Kakkar Complex Steels Pvt. Ltd. Vs. Collector of C. Ex. - Court Judgment

Excerpt:
1. by the captioned appeal, the appellants have assailed the order of ld. commissioner (appeals). the ld. commissioner (appeals), in his order, had confirmed the demand of rs. 56,369.80 under rule 57-i of the central excise rules, 1944 and imposed a personal penalty of rs. 5,000/- under rule 57-o.2. the facts of the case are that the appellants are engaged in the manufacture of steel ingots and were availing the credit of input duty under the modvat scheme. the appellants have availed credit of duty on inputs under the modvat scheme in respect of 'hot-tops' and 'refractory goods'. the department alleged that hot-tops and refractory goods were not inputs used in or in relation to the manufacture of steel ingots and therefore, were not eligible for input duty credit under the modvat scheme. accordingly, they issued a show cause notice. in the show cause notice, the appellants were asked to explain as to why duty amounting to rs. 56,369.80 should not be demanded from them under rule 57-i and why penalty should not be imposed. in reply to the show cause notice, the appellants submitted that hot-top is a chemical product falling under tariff heading 38; that the product is essential for sound and proper casting of steel ingots inasmuch as they keep the molten material hot in the hot-top portion. regarding admissibility of modvat credit on refractory goods, the appellants submitted that ceramics and refractory are used for making the pipeline for pouring the molten metal into the ingot moulds and thous form an integral part of electric furnace. it was contended before the lower authorities that as a part of the budget proposal for 1994-95, the benefit of modvat credit has been extended to capital goods w.e.f. 1-3-1994; that capital goods include not only machines, machinery, plant, equipment, apparatus, tools, or appliances used but also their components spare parts and accessories. after careful consideration of the submissions made, the dy. collector confirmed the demand of rs. 56,369.80 and also imposed a penalty of rs. 5,000/-. the appellants, against the order of the dy.collector, filed an appeal before the commissioner (appeals) who held that in view of the judgment of cegat in the case of mukund iron & steel works ltd. reported in 1990 (45) e.l.t. 84 (tribunal) and in the judgment of cegat in the case of r.d. alloys, it would be worthwhile to continue the present practice of not allowing modvat credit on refractory bricks and hot tops until the petitioners' appeal filed in their appeal nos. e/125,1268-69/95 is decided finally by the tribunal.against this order of the ld. commissioner (appeals), the appellants have come up in appeal before me.3. shri b.n. sharma, the ld. constt. appearing for the appellants submits that there were three issues raised. the issue no. 1 was that hot tops were inputs and were eligible for modvat credit. the ld.constt. submits that the ld. commissioner (appeals) had referred to three appeals which have since been decided by the tribunal in their favour and therefore, pleads that insofar as admissibility of modvat credit on hot tops is concerned, it is covered by the decision of the tribunal in its order nos. a/1850-52/96-nb, dated 19-7-1996 reported in 1996 (87) e.l.t. 710 (tribunal) and therefore, prays that modvat credit may be allowed to the appellants as held in this order.4. the second issue before the tribunal was about admissibility of modvat credit on refractory goods (bricks). he submits that modvat credit should be admissible on refractory bricks also as they are used in or in relation to the manufacture of the finished product. the ld.dr submits that in so far as admissibility of modvat credit on refractory goods is concerned, the deptt.'s case is fully covered by the decision in the case of mukund iron & steel works ltd. supra and raipur metal industries decided by the tribunal recently wherein the tribunal had disallowed modvat credit on refractory goods.5. the third issue that was agitated before me by the ld. constt. was that in case the benefit of modvat credit was not admissible on refractory goods as an input then the appellants were entitled to modvat credit on refractory goods as capital goods. he cited the decision of this tribunal in the case of c.c.e., meerut v. uttam indl.engg. pvt. ltd. reported in 1996 (86) e.l.t. 498 as also the decision of this tribunal in the case of roche products ltd. reported in 1995 (78) e.l.t. 127. he contended that procedural requirements should not come in the way of substantive benefit conferred by the modvat scheme.the ld. constt. submits that credit of duty is a substantive benefit and that the appellants should not be deprived of it simply because there was some lapse in following the procedure in respect of late submission of declaration under rule 57t insofar as the capital goods are concerned.6. on careful consideration of the submissions made by both sides, i find that admissibility of modvat credit on hot tops has already been decided by the tribunal in the appellants' own case. i do not see any reason to disagree with the order and therefore, hold that insofar as modvat credit on hot tops is concerned, the same will be admissible.7. insofar as the submission of the declaration first under rule 57g in respect of inputs and then under rule 57t in respect of capital goods is concerned, i find that the declaration in respect of capital goods was filed much after the date of taking modvat credit and thus their claim that in case the modvat credit in terms of the declaration filed under rule 57g is not allowed, the same should be allowed in terms of the declaration filed under rule 57t. i find, this plea of the appellants is not acceptable inasmuch as the claim is to be filed by the appellants in terms of specifics clearly showing whether the claim is fully under one rule or the other.8. insofar as the admissibility of modvat credit under rule 57a in respect of refractory goods is concerned, i find that this issue was considered by the tribunal first in the case of mukund iron & steel works pvt. ltd. (supra) and subsequently in the case of raipur metal industries and in the findings in both the cases, the tribunal held that modvat credit on refractory bricks shall not be admissible in terms of rule 57a meaning thereby that they are not inputs. i agree with the ratio of these two judgments.9. the findings in the above paragraph clearly reply that modvat credit on refractory bricks shall not be admissible to the appellants in terms of rule 57a nor was it admissible to the appellants in terms of rule 57q inasmuch as the declaration for availing credit as capital goods was filed much after the date of availing the credit.

