Collector of Central Excise Vs. Resch Extrusion Technic - Court Judgment

Excerpt:
1. this appeal is filed by the revenue against the order of the collector of central excise (appeals), madras. brief facts are that the respondents vide their letter dated 1.12.1987 approached the jurisdictional assistant collector for permission to avail of the modvat credit in respect of plastic raw material used for testing of their final product viz plastic processing machine manufactured by them. the learned assistant collector vide his order dated 18.12.1986 held that in respect of the plastic raw material used for testing the machine this can be considered to have been used in the process incidental or ancillary to the completion of the product namely plastic processing machine for which the respondents were eligible for the modvat credit. the department filed application under section 35e(4) of the central excises & salt act, 1944 before the collector of central excise (appeals) being aggrieved by the order of the original authority and the learned collector (appeals) vide his order dated 30.6.1987 in order no. 95/87 upheld the order of the original authority. the revenue thereafter filed appeal before the tribunal and the tribunal after taking into consideration allowed the appeal of the revenue. in pursuance of the order of the tribunal, the range supdt vide his letter dated 10.10.1988 asked the respondents to reverse the credit of rs. 72,809.20 in their rg 23a part ii within 10 days of the receipt of his letter and the details of the credit taken on plastic granules which were required to be reversed was given in the said letter as under:rg 23a pt i quantity rg 23a part ii amountno. & date no. & date rs__________ ________ _______________ _________5/18.2.1987 10,000 kgs 6/18.2.87 40,466.411/1.12.87 5,000" 41/1.12.87 32.342.79 total 72809.20 2. the respondents approached the assistant collector and appeared to have asked for an appealable order vide their letter dated 26.10.1988 and the assistant collector vide his letter dated 21.12.1988 informed the respondents that the letter of the superintendent dated 10.10.1988 may be treated as if notice issued under rule 57-1 of the central excise rules, 1944 and proceeded to issue an appealable order dated 31.3.1989 holding that the respondents arc required to pay the demand in terms of rule 57i and they were not entitled to issue of a show cause notice under section 11a of the central excises & salt act, 1944 as pleaded. he has also held that the question of issuing a separate show cause notice was redundant as the appeal before the tribunal was in continuation of the original proceedings dated 18.12.1986. the learned collector (appeals) however held that the credit was taken by the respondent on 18.2.1987 while the demand has been issued vide supdt's letter dated 10.10.1988 and since this was beyond the period of six months, the demand was hit by limitation.3. shri p. sundararaju, the learned sdr for the department stated the facts as set out above and submitted that the issue regarding taking of modvat credit was the subject matter of consideration by the departmental authorities right from december 1986 and the respondents sought for permission from the assistant collector for availing of the modvat credit. he has pleaded that inasmuch as the order of the cegat was in continuation of the original proceedings as held by the hon'ble supreme court in the case reported in 1983 elt 1651, the department was within its rights to reverse the modvat credit earlier taken, in view of the cegat's order in favour of the revenue as referred to in the facts above. he has pleaded that no show cause notice was required to be issued in the light of the decision of the tribunal and the only consequences flowing therefrom was the recovery of the credit already taken by the respondents.4. shri subash chand, the representative appearing for the respondents pleaded that the demand was raised for the first lime on 10.10.1986 and it can only be raised'within the limitation period in terms of rule 57-i. there was no suppression of facts on the part of the respondents and therefore the demand can be raised only for six months. he has pleaded that the respondents had been filing rt 12 returns and the same had been finalised by the department.5. the short point that falls for consideration is whether a show cause notice was required to be issued for recovery of modvat credit in view of the order of the cegat in favour of the revenue as mentioned above.we observe that the respondents initially sought for permission vide their letter dated 1.12.1987 for availing the modvat credit for testing their specified finished product namely plastic processing machine manufactured by them. the learned assistant collector held vide his order dated 18.12.1986 that the respondents were eligible to avail the modvat credit in terms of rule 57a in respect of plastic raw material input and the respondents took modvat credit as seen from the record from the letter of 18.2.1987 and 1.12.1987. in the meantime the department filed application under section 35e(4) before the collector (appeals) against the order of the assistant collector dated 18.12.1986. the respondents have also stated that they were filing the rt 12 returns which have been finalised and the fact of their availing the modvat credit was reflected in their rt 12 returns. the revenue did not file any appeal before the collector (appeals) against this rt 12 assessments nor have they raised any demand during this period under rule 57i. it is seen that the proceedings drawn before the collector (appeals) was only in the context of the learned assistant collector's findings that the respondents were eligible for the modvat credit in respect of plastic raw material as input. the specifics of modvat credit availment were not taken up for decision in the context of recovery of credit already availed of either in the proceedings before the original authority or before the collector (appeals). decision of the tribunal also was given in the context of the eligibility and it was not specifically mentioned before the bench that modvat credit already availed of was required to be reversed. in this background, therefore, we hold that the decision taken by the tribunal was only in regard to the eligibility of the respondents for the modvat credit and any recovery in respect of the modvat credit already availed of will have to be done in terms of specific rules and following the procedure specified therein. in the present case, the specific rule for the purpose as provided in the modvat scheme is rule 57-i. in the instant case, admittedly no show cause notice was issued by the lower authority within time as described in rule 57-i and the question of invoking the longer period will not arise. in the facts of this case, we hold that show cause notice was required to be issued to the respondents and it is not understandable as to why the revenue did not observe either provisional assessment procedure or why they did not issue the show cause notice within time for reversal of the credit in terms of rule 57-i when they had taken up the matter in appeal before the collector (appeals). not having done that and also not having filed any appeal against the rt 12 assessment the authorities have themselves to blame for not keeping the demand live for proceeding under rule 57-i. in view of above, we hold that there is no force in the plea of the revenue. we hold that collector (appeals)'s order is maintainable in law. the appeal of the revenue is dismissed.

