Customs, Excise and Gold Tribunal - Delhi
Indag Rubber Limited vs Collector Of Central Excise on 27 January, 1997
Equivalent citations: 1997(93)ELT572(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. By the captioned appeal, the appellants have assailed the order of the Collector of Central Excise, Jaipur. The Collector in his order disallowed the Modvat credit amounting to Rs. 1,41,353.05.
2. The facts of the case are that the appellants are engaged in the manufacture of tyre retreading equipments. The appellants opted to avail Modvat credit of duty on the inputs used in the manufacture of tyre retreading equipments. They filed a declaration on 20-3-1986 which was acknowledged on 27-3-1986. Subsequently the appellants filed revised declaration on 16-6-1987 and 11-11-1987. On scrutiny of the declaration it was alleged by the department that Modvat credit was wrongly availed by the appellants as the inputs were not properly declared. A show cause notice was issued to the appellants on 27-2-1988 asking them to explain as to why the Modvat credit taken by them during the period from 6-5-1986 to 29-5-1987 should not be denied to them and why the amount should not be recovered from them. In reply to the show cause notice the appellants submitted that the inputs not being declared alleged in the show cause notice was erroneous; that some of the inputs were being traded that Modvat credit in respect of those items will be reversed. After considering the submissions of the appellants the Collector disallowed the Modvat credit to the extent stated as above.
3. Shri M.P. Devnath, learned Advocate appearing for the appellants submits that he would like to contest the case on two aspects; that the first aspect is merit of the case that the second is the limitation. He submits that broad description of all the inputs was given in the declaration. He submits that since it was the beginning of the new scheme introduced by the Government with effect from 1-3-1986 and therefore the appellants were not fully conversant with the type of declaration. He submits that the department listed 25 items as not covered by the declaration; that out of 25 items 7 items namely stapler pins, Sprayer pump, Roto clean, Wadco Phenumatic Drill, Everyday Staple Pin, Radious Rasp and Relay were trading items and therefore he would not like to press modvat claim on these items. He submits that the amount of duty involved on these items comes to 8,727.60 and that the appellants are ready to reverse this amount of duty taken as Modvat credit on the above mentioned items. The learned Counsel submits that the items indicated by the department as not declared can be easily fitted in the broad description given in the declaration. He submits that since it was the initial period of implementation of the new scheme of modvat therefore some mistakes were bound to happen. He submits that having regard to these difficulties the Board under its Circular No. F. No. 263/17/87-CX.8, dated 9-2-1988 clarified "that the matter has been examined by the Board and it has been decided that the declaration of the description and sub-headings for both the inputs and final product is essential for availing Modvat credit. Therefore this requirement cannot be dispensed with. However the past cases may be decided by the Collectors on merits keeping in view the fact that if the private/statutory records maintained by the assessee show that inputs have been received and used in the manufacture of the final product and declaration giving broad descriptions/chapters have been filed as required under Rule 57G, then the credit should not be disallowed." The learned Counsel submits that their case is fully covered by the clarification given in the above referred circular of the Central Board of Excise and Customs inasmuch as the declaration was filed giving broad description of the inputs. The learned Advocate also refers to the decisions of the Tribunal in the case of Rajasthan Transformers and Switchgears, Jaipur 1995 (7) RLT 645 in which the Tribunal held that pre-February, 1988 cases are to be decided in the light of Board's instructions and various trade notices. It was further held that Modvat credit was allowable even if the description is broad if the private/statutory records maintained by the assessee show the receipt and utilisation of the inputs. The learned Counsel submits that there is no dispute about receipt of the inputs in their use in the manufacture of final product and therefore he submits that his case is fully covered by the above decision of the Tribunal and clarification given by the CBEC on the question of limitation, learned Counsel submits that Gujarat High in the case of Torrent Laboratories (P) Ltd. 1991 (55) E.L.T. 25 held that since Rule 57-1 does not provide for any time limit therefore no time limit as prescribed under Section 11A shall be applicable to demands under Rule 57-1. The learned Counsel submits that all the case law in respect of period of demand under Rule 57-1 before its amendment on 6-10-1988 was examined by the larger Bench of this Tribunal in the case of Brakes India Limited 1996 (15) RLT 68 (CEGAT-SRB) which came to the conclusion that even under Rule 57-1 where no limit is prescribed six months period is reasonable period in the facts and circumstances of the case and that it should be counted from the date of taking the credit after the receipt of the goods in the factory. For this purpose the larger bench of this Tribunal relied on the decision in the case of Citedal Fine Pharmaceuticals -1989 (42) E.L.T. 515 (S.C.). The learned Counsel submits that in so far as limitation is concerned the facts of the case of the appellants are exactly similar to those considered by the larger Bench and therefore, the ratio of the decision of the larger bench of this Tribunal in the above case is fully applicable to their case. He submits that the demand in their case pertains to the period of 6-5-1986 to 29-5-1987 and the show cause notice was issued on 27-2-1988 thus demand was beyond six months and is hit by limitation. Summing up his arguments the learned Counsel submits that both on merits and limitation the decisions are fully in their favour. He, therefore prays that the appeal may be allowed.
