Synthetics and Chemicals Ltd. Vs. Collector of Cen. Ex. - Court Judgment

Excerpt:
1. the ld. commissioner (appeals) in the impugned order dated 29-3-1996 held that in view of the above discussions, i uphold the order dated 13-11-1995 passed by the asstt. commissioner, central excise, bareilly.the asstt. commissioner, in his order, had disallowed modvat credit of rs. 15,468.25 and also imposed a personal penalty of rs. 10,000/- on the appellants.2. the facts of the case are that the appellants are engaged in the manufacture of synthetic rubber and various other products. the appellants are availing modvat facilities also. on scrutiny of rt 12 return for the month of jan. 1995, it was noticed that the appellants had filed modvat declaration under rule 57t(1) for availing modvat credit under rule 57q. on scrutiny of the declaration, it was noticed that the goods had been received before filing these declarations and that the appellants had taken the credit. accordingly, a show cause notice was issued to the appellants asking them to explain as to why modvat credit should not be disallowed and the amount should not be recovered from them and why penalty should not be imposed.3. shri s.c. sethi, the ld. advocate appearing for the appellants submitted that the appellants had filed an affidavit of shri v.v.shastri; that the adjudicating officer while deciding the case did not take into consideration the affidavit nor did he comment on the affidavit though the affidavit was mentioned under the heading of the case for the party. the ld. counsel also submitted that he had submitted technical expert opinion of techno-engineer contained in their letter dated 22-3-1996; that in the expert opinion, the chartered engineer shri v.p. agarwal had clearly opined that sleeve is a spare part of the machinery used in production of rubber, the final product; that pt- 100 sensor was a tool and appliance; that ldpe black lay flat tubing is a component and spare inasmuch as the tank is internally lined with ldpe black tubing which is laid flat like a sheet on internal surface; that this lining is replaced by spare ldpe sheet whenever found defective resulting in tank leakage. the ld. counsel submitted that in spite of the fact that this expert opinion was furnished to the ld. commissioner (appeals) but he did not take this into consideration while deciding the nature of the product. he therefore, submitted that the ld. commissioner (appeals) neither considered the technical opinion submitted by the appellants nor placed reliance on any technical material supplied by the department and thus there was a total non-application of mind.4. the ld. counsel submitted that the appellants had submitted the declaration on 6-1-1995. they explained that they could not submit the declaration immediately as the details were not readily available. the ld. counsel also referred to board's circular no. 181/15/96-cx, dated 7-3-1996 whereunder the board had clarified that credit could not be denied merely on the ground that the declaration has been filed after receipt of the capital goods. the board further clarified that in all the cases where a declaration was filed after receipt of the capital goods, the manufacturer should be required to file along with the declaration an explanation for delay in filing the same. the ld.counsel submitted that the appellants had filed the declaration and had also furnished the explanation. the ld. counsel submitted that whereas the department condoned the delay in filing the declaration of one or two days but only in one case where the delay was about 25 days, the delay was not condoned. the ld. counsel submitted that the appellants had filed declaration and had also explained the reasons for delayed filing of the declaration, therefore, the delay should have been condoned.5. on the question of imposition of penalty the ld. counsel submitted that there was no suppression or wilful mis-statement; that there was no intention to evade payment of duty and therefore, the imposition of penalty was not warranted and therefore, prayed that the impugned order may be set aside and the appeal may be allowed.6. shri a.k. agarwal, the ld. sdr appearing for the respondent commissioner submitted that wherever the delay was only one or two days, the same has been condoned by the adjudicating authority; that only in the case where the delay was long (25 days), the same has not been condoned for valid reasons and that the valid reasons have been given by the adjudicating officer.7. insofar as the consideration of the affidavit by the adjudicating authority and the expert opinion by the ld. commissioner (appeals) are concerned, the ld. sdr submitted that the adjudicating authority had taken into consideration the affidavit as he has mentioned it in the contentions of the appellants. he submitted that the board's circular relied upon by the appellants was received much after the date of adjudication. he submitted that the opinion given by the expert was of a general nature. he submitted that having regard to the findings of the lower authorities, modvat credit has rightly been denied in the case where the declaration was filed after 25 days and the penalty has rightly been imposed.8. heard the submissions of both sides. there are three issues for determination before me. the first issue is whether the reasons for filing the declaration late are sufficient. i find that the appellants in their letter dated 6-1-1995 had explained the reasons. i also observe that cbec in their circular dated 7-3-1996 cited above had clarified that credit should not be denied merely on the ground that the declaration had been filed after the receipt of the capital goods.i find that the appellants had filed the declaration and had also explained the reasons for delayed filing of the declaration, therefore, in terms of board's circular, they had complied with the requirements set out therein. in the circumstances, i hold that delay was condonable and delay of 25 days is hereby condoned.9. the second issue for determination is whether goods described as sleeves, mechanical seals, pt- 100 sensor and ldpe black lay flat tubing were capital goods and covered by rule 57q of the central excise rules, 1944. i observe that the appellants had produced expert technical opinion from shri v.p. agarwal, chartered engineer of m/s techno engineers who opined that sleeves of mechnical seals are spare parts of machinery used in the production of rubber; that pt-100 sensor was an integral part of thermo couple of sophisticated nature and was an important tool and appliance & ldpe black lay flat tubing was the lining material of internal surfaces of tanks and thus were component and spare for plant and equipment. i find that this technical opinion was not considered by the ld. commissioner (appeals) nor did he rely on any technical material of any sort. in the circumstances, the technical opinion becomes an evidence unrebutted. i therefore, hold that the items namely, sleeves, mechanical seal, pt-100 sensor and ldpe black lay flat tubing are capital goods for purpose of rule 57q and are eligible for modvat credit.10. the third issue is whether penalty was warranted in the present case. i find that there was no suppression, no wilful mis-statment, nor was there any intention to evade payment of duty and therefore, i hold that in the circumstances of the case, no penalty was warranted.in the result, the impugned order is set aside and the appeal is allowed.

