Judgment:
1. In the impugned order ld. Commissioner (Appeals) observed that the appellant got such capsules printed in their own name from M/s. Mittu Pharma, therefore, the consignments were enrouted from M/s. Universal Capsules to appellant factory via M/s. Mittu Pharma. Accordingly, the invoices on which credit has been taken were issued showing name of M/s. Mittu Pharma A/c M/s. Lupin Laboratory and held that there was a procedure for such movement of consignment subject for observance of Rule 57F(2) of the Central Excise Rules at the relevant time. The adjudicating authority and the appellant had agreed that such procedure was in existence during the relevant time but the adjudicating authority did not consider this on the ground that appellant did not only faild to follow the procedure but on the ground that the availment is in violation of the provision of the Modvat rule in so far as the goods are consigned directly to M/s. Mittu Pharma. In view of this, ld.Commissioner (Appeals) rejected the appeal of the assessee and reduced the penalty of Rs. 5/000/-. Against this order, the appellants have filed this appeal.
2. Facts of the case in brief are that appellant is manufacturer of P.& P Medicines falling under Chapter 30 and were availing facility of Modvat credit under Rule 57A. The appellants took credit of Modvat on the strength of invoices showing consignee of the goods as M/s. Mittu Pharma Ltd. A/c of Lupin Laboratories Ltd. The Department alleged that since the goods did not come directly to the premises of the appellant as in the documents on the strength of which Modvat credit has been taken by the appellants the goods were consigned to M/s. Mittu Pharma Ltd. and therefore, Modvat credit was not admissible. A SCN was issued to the appellants asking them to explain as to why Modvat credit should not be denied on the strength of invoices produced by them and why penalty should not be imposed. In defence, the appellants submitted that M/s. Universal Capsules Ltd. manufactured empty gelatin capsules; that these capsules were cleared by them on payment of duty that the goods were consigned to M/s. Mittu Pharma Ltd. for printing the name of the appellant that the printed empty capsules are then received by the appellant. It was submitted by them that the goods covered by the invoices were received in the factory of the appellants that there was no dispute about the duty paid character of inputs; their receipt and utilisation, that if at all there was some technical breach by not following Rule 57F(3), substantive benefit of taking credit of duty paid on empty gelatine capsules should not be denied to them.
3. After careful consideration of the submissions; the Asstt.
Commissioner denied Modvat credit and imposed a penalty of Rs. 10,000/-. In appeal the ld. Commissioner(Appeals) held as indicated in the preceding paragraph.
4. Shri P. Sudhir, ld. Counsel appears for the appellants and submits that Lupin Laboratories placed purchase order on M/s. Universal Capsules for supply of empty gelatine capsules; that the empty capsules were required to be printed with the name of the appellants, that for printing the empty gelatine capsules, the appellants placed an order on M/s. Mittu Pharma for printing the capsules; that M/s. Universal Capsules manufacturer of empty gelatine capsules raised an invoice on M/s. Lupin Laboratories and mentioned in the invoice that the goods were to be delivered to M/s. Mittu Pharma; that M/s. Universal Capsules had raised a commercial invoice for payment directly on M/s. Lupin Laboratories' name; that the payment was made directly by the appellants to M/s. Universal Capsules; that printing charges were paid to M/s. Mittu Pharma Ltd., that the appellants received the empty gelatine capsules from M/s. Mittu Pharma alongwith duplicate copy of invoice of M/s. Universal Capsules; that the said printed capsules were used by the appellants in dutiable final products that there was no dispute about nexus between the input and the final product, The Ld.
Counsel, also submitted that the goods could be directly sent to job worker in terms of Indore Collectorate Trade Notice No. 38/86-CE dated 17-7-1986; that there was no dispute about the availability of Modvat on the inputs or the final product; that there was no dispute about the receipt of the inputs finally in the premises of the appellants and use of inputs in the manufacture of final product. It was submitted by the Ld. Counsel that the benefit was not deniable merely on account of procedural irregularities when substantial compliance of the law was there. In support of his contention he cited and relied upon the decision of this Tribunal in the case of C.C.E., Nagpur v. Noble Explochem Ltd. Ld. Counsel also submitted that benefit was not deniable simply because permission of a routine nature for removing raw-materials directly to job worker was not specifically sought for.
In support of his contention he cited Notification No. 214/86 and the provisions of Rule 57F(2), 57F(3) and 57G. Ld. Counsel also supported his arguments by relying on the decision of this Tribunal in the case of British Physical Laboratories v. C.C.E., Bangalore 1994 (74) E.L.T.593 in the case of Apex Steel Pvt. Ltd. v. C.C.E., Chandigarh 1995 (80) E.L.T. 368. The Ld. Counsel therefore, submitted that in view of their submissions, and the case law cited above, the appeal may be allowed.
5. Shri T.A. Arunachalam, ld. JDR submits that receipt of the goods in the premises of the appellant is not direct. The goods in question according to the invoices were consigned to M/s. Mittu Pharma Ltd. He submits that for taking Modvat credit on any inputs, the inputs should be directly received in the factory of the appellant who is taking Modvat credit on the strength of those documents. He submits that invoices which were enclosed with R.T. 12 returns show that the goods were directly sent to M/s. Mittu pharma and not to the premises of the appellant. He submitted that under Rule 57F(2), there was a procedure to be followed which admittedly was not followed by the appellants and since the procedure was not followed, the appellants have rightly been denied the benefit of Modvat credit. He reiterated the findings of the lower authorities.
6. I have heard the submissions of both the sides. I have also perused the case law on the subject and the rules cited in support of their contention by both the sides. Receipt of the goods in the premises and their in the final product is not in dispute. Duty paid character of the inputs also is not disputed. The only dispute is that there was a procedure set out for the purpose which was not followed by the appellants. I find that the appellants have cited cases decided by this Tribunal in which this Tribunal has held that substantive benefit cannot be denied for procedural lapses. In the instant case taking of Modvat credit is a substantive benefit. Following the provisions of Rule 57F(2) and 57F(3) are procedural requirement Thus, following the ratio of these decisions and the submissions of the appellants, I hold that Modvat credit will be admissible to the appellants.
7. In so. far as imposition of penalty is concerned, the admitted position is that the appellants did not follow the procedure set out under Rules 57F(2) and 57F(3). For this lapse imposition of penalty is sustainable in law. Looking to the facts that penalty has already been reduced by the Commissioner (Appeals) to Rs. 5,000/-1 do not see any reason to interfere with this amount.
8. But for the above modifications, the impugned order is uphold and the appeal is disposed of accordingly.