Poly Plast Chemi Plants (i) Ltd. Vs. Commissioner of Central Excise, - Court Judgment

Excerpt:
a. certain modvat credits were availed on goods imported. these credits were availed during the period of 18.08.88 - 01.02.89 and were reversed in rg32a and by entry in pla on 23.11.92 and 01.12.92. the appellants thereafter wrote a letter to the range superintendent that the reversal of the credit and payment of duty made under pla, as effected, was not correct and requested the department to treat these debit entries made under rg23a and pla to be cancelled and the balance to be corrected by reversal of the debit entries. the authorities presumed that the appellants had already did so, and was not correct. the commissioner found as follows;- "the appellants during the hearing informed that though they had written a letter on 8th may, 1993 for cancelling the entry and for treating the balance enhanced by the cancellation of the amount already debited, the same was not effected to and therefore, the confirmation of the show cause notice was bad, the perusal of the letter indicated that the credit was cancelled and the credit balance in rg23a and pla account may be read with the enhanced amount as recredited by cancellation of the debit entry. the debit was effected in november and december, 1993. the correct procedure would have been that the appellant should have approached the department, seeking permission to recredit the reversed amount. instead the department was informed that they had suo moto cancelled the entry and the letter was addressed to the department for information. the conduct of the appellants for taking the recredit of the wrongly reversed modvat credit and the procedure adopted was not inorder. however, since the amount has already been paid and there therefore cannot be second payment, when the appellants informed that the credit was not taken. the question of further debit or payment of the amount will therefore not arise. however the department may verify the factual position about the cancellation and recredit of the reverse entry taken by the appellants. if the amount has not been recredited the order for recovery cannot be implemented but if the amount has been recredited the appellants have to pay the amount under rule 57i. upholding the order-in original, the appeal is rejected." 2. (a) i find, rule 226 of the central excise rules provides & casts an obligation on the assessee to maintain all the account book prescribed in proper order. if this is not done, they are liable for a penalty.this rule also prescribes the course action required for corrections to be made in the accounts books, i.e. with the sanction and in the presence of central excise officers. the appellant herein have no doubt approached range officers to get the entries corrected which they felt were not correct.(b). the appellants have submitted before me that no action was taken on this request made by them to correct the rg23a and pla a/c books. a notice was issued, which was settled, as the high court in a petition is filed in the bombay high court, wherein it was allowed to be withdrawn when the statement was made on behalf of the department that on verification of the accounts it was found that no debit entry was cancelled.(c). i find that the debit entries in the rg23a and pla can be made pursuant to the rules and to meet the order of the written demands; the appellant / assessees who are maintaining these account books cannot make debit on the oral instructions of the audit or any other authority. therefore the debit entries made are not permissible and are required to be corrected as per law.(d). i find that the custom tariff is not fully aligned to the central excise tariff, therefore there would be consequential difference in the tariff heading and the reasons given for the "debit entries", "reversal entries" in the objections of the audit department are therefore, not reasons prescribed for denial of modvat credit. however if the department wants to deny the credit they should have issued a proper notice to the assessee giving reasons why they considered the credit taken by them not to be in order and thereafter order the reversals/debits as provided under the central excise act and the rules. this has also not being done. from the impugned order of the asst. collector, i find that he has not gone into these aspect of the matter. there is virtually no decision taken whether credit would be eligible in respect of the inputs with customs tariff heading not matching central excise tariff headings. the appellant submits before me that credit on similar inputs, has been availed by them without objections from the department and these inputs have also being used by them in the manufacture of the final product. this aspect is however required to be examined.3. in view of my findings i would therefore consider this denial of credit in this case by the lower appellate authority to be caused by mis-directing the procedure established by law and they should examine whether the credit on the inputs was eligible or not. i would therefore set aside the impugned order and remand the matter back to the jurisdictional range superintendent to sanction the reversal or and correction of the entries required to be made in the rg23a and pla by the appellant, if he is satisfied with the use of the inputs and founds them to be eligible inputs used in the manufacture of the final product and permit the corrections entries with consequential benefits if any.