Judgment:
1. The ld. Commissioner (Appeals) in the impugned order dated 29-3-1996 held that in view of the above discussions, I uphold the order dated 13-11-1995 passed by the Asstt. Commissioner, Central Excise, Bareilly.

The Asstt. Commissioner, in his order, had disallowed Modvat credit of Rs. 15,468.25 and also imposed a personal penalty of Rs. 10,000/- on the appellants.

2. The facts of the case are that the appellants are engaged in the manufacture of synthetic rubber and various other products. The appellants are availing modvat facilities also. On scrutiny of RT 12 return for the month of Jan. 1995, it was noticed that the appellants had filed modvat declaration under Rule 57T(1) for availing Modvat credit under Rule 57Q. On scrutiny of the declaration, it was noticed that the goods had been received before filing these declarations and that the appellants had taken the credit. Accordingly, a show cause notice was issued to the appellants asking them to explain as to why Modvat credit should not be disallowed and the amount should not be recovered from them and why penalty should not be imposed.

3. Shri S.C. Sethi, the ld. Advocate appearing for the appellants submitted that the appellants had filed an affidavit of Shri V.V.Shastri; that the adjudicating officer while deciding the case did not take into consideration the affidavit nor did he comment on the affidavit though the affidavit was mentioned under the heading of the case for the party. The ld. Counsel also submitted that he had submitted technical expert opinion of techno-engineer contained in their letter dated 22-3-1996; that in the expert opinion, the Chartered Engineer Shri V.P. Agarwal had clearly opined that sleeve is a spare part of the machinery used in production of rubber, the final product; that PT- 100 Sensor was a tool and appliance; that LDPE Black Lay Flat Tubing is a component and spare inasmuch as the tank is internally lined with LDPE Black Tubing which is laid flat like a sheet on internal surface; that this lining is replaced by spare LDPE sheet whenever found defective resulting in tank leakage. The ld. Counsel submitted that in spite of the fact that this expert opinion was furnished to the ld. Commissioner (Appeals) but he did not take this into consideration while deciding the nature of the product. He therefore, submitted that the ld. Commissioner (Appeals) neither considered the technical opinion submitted by the appellants nor placed reliance on any technical material supplied by the department and thus there was a total non-application of mind.