Judgment:
1. By the captioned appeal, the appellants have assailed the order of ld. Commissioner (Appeals). The ld. Commissioner (Appeals), in his order, had confirmed the demand of Rs. 56,369.80 under Rule 57-I of the Central Excise Rules, 1944 and imposed a personal penalty of Rs. 5,000/- under Rule 57-O.2. The facts of the case are that the appellants are engaged in the manufacture of steel ingots and were availing the credit of input duty under the Modvat scheme. The appellants have availed credit of duty on inputs under the Modvat scheme in respect of 'hot-tops' and 'refractory goods'. The department alleged that hot-tops and refractory goods were not inputs used in or in relation to the manufacture of steel ingots and therefore, were not eligible for input duty credit under the Modvat scheme. Accordingly, they issued a show cause notice. In the show cause notice, the appellants were asked to explain as to why duty amounting to Rs. 56,369.80 should not be demanded from them under Rule 57-I and why penalty should not be imposed. In reply to the show cause notice, the appellants submitted that hot-top is a chemical product falling under Tariff Heading 38; that the product is essential for sound and proper casting of steel ingots inasmuch as they keep the molten material hot in the hot-top portion. Regarding admissibility of Modvat credit on refractory goods, the appellants submitted that ceramics and refractory are used for making the pipeline for pouring the molten metal into the ingot moulds and thous form an integral part of electric furnace. It was contended before the lower authorities that as a part of the Budget proposal for 1994-95, the benefit of Modvat credit has been extended to capital goods w.e.f. 1-3-1994; that capital goods include not only machines, machinery, plant, equipment, apparatus, tools, or appliances used but also their components spare parts and accessories. After careful consideration of the submissions made, the Dy. Collector confirmed the demand of Rs. 56,369.80 and also imposed a penalty of Rs. 5,000/-. The appellants, against the order of the Dy.

