Judgment:
1. The appellants manufacture Alloy Steels Castings in two units located in Lucknow in UP arid Bhiwadi in Rajasthan. At times, the rough castings manufactured in one unit are sent to the other for carrying put certain finishing processes. The removal of the rough castings is on payment of duty and takes the duty paid in the first unit is taken as modvat credit in the second unit. The second unit which receives the goods carries out the finishing processes like machining, hardening, testing etc. and sells the goods after payment of duty. Differential duty demands have been raised in the impugned orders in regard to clearance of rough castings on the ground that these goods have been undervalued, leading to short payment of duty.
2. It is the appellant's contention that the duty demand is not warranted since whatever duty is paid in the first unit in regard to rough castings is available to the second unit as modvat credit and thus making the entire exercise revenue neutral. It is also pointed out that on an identical issue, the Commissioner of Central Excise (Appeals) had decided in favour of the appellants vide Order-in-Appeal No. 652(SN)/CE/JPR-I(390) 2002, dated 1.11.2002 for a different period.
3. We have perused the records and have heard both sides. In the facts of the case, we are of the opinion that the appeal themselves can be disposed of. Therefore, after waiving the requirement of pre-deposit, we take up the appeals for consideration.
4. In regard to duty demand for the earlier period, the Commissioner (Appeals) finding was as under: "3. I have gone through the case records, submissions made by the appellants in their grounds of appeal and as well as at the time of personal hearing. That the appellants are engaged in the manufacture of Alloy Steel Castings, C.I. Castings and other Casting articles of iron and steel falling under sub-heading 7325.20, 7325.30 and 7325.10 respectively of the Schedule to the Central Excise Tariff Act, 1985. The department says the clearances made by the appellants from their Bhiwadi to the Lucknow unit were 'stock transfer'. The appellants state that these were not stock transfers but normal sale. The department has failed to establish that there was any under-valuation of the goods, as the department had not compared their value of clearances with other like-goods manufactured and cleared by the appellants to other buyers than the Lucknow unit.
Further, I find that the department had not made any enquiry from the buyers' side to enable the department to prove that the appellants had cleared the castings to their Lucknow plant at undervalued rate.
4. Further, I find that in the instant case. The appellants had received the show cause notice dated 5.7.2001 for the period from 1.4.1998 to 3/2000. The adjudicating authority in the impugned order has held that the appellants unit formerly known as M/s Sunika Alloys had amalgamated to M/s P.T.C Industries only with effect from 22.1.1999. The show cause notice dated 5.7.2001 was not issued to M/s Sunika Industries Ltd., Bhiwadi. Thus, the demand raised and confirmed from the appellants (M/s PTC Industries) up to the period 22.1.1999 is set aside.
5. Further, the appellants vide their letter No. PTCL/99-2000/224 dated 20.5.1999 had informed to the Assistant Commissioner, Central Excise Bhiwadi after amalgamation that '...on receipt of raw castings cleared by us on payment of duty under Chapter 73, the Lucknow plant takes Modvat credit of Central Excise duty on the said rough castings.' Thus, vide aforesaid letter, the appellants had informed that after clearances made by the appellants, their Lucknow Unit would be taking Modvat credit. Thus, the findings of the adjudicating authority are not correct that the appellants had suppressed the facts from the Department. In view of the letter dated 20.5.1999 (supra), I am inclined to hold that the appellants had not suppressed the fact as alleged in the impugned order and accordingly, I hold that extended period is not available to the Department as per the proviso of 11A of the Central Excise Act, 1944. Further, I see that the show cause notice was issued up to the period 31.3.2000 on 20.5.2001, i.e. after one year, thus, the notice is time barred in terms of Section 11A (1) ibid. In view of above, I hold the demand is time barred and therefore, I set aside the impugned order in toto." The facts in the present case are identical. Therefore, the findings in the previous order would apply to the present dispute also. In such a case, it was patently unjust to have directed the appellant to make pre-deposit of demanded amounts and to have rejected the appeals for failure to comply with that order. In any event, since this is a case of movement of goods from one unit to another of the same assessee under Modvat scheme, the whole issue is revenue neutral inasmuch as whatever duty is paid in one unit is available in the next unit. In case the assessees were to pay the differential duty as demanded, the same amount would be available as credit in the second unit for utilization for payment of duty on goods manufactured there. We consider the entire proceedings unwarranted. The appeals are accordingly allowed.