Customs, Excise and Gold Tribunal - Mumbai
Tata Engineering And Locomotive Co. ... vs C.C.E. on 14 May, 2003
Equivalent citations: 2003(161)ELT753(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. Tata Engineering & Locomotive Co. Ltd. is engaged, inter alia, in the manufacture of motor vehicles in its factory at Jamshedpur. It took credit of the duty paid on inputs that it received and utilised in the manufacture of these vehicles. The notice issued to it proposed to deny the credit that this appellant had taken during the period between August and December, 1992 and between July and December, 1993. The basis for the denial contained in the notice and in the subsequent corrigendum that was issued is threefold. It first proposed to deny Modvat credit in those cases where the gate passes did not bear upon them the part number of the input as figuring in the declaration filed by the assessee under Rule 57G. It secondly, proposed to deny credit on those invoices taken of the duty shown in the gate passes which bore a part number, but the number did not tally with the number shown against the input in Rule 57G declaration. The third proposed to deny the credit on the ground that the assessee had not enclosed the duty paying documents with the RT 12 returns that it filed as required in Sub-rule (4) of Rule 57G. Penalty was also proposed on the assessee as well as on its various employees. In his order, the Commissioner has confirmed the demand for duty on all the counts and imposed penalty on the company and its five employees. Hence these six appeals.
2. The common Counsel for the appellants relies, so far as the first two grounds are concerned, upon the decision of the Kolkata Bench of the Tribunal in the appellant's own case reported in 1999 (33) RLT 711, for the period between January to June, 1993 i.e. the interim period between the two periods specified in the notice that led to the passing of the order impugned before us. The departmental representative emphasises what the Commissioner has observed, that this is that the appellant manufactured large variety of motor vehicles and parts thereof and for the manufacture of each of these number of inputs. Many of these inputs have common names, and it is the part number that identifies the particular input which is used in the manufacture of specific vehicle. Therefore, where a particular number in the gate pass does not correspond with a particular input and final product mentioned in the 57G declaration for the reason that the gate pass either does not contain a number or contains a number which is not found in the 57G declaration, it is not possible to say that this input is in fact required to be used in the manufacture of particular finished products. Credit has therefore been rightly denied.
3. Counsel for the appellant explains to us that a particular number is allotted to each input that is received by the appellant required not only for manufacture, but indeed to every item that is supplied for use in its factory. The object of allotting such a number, requiring large number of components, is to provide an easy system of identifying a particular item which goes into or used in the manufacture, of the machine, or is used elsewhere, such as in the office, both for the purposes of inventory control by its supplier and for identification by this appellant for such purposes as inventory. The Commissioner is, in our view, right when he says that model number does provide a unique system capable of easy implementation, for identifying particular component which goes into the manufacture of each final product. However to jump from this fact to the conclusion that, in the absence of part numbers, Modvat credit cannot be taken, is more of an act of faith than any conclusion based upon reason or law. The rules at no time provided for provision by the manufacturer of part number in the 57G declaration. Sub-rule (1) of Rule 57G only required a declaration to be filed by a manufacturer to indicate description of final products manufactured in its factory and inputs intended to be used in the final products "and such other information as the Assistant Commissioner may require." In the absence of a specific requirement by the Assistant Commissioner, therefore, the rule does not contemplate furnishing anything other than description of both final products and the inputs. The requirement will be satisfied if the goods are described in a reasonably comprehensible manner so as to establish their identity i.e. the name of the input or its chemical identity and the final product in the manufacture of which it is intended to be used. Even in the absence of a particular number, these details are enough to establish whether the input is or is not intended to be used in the manufacture of finished products. A part number no doubt facilitates establishing this requirement and it was always open to the Assistant Commissioner to require a part number to be specified. The rule which we have excerpted above provides for it. There is some controversy as to whether the appellant was asked to furnish part number in the 57G declaration, the departmental representatives maintaining that it was and the appellant contending that it was not. This is not really crucial to the issue. All that can be done by applying Rule 57G(1), is to insist that the manufacturer include part numbers in the 57G declaration.
4. We are however not able to find any requirement in the rules asking the supplier of the goods to indicate on the gate passes part number used by intending recipient of the input. The provisions of Rule 52A, which specifies the particulars required to be contained in an invoice and gate pass, do not grant discretion to any official to ask for any information in addition to that which is specified in the rules. A gate pass does not become invalid solely for the reason that it does not contain information that the departmental officers may find convenient for their purposes but for inclusion of which there is no legal provision. Therefore denial of credit on the ground that the gate pass did not contain the part numbers cannot be upheld. Here perhaps a doubt could arise as to whether, in the absence of part number in the 57G declaration, the input could be required at all. We put this doubt to the Counsel for the appellant. He says that the difference arises because part numbers may sometimes change. A new part, serving the function of an earlier existing part, may or was of a different material or by a different process may be introduced, to be used either in addition any selected matters, to the old part or any replacement of it. In such situations, the part number will change.
