9911796707
TMI Blog1993 (5) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... ling of Modvat Credit of duty paid on such inputs. It is reported that prior to introduction of Modvat and when such equipments were classifiable under the erstwhile Tariff item 68, they were following the procedure under Rule 56c of the C.Ex Rules (now deleted) by sending the inputs for fabrication outside and getting the fabricated goods back from job workers. During that period, they in their letter dated 22.8.83, addressed to the Range Superintendent of Central Excise intimated that they were having one storage godown in the premises of Anant Machinery (P) Ltd. (herein after referred to as Anant Machinery premises--abbreviated as 'A.M.P.'). This premises have already been sought to be deleted from the bonded area of Anant Machinery Ltd. and this place is strictly for their godown and they are stocking only the bought out items in their premises. 2.2. On an information received by the Department on 22.6.88, the Supdt. and his staff visited the premises 'A.M.P.'. They noticed filters in finished condition lying in the open yard. It is also alleged that the officers noticed manufacturing activities in that premises, for which M/s. Thermax did not possess any L4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.M.P. and by suppressing material facts connected with receipt of inputs in A.M.P. and despatch of goods from that premises deliberately, they had availed Modvat credit to the extent of ₹ 18,89,145 (basic) plus ₹ 8,658.58 (special) which should be recovered in terms of proviso to Rule 57-I of the Central Excise Rules read with Section 11-A of the Central Excise Act, as they had not disclosed these facts with an intention to evading payment of duty. 3. In the adjudication proceedings held by the Collector, Pune, he confirmed the demand for reversal of Modvat Credit and ordered that the same should be recovered from RG 23A Part II to the extent available and the balance to be paid in cash/debit in PLA. A penalty of ₹ 10 lakhs was also imposed on the appellants. The present appeal is against the above order. 4. Heard the elaborate arguments from both the sides and perused the records made available to us in two paper books. 5. The main thrust of the arguments of the Ld. advocate can be summed up as below-- 5.1. The department themselves have accepted that they manufacture parts of pollution control equipment in A.M.P., which is not included in their lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 19.49 lakhs. He referred to the affidavit filed by Shri G.K. Gureja, Director in this regard and pleaded that all these activities have since been shifted to their own premises and the department have no objection to the Modvat being availed now. 5.3 Had their intention been to evade duty, they would have sent the inputs by endorsing the gate passes in favour of job workers and made the job workers pay lower duty, as small scale units and dispatched the fabricated parts direct to the site. By holding themselves out to be manufacturers, they have themselves paid duty at the normal effective rate. Hence in such a circumstance, there cannot be an intention of evading duty of availing Modvat Credit, with a view to paying lower duty. Since their action does not lead to such a conclusion of deceit for defrauding revenue, any omission committed foolishly or unwittingly, in not following the right procedure, should not come in the way of substantive benefit of Modvat credit. 5.4 Had they applied for L4 licence for A.M.P. or had sought for permission for storage of Modvat inputs in A.M.P., they would have got it. Mere omission to do that cannot justify invoking proviso to Rule 57-I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., even then Modvat credit cannot be taken, when they were not even under licensing control in respect of the premises. Their declaration for Modvat purposes is with regard to bringing of inputs for manufacture of these products in Chinchwad factory. There is no valid declaration in respect of inputs to be received for manufacture of final products in A.M.P. It has been laid down by the Bench as also by other Benches that filing of declaration cannot be dispensed with for availing Modvat benefit and where this essential requisite is not complied with, how can they take Modvat Credit without even filing a proper declaration in respect of inputs received in A.M.P.? 6.5. On the question of applying the extended period, he pleaded that the question to be looked into is whether their actions are deliberate or innocent. In this case, they had filed declaration for bringing duty paid inputs only in their Chinchwad Unit, which is a licensed factory. The Dept. was not made aware of the receipt of such inputs in A.M.P. and they have not declared or obtained permission for receipt of Modvat inputs in A.M.P. On the contrary, even in their letter dated 22.8.83 they intimated that