Judgment:
a. Certain Modvat credits were availed on goods imported. These credits were availed during the period of 18.08.88 - 01.02.89 and were reversed in RG32A and by entry in PLA on 23.11.92 and 01.12.92.

The appellants thereafter wrote a letter to the Range Superintendent that the reversal of the credit and payment of duty made under PLA, as effected, was not correct and requested the department to treat these debit entries made under RG23A and PLA to be cancelled and the balance to be corrected by reversal of the debit entries. The authorities presumed that the appellants had already did so, and was not correct. The Commissioner found as follows;- "The appellants during the hearing informed that though they had written a letter on 8th may, 1993 for cancelling the entry and for treating the balance enhanced by the cancellation of the amount already debited, the same was not effected to and therefore, the confirmation of the show cause notice was bad, The perusal of the letter indicated that the credit was cancelled and the credit balance in RG23a and PLA account may be read with the enhanced amount as recredited by cancellation of the debit entry. The debit was effected in November and December, 1993. The correct procedure would have been that the appellant should have approached the department, seeking permission to recredit the reversed amount.

Instead the department was informed that they had suo moto cancelled the entry and the letter was addressed to the department for information. The conduct of the appellants for taking the recredit of the wrongly reversed modvat credit and the procedure adopted was not inorder. However, since the amount has already been paid and there therefore cannot be second payment, when the appellants informed that the credit was not taken. The question of further debit or payment of the amount will therefore not arise. However the department may verify the factual position about the cancellation and recredit of the reverse entry taken by the appellants. If the amount has not been recredited the order for recovery cannot be implemented but if the amount has been recredited the appellants have to pay the amount under Rule 57I. Upholding the Order-in Original, the appeal is rejected." 2. (a) I find, Rule 226 of the Central Excise Rules provides & casts an obligation on the assessee to maintain all the account book prescribed in proper order. If this is not done, they are liable for a penalty.

This rule also prescribes the course action required for corrections to be made in the accounts books, i.e. with the sanction and in the presence of Central Excise Officers. The appellant herein have no doubt approached Range officers to get the entries corrected which they felt were not correct.

(b). The appellants have submitted before me that no action was taken on this request made by them to correct the RG23A and PLA a/c books. A notice was issued, which was settled, as the High Court in a petition is filed in the Bombay High Court, wherein it was allowed to be withdrawn when the statement was made on behalf of the department that on verification of the accounts it was found that no debit entry was cancelled.

(c). I find that the debit entries in the RG23A and PLA can be made pursuant to the rules and to meet the order of the written demands; the appellant / assessees who are maintaining these account books cannot make debit on the oral instructions of the Audit or any other authority. Therefore the debit entries made are not permissible and are required to be corrected as per law.

(d). I find that the Custom Tariff is not fully aligned to the Central Excise Tariff, therefore there would be consequential difference in the Tariff Heading and the reasons given for the "Debit Entries", "Reversal Entries" in the objections of the Audit Department are therefore, not reasons prescribed for denial of modvat Credit. However if the department wants to deny the credit they should have issued a proper notice to the assessee giving reasons why they considered the credit taken by them not to be in order and thereafter order the reversals/debits as provided under the Central Excise Act and the Rules. This has also not being done. From the impugned order of the Asst. Collector, I find that he has not gone into these aspect of the matter. There is virtually no decision taken whether credit would be eligible in respect of the inputs with Customs Tariff Heading not matching Central Excise Tariff Headings. The appellant submits before me that credit on similar inputs, has been availed by them without objections from the Department and these inputs have also being used by them in the manufacture of the final product. This aspect is however required to be examined.

3. In view of my findings I would therefore consider this denial of credit in this case by the lower appellate authority to be caused by mis-directing the procedure established by law and they should examine whether the credit on the inputs was eligible or not. I would therefore set aside the impugned order and remand the matter back to the Jurisdictional Range Superintendent to sanction the reversal or and correction of the entries required to be made in the RG23A and PLA by the appellant, if he is satisfied with the use of the inputs and founds them to be eligible inputs used in the manufacture of the final product and permit the corrections entries with consequential benefits if any.