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TMI Blog2004 (3) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... gly availed of; and (vi) Whether the facts and ratio of the case of M/s. Machine Builders and other v. Collector of Central Excise is applicable in the case of the applicants?" 2.Heard learned counsel for the parties, Shri A.P. Mathur for the assessee and Shri S.P. Kesharwani for the department. 3.In the manufacture of M.S. Bars and Rods falling under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985 the assessee is using re-rollable materials of Mild Steel in the manufacture of the final product. The assessee availed the benefit of deemed credit order dated 17-7-1992, but thereafter a show notice was issued by the Central Excise Department seeking to recover the amount of deemed credit on the ground that the re-rollable materials on which credit has been taken was not dearly recognisable as duty paid. 4.The Assistant Commissioner dropped the proceedings but the department reviewed the order under Section 35E(2) of the Central Excise Act, and the Commissioner (Appeals) held that the deemed credit was not available on the ground that Railway Scrap (re-rollable material) was clearly recognisable as non-duty paid. 5.The assessee filed an appeal before the CEG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee that no duty was paid on the unserviceable rail materials. Hence the inputs in question are dearly non-duty paid. The Tribunal has relied on the Larger Bench decision of the Tribunal in the case of M/s. Machine Builders v. Collector of Central Excise, [1996 (83) E.L.T. 576 (T) = 1996 (12) RLT 817]. In that decision it was held in para 17 that the words " non-duty paid" have to be interpreted in the plain and literal sense. They do not require that there must be some duty payable on the goods under the Schedule to the Tariff Act, and that the same has not been paid for some reason. In the opinion of the Tribunal there is no such requirement that some duty must be payable, and the same has not been paid for some reason. If duty has not been paid on the inputs it is a clear case of duty not having been paid irrespective of whether any duty was leviable on the goods or not. 12.The Tribunal was of the view that since it has been admitted by the assessee that no duty has been paid on the unserviceable railway material the assessee is not entitled for deemed Modvat credit. The Tribunal also relied on its earlier decision in the case of M/s. Ravi Steels v. C.C.E, dated 4-2-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, a bill of entry or any other document as may be prescribed by the Central Board of Excise and Customs in this behalf evidencing the payment of duty on such inputs. The second proviso to Rule 57G(2) of the Rules provides that having regard to the period that has elapsed since the duty of excise was imposed on any inputs, the Central Government may direct that w.e.f. a specified date stocks of the said inputs in the country may be deemed to be duty paid. In respect of said inputs Modvat credit may be allowed at such rate and subject to such conditions as the Central Government may direct without production of documents evidencing the payment of duty. The third proviso to Rule 57G(2) further imposes a restriction/responsibility that the manufacturer shall take all reasonable steps to ensure that the inputs acquired by him are goods on which the appropriate duty as indicated in the documents accompanying the goods, has been paid. 14.In exercise of the aforesaid provisions of Rule 57G(2) of the Rules the Central Government has issued order dated 1-3-1994 directing that Modvat credit may be allowed @ 920/- per M.T. without production of documents evidencing the payment of duty. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw material and the hardship that the notification seeks to alleviate does not arise." 17.In para 8 of the impugned order of the CEGAT dated 4-12-1998 a finding of fact has been recorded as follows : "In the present case, it is admitted by the appellant that no duty has been paid on unserviceable rail material". 18.Hence the decision of the Supreme Court in Vivek Re-Rolling Mills v. Collector of Central Excise, 2002 (146) E.L.T. 496 (S.C.) = 2002 (53) RLT 888 relied on by the assessee is distinguishable because in that decision it has been clearly stated (vide para 2) "There is no dispute that the inputs have suffered the duty". 19.Learned counsel for the assessee has heavily relied upon the judgment of a learned Single Judge of this Court in Laxmi Rolling Mills v. CEGAT, 2002 (142) E.L.T. 327 (All) = 2002 (48) RLT 1. In that decision the learned Single Judge considered the notification dated 20-5-1988 issued under Rule 8(1) of the Central Excise Rules, 1944 (now Section 5A of the Act) which exempts goods of the specified description from excise duty if such final products are made from goods of specified description on its excise duty leviable under the Schedule has alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue an order or agree to refund the tax realised by it from people in exercise of its sovereign powers, except when the levy or realisation is contrary to a law validly enacted. A promise or agreement to refund tax which is due under the Act and realised in accordance with law would be fraud on the Constitution and breach of faith of the people." 25.In Upper India Steel Mfg. Engg. Co. Ltd. v. Union of India, 1995 (75) E.L.T. 735 the Punjab and Haryana High Court held that the purpose of Modvat was not to unduly enrich the industry. It was introduced to regulate the procedure for collection and to avoid payment of duty on duty, but it appears to have been turned into a process of collection of duty by the industry. Such could not have been the intention of the Central Government. 26.In Machine Builders v. Collector of Central Excise, 1996 (83) E.L.T. 576 a Larger Bench of the CEGAT held that the facility of deemed credit is available only to inputs which have suffered duty and where it may not be possible to produce documents evidencing payment of duty. Inputs not suffering duty, for whatever reason, are not eligible for deemed credit facility. We fully agree with the view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice was issued by the Superintendent Central Excise under Rule 57(1) of the Central Excise Rules which provides for issuance of notice by a proper officer for recovery of credit wrongly availed of or utilised in an improper manner. The show cause notice was adjudicated upon by the Assistant Commissioner, Central Excise by order dated 27-8-1996 and the Modvat credit was allowed to the assessee. The Department filed appeal before the Commissioner (Appeals) which was allowed on 19-11-1997 and against this order the assessee's appeal was dismissed by the CEGAT. The question of jurisdiction about the show cause notice was not raised by the assessee rather he submitted to this jurisdiction. Hence in our opinion he cannot raise it now in this reference. 32.Moreover, Rule 2(14) of the Central Excise Rules which defines the term "proper officer" clearly includes the Superintendent who issues the show cause notice as he was having territorial jurisdiction with regard to the manufacturing premises of the petitioner. Hence the Superintendent as well as the Assistant Commissioner are both the proper officers. 33.As regards the last question referred we have already observed that we a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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