1994 (3) TMI 218 - AT - Central Excise

Summary

Issues Involved:

1. Violation of Rule 57F(2) of the Central Excise Rules.
2. Availment of Modvat credit on Hydrated Lime.
3. Applicability of the extended period of limitation under Section 11A read with Rule 57-I.
4. Imposition of penalty under Rule 173Q(bb) of the Central Excise Rules, 1944.

Detailed Analysis:

1. Violation of Rule 57F(2) of the Central Excise Rules:

The primary issue was whether the appellant violated Rule 57F(2) by directly supplying raw materials to job workers without first bringing them to their factory. The appellant had applied for permission to remove raw materials directly to job workers' premises, which was granted by the Assistant Collector on 26-7-1989. The Tribunal noted that Rule 57F(2) allows a manufacturer to remove inputs to a place outside the factory for manufacturing intermediate products, provided permission is obtained from the authorities. Since the appellant had secured such permission, the Tribunal concluded that there was no violation of Rule 57F(2). Hence, the Modvat credit could not be reversed on this ground.

2. Availment of Modvat credit on Hydrated Lime:

The appellant had filed a revised Modvat Declaration on 12-10-1989, stating that Hydrated Lime was used as an input. Although the Department acknowledged this declaration on 6-11-1989, the Tribunal held that the declaration date was 12-10-1989. Therefore, the credit availed was valid, and the order reversing the Modvat credit on this count could not be sustained.

3. Applicability of the extended period of limitation under Section 11A read with Rule 57-I:

The show cause notice was issued on 19-8-1991 for the period from May 1989 to October 1990. The Tribunal found no suppression of material facts by the appellant. The appellant had clearly stated in their application that the inputs were sent directly to the job worker and that waste with no commercial value was not returned. The Assistant Collector had approved this procedure. Since all material facts were disclosed and permission was obtained, there was no suppression, and thus, the extended period of limitation was not applicable. Consequently, the demand was barred by limitation.

4. Imposition of penalty under Rule 173Q(bb) of the Central Excise Rules, 1944:

The Adjudicating Officer had imposed a penalty of Rs. 10,000, considering the breach as a procedural aspect of the Modvat Scheme. However, the Tribunal noted that the procedural condition could be condoned if it did not facilitate fraud or administrative inconvenience. Since there was no fraud or inconvenience, and the appellant had obtained necessary approvals, the imposition of penalty was not justified. The Tribunal set aside the demand of duty and the penalty, allowing the appeal.

Conclusion:

The Tribunal concluded that there was no violation of Rule 57F(2) as the appellant had obtained necessary permission. The Modvat credit on Hydrated Lime was validly availed, and there was no suppression of facts to invoke the extended period of limitation. The procedural breach did not justify the imposition of penalty. Consequently, the appeal was allowed, and the demand of duty and penalty were set aside.