Paliwal Mini Steel (India) Ltd. Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. this is an appeal against the order dated 5-3-1993 passed by the commissioner of central excise (appeals), new delhi. in this case, the appellants, manufacture stainless steel and other alloy steel. h.r.flats of stainless steel had been declared as one of the inputs in the modvat declaration under rule 57g of central excise rules which they filed with the assistant commissioner of central excise on 20-9-1991 and which was acknowledged on that day. they had, however, received some inputs, prior to the filing of the declaration on 13-9-1991 and they had taken the credit thereon on 14-9-1991. this was detected by the department on checking of their monthly return rt 12 for the month of september 1991 and the additional commissioner, therefore, initiated proceedings by issue of show cause notice on 16-12-1991 for the recovery thereof on the ground that such taking of credit prior to the filing and acknowledgement of the declaration was in violation of rule 57g of central excise rules. the demand for duty of rs. 45,226.50 was confirmed under rule 57-1 of central excise rules by the additional commissioner's adjudication order dated 2-12-1992 and was upheld in appeal by the commissioner (appeals).2. we have heard sh. r. pal singh, ld. consultant for the appellants and sh. jhangir singh, ld. d.r.3. on a careful consideration, it is seen that rule 57h of central excise rules has two limbs, one pertains to such inputs which are lying in stock or are received in the factory after filing the declaration under rule 57g for opting for the modvat credit scheme. the second limbs of the rule pertains to those inputs which are used in the manufacture of final products and which are cleared from the factory on or after the date mentioned in the rule at the relevant time, provided no credit has been taken by the manufacturer under any other rule or notification. the purpose of the rule was to give credit both to inputs which were lying in stock and available for verification, and also those inputs which had already been vised in the manufacture of final products cleared on or after the stipulated date in the rules. in the present case, the fact remains as rightly noted by the additional commissioner, that the appellants had not given any intimation of inputs already received on 13-9-1991 and lying in stock on the date of declaration for the assistant commissioner to take action in respect of them under rule 57h. on the other hand, they had taken credit on 14-9-1991 even before filing the declaration. however, there are certain mitigating circumstances. the claim of the appellants that the h.r. flats received by the appellants had not been issued for manufacture till the date of assistant commissioner's acknowledgement of their declaration is supported by entries in their rg 23a, ft. i register which shows that in sept. 1991, the first issue of input for manufacture was only on 20-9-1991, i.e. on the date of acknowledgement of their declaration. in such a context, there is substance in the appellants' reliance cited before lower authorities. on a trade notice no. 52/91, dated 31-3-1991 of madras central excise collectorate, based on instructions of central board of excise & customs, that if the inputs continued to be available for verification on the date of declaration, modvat credit, thereon, could be allowed. moreover, the receipt of the inputs in this case (h.r. flats purchased from the market) on 13-9-1991 is reasonably proximate to the declaration acknowledged on 20-9-1991. lastly, the circumstances of this case do not also reveal any mala fides on the part of the appellants in the irregularity committed, in not making a formal application under rule 57h in respect of inputs received prior to the date of filing the declaration under rule 57g. therefore, considering that modvat credit scheme is essentially in the nature of a beneficial legislation, and on the peculiar facts and in the circumstances of this case, it is held that the appellants, herein, are eligible for modvat credit of rs. 45,226.50. the appeal is allowed.

Judgment:
1. This is an appeal against the order dated 5-3-1993 passed by the Commissioner of Central Excise (Appeals), New Delhi. In this case, the appellants, manufacture stainless steel and other alloy steel. H.R.Flats of stainless steel had been declared as one of the inputs in the Modvat declaration under Rule 57G of Central Excise Rules which they filed with the Assistant Commissioner of Central Excise on 20-9-1991 and which was acknowledged on that day. They had, however, received some inputs, prior to the filing of the declaration on 13-9-1991 and they had taken the credit thereon on 14-9-1991. This was detected by the department on checking of their monthly return RT 12 for the month of September 1991 and the Additional Commissioner, therefore, initiated proceedings by issue of Show Cause Notice on 16-12-1991 for the recovery thereof on the ground that such taking of credit prior to the filing and acknowledgement of the declaration was in violation of Rule 57G of Central Excise Rules. The demand for duty of Rs. 45,226.50 was confirmed under Rule 57-1 of Central Excise Rules by the Additional Commissioner's adjudication order dated 2-12-1992 and was upheld in appeal by the Commissioner (Appeals).

2. We have heard Sh. R. Pal Singh, ld. Consultant for the appellants and Sh. Jhangir Singh, ld. D.R.3. On a careful consideration, it is seen that Rule 57H of Central Excise Rules has two limbs, one pertains to such inputs which are lying in stock or are received in the factory after filing the declaration under Rule 57G for opting for the Modvat credit scheme. The second limbs of the Rule pertains to those inputs which are used in the manufacture of final products and which are cleared from the factory on or after the date mentioned in the Rule at the relevant time, provided no credit has been taken by the manufacturer under any other Rule or notification. The purpose of the Rule was to give credit both to inputs which were lying in stock and available for verification, and also those inputs which had already been vised in the manufacture of final products cleared on or after the stipulated date in the Rules. In the present case, the fact remains as rightly noted by the Additional Commissioner, that the appellants had not given any intimation of inputs already received on 13-9-1991 and lying in stock on the date of declaration for the Assistant Commissioner to take action in respect of them under Rule 57H. On the other hand, they had taken credit on 14-9-1991 even before filing the declaration. However, there are certain mitigating circumstances. The claim of the appellants that the H.R. Flats received by the appellants had not been issued for manufacture till the date of Assistant Commissioner's acknowledgement of their declaration is supported by entries in their RG 23A, Ft. I register which shows that in Sept. 1991, the first issue of input for manufacture was only on 20-9-1991, i.e. on the date of acknowledgement of their declaration. In such a context, there is substance in the appellants' reliance cited before lower authorities. On a Trade Notice No. 52/91, dated 31-3-1991 of Madras Central Excise Collectorate, based on instructions of Central Board of Excise & Customs, that if the inputs continued to be available for verification on the date of declaration, Modvat credit, thereon, could be allowed. Moreover, the receipt of the inputs in this case (H.R. Flats purchased from the market) on 13-9-1991 is reasonably proximate to the declaration acknowledged on 20-9-1991. Lastly, the circumstances of this case do not also reveal any mala fides on the part of the appellants in the irregularity committed, in not making a formal application under Rule 57H in respect of inputs received prior to the date of filing the declaration under Rule 57G. Therefore, considering that Modvat credit scheme is essentially in the nature of a beneficial legislation, and on the peculiar facts and in the circumstances of this case, it is held that the appellants, herein, are eligible for Modvat credit of Rs. 45,226.50. The appeal is allowed.