no compliance of Rule 57T(2) and hence the Order-in-Original does not suffer from any infirmity and there is no merit in the appeal.
9. We have carefully considered the rival submissions as well as the records of the case. In particular we have scrutinised the format and contents of the declarations contained in pages 86 to 189 of the paper book. We find after a careful consideration of these declarations that the following facts emerge : -
(a) Almost all the declarations have been filed after the receipt of the goods but within a few days thereon. Therefore, we find that there is no undue delay in filing these declarations.
(b) That the same have been filed to the Assistant Commissioner incharge, but a copy of that has also been given to the range Superintendent concerned. It is also on record that the Assistant Commissioner has endorsed a copy for having received these declarations along with a copy of the declaration to the range Superintendent from his end also.
(c) The declaration is fairly exhaustive inasmuch as it not only gives the description of the capital goods but it also gives the duty paid on the capital goods, the date of receipt, the end-use to which the capital goods are to be put to, as well as the description of the final product and the tariff classification towards which the said capital goods would be used for their manufacture. The description of the capital goods received include also the tariff classification thereon. We find that these declarations are fairly exhaustive and since the Range Superintendent has received copies thereof both from the assessee as well as from the Assistant Commissioner, therefore, the Range Superintendent was fully aware of what had been received, to what purpose it was put to use, the duty already paid on these goods and the date of receipt etc.
10. In our considered opinion, if any verification was necessary for the satisfaction of the department that the capital goods had been received and installed and that they were used in the manufacture of the declared final product, the information contained in these declarations was sufficient for the department to have caused such a verification to satisfy themselves about the bona fides of these capital goods and the Modvat credit involved therein. If this be so, then it is our considered view that the purpose for prescribing that an intimation is submitted under Rule 57T(2) after the receipt of the capital goods as soon as possible, is clearly served by these declarations. It is not material whether you call such communications declarations or intimations; what is material is whether the purpose for which the rule requires such information to be made available to the departmental authorities is served or not. In this case the facts show as per our analysis above, that this purpose was served. Therefore, we have no other alternative but to conclude that irrespective of whether this rule is a procedural rule or substantive rule, we find that there was substantive compliance of whatever this rule requires in terms of this communication sent by the assessee. In this connection we also note that the show cause notice has not alleged that the declaration under Rule 57T(1) (the general declaration) was not given. The show cause notice has only alleged that an intimation in terms of Rule 57T(2) was not given.
11. In view of the aforesaid analysis, we find that whatever communication was given as noted above, satisfies the purpose behind Rule 57T(2) as it then existed. Therefore, it is our considered opinion that the evidence on record pertaining to the facts of this case do not justify denial of Modvat credit on these capital goods on this count.
12. We now proceed to consider the 7 items with respect to the availability of Modvat credit on them under Rule 57Q as the learned Consultant has not pressed their claim in this appeal with respect to the items other than these 7 items. It is hereby clarified that learned Consultant has not pressed his claim only on items other than these on which the Order-in-Original impugned has rejected the Modvat credit i.e. to say where the Order-in-Original has allowed credit, that is not a subject before us in this appeal. Each of these are considered as follows:-
(i) With respect to the Boiler and Parts, we find that in the case of Triveni Engineering Works Ltd. supra, it has been clearly held that the same qualifies for Modvat credit under Rule 57Q. Therefore, applying the ratio thereof we find that Modvat credit would be available to this item.
(ii) With respect to Stabilizer, we again find that applying the ratio of Shanti Synthetics Ltd. supra, the Modvat credit would be available under Rule 57Q in this case.
(iii) With respect to Air Compressor, we apply the ratio of Bell Granito Ceramica Ltd. supra and find that Modvat credit would be available under Rule 57Q.
(iv) With respect to Control Panels, we apply the ratio of Hindustan Composites Ltd., Jindal Polyester and Birla Ericson Opticals case supra and find that Modvat credit would be available under Rule 57Q.
(v) With respect to Transformer, we apply the ratio of Nahar Spinning Mills Ltd., Shri Gobind Mills Ltd. and Birla Ericson Opticals Ltd. case and find that Modvat credit would be available under Rule 57Q.
(vi) With respect to availability of Modvat credit on Carding Machine, the issue is quite clear from the decision of this very Tribunal in the case of Singaravelar Spinning Mills Ltd. supra, wherein, the position of law has been considered with respect to the effect of Notification No. 60/94-C.E. (NT), dated 21-10-1994 and it has been held that the said notification not being clarificatory, the effect thereof is only applicable with prospective effect. It is not disputed that the Carding Machine in this case was received on 19-2-1995, which is well after the amendment of Rule 57Q by the said notification. The effect of that was that the intermediate products were specified in the Rule and, therefore, with effect from that date of amendment Modvat credit on such Carding Machines would be available under Rule 57Q. Therefore, applying the ratio of the said decision, we hold that Modvat credit would be available on the Carding Machine in this case having been received on the date noted above.
13. In view of the fact that we have held as noted above, that the Modvat credit cannot be denied for non-compliance of Rule 57T(2) and in view of the fact that in the cases above the Modvat credit denied is now found to be available to the appellants, therefore, there is clearly a case for re-considering the imposition of penalty to the extent contained in the Order-in-Original. In view of the fact that the denial of credit noted above has been now allowed in this order, therefore, the only infraction remaining on record is with respect to those items where the Order-in-Original has denied credit and appeal against them not having been pressed before us. Since these are very few in number, we find that justice requires that the quantum of penalty be reduced accordingly. We, therefore, reduce the penalty on the appellants to Rs. 5,000/- (Rupees Five Thousand only).
14. The Order-in-Original impugned is ordered to be modified to the above extent. The appeal succeeds partially with consequential relief as ordered above.