4. Shri Ram Sharan, learned JDR appearing for the department submits that both aspects of the case namely merits and limitation have been dealt with by the adjudicating authority. He submits that allegation against the appellant was that the inputs were not declared since inputs were not declared therefore adjudicating authority rightly held that Modvat credit on the items was not admissible. The learned JDR also submits that since there was no declaration filed in respect of inputs automatically there was suppression and the period was extended beyond six months. He submits that Rule 57-1 as it then was did not prescribe in any period of limitation in so far as recovery of the credit taken was concerned. He also submits that since there was no time limit under Rule 57-1 and the Hon'ble High Court of Gujarat in the case of Torrent Laboratories Pvt. Ltd. reported in 1991 (55) E.L.T. 25 (Guj.) had held that the demand under Rule 57-1 can be raised for a period beyond six months as there was no time limit then prescribed under the rule. The ld. JDR therefore submits that both on merits and limitation the case is against the appellants.
5. Heard the submissions of both sides. I find that two aspects of the case are before me for determination. The first aspect is on merits whether imported items were described broadly or were not described in the declaration. From the evidence placed before me as also the contentions of the appellants before the lower authorities in reply to the show cause notice was that description of the goods in the declaration filed under Rule 57G was broad; that it was a broad declaration because the goods were known by different names or trade names and were not described as such in the declaration. I also observe that broad list showing which items described in the declaration fall under which items shown in the duty paying documents was placed before the adjudicating authority. I find that description given in the declaration is a broad description and the items can be clubbed in the broad description given in the declaration. I therefore hold that the items were broadly described in the declaration filed before the department. Having held so I find that there is specific clarification given by the Board in their Circular No. F. No. 263/17/87-CX.8, dated 9-2-1988 clarifying that past cases may be decided by the Collectors on merits keeping in view the fact that if the private/statutory records maintained by the assessee show that inputs have been received and used in the manufacture of the final product and declaration giving broad descriptions/chapters have been filed as required under Rule 57G, then the credit should not be disallowed. I find that the admitted position is that the credit of duty was taken on the strength of duty paying documents; that there is no dispute that the goods were not received or were not used in the manufacture of the final product. Since the credit of duty has been taken on the strength of GP1/Bills of Entry and therefore there cannot be any dispute about non availability of these documents. Having regard to these facts that the goods were broadly described in the declaration filed and in fact receipt of the goods in their factory and utilisation of the inputs in the manufacture of the final product is not in dispute therefore I agree with the contentions of the learned Counsel that their case is fully covered by the clarification given by the Central Board of Excise & Customs dated 9-8-1988. I also observe that similar issue came up before the Tribunal in the case of Rajasthan Transformers & Switchgears 1995 (7) RLT 645 wherein this Tribunal by a majority judgment held that Pre-February, 1988 cases are to be decided in the light of Board's instructions and various trade notices issued and that Modvat credit was allowable even if description is broad and if the private records maintained by the assessee show that the inputs were utilised in the manufacture. I find in the instant case that the goods were described broadly. I also observe that duty paying documents clearly show that the goods were received in the factory and also that there is no dispute about the inputs being used in the manufacture of final product therefore ratio of this decision also fully covers the case of the appellants.
6. Some of the items indicated in earlier paragraph were trading items and since no Modvat credit is admissible on those items I therefore hold that Modvat credit amounting to Rs. 8,727.60 will not be admissible to the appellants. Having held so I hold that Modvat credit amounting to Rs. 1,32,525.40 shall be admissible to the appellants.
7. On the second aspect namely limitation I find the main contention of the respondent is that Rule 57-1 before its amendment did not lay down any time limit for recovery of credit taken. For this contention the respondent has heavily relied upon the judgment of the Gujarat High Court in the case of Torrent Laboratories Pvt. Ltd. As against this the appellants have referred to the Larger Bench decision in the case of Brakes India Limited considered the decision of the Gujarat High Court in the case of Torrent Laboratories Pvt. Ltd. reported in 1991 (55) E.L.T. 25 (Guj.) and held that Rule 57-1 is to be read with Section 11A of the Central Excise Act, 1944 even before its amendment on 6-10-1988. In the instant case the demand is for the period when Rule 57-1 was not amended. Following the ratio of the Larger Bench decision I hold that the demand is hit by limitation and was time barred.
8. In view of the above findings the appeal is allowed. Consequential relief, if any, shall be admissible to the appellants in accordance with law.