Judgment:
1. This appeal is directed against the order dated 24-8-1987 passed by the Collector of Central Excise, Bangalore by which he had ordered reversal of Modvat credit of a sum of Rs. 2,54,629.97, as the Modvat credit was irregularly availed by the appellant. The Central Excise Officers of Bengalore Collectorate Headquarters visited the appellant's factory on 23-9-1986. The appellants are manufacturers of certain types of machinery items in their Bangalore factory. They had filed a declaration for the purpose of Modvat on 27-3-1986 and a further declaration on 22-9-1986 under Rule 57G of the Central Excise Rules, 1944 giving details of the inputs and their finished products. By a letter dated 19-11-1986 they revised the nomenclature of inputs declared by them on 22-9-1986. They filed a further (third) declaration on 17-12- 1986 and 19-12-1986 showing the addition of five more inputs.
On a verification of the records the officers found that the appellants had taken Modvat credit on inputs for which they had not filed any declaration under Rule 57G. The main items on which it was alleged that credit had been taken without declaring the inputs were gear wheel, gear boxes, dynodrives motors. The Department therefore, initiated proceedings by a Show Cause Notice for recovery of the MODVAT credit availed of on such inputs and after considering the defence of the appellants, the Collector passed the impugned order.
2. Shri R.B. Sinha the learned Consultant appearing for the appellants contended that he was confining the appeal only to the order for reversing the credit on the three main inputs mentioned above although there was another ground in the impugned order regarding availment of credit on compressed oxygen. The learned Consultant urged that what was mentioned as gear wheel in the gate pass is worm gear set; it consists of Worm shaft and Worm wheel. He submitted that copies of the order placed with the supplier and the related invoice as well as the corresponding gate pass which were available on record would show that the order and the invoice were for Worm gear sets. Both gears and gear boxes fall under Heading 84.33 of the CETA 1985. They had initially mentioned Chapter 84 in the declaration on 27-3-1986 and in the revised declaration filed on 22-9-1986 greater details were given. Names of the inputs were fully amplified by that in the amendment submitted on 19-11-1986 mentioning inter alia gears, gear wheel and gear boxes etc.
Therefore, the learned Consultant argued that it cannot be said that gears and gear boxes had not been declared. As for the other inputs namely dynodrive, it was contended that this is a type of electrical motor classifiable under Heading 85.01 and that they had mentioned Chapter 85 in their initial declaration filed on 27-3-1986 and they had mentioned Electric Motor specifically under sub-heading 8501.00 in the revised declaration on 22-9-1986. It was further elaborated in their amendment on 19-11-1986 by specifically mentioning dynodrive.
Dynodrive, according to the appellant is nothing but Electric motor and it was mentioned that even the Central Board of Excise & Customs had clarified in 1984 to the same effect.
4. We have carefully considered the submissions made by the learned Consultant and the learned S.D.R. There has been in this case initial declaration by the appellants on 27-3-1986 in which they had given broad description of the inputs and the Chapter numbers of the Central Excise Tariff Act, 1985 along with description and Chapter heading and subsequently on 22-9-1986. They had furnished declaration in the prescribed proforma. In this declaration they had indicated under the heading 'description of inputs and its tariff classification' as Gears, couplings etc. Pulleys, blocks, bearing housing and under sub-heading 8483.00. Another input declared in this is Electric motors under sub-heading 8501.00. In the subsequent letter of 19-11-1986 they had put forth the amendment to the nomenclature of the inputs and other fresh items. In this they had expanded the declaration earlier made in respect of Gears and Electric Motors and the following expanded description of the inputs was given:-"Sub-heading No. 8483.00 - Gears, Gear Wheels, Gear Shafts, Gear boxes, Industrial and Marine gear boxes, gearing worm gear, Worm shaft and Worm Wheel, Bevel gears, Bevel Penion crown gears and pinions, Sprockets, propeller shafts, Bearing housing and other speed changes, fly-wheels, pulleys, clutches, couplings, Shaft couplings variators/special gears and parts & spares for the above 8501.00 - Eddy current coupling, dynodrives Electric Motors of In this amendment in the nomenclature of inputs, they had specifically included Gear wheels and Gear boxes as well as Dynodrive against the related sub-heading of tariff. The question is whether in the circumstances, the appellants can be said to have complied with the requirement under Rule 57G of the Central Excise Rules, 1944 for declaring the inputs for the purpose of availing of MODVAT credit. This Rule says that every manufacturer intending to take credit of the duty paid on the inputs shall file a declaration with the jurisdictional Assistant Collector indicating the description of the final products manufactured and the inputs intended to be used in each of the said final products and such other information as the Assistant Collector may require, and obtain a dated acknowledgement of the said declaration and take credit of duty paid on the inputs. It is an admitted position that immediately when the MODVAT Credit Scheme was introduced in March, 1986, the detailed procedural requirement had not been fully laid down.