Judgment:
1. This appeal is filed by the Revenue against the order of the Collector of Central Excise (Appeals), Madras. Brief facts are that the Respondents vide their letter dated 1.12.1987 approached the jurisdictional Assistant Collector for permission to avail of the MODVAT Credit in respect of plastic raw material used for testing of their final product viz Plastic processing machine manufactured by them. The learned Assistant Collector vide his order dated 18.12.1986 held that in respect of the plastic raw material used for testing the machine this can be considered to have been used in the process incidental or ancillary to the completion of the product namely plastic processing machine for which the respondents were eligible for the MODVAT Credit. The Department filed application under Section 35E(4) of the Central Excises & Salt Act, 1944 before the Collector of Central Excise (Appeals) being aggrieved by the order of the original authority and the learned Collector (Appeals) vide his order dated 30.6.1987 in ORDER No. 95/87 upheld the order of the Original authority. The Revenue thereafter filed appeal before the Tribunal and the Tribunal after taking into consideration allowed the appeal of the Revenue. In pursuance of the order of the Tribunal, the Range Supdt vide his letter dated 10.10.1988 asked the Respondents to reverse the credit of Rs. 72,809.20 in their RG 23A Part II within 10 days of the receipt of his letter and the details of the credit taken on plastic granules which were required to be reversed was given in the said letter as under:RG 23A Pt I Quantity RG 23A Part II AmountNo. & Date No. & date Rs__________ ________ _______________ _________5/18.2.1987 10,000 Kgs 6/18.2.87 40,466.411/1.12.87 5,000" 41/1.12.87 32.342.79 Total 72809.20 2. The Respondents approached the Assistant Collector and appeared to have asked for an appealable order vide their letter dated 26.10.1988 and the Assistant Collector vide his letter dated 21.12.1988 informed the Respondents that the letter of the Superintendent dated 10.10.1988 may be treated as if notice issued under Rule 57-1 of the Central Excise Rules, 1944 and proceeded to issue an appealable order dated 31.3.1989 holding that the Respondents arc required to pay the demand in terms of Rule 57I and they were not entitled to issue of a show cause notice under Section 11A of the Central Excises & Salt Act, 1944 as pleaded. He has also held that the question of issuing a separate show cause notice was redundant as the appeal before the Tribunal was in continuation of the original proceedings dated 18.12.1986. The learned Collector (Appeals) however held that the credit was taken by the Respondent on 18.2.1987 while the demand has been issued vide Supdt's letter dated 10.10.1988 and since this was beyond the period of six months, the demand was hit by limitation.

