ORDER
P.G. Chacko, Member (J)
1. The appellants are engaged in the manufacture of excisable goods. During the material period (Jan. to June, 1997), they were availing the facility of Modvat credit on inputs under Rule 57A of the Central Excise Rules, 1944 after filing the necessary declaration under Rule 57G of the said Rules. During the said period, they removed inputs (after taking Modvat credit of the duty paid thereon) from their factory to job worker’s premises under Rule 57F(4) for further processing and return. While doing so, in some instances, they debited an amount equal to the Modvat credit taken, under Sub-rule (6) of Rule 57F. When, in such cases, the processed inputs were returned by the job worker and received by the appellants in their factory for the manufacture of final product, the appellants took recredit of the entire amount which was debited at the time of dispatch of the inputs to job worker. The original authority found that excess credit of an amount of Rs. 17,438/- was so taken by the appellants in excess of 10% of the value of the goods permitted under Sub-rule (7) read with Sub-rule (6) of Rule 57F. It disallowed the excess credit. In some other instances, the processed inputs returned by the job worker were received in the appellant’s factory beyond the period of 60 days prescribed under Sub-rule (11). The entire credit of duty of Rs. 32,364/- taken by the appellants on such inputs was disallowed by the original authority on the ground that the legal requirement of return of the goods within the prescribed time limit of 60 days had not been fulfilled. The original authority also disallowed a credit of Rs. 4,044/- on the ground that no corresponding debit had been made by the appellants on expiry of the above period of 60 days. The authority also disallowed a credit of Rs. 650/-on the ground that the appellants had, while removing the inputs under Sub-rule (4) to the job worker, debited an amount which was less by Rs. 650/-than 10% of the value of the goods. Aggrieved by the decision of the original authority, the appellants preferred appeal to the Commissioner (Appeals). But that appeal was unsuccessful. Hence the present appeal.
2. The appellants have requested for a decision on merits by dispensing with personal hearing. They have, however, reiterated the main grounds of the appeal in their written submissions filed on 25-11-2002. In respect of the credit of Rs. 17,438/-, they have submitted that such credit was taken correctly in terms of Sub-rule (7) of Rule 57F in as much as whatever amount was debited under Sub-rule (6) was recredited under Sub-rule (7). The appellants have relied on the Tribunal’s decision in CCE v. SAIL [2001 (137) E.L.T. 457 (T) = 2000 (40) RLT 1064]. In respect of the credit of Rs. 32,364/-, the appellants have contended that it was not permissible to disallow the credit on the ground of the procedural lapse of the processed inputs being received in the appellants’ factory beyond the period of 60 days. In this connection, they have relied on the decision of the Tribunal in Arunachal Plywood Industries Ltd. v. CCE [1992 (62) E.L.T. 830]. They have also relied on the decision in U.P. Twiga Fibre Glass Ltd. v. CCE [1999 (32) RLT 721]. In respect of the credits of Rs. 4,044/- and Rs. 650/-, the appellants have claimed that these amounts are part of the above amount of Rs. 32,364/-. They have also challenged the penalty of Rs. 10,000/- imposed by the original authority and sustained by the lower appellate authority.
3. Ld. DR has endeavoured to justify the orders of the authorities below.
4. I have carefully examined the grounds of the appeal as well as the written submissions dated 25-11-2002. I have also considered the submissions of ld. DR. The show-cause notice had, inter alia, proposed to deny a total credit of Rs. 25,531/- on the ground that such credit was in excess of the limit of 10% of the value of the goods prescribed under Sub-rule (6) of Rule 57F. Going by the pleadings contained in this appeal, I observe, the appellants are under the impression that the entire credit of Rs. 25.531/- was disallowed by the lower authorities. It appears from the orders of the lower authorities that the credit of duty denied to the appellants on the above ground is to the extent of only Rs. 17,438/-. Insofar as this credit Rs. 17,438/- is concerned, the appellants have contended that they had taken the credit only in terms of Sub-rule (7). The lower authorities have disallowed Modvat credit of Rs. 32,364/- to the appellants on the ground that such credit was taken in respect of inputs (processed) received back in their factory from their job worker beyond the prescribed time limit of 60 days. In this connection, the appellants have contended that, as the Rule permitted extension of the time limit, it was not legal to deny the Modvat credit on the ground of procedural lapse. The time limit of 60 days was prescribed under Sub-rule (11). In any case, it appears from the contentions of the party that it is necessary to look at the relevant provisions of Rule 57F as the Rule stood at the material time. Sub-rules (6) to (11) are the relevant provisions and same are extracted below :-
(6) (i) Where a manufacturer removes the inputs as such or in the partially processed form to a place outside his factory for the purposes specified in Sub-rule (4), the manufacturer shall do so only after debiting an amount equal to ten percent of the value of such inputs or, as the case may be, the partially processed inputs declared by him on the challan under which such inputs or partially processed inputs are cleared from his factory.
