Judgment:
1. The appellants are manufacturers of electric wires and cables classifiable under Heading 8544.00 of the Central Excise Tariff using inputs like Aluminium and Copper Wire Rods, PVC compound made from duty paid PVC resin. Objection was taken by the departmental officers about their irregular availment of Modvat credit and show cause notice was issued. The Assistant Collector adjudicated the case confirming demand of duty of Rs. 9,54,687.32 under Rule 57-I of Central Excise Rules read with Section 11A of Central Excises & Salt Act, 1944. The Collector (Appeals) partly allowed their appeal by directing the Assistant Collector to consider the admissibility of Notification 198/86 in respect of PVC compound and benefit of notional credit of Rs. 15,271.27 and to give them the opportunity to submit duty paying documents which they claimed to have submitted earlier and grant them relief admissible as per law in the light of these decisions. The Assistant Collector's order was otherwise upheld by the Collector (Appeals). Aggrieved with the above order-in-appeal, the appellants have filed the present appeal.
2. Shri A.K. Jain, learned counsel for the appellants submitted that the show cause notice issued on 28-11-1986 was time barred for the credit amounts taken more than six months earlier. The Superintendent of Central Excise had issued the notice and evasion of duty has been alleged. In such case the Superintendent was not the competent authority to issue the notice. Only the Collector could have issued the notice. The notice was issued making it answerable to the Assistant Collector while it was adjudicated by another. This was not in order.
There was no effective personal hearing. Their plea that the proceedings were without jurisdiction had not been disposed of and during the pendency of their objection in this regard, the adjudication had been proceeded with and the demand confirmed. The order has been confirmed by the Collector (Appeals) except for a small part of the demand to which he remanded the case for redetermination of the amount of demand. The time limit starts from the date of taking the credit and not the date of submission of the RT 12 return. This is the clear position from the wording in Rule 57-I amended on 6-10-1988. This amendment was retrospective in nature and would apply to past cases also. He pleaded that the appeal be allowed. The plea was opposed by the learned Departmental Representative, Shri Mewa Singh.
3. We have considered the submissions and perused the record. We find that the Collector (Appeals) has remanded the matter to the Assistant Collector for determination of the amount of demand after granting the admissible benefit as per the relevant rules in the light of his directions on certain issues. It is not known whether the Assistant Collector had already carried out such re-determination of the amount of demand in the light of the direction contained in the order-in-appeal passed by Collector (Appeals). In the arguments advanced before us on behalf of the appellants, the emphasis was only on legal questions the jurisdiction, time barred nature of the show cause notice. The arguments on the merits of the issue were confined to Notification 198/86 regarding PVC compound, the intermediate product made from duty paid inputs, namely PVC Resin. On this question, we find that the Collector (Appeals) has already directed the Assistant Collector to consider its admissibility. This should be done by that authority if not already done.
4. We find that the show cause notice bears the dated 25-11-1986. It was issued citing Rule 57-I and Section 11A. The period when the alleged irregular taking of credit had been taken was May 1986, June 1986 and July 1986. Rule 57-I is specific for modvat credit situations and Section HA is to deal with cases of short-levy, non-levy or short-payment or non-payment of duty or erroneous refund. Whether one looks at the notice with reference to Rule 57-I or Section HA, the notice cannot be held to be time barred. Rule 57-I at the material time did not have any inbuilt provision for issue of notice or any time limit for its issue. But even in the absence of such provisions, there is no escape from the requirement of issue of notice. As regards the other factor of time limit within which such notice is to be issued, there is no support in either of the two provisions mentioned in the notice for the plea that it was barred by limitation. This is because Rule 57-I as it stood when the notice was issued had, as stated already, no time limit restriction. In such a case where the statute is silent in that regard reasonable time limit will have to be provided or applied as per the ratio of Supreme Court judgment Government of India v. Citadel Fine Pharmaceuticals reported in 1989 (42) E.L.T. 515. We do not accept the plea raised by the learned counsel that the time limit will have to be reckoned in the manner laid down in Rule 57-I as amended from 6-10-1988. In the amended Rule 57-I, the notice has to be issued "within six months from the date of such credit". This condition was not there when the notice was issued and it cannot be applied retrospectively to invalidate a notice issued earlier which was within the terms of the Rule as it existed or as it should be read and applied. The earlier credits had been taken in the month of May 1986.
The department could have come to know about the credit having been taken only when the RT 12 return along with the accompanying RG 23A Part II statement showing the particular credits taken. The starting point for time limit will be the date of submission of the RT 12 return. The stand taken on behalf of the appellants' ld. counsel that the amendment will apply for past cases also will, by the same logic, lead them to face the consequence of a subsequent amendment to Rule 57-I with effect from 16-3-1995 when the starting point of the six months time limit has been specifically made the date of filing of the return. As already considered it is the Rule as it stood at the material time that was applicable in their case. The application of the other provision, namely Section HA will also lead to the same conclusion. The notice issued by the Superintendent was also not barred by any jurisdictional constraints. The notice issued in November was within a period of six months from the date of filing of the RT 12 return which is the relevant date under Section 11A. Any proposal to impose penalty does not make the notice invalid on the score it was issued by the Superintendent. No penalty was actually imposed. The notice was also within time. In Raletronics Ltd. v. Assistant Collector of Central Excise - 1992 (60) E.L.T. 388 a Divisional Bench of the Karnataka High Court held that the show cause notice issued by the Superintendent mentioning the charge of suppression, misstatement etc.
was not invalid and the reference to suppression, misstatement etc. may be deleted. The judgment has been upheld by the Supreme Court. In the present case there is not even an allegation of suppression or misstatement etc. There is no merit in the stand taken in the appeal that the notice issued by the Superintendent was beyond jurisdiction.
5. A plea taken in take appeal justifying the credit taken for inputs received by them before filing the declaration is that Rule 57G does not restrict taking of credit only in respect of inputs received after filing of the declaration. It only lays down that credit can be taken only after filing the declaration. They have thus justified their taking of credits for inputs received even before their declaration.
Such a view does not quite fit in with the fact that there is an express provision in the shape of Rule 57H as transitional provision.
This rule authorises the Assistant Collector to allow credit of duty on inputs received prior to the filing of the declaration under Rule 57G.Since the appellants have stated that they had in fact filed an application under Rule 57H for such benefit, their eligibility in this regard would be subject to their fulfilling the terms of this Rule. It is, however, seen that the Assistant Collector had discussed this question in her order (first paragraph on page 4 of the order-in-original). On the rest of the points where credit had been disallowed for credit taken on the strength of certificates issued by a Public Sector Undertaking, the plea is taken that in any case deemed credit was admissible to them. We find that this has not been adequately dealt with in the order of the authorities below. As the Collector (Appeals) had remanded the matter to the Assistant Collector for de novo decision in respect of certain issues, we are inclined to direct that authority may decide afresh all the grounds taken on merits. The submission of the appellants on other issues of jurisdiction, limitation and denial of principles of natural justice are rejected.