4. The ld. Counsel submitted that the appellants had submitted the declaration on 6-1-1995. They explained that they could not submit the declaration immediately as the details were not readily available. The ld. Counsel also referred to Board's Circular No. 181/15/96-CX, dated 7-3-1996 whereunder the Board had clarified that credit could not be denied merely on the ground that the declaration has been filed after receipt of the capital goods. The Board further clarified that in all the cases where a declaration was filed after receipt of the capital goods, the manufacturer should be required to file along with the declaration an explanation for delay in filing the same. The ld.Counsel submitted that the appellants had filed the declaration and had also furnished the explanation. The ld. Counsel submitted that whereas the department condoned the delay in filing the declaration of one or two days but only in one case where the delay was about 25 days, the delay was not condoned. The ld. Counsel submitted that the appellants had filed declaration and had also explained the reasons for delayed filing of the declaration, therefore, the delay should have been condoned.

5. On the question of imposition of penalty the ld. Counsel submitted that there was no suppression or wilful mis-statement; that there was no intention to evade payment of duty and therefore, the imposition of penalty was not warranted and therefore, prayed that the impugned order may be set aside and the appeal may be allowed.

6. Shri A.K. Agarwal, the ld. SDR appearing for the respondent Commissioner submitted that wherever the delay was only one or two days, the same has been condoned by the adjudicating authority; that only in the case where the delay was long (25 days), the same has not been condoned for valid reasons and that the valid reasons have been given by the adjudicating officer.

7. Insofar as the consideration of the affidavit by the adjudicating authority and the expert opinion by the ld. Commissioner (Appeals) are concerned, the ld. SDR submitted that the adjudicating authority had taken into consideration the affidavit as he has mentioned it in the contentions of the appellants. He submitted that the Board's Circular relied upon by the appellants was received much after the date of adjudication. He submitted that the opinion given by the expert was of a general nature. He submitted that having regard to the findings of the lower authorities, Modvat credit has rightly been denied in the case where the declaration was filed after 25 days and the penalty has rightly been imposed.

8. Heard the submissions of both sides. There are three issues for determination before me. The first issue is whether the reasons for filing the declaration late are sufficient. I find that the appellants in their letter dated 6-1-1995 had explained the reasons. I also observe that CBEC in their Circular dated 7-3-1996 cited above had clarified that credit should not be denied merely on the ground that the declaration had been filed after the receipt of the capital goods.

I find that the appellants had filed the declaration and had also explained the reasons for delayed filing of the declaration, therefore, in terms of Board's Circular, they had complied with the requirements set out therein. In the circumstances, I hold that delay was condonable and delay of 25 days is hereby condoned.

9. The second issue for determination is whether goods described as sleeves, mechanical seals, PT- 100 sensor and LDPE Black Lay Flat Tubing were capital goods and covered by Rule 57Q of the Central Excise Rules, 1944. I observe that the appellants had produced expert technical opinion from Shri V.P. Agarwal, Chartered Engineer of M/s Techno Engineers who opined that sleeves of mechnical seals are spare parts of machinery used in the production of rubber; that PT-100 sensor was an integral part of thermo couple of sophisticated nature and was an important tool and appliance & LDPE Black Lay Flat Tubing was the lining material of internal surfaces of tanks and thus were component and spare for plant and equipment. I find that this technical opinion was not considered by the ld. Commissioner (Appeals) nor did he rely on any technical material of any sort. In the circumstances, the technical opinion becomes an evidence unrebutted. I therefore, hold that the items namely, sleeves, mechanical seal, PT-100 sensor and LDPE Black Lay Flat Tubing are capital goods for purpose of Rule 57Q and are eligible for Modvat credit.

10. The third issue is whether penalty was warranted in the present case. I find that there was no suppression, no wilful mis-statment, nor was there any intention to evade payment of duty and therefore, I hold that in the circumstances of the case, no penalty was warranted.

In the result, the impugned order is set aside and the appeal is allowed.