1. These are four appeals filed by M/s. Vimal Alloys Pvt. Ltd., Mandi Gobindgarh, Chandigarh, against the two separate orders-in-appeal of the Collector of Central Excise (Appeals), Chan- digarh; one dated 30-5-1991 and the other dated 31-5-1991. Under her order dated 31-5-1991, the Collector of Central Excise (Appeals) had disposed of three appeals by a common order. As in all the three appeals common issues relating to the Modvat credit are involved, they were heard together and are being disposed of by this common order.
2. The appellant had received re-rollable material, defective steel ingots, blooms, cut ends, etc. (inputs), and used them in the manufacture of steel ingots and steel castings (final product), through the process of melting. In their declaration, the inputs were described as melting scrap. The inputs were not received directly from the manufacturers but were received under the cover of endorsed gate passes through third parties. In some cases, these third parties had taken deemed credit in respect of these inputs. Under the Scheme of the deemed credit, there was no requirement of receiving the inputs under the cover of gate passes. These third parties endorsed the gate passes under which the inputs had been received by them and sold those inputs to the appellant on the strength of such endorsed gate passes. It was alleged that the deemed Modvat credit on re-rollable material was admissible only when the inputs were used for re-rolling purposes, and was not admissible when the inputs were used for melting. As the goods said to have been received differed from the description in the Modvat declaration it was alleged that the credit had been taken without declaration/without approval. In Appeal No. 3187, it was also alleged that the appellant had taken credit of Rs. 58,706.60 on inputs without documents evidencing payment of Central Excise duty. These inputs had been purchased by them prior to 7-4-1986 when the deemed credit was allowed by the Government. The Asstt. Collector of Central Excise, Patiala had not given the necessary permission to take the credit under Rule 57H of the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules'), as the inputs on which the credit had been taken were purchased by the appellant prior to 27-3-1986 when they filed a declaration under Rule 57G of the Rules. The Asstt. Collector of Central Excise, Patiala, who had adjudicated the matters, confirmed the demand of Rs. 75,934.96 as basic excise duty and Rs. 3,796.73 as special excise duty in Appeal No. 3185; Rs. 1,59,961.26 in Appeal No.3186; Rs. 34,698.75 and Rs. 58,706.60 in Appeal No. 3187; and Rs. 20,706.46 in Appeal No. 3188. The Collector of Central Excise (Appeals) had rejected all the four appeals under her two separate orders.
3. The matter was posted for hearing on 14-7-1995 when Shri K.K. Anand, Advocate appeared for the appellant. Shri K.K. Dutta, JDR represented the respondent.
4. Shri K.K. Anand, the learned Advocate stated that the appellant were engaged in the manufacture of steel ingots for which they had a furnace. They were bringing scrap defective ingots etc., from outside after filing declaration wherein the inputs were shown as melting scrap. The Revenue had taken a stand that the re-rollable scrap brought by them could not be said to be an input for the purposes of Modvat scheme. The learned Advocate referred to the Tribunal's decision in the case of Alcobex Metals Ltd. v. Collector Central Excise -1993 (68) E.L.T. 146 (Tribunal) wherein it has been held that the defective goods used as inputs in the manufacture of final products by re-melting could not be considered as final products. In their declaration they had referred to their inputs as melting scrap which according to them was a correct description in their case. Reliance was placed on the Tribunal's decision in the case of Plaza Steels and Alloys Ltd. v.Collector of Central Excise -1993 (68) E.L.T. 213 (Tribunal) wherein it has been held that rejected steel ingots were nothing but re-melting scrap. As regards allegation about taking of Modvat credit without declaration, reliance was placed on the Tribunal's decision in the case of EMC Steel Ltd. v. Collector of Central Excise, Allahabad - 1993 (44) ECR 215 (Tribunal) wherein it has been held that credit taken without Asstt. Collector's prior permission on inputs lying in stock or received before filing declaration was admissible.
5. Shri K.K. Dutta, the learned JDR replied that the matter related to the deemed credit and that in the circumstances of the case the endorsed challans were not admissible. The re-rollable material could not be taken as melting scrap and the deemed credit was not available on melting scrap. The learned JDR submitted that the appellant had committed a number of irregularities in taking the Modvat credit and have by misdeclaration and suppression, taken advantage of the credit which was not legally admissible to them.
6. We have carefully considered the matter. The appellant were engaged in the manufacture of steel ingots and steel castings (their final products) through the process of melting, for which they had an electric furnace. For the purposes of manufacture of their final products they brought different kinds of iron and steel - re-rollable material, slab/flat, end cuttings, bars, rods, angles, channels, etc.
(their inputs), which they referred to in their declaration for the purpose of availing of Modvat credit as melting scrap. The inputs were received on endorsed gate passes.
(1) The Modvat credit had been taken in respect of slab end cuttings on the basis of Steel Authority of India Ltd. (SAIL) challans, which could not be endorsed.
(2) No deemed Modvat credit was available in respect of re-rollable material consumed for melting. The inputs were first received by another manufacturer, who availed of the deemed Modvat credit. They however cleared the said inputs on endorsed gate passes to the appellant. It was thus, a case of transfer of deemed credit which was not permissible.
