ORDER
C.N.B. Nair, Member (T)
1. The appellant is a manufacturer of parts of steam turbine, electric motors, generators etc. Under the impugned order, differential duty demands of about Rs. 11 lakhs was confirmed. The above demand is on two grounds. One, that the appellant manufactured ‘fin tubes’ and ‘bend tubes’ in the factory and used them for repair of air coolers etc. without payment of duty and the other that raw materials had not been accounted properly. The appellant contests the duty demand under both heads.
2. With regard to the demand in respect of Fin Tubes and Bend Tubes, the appellant has many submissions. The very first is that the demand is time-barred. It is being pointed out that the alleged manufacture was during the period 1994-95 to 1998-99, and no demand was raised within the normal period stipulated in the statute. Instead, the demand was raised on 3-8-99 by issuing of a show cause notice alleging that the appellant had suppressed relevant information from the excise authorities. It is being pointed out that the appellant had intimated the excise authorities about each of the repair work undertaken at the relevant time and repair work was undertaken with the permission of excise. It has further been pointed out that the work order relating to repair work was also being filed along with the request for permission. The Id. Counsel emphasized that since the department had allowed permission to undertake the repair work after being aware of the work orders, it should be accepted that full facts about the repair work was known to the department and if it was of the view that either the repair work or connected activity involved dutiable manufacturer, it should have raised the demand within the normal period. It as also pointed out that the assessee was using modvatted input (pipes) for the purpose of repairing of aforesaid pipes and that concurrent to such use, the Modvat credit taken on those pipes were being reversed in the books of account. This aspect specifically should have alerted excise authorities about the repair activities of the appellant.
3. As against the above submissions on behalf of the assessee, the Id. SDR has submitted that no specific information was given to the excise authorities about the manufacture of fin tubes and bend tubes. The Id. SDR has contended that in the absence of such information, the Revenue authorities had no means of knowing that the manufacture was being carried out by the assessee who was working under self-removal procedure. The Id. SDR has also, in this connection, relied upon the judgment of the Apex Court in the case of Nizam Sugar Factory Ltd. v. Collector of Central Excise and Ors., and the judgment of the Supreme Court in the case of Madras Petro-Chem Ltd. v. Collector of Central Excise, Madras, 1999 (108) E.L.T. 611 (S.C.).
4. We find that material information including the nature of repair activity was known to the department through the work orders. The reversal of credit taken on inputs (pipes) was also being done concurrently. In these circumstances, Revenue’s case that facts were being suppressed with intent to evade payment of duty cannot be upheld. It is also to be noted that there is considerable doubt as to whether the use of pipes and tubes after bending etc. in a process of repair would involve manufacture. Further, the appellant was modifying pipes (bending etc.) for the manufacture of new items. No manufacturing account was being asked for in regard the pipes so converted. In these facts and circumstances, the appellant’s contention that this is not a case involving suppression of facts with intent to evade payment of duty and the Revenue authorities are not entitled to raise the demand during the extended period merits acceptance.
5. The second demand is on the ground that raw materials have not been accounted properly. The Id. Counsel has taken us through the particulars of the dispute and it is seen that the basis for the dispute is that the appellant had carried out revaluation of inputs received under Modvat Scheme and according to such revaluation, the value of the inputs in stock was higher than the value shown in the input register. On this question, the submission of the Id. Counsel is that revaluation of assets and materials by a company has no relevance for the purpose of Cenvat credit, inasmuch as the credit taken is equal to the duty paid by the manufacturer of the inputs and the credit amount is not affected by the subsequent revaluation of the input stock.
6. There is merit in the submission of the appellant whether under Modvat or Cenvat credit scheme, the credit available is equal to the actual duty paid on the input in question. The subsequent revaluation of the input by a manufacturer for various purposes has no effect on the credit available. Revaluation is altogether irrelevant to Cenvat credit. We hold that the demand under this head is also not sustainable.
7. In view what is stated above, we hold that the demands are not sustainable. In the absence of duty demand, penalties and interest are not sustainable. Accordingly, the impugned order is set aside and the appeals are allowed with consequential relief to the appellant.
(Dictated & pronounced in open Court on 27-6-2005)