ORDER
S.S. Sekhon, Member (T)
1. This is an appeal filed by the Revenue.
2. M/s. Siri Sri Plastics (P) Ltd. the Respondents herein, are manufacturers of co-extruded LDPE films and were alleged to have illegally availed SSI exemption for the years 1991-92, 92-93 as their clearances were found to have exceeded the basic exemption limit of 20 lakhs in the respective years, resulting in short payment of duty of Rs. 4,20,858. On getting registered on 20.10.92, the department examined the past clearances of the assessee and came to the conclusion that the assessee suppressed the value of clearances and enjoyed SSI exemption illegally. On being pointed out, the assessee reversed an amount of Rs. 1,00,000 in R.G. 23A Part-ll SI. No. 7/3.11.92 initially, and other part amounts vide R.G. 23A P-ll 9/8.11.02, 21/13.3.93. Though the assessee paid the entire amount in R.G. 23A AP-ll, it was considered as not valid, as at the material time of clearance, there was no R.G. 23 A and accrual of credit. A show cause notice vide O.R. No. 67/96-Adjn. Dated25.10.1996, proposing recovery of duty and penal action under Rules 173-Q Section 11-AB, 11-AC of Central Excise Rules, 1944 was issued. The assessee pleaded bona fide mistake on their part and payment of duty in R.G. 23-A P-ll and requested to condone the lapse. On adjudication, the learned Commissioner mainly dealt with invoking of proviso to Section 11(A) of Act. He found the department had not adduced any further evidence to the effect of short payment by reasons of fraud, collusion, or willful misstatement. He observed that the department had not objected when the assessee made the payments in R.G. 23 A P-ll, and also approved the R.T.12s finally. The issue of show cause notice in the year 1996, when the incident occurred in 1992 was also felt improper by the Commissioner. Recounting all the above infirmities, the learned Commissioner dropped the proceedings, and even the request of the assessee for refunding impugned amount was favour ably looked upon by him and was disposed with a direction to take it up with appropriate authority.
3. In this appeal, Revenue has taken the grounds
(a) It is admitted, unit was availing SSI exemption during 1991-92, 1992-93 and ought to have filed statutory declaration under Notification No. 13/92 (N.T). claiming exemption from licensing control. Very vital information in these declarations in regard to the value of clearances, and statutory binding ness in the event of exceeding the limits is cast on them, they came up for registration only in October 1992, after reaching 31.0 lakhs value of clearance without any hint of value of clearances for the year 1991 -92. The learned Commissioner’s finding fault with the department for not adducing further evidence is not only inequitable but also misconceived as there was no dispute that the assessee willfully suppressed the value of clearances for 2 years and to that extent the learned Commissioner ought to have held the invoking of proviso justified and proper.
(b) The approval made to R.T. 12 was only summary, in the light of special excise system to SSI unit, the statutory obligation cast upon the assessee to come up for registration at appropriate time and pay duty cannot either be belittled or eroded by such irrelevant insignificant events. Moreover, the assessment/approval of R.T. 12 was a subsequent event which occurred in 1993, whereas the material period covered in this case was up to October 1992.
(c) As for the issue of show cause notice in 1996, when issue relates to October 1992, In fact, it is on record that the date of crossing of exemption limit of 20 lakhs for the year 1991 -92 was 13.1.1992, and the assessee got registered on 20.10.92 by which time six month period had elapsed and invoking of proviso was inevitable, even if a show cause notice was issued in 1992. The show cause notice was issued well within the extended period, provided under proviso to Section 11(A) of Act, after having fulfilled the presence of special circumstances.
(d) Commissioner has failed to give any finding to the assessee having adjusted Central Excise Duty in R.G. 23A P-ll, when the illicit clearances relate to exemption period under Notification No. 175/86. There is no provision under the Modvat Rules for retrospective application, for utilization of Modvat Credit, in respect of the goods which had already been cleared under exemption, as held out by Hon’ble CEGAT in the case of Cochin Silicate and Glass industries v. CCE Cochin .
(e) Since the assessee admitted duty liability during the impugned period, and paid duty in R.G. 23 A P-ll. On the other hand, the assessee put forth the claim of refund at the time of personal hearing, for which the learned Commissioner favour ably commented upon to approach appropriate authority.
