Judgment:
1. Both these appeals involving common question of law and facts were heard together and are being disposed of through this common order.
1. Appellants are alleged to have availed modvat credit even when their final products were eligible to nil rate of duty in terms of Notification 214/86. Assistant Collector dropped the proceedings against the appellants. Revenue, however, by virtue of powers under Section 35(E) moved an appeal before Collector of Appeals. Collector (Appeals) set aside the impugned order and held that on point of mis-declaration, the Order of Assistant Collector was beyond his jurisdiction. He in the result, remanded the case to Collector for de novo adjudication in view of prima facie allegation of mis-declaration and suppression of facts.
2. Arguing for the appellants the Ld. Advocate submits that they are a job worker undertaking the job work of converting copper bar into copper wire rods on behalf of Principals. They either work under Rule 57F(ii) or they themselves take credit on the inputs and clear the goods to their Principals on payment of duty. In other words, while in some cases they opt for benefit of Notification 214/86, in other cases they straightaway take the modvat credit and remove the goods again to the Principal on the payment of duty. He submits that the Collector (Appeals) has travelled beyond show cause notice in alleging suppression as no such allegation was made. In regard to mis-declaration also he has not given any clear findings. Revenue also in the Order which authorized filing of appeal has not alleged any suppression. The only ground pressed in to service by Revenue was that the appellants had availed of Modvat when final products in terms of Notification 214/86 were exempted, and therefore, such modvat credit could not be availed of. Collector (Appeals) instead of dealing with this issue has remanded it on a ground not at all urged in the show cause notice nor indeed pressed into service by Revenue while ordering filing of appeal before Collector (Appeals).
2A. On the main issue whether in such cases a job worker could take the credit, Collector in subsequent proceedings, in fact, gave them the benefit and dropped the proceedings initiated against them. In this connection, he draws our attention to internal page 5 of Collector's Order dated 13.9.1993 in their own case, which is the subject matter of Appeal No. E/3202/93-NB. He also cites in support of his contention Tribunal's order in case of National Workshop and Foundries v. CCE & Customs, Aurangabad 1993 (47) ECR 68(T) where Tribunal held that Modvat is available to job worker on inputs received from Principal on Stock Transfer basis provided the Principal has not taken the modvat thereon.
There is no allegation, the Ld. Consultant submitted, that the Principal has taken modvat since Principal had not taken modvat on the impugned goods, the Law permitted job worker to take credit, provided subsequently goods were removed by him to the Principal on payment of duty. It is well-settled position that the job worker himself is also a manufacturer.
3. Ld. DR reiterates departmental arguments and submits that charge of suppression is implied in the show cause notice since Rule 173(Q) has been invoked.
4. We have heard both sides. Basically the charge against the appellants was that whereas goods were eligible to exemption under Notification 214/86, they paid duty on these goods. We agree with the Ld. Advocate that it is the option of the Principal to either adopt procedure under Rule 57F(1)(ii) or receive the goods after job work on payment of duty, provided in the latter case, no credit has been taken by the Principal. What has happened in this case is that job worker has taken modvat credit on the inputs and removed goods on payment of duty.
Job worker is a manufacturer in his own right [See Collector of Central Excise, Baroda v. Mis. MM. Khambhatwala . There is no allegation that Principal in this case had already taken the modvat credit on the impugned goods. In fact, we find that Collector himself in case of Appeal No. E/3202/93-NB dropped the proceedings on this ground. Para 6 of his Order is extracted below: 6. A simple reading of the above provisions would indicate that where these conditions are not observed the concession under the notification will not be available and the goods would have to be cleared on payment of duty which is begin done in this case.
Therefore, since the final products are not exempt from the payment of duty, Rule 57C is not applicable. Further, there is also no mandatory condition in the Modvat rules that the provisions of Rule 57F(1) and (2) cannot be simultaneously availed. As rightly contended by the party, Sub-rule (2) of Rule 57F itself starts with the prefix. "Notwithstanding anything contained in Sub-rule (1)".
Therefore, there is no denial in law that if the provisions under Rule 57F(2) are availed, the facility under Sub-rule(1) will not be available or vice-versa. Both provisions are independent and can be availed simultaneously. The party is maintaining separate records in relation to the goods received under Sub-rule (1) and (2) of Rule 57F and there is no allegation that they have mixed up the goods received under the provisions of the two sub rules and there is violation liable to the recovery of Modvat credit. Therefore, the charges as levelled in the show cause notices are not sustainable.
