Full Judgment
2. The facts in brief are that Modvat credit under Rule 57A was made available in respect of Plastic Bags and sacks with effect from 16-3-1995. The Respondents filed a declaration for availing of Modvat credit on such sacks under Rule 57G on 6-7-1995. Further, they, in their letter dated 4-9-1995, requested for allowance of Modvat Credit on sacks with effect from 1-4-1995 which was permitted to them by the Assistant Commissioner under letter dated 18-3-1996 condoning the delay in filing the declaration under Rule 57G. The Respondents availed total Modvat Credit of Rs. 65,857.95 ps. which included the credit in respect of these sacks lying in stock with them as on 31-3-1995. The Assistant Commissioner disallowed the Modvat Credit of Rs. 20,653,95 ps.
pertaining to the stock of sacks lying on 31-3-1995 holding that the Respondents had not sought any permission under Rule 57H upto 15-4-1995 to avail of the Modvat Credit in respect of sacks lying in stock as on 16-3-1995; that as per provisions of Sub-rule 57H(1) no credit was to be allowed under the said rule in respect of inputs received or declaration made under Rule 57G on or after the 15th day of April 1995; that the Respondents had filed a request on 8-1-1997 for allowing this credit which is beyond the date of 15th April, 1995 as provided in the Rule 57H(1). On Appeal filed by the Respondents, the Commissioner (Appeals), under the impugned order, set aside the Assistant Commissioner's order and allowed the appeal holding that the Respondent's request for condonation of delay was accepted by the Assistant Commissioner; that the Respondents had requested the department to allow the credit of Rs. 59,182.72 ps. which included the disputed Rs. 20,653.95. in their letter of condonation which was objected to by the Assistant Commissioner.
3. Shri T.A. Arunachalam, ld. DR submitted that the Assistant Commissioner had only condoned the delay in filing the declaration under Rule 57G and had allowed the Respondents to avail the credit on HDPE sacks from 1-4-1995. Accordingly they were not entitled to avail the credit of Rs. 20,653.95 in respect of HDPE sacks lying in stock as on 31-3-1995 because they had not applied for taking the credit in respect of these goods under Rule 57H which put the restrictions for allowing credit if declaration is made on or after 15-4-1995. He finally submitted that the Respondent's request dated 8-1-1997 for allowing the credit under Rule 57H was rejected by the Assistant Commissioner in view of the provisions of Rule 57H.4. Countering the arguments, Shri S.D. Gaur, ld. Advocate for the Respondents, submitted that once the delay has been condoned by the Assistant Commissioner the same would cover all the delays in filing the declaration whether under Rule 57G or 57H. He further submitted that no permission was required to be obtained from the Assistant Commissioner for availing the Modvat credit under Rule 57H(1B) of the Central Excise Rules. He also contended that no time limit for filing the declaration has been provided under Rule 57H(1B) and as such there was no delay on their part and they are eligible for availing of the Modvat credit in respect of the HDPE sacks lying in stock; he also mentioned that in their letter dated 4-9-1995 they had clearly mentioned that the total amount involved on the sacks was Rs. 59,088.32 ps. which was requested to be allowed by the Assistant Commissioner; that the Assistant Commissioner under letter dated 18-3-1996, while condoning the delay in filing the Modvat declaration, ordered the Range Officer to allow the credit covered under the time limit i.e. 1-4-1995 to 8-8-1995. In reply the ld. DR submitted that filing the declaration under Rule 57H(1B) was mandatory which is evident from the provisions of the Sub-rule which provides that every manufacturer who intends to avail of the credit of duty paid on inputs received by a manufacturer immediately before obtaining the dated acknowledgment of the declaration made under Rule 57G, shall file a declaration under Rule 57H(1B) stating that the inputs are lying in stock or received in the factory after filing the declaration under Rule 57G or such inputs are used in the manufacture of final product which are cleared from the factory after filing the declaration under Rule 57G. He also relied upon the decision in the case of Shivani Surgicals Pvt. Ltd. v. C.C.E.- 1998 (103) E.L.T. 185 (Tribunal) in which it was held that the purpose of declaration required under Rule 57H(1B) is to put the Assistant Commissioner on notice of the facts that stock of raw materials is lying with the Assessee or that inputs are used in the manufacture of final product clearing from the factory after filing the declaration made under Rule 57G. The purpose of declaration is to intimate the Assistant Commissioner of this circumstance so that he may proceed to the factory and verify whether the stock as declared is in existence or has been utilised as declared. The failure to file this declaration successfully disabled the Assistant Commissioner from proceeding to the factory and verifying the stock. The Tribunal further held that "the failure of the appellants to file declaration under Rule 57H cannot be taken lightly or condoned. Therefore the denial of the benefit of Modvat Credit to the Appellants was justified." 6. I have considered the submissions of both the sides. In their letter dated 4-9-1995 the Respondents, no doubt, had sought permission for allowance of the credit on inputs on HDPE sacks used during this period 1-4-1995 to 8-8-1995. However, it is observed that they had not made any mention in the said letter about the stock lying in balance on the date the Modvat credit was made admissible in respect of HDPE Sacks.
The Assistant Commissioner's letter dated 18-3-1996 is very specific in condoning the delay in filing the Modvat declaration under Rule 57G. A condonation was allowed by the Assistant Commissioner in exercise of the powers under the provisions of Rules 57G(5) and he has directed the Range Superintendent to allow the credit in respect of the time lapse allowed by him. There is no substance in the submissions of the Respondents that once the delay in filing declaration under Rule 57G has been condoned it would cover all the delays. No doubt there is no mention in Rule 57H(1B) that any permission is to be obtained from the Assistant Commissioner for availing the Modvat Credit under Sub-rule.
However, filing of a declaration under Rule 57H(1B) is mandatory which is evident from the provisions of the Sub-rule itself. Further, the Tribunal in Shivani Surgicals Pvt. Ltd. case, referred to above and relied upon by the ld. DR, has held that failure to file declaration under Rule 57H cannot be taken lightly or condoned. As held by the Tribunal in the Shivani Surgical Pvt. Ltd. (supra), the provisions of filing declaration has been contained in the Sub-rule so that the department can verify the inputs which are lying in stock or if such inputs had been used in the manufacture of the final products to verify such final products. As no declaration was filed by them the condition as stipulated in Rule 57H(1B) was not complied with and following the ratio of the decision in the case of Shivani Surgicals Ltd. (supra) the Appeal filed by the Revenue is allowed.