(3) Steel flat, end cuttings, slab end cuttings and bars and rods of the variety/specifications received could not be considered as inputs in the manufacture of steel ingots/castings.
(1) The credit had been taken without filing any declaration under Rule 57G of the Rules with regard to their inputs rolling/re-rollable material, steel ingots, angles, channels, cuttings etc. The declaration filed and approved, described their inputs as ferro alloys and melting scraps.
(2) The credit had been taken without documents evidencing payment of central excise duty and without permission/approval of the proper officer.
8. The appellant had contended that the various inputs received by them were fit for melting and had actually being melted by them for the production of their final products. As they intended to melt the material which they purchased, they had described them as melting scrap, for which a proper declaration had been filed. They had also stated that all the inputs had been received by them under the cover of duty paying documents. When there were proper duty paying documents, the question of deemed credit would not arise and they were eligible for the credit of the duty as reflected in the duty paying documents.
9. We find that there is no allegation that the inputs were not received by the appellant, and only the endorsed documents without goods had moved from their suppliers. There is also no allegation that the inputs in whatever form and under whatever name received, were not used in or in relation to the manufacture of their final products. The inputs were received under the cover of endorsed gate passes. It is not a case of deemed Modvat credit. The question of deemed credit will arise only when there are no duty paying documents and when the Central Government had issued directions under the second proviso of Sub-rule (2) of Rule 57G of the Rules. If the matter is covered by the first proviso under Sub-rule (2) of Rule 57G, then the question of deemed credit will not arise.
10. It has been alleged that the Modvat credit had been taken in respect of slab end cuttings on the basis of endorsed SAIL challans, which could not be endorsed. There is no allegation that these challans issued by SAIL were fake or false. There is also no allegation that the inputs have not actually been received. Under Rule 57G(2) the Central Board of Excise and Customs (CBEC) could prescribe any other document, other than a gate pass, evidencing the payment of central excise duty on the inputs. On representation from the trade and industry a concession of endorsement upto two times was also provided. Certain facilities had been extended to Public Sector Steel Plants and other integrated steel plants. There is nothing on record to show that there was a prohibition with regard to endorsement of SAIL challans.
11. The declaration filed described the inputs as melting scrap. While it could be said that in the context of the inputs used by the appellant, this description was general and somehow vague; on that account however, it could not be said that the credit with regard to the rolling/re-rollable material, steel ingots, etc. had been taken without declaration and without documents evidencing payment of duty or without permission/approval of the proper officer. The Asstt. Collector of Central Excise, Patiala under his communication dated 21-7-1986, had allowed the appellant to take credit under Modvat scheme on melting scrap. On this account, in the circumstances of this case, it does not appear appropriate to deny the credit. The documents showed the description as melting scrap, defective steel ingots/material cuttings, bloom cuttings, etc. The Revenue had contended that these material were re-rollable material. As we have observed above, there is no allegation that the inputs were not actually received or were not melted to produce steel ingots/castings. On the basis of the different terminology used, or the difference of opinion between the Revenue and the assessee about the correct name of the inputs, it does not appear, in the circumstances of these cases, appropriate to deny the credit.
12. The appellant had declared their inputs as melting scrap. For the purpose of Rule 57 A of the Rules, the specification of principal raw materials under Rule 55 is of no relevance. Whether the goods have been used in or in relation to the manufacture of the specified final products, had to be determined only under the provisions of Rules 57A.On this account, it could not be said that they were not inputs. There is no allegation that these inputs were not used in the manufacture of the final products of the appellant. Whether such a use was logical or not, to out mind had no logic if they had been actually used as such, and the use was otherwise covered by the Scheme of Modvat.
13. Insofar as the inputs lying in stock prior to 7-4-1986, and which are the subject matter of Appeal No. 3187, it is seen that they had been purchased prior to 7-4-1986 and there were no documents evidencing payment of central excise duty on those inputs. They were purchased even prior to filing of the declaration under Rule 57G of the Rules.
The defence of the appellant is that "the credit on this account was taken on the belief that the permission if required would be obtained by the range authorities with whom complete data is regularly filed." In their reply to the show cause notice they requested that ex post facto permission in respect of the credit which has already been taken be granted, and that their reply may be treated as a request for the grant of permission. This reply is dated 1-12-1987 while they had already taken credit of Rs. 58,706.60 on 20-1-1987. The Asstt.
Collector of Central Excise, Patiala, who adjudicated the matter had observed that as the party had not submitted the proof of payment of duty on the inputs lying in stock prior to 7-4-1986, the competent authority had not allowed the credit. The Collector of Central Excise (Appeals) had also remarked that the appellant failed to produce any duty paying documents, and as such no credit was admissible on this account. In so far as, this part of the matter relating to credit of Rs. 58,706.60, we find no infirmity in the impugned order.
14. Taking all the relevant considerations into account, we confirm that part of the order-in-appeal dated 31-5-1991, which relates to the credit of Rs. 58,706.60 relating to the inputs lying in stock prior to 7-4-1986. Insofar as the other allegations are concerned, we consider that in the facts and circumstances of these cases, the appeals merit acceptance, and we order accordingly.