Customs, Excise and Gold Tribunal - Tamil Nadu
The Aluminium Industries Ltd. vs Collector Of Central Excise on 26 October, 1992
Equivalent citations: 1993ECR615(TRI.-CHENNAI), 1993(65)ELT460(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. This appeal is against the order of the Collector of Central Excise (Appeals), Madras. Under the impugned order the appellant's plea for grant of credit of Rs. 4,49,599.54 has been denied for the reason that the provision of Notification 214/86 read with Notification 351/86 Central Excise had not been complied with when the raw materials belonging to the appellant were sent to the job worker. The learned Advocate for the appellants pleaded that the appellants were working under the MOD-VAT scheme and availed the MODVAT credit in respect of the Aluminium ingots. These aluminium ingots they were rolling in their factory and were using them captively. However, for a brief period, during 22-2-1987 to 10-3-1987, the appellants rolling mill was not functional and they informed the jurisdictional Central Excise authorities that they would be sending the aluminium ingots to the premises of a job worker, viz. M/s. Dharmadeep Properzi Rolling Mills (P) Ltd., and getting the ingots rolled there and receiving the rolled product back in their factory. He has pleaded that the jurisdictional authorities informed them that they could do so subject to their following the procedure laid down under Rule 214/86 and the trade notice 115/86 issued in this regard. He pleaded that the appellants sent the ingots to the job worker and received the intermediate product manufactured out of these, viz. the rolled product back in their factory. He has pleaded that the job worker instead of clearing the goods free of duty, as provided for under Notification 214/86 read with Notification 351/86, paid the duty on the rolled product manufactured out of the ingots which, were supplied on their account by the MMTC to them. He has pleaded that the appellants have been ruled out for the grant of MODVAT credit merely on the ground that the procedural formalities had not been complied with. He has pleaded that there is no dispute that the ingots belonging to the appellants were sent to the job worker after due intimation to the authorities and thereafter the said ingots after being rolled were converted into rods which were received back into the appellant's factory. He has pleaded that mere payment of duty at the premises of the job worker cannot dis-entitle the appellant from the substantive benefit allowed under the MODVAT scheme. He has pleaded so far as the duty paid on the product received from the job worker is concerned the appellants have not taken any MODVAT credit in respect of the same nor the job worker has taken the MODVAT credit in respect of the duty paid on the ingots received by him.
2. The learned D.R. submitted that at the relevant time the so called job worker could not be treated as a job worker in terms of Notification 214/86 which envisages the manufacture of goods by the job worker, subject to the fulfilment of certain conditions and the return of the same without payment of duty to the supplier of the raw material. He has pleaded that since the appellant has not worked under the provisions of Notification 214/86 the question of therefore allowing MODVAT credit to the appellant would not arise. He further pleaded as it is no specific permission under Rule 57F(2) was given to the appellant.
3. We observe there is no dispute that the appellants had for bonafide reasons sent the ingots to the job worker's premises and had informed the authorities of what they were going to do. The authorities had informed them that they could avail the facility subject to their following the procedure under Notification 214/86 and the trade notice issued in this regard. We observe the whole procedure and the rules have been framed with a view to ensure that the inputs in respect of which MODVAT credit is taken are in fact used for the manufacture of intermediate goods which ultimately come back to the person who is availing MODVAT credit and there is no diversion of the goods and all other requirements regarding disposal of waste etc. as provided in the rule are carried out in the present case. We observe that the appellants have been denied the benefit of MODVAT credit merely for the reason that the procedural formalities as prescribed in the notification referred to supra and the trade notice issued have not been complied with. We like to observe that both the appellants and the job worker were working under Central Excise Control and it should not be difficult for the authorities to verify from the contemporaneous records maintained in both the units as to whether the ingots which were supplied at the instance of the appellants to the job worker had been in fact utilised for the manufacture of the intermediate product, viz. the rods and whether the said rods were ultimately sent to the factory of the appellant. It should also be possible to ascertain as to whether the requirements of rules in respect of waste, if any, arising during the course of the manufacture had been complied with. We have held in many cases that MODVAT scheme is a beneficial piece of legislation with a view to mitigate the cascading effect of the duties. It is, therefore, necessary that when the assessees working under a MODVAT scheme commits a procedural infraction, he should not be ruled out for the benefit so long as they are able to show that the inputs have been used as envisaged under Rule 57A and also the other requirements of the rules have been complied with. We, therefore, hold that this is one such case where the authorities should approach the matter in the above light. We observe that in the present case the appellants had informed the authorities and obtained their permission for sending the ingots to the job worker and instead of clearing the goods free of duty as envisaged in Notification 214/86 the job worker chose to pay duty. The clearance of goods on payment of duty by job worker is not a bar for grant of concession under Rule 57F(2). Since all the facts regarding the manufacture and clearance of goods have not been disputed, we are constrained to remand the matter for de novo consideration to the original authority to decide the matter in the light of the above observations. We clarify that we have proceeded on the assumption that the job worker has not taken the MODVAT credit in respect of the inputs and the appellants have not taken the MODVAT credit in respect of the intermediate goods received by them from the job worker.