Collector, filed an appeal before the Commissioner (Appeals) who held that in view of the judgment of CEGAT in the case of Mukund Iron & Steel Works Ltd. reported in 1990 (45) E.L.T. 84 (Tribunal) and in the judgment of CEGAT in the case of R.D. Alloys, it would be worthwhile to continue the present practice of not allowing Modvat credit on refractory bricks and hot tops until the petitioners' appeal filed in their Appeal Nos. E/125,1268-69/95 is decided finally by the Tribunal.

Against this order of the ld. Commissioner (Appeals), the appellants have come up in appeal before me.

3. Shri B.N. Sharma, the ld. Constt. appearing for the appellants submits that there were three issues raised. The issue No. 1 was that hot tops were inputs and were eligible for Modvat credit. The ld.Constt. submits that the ld. Commissioner (Appeals) had referred to three appeals which have since been decided by the Tribunal in their favour and therefore, pleads that insofar as admissibility of Modvat credit on hot tops is concerned, it is covered by the decision of the Tribunal in its Order Nos. A/1850-52/96-NB, dated 19-7-1996 reported in 1996 (87) E.L.T. 710 (Tribunal) and therefore, prays that Modvat credit may be allowed to the appellants as held in this order.

4. The second issue before the Tribunal was about admissibility of Modvat credit on refractory goods (bricks). He submits that Modvat credit should be admissible on refractory bricks also as they are used in or in relation to the manufacture of the finished product. The ld.DR submits that in so far as admissibility of Modvat credit on refractory goods is concerned, the deptt.'s case is fully covered by the decision in the case of Mukund Iron & Steel Works Ltd. supra and Raipur Metal Industries decided by the Tribunal recently wherein the Tribunal had disallowed Modvat credit on refractory goods.

5. The third issue that was agitated before me by the ld. Constt. was that in case the benefit of Modvat credit was not admissible on refractory goods as an input then the appellants were entitled to Modvat credit on refractory goods as capital goods. He cited the decision of this Tribunal in the case of C.C.E., Meerut v. Uttam Indl.

Engg. Pvt. Ltd. reported in 1996 (86) E.L.T. 498 as also the decision of this Tribunal in the case of Roche Products Ltd. reported in 1995 (78) E.L.T. 127. He contended that procedural requirements should not come in the way of substantive benefit conferred by the Modvat scheme.

The ld. Constt. submits that credit of duty is a substantive benefit and that the appellants should not be deprived of it simply because there was some lapse in following the procedure in respect of late submission of declaration under Rule 57T insofar as the capital goods are concerned.

6. On careful consideration of the submissions made by both sides, I find that admissibility of Modvat credit on hot tops has already been decided by the Tribunal in the appellants' own case. I do not see any reason to disagree with the Order and therefore, hold that insofar as Modvat credit on hot tops is concerned, the same will be admissible.

7. Insofar as the submission of the declaration first under Rule 57G in respect of inputs and then under Rule 57T in respect of capital goods is concerned, I find that the declaration in respect of capital goods was filed much after the date of taking Modvat credit and thus their claim that in case the Modvat credit in terms of the declaration filed under Rule 57G is not allowed, the same should be allowed in terms of the declaration filed under Rule 57T. I find, this plea of the appellants is not acceptable inasmuch as the claim is to be filed by the appellants in terms of specifics clearly showing whether the claim is fully under one Rule or the other.

8. Insofar as the admissibility of Modvat credit under Rule 57A in respect of refractory goods is concerned, I find that this issue was considered by the Tribunal first in the case of Mukund Iron & Steel Works Pvt. Ltd. (supra) and subsequently in the case of Raipur Metal Industries and in the findings in both the cases, the Tribunal held that Modvat credit on refractory bricks shall not be admissible in terms of Rule 57A meaning thereby that they are not inputs. I agree with the ratio of these two judgments.

9. The findings in the above paragraph clearly reply that Modvat credit on refractory bricks shall not be admissible to the appellants in terms of Rule 57A nor was it admissible to the appellants in terms of Rule 57Q inasmuch as the declaration for availing credit as capital goods was filed much after the date of availing the credit.