Customs, Excise and Gold Tribunal - Tamil Nadu
Prameela Plastics Pvt. Ltd. vs Collector Of Central Excise on 26 February, 1988
Equivalent citations: 1989(22)ECR367(TRI.-CHENNAI)
ORDER
K.S. Venkataramani, Member
1. This appeal is directed against the order dated 20.5.1987 passed by the Collector of Central Excise (Appeals), Madras.
2. The facts in brief are that the Assistant Collector of Central Excise, Lalbagh Division, Bangalore, allowed MODVAT facility to the appellants by taking their letter dated 4.3.1986 addressed to the Supcrintendant, Central Excise for availing MODVAT under Rule 57G of the Central Rules, 1944 whereas they had filed the declaration for MODVAT only vide their letter dated 26.8.1986. This order of the Assistant Collector was sought to be reviewed by the application filed before the Collector (Appeals) by the Department under Section 35-E (4) of the Central Excises and Salt Act, 1944 on the ground that the Assistant Collector's order was erroneous because according to the application for review, any order for availing MODVAT has to be only to take effect after the declaration has been filed with the jurisdictional Assistant Collector and acknowledged, and it cannot take effect before that date. The Collector (Appeals) held the contention of the Department that MODVAT credit cannot be allowed and utilized prior to filing of declaration as envisaged under Rule 57G of the Central Excise Rules, 1944.
3. Appearing for the appellants, the learned Counsel Shri G. Sampath drew attention to their letter dated 4.3.1986 to the Superintendant. In this letter they have clearly slated that their product if dutiable may be permitted to avail of MODVAT benefit. The Counsel submitted that prior to 28.2.1986 their product, namely, Co-extruded LDPE film for packing milk, was classified under item No. 68 of the CET and was exempted under Notification 182/82 dated 11.5.1982. However, on coming into force the Excise Tarrif Act, 1985, with effect from 28.2.86. the question of classification of their goods arose. The Departmental officers had called for particulars of this stock and had also directed the appellants to contact for further details before effecting clearance. It was in this context that in their letter dated 4.3.1986 the appellants had intimated about the end product manufactured by them, and also requested permission to clear the goods since it is an essential commodity. In this letter they had categorically mentioned that if their product is dutiable, they may be permitted to avail of the MODVAT benefit. Thus the classification of the product was in doubt in the initial period after introduction of the new tarrif. It was in this background that their letter of 4.3.1986 was written to the jurisdictional Supcrintendent. No definite clarification was issued to the appellant but the appellant was permitted to clear the goods on furnishing an undertaking that they would pay duty if it is ultimately held that duty is leviable on such product. The appellants gave the requisite undertaking on 21.3.1986 itself. On 23.8.1986, the Assistant Collector decided that the goods are classifiable under 3920.32 of the Central Excise Tariff Act and that duty has to be paid from 1.3.1986 onwards. On this, the appellants agreed to discharge duty liability and also requested that the application for availing MODVAT benefit as mentioned in their letter of 4.3.1986 should be granted since they have been seeking clarification in the matter from 4.3.1986. In this background the learned Counsel contended that to hold that the appellants had made declaration only subsequently on 26.8.1986 was not correct. The appellants had furnished the particulars regarding their product to the Superintendent on 4.3.1986 and had requested for MODVAT benefit. In such a situation the Counsel argued that denial of the MODVAT credit on the grounds of their letter dated 4.3.1986 was not proper and unjustified because, according to Counsel, there is substantial compliance with the requirements of declaration by the appellants in terms of Rule 57G of Central Excise Rules, since all the aspects laid down in that Rule have been covered by their letter dated 4.3.1986. He further pointed out that the order of the Assistant Collector dated 30.9.1986 clearly shows that the appellants were maintaining the necessary records for the purpose of MODVAT benefit.
4. Heard Shri K. K. Bhalia, the learned S.D.R. who contended that the provisions of Rule 57G are very specific that the MODVAT facility of taking credit on inputs for paying duty on the final product has necessarily to follow the filing of a declaration with the jurisdictional Assistant Collector and obtaining acknowledgement therefor. In this case, the declaration letter dated 4.3.1986 does not amount to such a declaration since it was filed before jurisdictional Superintendent.
5. On careful consideration of the submissions made by the parties herein it is observed that in case of the appellants the Department itself had accepted the position that there was some confusion and uncertainty during the month of March and April 1986 both in the trade and in the Department regarding classification of the item. But it is not in dispute at the same time that raw material namely LDPE granules used by the appellants in the manufacture of LDPE film are eligible for MODVAT under Rule 57A as an input. It is also seen from the perusal of the order of the Assistant Collector dated 30.9.1986 that the appellants had been maintaining RG-23-A Part 1 and RG-23-A Part 11 with effect from 1.3.1986 and they had obtained Central Excise Licence and had been maintaining other connected registers of Central Excise. Assistant Collector has further observed in his Order." I have no reason to suspect any malafide intention. On the contrary they have established their bonafides by contacting the proper officer in time for guidance". From the above it is clear that the claim of the appellants that there has been substantial compliance with the provisions of declaration under Section 57G has a lot of force, and is accepted. In the peculiar facts and circumstances of the case, and in the admitted position that in March, 1986 and April, 1986, the very classification issue was clouded with doubt on both sides and since the appellants had intimated about their end product and had sought in their letter of 4.3.1986 MODVAT facility if their product is found dutiable, the mere fact of their letter being addressed to the jurisdictional Superintendent should not, in our view, stand in the way of the facility being extended to them, especially in the light of the observations of the Assistant Collector himself. In this view of the matter, having regard to the facts and circumstances of the case, the appeal is allowed.