(f) It would appear that a lone instance of approval/assessment of R.T. 12 by the Range Officer will be a stumbling block for successful availment and sailing of departmental appeal before CEGAT and there have been no cases or precedents to term such an event as insignificant and may not be taken note of it. But, in overall perspective, the infirmities stated above will be far outweigh to a singular correct finding of Learned Commissioner.
4. We have heard both sides and considered the material and find:
(a) The Central Excise Rules, as regards the clearance by an assessee under Rule 173-F and the assessment to be made by the proper officer under Rule 173-I, were amended only after 1996. The assessments of the RT-12’s under which the payments were made and reported would be RT 12s of November 92 and March 93. The grounds in appeal itself accept that.
Moreover, the assessment/approval of RT 12 was subsequent event occurred in 1993, whereas the material period covered in this case was up to October 1992.
We cannot accept that the assessment in this case under 173-I when made on the RT 12s would be mere formality as is being submitted and urged by Revenue in the grounds. Demands if any, were required to be made as provided for under Rule 173-I after the assessments were finalised. NO evidence has been brought forth that the demand has been made as prescribed by the law. Therefore, we cannot uphold the same. As regards the question of payments of past duty due and subsequent assessment on RT 12’s under 173-I, the present proceedings are clearly barred by limitation under Section 11A. We find circular No. 2/93 C.Ex. 6 dt 15.1.93 (from F. No. 208/41/92-CX.6) of Govt. of India, Ministry of Finance, (Department of Revenue), Central Board of Excise & Customs, New Delhi prescribed as follows as regards past duties payment which are barred by limitation….
…Assessee makes payment of duty voluntarily, even for the period which is otherwise time-barred, the preferable course would be to request him to submit RT-12 Returns for the period and to complete the assessment under Rule 173-I, as provisions of Section 11A cannot be invoked for the time-barred amount.
The department was therefore bound by these instructions issued in 1993, and we find no infirmity in the appellants having resorted to debiting duty in the register being maintained by them and thereafter getting the RT 12 assessed in 1993. Further demands if any, should have been made within six months of this assessment, that has not been made. Therefore, we find no reason to sustain the present notice of demand.
(b) In view of the circular, mentioned in para above. We find no reason to interfere with the assessments arrived at by the proper officer in accepting the payments against the duties determined and as paid by the respondents. Therefore, the Commissioner’s order directing the respondent’s request for refund of the impugned amounts of the duties, to be looked favour ably also cannot be upheld by us, since the assessments for these payments have been made finalised and accepted and there was no protest. Since the assessments have been made as prescribed by the Board’s orders, we find no grounds in this appeal which could be entertained by us as regards the payments made and accepted by the proper officer who has assessed the RT 12.
(c) We find that when the goods have been held to be dutiable, then the Respondents herein was eligible for modvat credit from the date of the goods becoming dutiable. This question is well settled, as the Tribunal in a catena of decisions , , , , , , , have held that if the final end product goods which were exempt/NIL rate of duty, become dutiable subsequently, then the benefit of Modvat credit cannot be denied. Once the Modvat credit is eligible to the appellants, with effect from 1992, the date which, subsequently duty has been assessed; & if the assessee is eligible to MODVAT credit from the date of removal of his goods cleared at NIL rate as dutiable, then from that same date, his Credit Register under Rule 23 A has to be recast. If that is done, then we find no infirmity in the appellants debiting the Modvat credit in the registers of RG 23 A on such assessments made subsequently, Since there is no one to one correlation of inputs and final products under MODVAT Rules. The case law relied upon by the Revenue i.e. Cochin Silicate and Glass Industries has not considered this aspect, therefore, the case is not applicable in this case. It is an admitted position in that case, when duty liability accrued, the MODVAT scheme was not in force, as is seen from para 6 of that decision. In the case before us, it is no body’s case that MODVAT scheme was not applicable to the Respondent’s end products during the years 1991-92, 1992-93 or when duty liability accrued. Therefore, the case law relied upon by Revenue is not applicable.
(d) When we find that the assessments have been made and the duty demands cannot be now questioned and the debits as have been made are in order, since the appellant was eligible for MODVAT credit from the date his goods became dutiable, then there is no case/cause as taken in grounds in the Revenue’s appeal to uphold the same. The appeal made in violation or ignorance of the Board’s instruction cannot be upheld.
5. The Revenue’s appeal is partially allowed only as regards the deleting the Commissioner’s directions regarding favour able consideration of refund.