A.M.P. hire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MP, and a parallel RG 23A register was maintained in A.M.P. without any authority. These allegations, clearly indicate that the appellants manufactured and cleared the pollution Control equipments from A.M.P., which is an unlicensed premises and they have received Modvat inputs in this hired unlicensed premises (A.M.P.), for which the declaration has not been filed and prior permission not obtained. The Collector in his findings also holds that the process of manufacture was completed at the rented premises in A.M.P. and such finished goods were found in A.M.P. He also held that the appellants are the manufacturer of these goods in the A.M.P. Since not a single process was carried out in Chinchwad factory, the Modvat credit availed of by debiting in RG 23A register maintained at Chinchwad factory is not in order and they have fooled the Dept. by showing as though the goods had entered the Chinchwad factory for further processing. In other words, the Collector has also come to the conclusion that whatever manufacture is required, it is completed only in A.M.P. and neither the inputs nor the finished goods ever entered the Chinchwad factory for further processing and subsequent clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... censed premises and despatched as such or after packing and testing from that premises could be held to be in substantive compliance with the provisions of Modvat scheme. 8.1. This is what we propose to do in the context of the circumstances discussed above. The main thrust of the Department's objection is that inputs were received in AMP (not a licensed premises) and sent to job workers from a premises not approved and finished goods received back and manufacture completed in the A.M.P., but Modvat credit taken and utilised, making a show that the goods have been brought in the licensed Chinchwad factory and cleared therefrom. The following facts are not disputed (i) No inputs other than those declared by the appellants were received in A.M.P. and sent to job workers. (ii) The inputs received at AMP were sent to job workers and fabricated goods were received from job workers in AMP, where manufacture is said to have been completed, as per Collector's findings. (It is however pleaded by Shri Mondal that there is no manufacture or process carried out in A.M.P. over the goods returned by job workers and it is only a commercial activity and hence Modvat is not admissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hinchwad factory, cannot adopt a different standard, when it comes to the question of payment of duty through RG 23A. Shri Mondal, however, contends that this is a case of availment of credit, which is subject to observance of certain discipline and hence has to be treated differently. We have carefully considered this aspect. Modvat scheme is mainly intended to avert cascading effect of input taxation. In the scheme of value added tax even trading activities would be covered. But in Modvat scheme, activities at the manufacturing level are sought to be covered. Here, there is neither an allegation in the S.C.N nor in the findings of the Collector to the effect that the activities of Enviro division are only trading activity and they are not manufacturing the Pollution Control equipments. The Department have treated them as manufacturers and the appellants have also held themselves out to be manufacturers. They have filed a Modvat declaration and as per the declaration, they have received the declared duty-paid inputs and credit has been taken on the same. They are also stated to be maintaining a parallel RG 23-A records in A.M.P. for their own purposes. It is not the case of the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er merely states that the premise would be used strictly for godown purposes for storage of bought out items. (ii) The appellants not only received Modvat inputs in the unlicensed premises (A.M.P.) but also completed manufacture of final product, stored there and cleared the finished goods from such an unlicensed premises. (iii) They had committed the irregularity knowingly inasmuch as Modvat inputs were kept in unlicensed premises from where they were sent to job workers. (iv) The appellants are a major assessee and are not a small unit, who can plead foolishness or lack of knowledge. (v) There was an overt attempt to show that the goods which were manufactured in unlicensed premises, were done in the licensed premises by making gate entries in the Chinchwad factory. 9.2. In the context of the above position, we are to hold that there is a clear contravention of Rules 174, 9 49 of the Central Excise Rules. There is also a procedural violation of Modvat rules. The only saving grace is that goods manufactured in unlicensed premises were cleared on payment of duty from the licensed factory. The plea of the Id. counsel that the appellants have acted foolishly or un ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
