1993 (5) TMI 105 - AT - Central Excise

Issues Involved:

1. Whether the Assistant Collector of Central Excise had passed an order permitting the appellants to avail of Modvat Credit on crucibles on 14-5-1987.
2. Whether crucibles are used in relation to the manufacture of Ultramarine Blue.
3. Whether crucibles can be termed as equipment, apparatus, or appliances and thus excluded from Modvat Credit under Rule 57(A) of the Central Excise Rules, 1944.
4. Whether the demand notice was issued within the permissible time limit.

Issue-wise Detailed Analysis:

1. Whether an order was passed by the Assistant Collector of Central Excise permitting the appellants to avail of Modvat Credit on crucibles on 14-5-1987:

The appellants argued that the Assistant Collector had granted permission to avail Modvat Credit on crucibles via a letter dated 14-5-1987. However, the tribunal found that the letter merely acknowledged the appellant's declaration and stated that Modvat Credit may be availed as admissible under the rules, without specifically permitting credit on crucibles. Thus, it was concluded that no specific order was passed by the Assistant Collector allowing Modvat Credit on crucibles, and the question of reviewing such an order did not arise.

2. Whether crucibles are used in relation to the manufacture of Ultramarine Blue:

The Additional Collector admitted that crucibles are used in the manufacture of Ultramarine Blue. The tribunal noted that the department did not dispute this fact. Therefore, it was established that crucibles are indeed used in relation to the manufacture of Ultramarine Blue.

3. Whether crucibles can be termed as equipment, apparatus, or appliances and thus excluded from Modvat Credit under Rule 57(A) of the Central Excise Rules, 1944:

The tribunal examined whether crucibles could be classified as equipment, apparatus, or appliances. The show cause notice and the adjudication order suggested that crucibles are used as equipment or apparatus. However, the appellants contended that crucibles are consumables used in the manufacturing process and not equipment or apparatus. The tribunal referred to various decisions and concluded that crucibles, which get consumed in the manufacturing process, cannot be termed as apparatus, equipment, or appliances. Therefore, they should not be excluded from Modvat Credit.

4. Whether the demand notice was issued within the permissible time limit:

The appellants argued that the demand notice was time-barred. The tribunal noted that the appellants had informed the Assistant Collector about their intention to use Modvat Credit on crucibles, and the Assistant Collector's non-committal reply did not constitute a refusal. Given that the appellants acted with the knowledge and approval of the Assistant Collector, the tribunal found that the demand notice issued on 2-2-1989 was beyond the permissible time limit. The tribunal relied on various High Court decisions to conclude that the notice was time-barred, and thus, the demand failed on this ground.

Conclusion:

The tribunal set aside the impugned order demanding duty and imposing a penalty on the appellants. The appeal was allowed, and the appellants were granted consequential reliefs. The decision was based on the findings that no specific order was passed permitting Modvat Credit on crucibles, crucibles are used in the manufacture of Ultramarine Blue, crucibles cannot be classified as equipment or apparatus, and the demand notice was time-barred.

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