5. We do not find this explanation unreasonable given the fact that there is constant research going on in the field of automotive engineering and many other industry and new parts, differently designed, or having different composition from the existing parts are introduced, it is reasonable to explain a manufacturer to change the makeup of its parts and, therefore, the composition of parts change. We note that, despite the power to do so that the department possessed, there is not the slightest indication in the notice issued to the appellant or in the order that such verification was conducted which showed that inputs covered by a gate pass bearing a part number which indicated in the 57G declaration were not in fact used or necessary for use in the manufacture of any of the appellant's final product. It has, of course, also to be borne in mind that the gate pass or invoice will contain in addition to the part number, the description of the part or item - steel sheet, bolt, etc, Presumably, the departmental officers would have conducted checks to see that the declared inputs are in fact utilised in the manufacture of finished products. It is also necessary to note at this stage that the requirement of filing a declaration has itself been done away with from 1st April, 2000 onwards.
6. So far as these are concerned, therefore, our conclusion is the same as that arrived at, substantially for the same reasons, by the Kolkata Bench of the Tribunal and we hold that credit could not be denied to the appellant.
7. We now turn to the last issue. Duty of Rs. 2.84 crores approximately has been demanded on the ground that duty paying documents on which credit to this extent was taken were not produced. The Counsel for the appellant states with regard to this aspect as follows. The requirement of the manufacturer having to submit the duty paying documents on which credit was taken to the jurisdictional officer along with the copies of the RT 12 returns furnished arose as a result of amendment made to Rule 57G(4) on 1-2-1990. By letter dated 20-7-1990 to the jurisdictional Assistant Commissioner, the assessee expressed its difficulty in submitting the monthly RT 12 returns on account of the large number of gate passes - exceeding 9,000 - and other difficulties which were spelt out and requesting for verification of defacing of the document in the location of the gate passes within the factory. There has been no reply to this letter at all. In fact the duty paying documents were being verified and defaced by the officer in the manner requested by the assessee. It is only by issue of notice dated 6-7-1993 that this point was raised. By that notice, credit was sought to be denied on this ground as also on the ground that copy of the declaration under Rule 57G was not given, for the period January to June, 1993. In his order confirming the demand, the Commissioner demands duty only with regard to missing or unconnected part numbers and does not say a word about this issue. The Commissioner's order in any case has been set aside by the Tribunal. On 28-12-1993, the appellant was told by the Assistant Commissioner that it should henceforth submit original duty paying documents along with RT 12 returns for verification and defacing and it has complied with this requirement thereafter. There is therefore no intention at all to evade duty and to take credit wrongly by not submitting the documents and the extended period of limitation will not apply.
8. The departmental representative answers that failure to submit the documents itself leads to suppression referred to in the proviso under Sub-rule (1) of Rule 57-1 and the extended period of five years would be available. He further emphasises the aspects in the notice relating to receipt and lack of co-operation of the assessee.
9. Sub-rule (4) of Rule 57G at the relevant time required a manufacturer to submit to the jurisdictional Superintendent copies of the duty paying documents on which credit had been taken along with the RT 12 returns which were required to be submitted. This embodies the procedure to verify that the credit which has been taken relates to duty which has been paid which had been declared. Absence of these documents would result in the officers not being able to verify this position and therefore can lead to prima facie conclusion that credit has not been correctly taken. From the letter of 1990 to the appellant, it has been clear to the department that the documents were not being submitted. The departmental representative is not able to produce any material to show that this request was not accepted, or any reply furnished to the assessee. The contention of the Counsel for the appellant that this letter was in fact acted upon appears to be sound. It will be clear from this correspondence that the duty paying documents had not enclosed to the RT12 returns from July, 1990 till December, 1993. The notices issued to it alleging wrong taking of Modvat credit on this score only covered the period from August, 1992 to December, 1993. No notice has been issued for the period from January, 1990 to July, 1992. Considering the meticulous manner which the department has demanded duty, it is reasonable to conclude that had the gate passes for that period not been made available at all, notice would have been issued for this period also. The absence of any such notice therefore justifies an inference in favour of the appellant. In this situation, we do not find it possible to say that failure by the appellant to enclose copies of the duty paying documents by itself amounts to suppression of fact justifying the invocation of the extended period of limitation. The notice is therefore barred by limitation.
10. It would then follow that penalty was not imposable on the assessee and its employees.
11. The appeals are accordingly allowed and the impugned order set aside.