The initial declaration filed and the one subsequently filed by the appellants will therefore have to be looked at with this background.
Their declaration of inputs and the output given on 27-3-1986 was indeed very broad. The further declaration of 22-9-1986 was in the prescribed proforma. In this declaration, they had declared in respect of gears as follows "Gears, couplings etc., Pulleys, blocks, bearing housing" under subheading 8483.00 of the CETA. The Department's case is that the appellants failed to declare Gear wheels and Gear boxes specifically in this declaration, which they had filed according to the Department only on 19-11-1986. So also in the case of Dynodrive there has been no mention of it in the declaration of 22-9-1986 and the same was indicated only in their letter of 19-11-1986. On examining various contentions in this regard, we find that in respect of Gear Wheel and Gear boxes the declaration in the prescribed proforma of 22-9-1986 was Gear couplings etc. with the tariff sub-heading 8483.00 given therein.
Tariff Heading 8483 mentions among others Gear and Gearing. According to the book "Gear Engineering by H.E. Merritt" available in the record," gear is a generic term for a mechanical contrivance, the function of which may be indicated by a qualifying adjective, e.g.
steering gear, haulage gear. It may also connote some type of toothed-wheel combination, i.e. reduction gear, change-speed gear, differential gear etc. Without qualification, "gear" means a toothed wheel of any kind." It is also seen that admittedly the order with the supplier was placed by the appellants for Worm gear sets. The gate pass available in the record also shows that the gear wheeels have been described in sets. The value of the goods shown in the gate pass also tallys with the value mentioned in the order and invoice. Therefore, in view of the declaration given on 22-9-1986 for the gears by adding the words "etc" thereafter, and in view of the tariff description for the item as mentioned above, and also in view of the technical description of what constitutes Gear and the evidence on record, we are satisfied that the description of the item Gear given in the declaration of 22-9-1986 was only expanded in nomenclature by their letter of 19-11-1986 and no new input has been included which was not covered by their earlier declaration. We also observe that even before the appellants opted for the MODVAT Scheme, the appellants had been availing of the proforma credit on gear and gear boxes under Rule 56A of the Central Excise Rules on the accepted position that these were inputs for their finished products. Therefore, the order of the Collector holding that MODVAT credit availed on gear and gear boxes is illegal is not sustainable and is therefore set aside.
5. In regard to the other input, namely, Dynodrive, the contention of the appellants that this is nothing but Electric Motor and that since they had included Electric Motor in their initial declaration of 22-9-1986, there was no illegality in availing of MODVAT credit thereon, does not have much force because the description in the declaration given on 22-9- 1986 merely specified Electric Motors against sub-heading 8501.00. The literature relating to Dynodrive describes it as electromagnetic eddy current coupling of being a totally new concept in variable speed drive systems for industrial applications. Unless there is specific description of the item in the declaration, the department cannot be expected to understand that Dynodrive is also nothing but Electric Motor. The item with its specific description was included as an input only in their letter dated 19-11-1986. The Collector's findings in this regard are therefore well founded. Hence the order to reverse credit availed of in respect of Dynodrive is valid and is upheld. The appeal is disposed of in the above terms.