In fact, the Assistant Collector of Central Excise, MOD-IV in his Order-in-original No. 23/92 dated 30.3.1992 has dropped the charges for reversal for Modvat credit of Rs. 56,57,896.41 relating to the three show cause notices dated 16.4.1991, 8.10.1991 and 5.2.1992 issued to this very unit. I have seen this order of the Assistant Collector and I agree with the findings of the Assistant Collector leading to the dropping of demands in these cases. The Hon'ble Tribunal in the case of Mis. National Workshop and Foundaries v. Collector of Central Excise Aurangabad reported in 1993 (47) ECR 686 (Tribunal) have also held that the Modvat is available to the job worker on inputs received from the principal on stock transfer basis, provided the principal has not taken Modvat thereon. The Hon'ble Tribunal in para 5 of this decision have also referred to the circular of the CBEC dated 1.3.1989 in which it is specified that Modvat credit facility would be available in case of purchase as well as stock transfer. In the present case, the goods are received on stock transfers. Here the goods are received either on endorsed gate passes or G.P.Is issued by the principal under Rule 57F(1). The transfer of goods by both ways is recognised under the rules and there is no irregularity.
5. We also do not agree that allegation of suppression can be merely inferred from the show cause notice. Suppression, mis-declaration, etc.
are serious charges and have to be clearly spelt out in the order to put the appellants on notice. Tribunal in case of National Workshop and Foundries v. CCE held that modvat was available to job worker on inputs received from Principal on stock transfer basis provided the Principal has not taken modvat credit thereon. Ld. DR concedes that Principal had not taken modvat credit on the impugned goods, and therefore, the job worker was free to pay duty on the finished goods after claiming modvat on inputs. In any case, whether to follow Rule 57F(ii) procedure or not was the option of the Principal and if the Principal did not choose to follow such procedure and in such condition, job worker, carrying out job work for a principal, could not have been forced to discharge that obligation. Rule 57F(ii) essentially casts an obligation on the Principal and not on the job worker.
6. In view of this, we set aside the impugned order and allow the appeal. II) Appeal No. E/3202/93-NB.7. In this appeal relief has not been given to the appellants following the ratio of the Tribunal's Order in case of National Workshop and Foundries v. CCE Supra. However, a part of demand of duty has been confirmed under Rule 57-1 (ii) on the ground that the goods were received on the endorsed Bill of Entry. Collector in Para 7 of his order has referred to show cause notice dated 27.7.1992 with corrigendum dated 31.7.1992 in which it is alleged that the two consignments of the inputs in this case were received under Bill of Entry No. 1238 and 1239 dated 5.5.1992 which were in the name of M/s.
Jain Tar Udyog, Shahdara, and the goods covered by these Bills of Entry were sold to the party by making endorsement on the bills of entry which has not been prescribed as a valid duty paid document by CBEC, in terms of Rule 57G(2) of Central Excise Rules, 1944, against which the credit of additional duty of Customs (CVD) could be allowed. Collector has also recorded that there was no allegation in the original show cause notice on the ground that modvat credit on the endorsed bills of entry was not available. This allegation, however, appears to have been made in Corrigendum. Collector has recorded that CBEC have prescribed detailed procedure under Rule 57G(2) for availing credit of CVD on the imported inputs when the goods are obtained by way of high sea sales or are purchased after their import. He has referred to Bombay-I Trade Notice No. 57/1987 dated 7.8.1987 holding that the procedure is mandatory and in absence of this procedure, bill of entry cannot be considered as a prescribed document under Rule 57G(2). The Collector has confirmed the demand.
8. In this connection, our attention was drawn by Ld. Advocate to the case of Shri Krishna Strips Ltd. v. CCE 1995 (10) RLT 650 (CEGAT-NRB) where Tribunal held that additional duty of Customs paid on imported copper wire bars used in the copper strips and copper foils is available as credit on the endorsed bill of entry. Not following certain procedure would not result in denial of the credit. We are reproducing only the head note in this connection: Modvat Credit-Additional duty of Customs paid on imported copper wire bars used in the manufacture of copper strips and copper foilsavailable credit on the endorsed bill of entrynon-following of certain procedures, not to deny the credit.
The Tribunal held that credit should not be denied merely because the appellants have not satisfied procedural condition imposed by Central Board of Excise and Customs 9. Ld. DR did not dispute the fact of admissibility otherwise of modvat on the impugned goods covered by these two bills of entry. The actual issue involved was a fact of endorsement on the Bill of Entry.
10. Following the ratio of Tribunal's earlier orders, we are of the view that once duty is paid the fact that the credit was taken on the basis of endorsed bill of entry provided the entire consignment is covered by the endorsed bill of entry, should not come in the way of grant of benefit.
11. In view of this we set aside the impugned order and allow the appeal.