Full Judgment
2. The appellants had filed declarations on 12-1-1988 and 14-7-1988 under Rule 57G of the Central Excise Rules, 1944 for availing Modvat credit of duty in respect of polythene printing ink, master batch and ethyl acetate to be used in the manufacture of their final product, namely, plastic filling sheets. In the classification lists filed by them from time to time they had also mentioned one more product, namely, flexible layflat tubing falling under sub-heading 3917.00 which is fully exempted from duty under Notification No. 14/92, dated 1-3-1992. Though, as per Rule 57C they were not to be allowed any credit of duty in respect of inputs used in the manufacture of this exempted product, during the years 1992-93 and 1993-94 they cleared 20,447 MT of flexible layflat tubing at nil rate of duty in terms of Notification No. 14/92. Simultaneously they also availed Modvat credit on the inputs used in the manufacture of their final product including this exempted product.
3. The Department by its demand-cum-show cause notice dated 14-6- 1994 alleged that the appellants had suppressed the fact that the inputs were also used in the manufacture of exempted goods while filing their declaration under Rule 57G.4. In reply to the show cause notice the present appellants by their latter dated 26-6-1995 denied the allegation and contended that Modvat credit was admissible whether parts of the common inputs were used in exemped final products and relied on the Tribunal decision rendered in the case of Cllector of Central Excise v. Premier Tyres - 1992 (62) E.L.T. 104. They also contented that there was no suppression of any information on their part since they had cleared both dutiable and exempted goods from RG 23A Part II Account and had enclosed copies of gate-passes in their monthly RT12 returns which were duly approved.
They also submitted that the demand was hit by limitation.
5. By the impugned order the Commissioner observed that the declarations filed by the present appellants dated 12-1-1988 and 14-7-1988 do not contain any mention of flexible layflat tubing as a final product. In such circumstances, they were not entitled to take Modvat credit on Indothene used in the manufacture of flexible layflat tubing or, after having taken such credit, they should have reversed the credit to the extent of Indothene used in the manufacture of layflat tubing as per the provisions of Rule 57C. He distinguished the decision of the Tribunal in the Premier Tyres case, supra, as in the Premier Tyres case there were common inputs for" the same final product whereas in the instant case though, there were common inputs but there were different end-products, one of them being an, exempted from payment of duty.
6. Appearing for the appellants Shri K.K. Anand, ld. Counsel submitted that the appellants were under the bona fide belief that they were not required to debit the credit to the extent it corresponded to the utilisation in the manufacture of exempted product since they had declared in the RT 12 returns the fact that the final product in question, namely, layflat flexible tubings had been cleared free of duty. He contended that the mere fact that their Modvat declaration did not specifically name the exempted product would not amount to suppression when duty paying documents entering the inputs in the statutory register such as RG 23A Part I and Part II, utilising the same in the manufacture of the final product and reversing the same in their Monthly RT 12 returns had been regularly filed and were within the knowledge of the Department. The Department, was, therefore, fully aware that they were utilising common inputs both for dutiable and exempted goods. Further, the exempted goods were being cleared on the strength of GP-I in which nil rate of duty was shown which were also duly reflected in the relevant columns of RG 23A Part II and also in RT 12 returns. He also contended that it was incorrect to hold that only documents for availing Modvat credit was the declaration and no other documents were relevant. If the appellants had any mala fide intention, they would not have shown all these details in the other documents which were filed and [duly] approved by the Department. When all the details were reflected in the statutory documents it was the duty of the jurisdictional excise officer to point out any mistake within a reasonable time. If they failed to do so which was their statutory duty, the assessee cannot be held guilty of suppression or mis-statement. He also referred to the Apex Court decision in Padmini Products v. Collector of Central Excise(S.C.) and Collector of Central Excise v. Chemphar Drugs & Liniments -1989 (40) E.L.T. 276 (S.C.) which laid cown that in order to make a demand for a period beyond six months, something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information was required to be established. Further, he also strongly urged that the Depatment had no justification for invoking the extended period of limitation alleging suppression, etc. on the basis of the very same documents which were filed before the Department and where the Department has not relied on any other evidence to show suppression. On the question of calculation of the demand of duty demanded in the show cause notice, the Department had not disclosed the basis for arriving at the figure since there was no one-to-one correlation in the Modvat scheme.
7. The Departmental Representative Shri Kilania reiterated the findings of the Collector.
8. I have considered the submissions of both sides. I find that on the question of non-disclosure of the exempted final product in the declaration for purposes of eligibility for Modvat credit, the question has been settled by the decision of the Larger Bench of the Tribunal in Kirloskar Oil Engines Limited v. Collector of Central Excise - 1994 (73) E.L.T. 835 wherein the Tribunal held that Rule 57C clearly forbade availment of Modvat credit on inputs in respect of exempted final products whenever a portion of final product is cleared under nil rate of duty under any Notification. In the instant case the admitted position is that the appellants have not disclosed the fact that the inputs has been utilised for the manufacture of the final product, namely, flexible layflat tubing which was an exempted item. The fact that G.P. 1s and RT 12 returns did mention the name of the final product does not absolve them of their duty to disclose the name of the final product irrespective of the fact whether the final product was exempted from duty or not. In view thereof I do not find any merit in the present appeal. As regards the question of time bar, the appellant's contention that their failure to mention flexible layflat tubing in the declaration was a bona fide mistake without any intention to evade duty is not sustainable since they have clearly mentioned the same item in their Classification List and claimed exemption for it.
9. In view of the foregoing I find no infirmity in the impugned order and do not feel called upon to interfere with the same.