Full Judgment
For that purpose they use scrap of old rail material, broken machinery parts and scrap purchased from open market as input in the manufacture of the aforesaid final products. They availed deemed Modvat credit on the above mentioned items during the period June, 1994 to September, 1994 amounting to Rs. 1,36,453.00. Revenue however, felt that deemed Modvat credit taken by them was not correct inasmuch as the scrap was not generated due to any manufacturing activity in a factory of production and as such was clearly recognisable as non-duty paid material. Hence, a show cause notice dated 20-12-1994 was issued proposing to reverse the aforesaid Modvat credit and if already utilised, to recover the same. On adjudication, the Assistant Collector, Faizabad confirmed the aforesaid amount against the appellants who have not succeeded even before the lower appellate authority. Hence, this appeal before the Tribunal.
2. Ld. Advocate, Shri M.P. Devnath for the appellants, submits that the deemed credit was taken by the appellants under Ministry of Finance (Deptt. of Revenue) Order No. T-5/36/94-TRU, dated 1-3-1994. The said order of the Ministry does not lay down any condition that the materials on which deemed Modvat credit is available should not be clearly recognised as non-duty paid. Only conditions in the said order are (1) that the re-rollable materials should be used without undergoing the process of melting, and (2) that such materials of iron or steel should be purchased from outside and lying in stock on or after the first day of April, 1994.
Both these conditions, submits ld. Advocate, have been fulfilled.
Therefore, the deemed Modvat credit has been rightly taken. He, further submits, that this issue is no longer res integra so far as Tribunal is concerned in view of the following judgments ;-Laxmi Steels Industries v. CCE, Kanpur - (Final Order No. 837/97-NB, dated 1-7-1997) 3. Appellant's own case (Final Order No. A/723/97-NB, dated 2-9-1997).
3. As against the aforesaid arguments of the ld. Advocate for the appellants, ld. JDR, Shri A.M. Tilak for the Revenue submits that it is not disputed that the re-rollable material is a bazar scrap that is discarded and broken articles, machinery parts, etc. Consequently on its clearance duty could not be paid and therefore it is clearly recognisable as non-duty paid and hence, the deemed credit order would not be applicable in view of the provisions of Rule 57G, even though no such restriction has been placed in the relevant deemed credit order.
The fact that deemed credit is not available in respect of excisable goods which are clearly recognisable as non-duty paid is upheld, he submits, by Tribunal's following judgments :-Man Ind. Corpn. Ltd. v. CCE, Jaipur 4. I have carefully considered the pleas advanced from both sides.
Insofar as the appellant is concerned, I observe that there is already a judgment in his favour as already pointed out by the ld. Advocate and as cited above. On this ground alone there is no reason to deny the benefit of deemed Modvat credit in respect of the present case as well.
5. I have gone through the judgments cited by both the sides. I agree with the reasoning adopted by the ld. Member in the case of Pareek Ferro Pvt. Ltd. (supra) which has been subsequently adopted by different benches of this Tribunal. However, I would like to add the following : Reliance placed by the Revenue on Rule 57G is misplaced. In this connection, I reproduce the second proviso in which reliance has been placed :- Provided further that having regard to the period that has elapsed since the duty of excise was imposed on any inputs, the position of demand and supply of the said inputs in the country and any other relevant considerations, the Central Government may direct that with effect from a specified date, all stocks of the said inputs in the country, except such stocks lying in a factory, customs area [as defined in the Customs Act, 1962 (52 of 1962)] or a warehouse as are clearly recognisable as being non-duty-paid, may be deemed to be duty-paid and credit of duty in respect of the said inputs may be allowed at such rate and subject to such conditions as the Central Government may direct, without production of documents evidencing the payment of duty.
On a careful analysis of the aforesaid Proviso, it is apparent that the Central Government has got the power vested in it, having a regard to the various factors mentioned in the said Proviso to direct that all stocks of specified inputs in the country shall be deemed to be duty paid except in respect of stocks lying in the following places :- Stocks lying in these three places has been considered, in my view by the Rule itself that they are clearly recognisable as being non-duty-paid. Therefore, the Central Government does not have the power to issue any order under the second Proviso to Rule 57G in respect of stocks of any excisable inputs lying in the aforesaid three places. It is not the case of the Revenue that the inputs purchased by the appellants herein were lying in any of the aforesaid three places.
Inputs lying in any other place can be treated by the Central Government as duty-paid and may therefore direct that the Modvat credit may be taken on any such stock purchased from any such place except the aforesaid three places unless of course it puts a condition in the order that it is otherwise clearly recognisable as non-duty-paid.
Deemed Modvat credit orders issued by the Government in 1986 or 1987 lays down such condition in those orders but no such condition has been placed in the present order dated 1-3-1994. Therefore, it has been rightly held by the various Benches of the Tribunal that in the absence of any condition of non-duty-paid character as clearly recognisable, the benefit of deemed Modvat credit cannot be denied under order dated 1-3-1994.
6. Before parting with this order, I may also add that the judgments relied upon by the ld. JDR as cited above are not relevant to the deemed Modvat credit order dated 1-3-1994 under consideration before me.
Hence, I set aside the impugned order and allow the appeal with consequential relief to the appellants.