Judgment:
1. This appeal has been filed in the year 1993 against the Order-in-Appeal No. 107/89 dated 1-10-1989. The matter was pending before the Madras High Court in Writ Petition No. 41 /89. By the order of the High Court, the appellants were granted an opportunity to file an appeal against the impugned order before 19-12-1993 and in compliance of the said direction, this appeal has been filed. The Registry had pointed out two defects by Defect Memo No.352/93/CEGAT/Mas. and had issued defect notice calling upon them to rectify the same. The matter had been kept pending. A fresh notice was issued again on 22-9-1998. In response to the said notice, the learned Counsel filed a memo of rectification of defect, inasmuch as, the Order-in-Appeal was not attested. Therefore, the Registry numbered the appeal and has listed the stay application and appeal for hearing.
2. The learned Counsel submits that the issue lies on a short compass and being covered by the judgment of Tribunal in the case of C.C.E. v.Indian Aluminium Company Ltd. as reported in 1992 (59) E.L.T. 168 the denial of Modvat credit was due to some procedural lapse, therefore, waiver of pre-deposit could be granted and the appeal may be taken up for hearing.
4. After a perusal of the said judgment, on the ground taken up by the appellants, waiver of pre-deposit is granted including stay of its recovery and the appeal itself is taken up for hearing, as the impugned order has been passed in 1989 and the appeal arising from 1989 orders.
5. The short question that arises for consideration is as to whether the declaration filed by the appellants on 7-6-1986 and 26-5-1987 under Rule 57G in respect of electric motors captively consumed for manufacture of monoblock pump sets and submersible pump sets could be accepted as declaration and could be treated as intermediate product for stators and rotors, which were declared as final product by Notification No. 142/86 (sic), dated 18-4-1988 and the credit be granted in respect of inputs namely stamping wires used in the manufacture of stators and rotors. The lower authorities have taken a view that after the introduction of this Notification No. 117/86 (sic), dated 1-3-1986, they ought to have filed a fresh declaration under Rule 57G and non-filing of the same for the period 1-3-1988 (sic) to 17-4-1988, which disentitled them from seeking relief for Modvat credit. The appellants contended that the department was in full knowledge of the facts from 1960 onwards that electric motors cannot at all be produced without producing the stators and rotors using the inputs declared by the appellants in its declaration under Rule 57G of the Rules, that both the electric motors and stators and rotors for the same are classifiable under the same Chapter 85 of the Central Excise Tariff Act and by using the same inputs and that the Central Excise Board themselves have clarified that "as long as the inputs and final products were covered by the specified chapter under the Notification, credit of duty on the inputs would be available." They further submitted that under the provisions of Notification No. 175/86, dated 1-3-1986 issued under Rule 57A the department has not established that the appellant is not eligible to avail the Modvat credit of duty in respect of the inputs used in the production of stators and rotors forming component parts of monoblock pump sets nor has it been proved that the impugned inputs in respect of which the duty has not been paid are rules which are not covered under Notification No. 175/86, dated 1-3-1986 as amended.
6. The learned advocate submits that in a similar situation in the case of C.C.E., v. India Aluminum Co. Ltd. cited supra, the Tribunal has held that the assessee respondent had revealed full information to the authorities for the purpose of availing Modvat credit and the only fault with them was that they did not declare under the main heading "Aluminium" but under the heading 'intermediate product'. The Tribunal held that the authorities are being only hyper-technical without fully looking into the details of the declaration and without going into the aspects of totality of the declaration filed by them and the operation in the unit of the respondents. The Tribunal further observed that the respondents in their classification lists have clearly shown their end product and also indicated necessary separate classification for the same. Therefore, the Tribunal noted that there was nothing wanting to be furnished so far as their availment of Modvat credit is concerned.
It held that in this view of the matter, it can be held that the declaration as filed by the respondents can be taken to have been in conformity with the requirement under Rule 57G as held by the lower appellate authority.
7. The learned D.R. pointed out that the said judgment is clearly distinguishable as it did not lay down any principle, but non-filing of any declaration in circumstances where an intermediate product has been declared as final product. It is her contention that when the final product which was monoblock pump sets has been preceded with electric motors and that stators and rotors are necessary, when stators and rotors has been declared as final product, therefore, it followed that they were required to have filed a fresh declaration under Notification No. 117/88 (sic), dated 1-3-1986, although there is no dispute with regard to the use of intermediate products emerging and basic inputs of stamping wires being used. However, shifting of final product from monoblock pump sets to stators and rotors, they are required to file a fresh declaration under Rule 57G. Non-filing of the same is not a procedural violation and hence the denial of credit by both the authorities is totally justified.
8. On a careful consideration of the submissions on both sides, I notice that the general law laid down is that in all cases where the manufacture as a final product by utilising the inputs, which are eligible for Modvat credit, they are required to take the credit only after filing a declaration under Rule 57G of the Central Excise Rules.
In this particular case, the process of manufacture of monoblock pump sets and submersible pump sets have been declared by declarations. For the purpose of manufacture of the same, electric motors have come into existence, the appellants have filed two declarations dated 7-6-1986 and 26-5-1987 under Rule 57G. Consequent to issue of Notification No.117/88 (sic), dated 1-3-1986 electric motors captively consumed for manufacture of monoblock pump sets and submersible pump sets became eligible for duty exemption. The department declared stators and rotors falling under Chapter 85 as final product and for that they were entitled to take benefit of Modvat credit in respect of inputs namely stamping wires used in its manufacture. The question is whether on change of the final product by the department from electric motors to stators and rotors, the assessee was required to file a fresh declaration under Rule 57G? The view taken by the authorities is that during the intervened period from 1-3-1988 (sic) to 17-4-1988, the appellants ought to have filed a fresh declaration in respect of final product namely stators and rotors and as there was a failure in this respect, they were not eligible to take Modvat credit. In my considered opinion, in this particular case, the view taken by the department is too technical. The reason being that there has been no change in the basic inputs used for manufacture namely the stamping wires, which is a starting point for the manufacture of stators and rotors, which were being used in the manufacture of electric motors, which was again used for the manufacture of monoblock pump sets and submersible pump sets, therefore, the department after granting the exemption to both the items i.e. electric motors and pump sets, levied duty on the stage of stators and rotors. This was only a shifting of final stage, however, duty paid at initial inputs in the present case remaining same. In any event of this matter, the duty paying input was the stamping wires, which should have got ultimately the benefit of Modvat credit in either case of manufacture of any of these final products. There was no change in the tariff heading nor there was a change in any of the inputs, which has been declared for manufacture of the final product.
Therefore, mere lapse for filing of a fresh declaration for the interim period can be taken as procedural lapse and for that lapse the substantive benefit of Modvat credit should not be denied.
9. In that view of the matter and after taking into consideration the view expressed by the Tribunal in the above-cited case which held that for procedural violation the Modvat credit should not be denied, therefore, I set aside the impugned order by allowing the appeal.