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TMI Blog1995 (7) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... in the end-[product], viz. tyres, which were cleared on payment of duty. The learned Consultant submitted that Notification 217/86 is mainly intended to avert payment of duty at each intermediate stage and take credit of such duty at stage starting from the basic materials ending with the final product. Such a vertical integration of production line can be in one and the same factory or spread over two or more factories of the same manufacturer. This position is obvious from the plain reading of Notification 217/86. It was urged that by a harmonious construction of Rule 57D and the wording of Notification 217/86 dated 2-4-1986 and also on the basis of the ratio of the ruling of West Regional Bench in the case of Bajaj Tempo Ltd. v. Collector of Central Excise, Pune, reported in 1994 (69) E.L.T. 122 (Tribunal) and also the ruling of the North Regional Bench in the case of M/s. Lupin Laboratories Ltd. v. Collector of Central Excise, Indore reported in 1994 (71) E.L.T. 914, the appellant would become eligible to Modvat credit. 2. Shri Jeyaseelan, the learned D.R. contended that inasmuch as the appellant did not follow Chapter X procedure the appellant would not be eligible to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right from stage one to the final stage. In case of vertically integrated production units the benefit is sought to be conferred by averting payment of duty at each stage and postponing the availment of credit to the final stage of manufacture. This is how the provisions of Rule 57C can be interpreted in the context of Notification 217/86. Therefore Modvat credit is available on the inputs. The view taken by the North Regional Bench is as under : It is well settled by a series of decisions of the Hon ble Supreme Court, various High Courts and the Tribunal that what is relevant is substantial compliance with the provisions of law and as long as a manufacturer has substantially complied with the law, the benefit in accordance with law cannot be denied for non-observance of technical requirement. In the case of Maschmeijer Aromatics reported in 1990 (46) E.L.T. 395, the Tribunal has held that the scheme of Modvat has been introduced with a view to lessen the burden on assessees by allowing credit of duty on inputs and so long as such credit was available and the inputs have actually been used for the declared finished product, benefit of concession should not be denied and to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder per : V.P. Gulati, Member (T)]. - I have carefully gone through the order recorded by my learned Brother and I am not able to agree with him that the matter needs to be remanded for de novo adjudication for consideration of the appellant s plea for benefit of Notification No. 217/86. I observe that the thrust of the learned Consultant s plea before us is that appellants had been ruled out for the benefit of this notification for the simple reason that they had not followed Chapter X procedure. I observe that before the learned lower authority no such plea for benefit under Notification No. 217/86 was taken that the appellants were eligible for the benefit of the Notification No. 217/86 notwithstanding the fact that Chapter X procedure had not been followed by them and that on facts the appellants satisfied the requirements of Chapter X procedure. Before the learned lower authority the only plea taken was that the appellants had made a mistake in having availed of the Modvat credit in respect of the goods in question when the same were exempted from payment of duty and were removed from their factory to another factory. It was the authorities who on check of consignment found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t up, and at the time when the demand was raised and the proceedings were drawn before the learned lower authority they certainly would have consulted their legal officers or a Counsel and obviously took a conscious decision to pay up the amount as demanded by reversal of the Modvat credit. In fact before the learned lower authority they did not even choose to appeal for a personal hearing and all that they pleaded was for a lenient view in view of their having already complied with the demand as issued in the show cause notice. No facts regarding compliance with requirements of Chapter X as such were brought on record nor it is shown before us that in fact they satisfy the requirements of Chapter X. It will be fraught with danger from Revenue s point of view if reliance is placed on records which required contemporaneous verification for the purposes of Chapter X. The Hon ble Supreme Court in the case of Indian Aluminium Co. Ltd. v. Thane Municipal Corporation reported in 1991 (55) E.L.T. 454 (S.C.) have held that the requirement of filing a declaration though procedural if not complied with did not entitle the appellants to the rebate of the concession as regard to payment of oct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority, we hold that learned lower authority s order is maintainable in law. Before parting with the case, we observe that the appellants expunged the Modvat credit on 10-5-1989, although it is recorded in the order of learned lower authority that they did so under protest. Consequent upon a letter addressed to them by the Superintendent dated 19-4-1989, the appellant replied on the very same day informing him that they would be reversing the Modvat credit as pointed out and they would be also expunging the Modvat credit in resect of the inputs used in the dipped tyre cord without payment of duty in future and they finally expunged this credit on 10-5-1989. There was not even a whisper of protest in this letter. Having done so without inviting an order from the authorities, the course open to them was by way of filing application for restoration of this credit within a period of six months and which was not done. There is apparently no provision under the Modvat Rules for reversing the Modvat credit under protest which in this case was not filed and was only endorsed in the RG 23-II register and only course open to them was to file an application for restoration giving reasons for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the requirement of Chapter X procedure from 1986 onwards and also for the reason that no bona fide reasons have been given by the appellants for not claiming the benefit of Notification 217/86 before the lower authority and that on their own volition they came forward to reverse the Modvat Credit and in the light of the rulings of the judgments of the Hon ble Supreme Court, Gujarat High Court and the Tribunal as held by Member (Technical). 9. The learned Vice President held that a plain reading of Notification 217/86 goes to show that in respect of the goods coming within the mischief of description of goods under the said Notification if the same to be used in the final product mentioned therein, the input manufactured in a factory housed within the factory of production or in any other factory of the same manufacturer in or in relation to the manufacture of final product specified in column (3) of the said Notification would stand exempted from the duty of excise but it was also mentioned by the learned Vice President that Chapter X procedure is a condition precedent. The decision of the West Regional Bench in the case of Bajaj Tempo Ltd. v. Collector of Central Excise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t taken in respect of this exempted final product, cleared by them. Thereafter the appellants were given an opportunity of personal hearing which they did not avail of before the adjudicating authority. There was also nothing on record to show that they have complied with the requirements of Chapter X procedure. The learned Consultant stated that there was investigation and after that show cause notice was issued and therefore no fresh facts are required to be gone into to find out the legal plea taken by the appellants. I find that it is no doubt true that legal plea can be taken for the first time in appeal. But in this case the plea taken by the appellants can only be assessed after investigation into the facts. Therefore, in order to appreciate the legal plea which is taken by the appellants investigation into the facts is required. The plea of the learned Consultant that such investigation has already taken place is not substantiated on the available evidence on record. Therefore when the appellants themselves admitted their fault and had already agreed for reversal of the Modvat Credit, the question of taking this plea at this stage does not arise. The appellants have not eve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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