3. Shri P. Sundararaju, the learned SDR for the Department stated the facts as set out above and submitted that the issue regarding taking of MODVAT Credit was the subject matter of consideration by the Departmental authorities right from December 1986 and the Respondents sought for permission from the Assistant Collector for availing of the MODVAT Credit. He has pleaded that inasmuch as the order of the CEGAT was in continuation of the original proceedings as held by the Hon'ble Supreme Court in the case reported in 1983 ELT 1651, the Department was within its rights to reverse the MODVAT Credit earlier taken, in view of the CEGAT's order in favour of the Revenue as referred to in the facts above. He has pleaded that no show cause notice was required to be issued in the light of the decision of the Tribunal and the only consequences flowing therefrom was the recovery of the credit already taken by the Respondents.

4. Shri Subash Chand, the representative appearing for the Respondents pleaded that the demand was raised for the first lime on 10.10.1986 and it can only be raised'within the limitation period in terms of Rule 57-I. There was no suppression of facts on the part of the Respondents and therefore the demand can be raised only for six months. He has pleaded that the Respondents had been filing RT 12 returns and the same had been finalised by the Department.

5. The short point that falls for consideration is whether a show cause notice was required to be issued for recovery of MODVAT Credit in view of the order of the CEGAT in favour of the Revenue as mentioned above.

We observe that the Respondents initially sought for permission vide their letter dated 1.12.1987 for availing the MODVAT Credit for testing their specified finished product namely Plastic processing machine manufactured by them. The learned Assistant Collector held vide his order dated 18.12.1986 that the Respondents were eligible to avail the MODVAT Credit in terms of Rule 57A in respect of Plastic raw material input and the Respondents took MODVAT Credit as seen from the record from the letter of 18.2.1987 and 1.12.1987. In the meantime the Department filed application under Section 35E(4) before the Collector (Appeals) against the order of the Assistant Collector dated 18.12.1986. The Respondents have also stated that they were filing the RT 12 returns which have been finalised and the fact of their availing the MODVAT Credit was reflected in their RT 12 returns. The Revenue did not file any appeal before the Collector (Appeals) against this RT 12 assessments nor have they raised any demand during this period under Rule 57I. It is seen that the proceedings drawn before the Collector (Appeals) was only in the context of the learned Assistant Collector's findings that the Respondents were eligible for the MODVAT Credit in respect of Plastic raw material as input. The specifics of MODVAT Credit availment were not taken up for decision in the context of recovery of credit already availed of either in the proceedings before the original authority or before the Collector (Appeals). Decision of the Tribunal also was given in the context of the eligibility and it was not specifically mentioned before the Bench that MODVAT Credit already availed of was required to be reversed. In this background, therefore, we hold that the decision taken by the Tribunal was only in regard to the eligibility of the Respondents for the MODVAT Credit and any recovery in respect of the MODVAT Credit already availed of will have to be done in terms of specific rules and following the procedure specified therein. In the present case, the specific Rule for the purpose as provided in the MODVAT Scheme is Rule 57-I. In the instant case, admittedly no show cause notice was issued by the lower authority within time as described in Rule 57-I and the question of invoking the longer period will not arise. In the facts of this case, we hold that show cause notice was required to be issued to the Respondents and it is not understandable as to why the Revenue did not observe either provisional assessment procedure or why they did not issue the show cause notice within time for reversal of the credit in terms of Rule 57-I when they had taken up the matter in appeal before the Collector (Appeals). Not having done that and also not having filed any appeal against the RT 12 assessment the authorities have themselves to blame for not keeping the demand live for proceeding under Rule 57-I. In view of above, we hold that there is no force in the plea of the Revenue. We hold that Collector (Appeals)'s order is maintainable in law. The appeal of the Revenue is dismissed.