(ii) The debit shall be made in the account maintained under Sub-rule (7) of rule 57G or the account-current maintained under rule 9 or Sub-rule (1) of rule 173G.
(7) Notwithstanding anything contained in rule 57A, the manufacturer shall be eligible to take credit of an amount equal to the amount debited by him under Sub-rule (6) when the inputs or partially processed inputs, as the case may be, are received back in full in his factory, in the account maintained under Sub-rule (7) of rule 57G.
(8) A manufacturer shall take credit under Sub-rule (7) only after the entire quantity of the inputs or the partially processed inputs, as the case may be, but excluding the waste, if any, arising in the course of operation outside the factory of the manufacturer, or otherwise, is received back in his factory.
(9) A manufacturer shall not take credit under Sub-rule (7) unless the inputs or the partially processed inputs are received back in his factory under the cover of the duplicate copy of the challan on which such inputs or partially processed inputs were removed from his factory.
(10) If the Assistant Commissioner of Central Excise is satisfied that the duplicate copy of the challan has been lost in transit, he may allow a manufacturer of final products to take credit under Sub-rule (7) on the basis of the triplicate copy of the challan.
(11) If the inputs or partially processed inputs are not received back in the factory of the manufacturer of final products within a period of sixty days or the extended period, as may be, allowed by the Assistant Commissioner of Central Excise, the manufacturer shall recalculate the amount of actual credit attributable to such inputs or on inputs contained in the partially processed inputs and thereafter he shall adjust the differential amount, if any, after taking into account the amount already debited while sending the inputs or partially processed inputs from his factory.
5. There is no dispute with regard to the removal of the inputs by the appellants to their job workers in terms of Sub-rule (4) of Rule 57F for the purpose of certain processing. Sub-rule (4) contemplated return of the processed inputs by the job worker within a period of 60 days or such extended period as the Asstt. Commissioner of Central Excise might allow in that behalf, for further use in the manufacture of the final product. Sub-rule (6) required that, while removing the inputs to his job worker, the manufacturer should debit an amount equal to 10% of the value of the goods. What the appellants did in some instances was that, instead of debiting 10% of the value, they debited the entire amount of duty paid on the inputs, which amount was in excess of the limit of 10% of the value. When the processed inputs were returned by the job worker to the appellants, the latter took credit, under Sub-rule (7), of what had been debited by them under Sub-rule (6). The contention of the Revenue is that the credits so taken exceeded the prescribed limit by an amount of Rs. 17,438/-. The Revenue has, however, no case that the credit had been taken in excess of the limit prescribed under Sub-rule (7), whereunder the appellants were entitled to take credit of an amount equal to the amount debited by them under Sub-rule (6). The Revenue also has no case that the processed inputs were not received within the prescribed period of 60 days in the appellant’s factory, nor do they have a case that the processed inputs were not utilized in the manufacture of final product in the appellants’ factory. The credit taken was, admittedly, of the same amount as that of the duty paid on the original inputs by the input-manufacturer. In such circumstances, the denial of the credit of Rs. 17,438/- on a ground based on Sub-rule (6) is not justifiable. If the appellants debited any amount in excess of the prescribed limit of 10% under Sub-rule (6) at the time of removal of inputs to job worker, that was only a minor technical defect which was not in any way detrimental to the interests of the Revenue. Had the debit been short of the prescribed limit of 10% of value of the inputs, then only it would have affected the Revenue. That is not the case here. I, therefore, hold that the credit of Rs. 17,438/- taken by the appellants cannot be denied to them.
6. Insofar as the credit of Rs. 32,364/- is concerned, the position is altogether different. Sub-rule (11) read with Sub-rule (4) provided that the inputs received from a manufacturer under Sub-rule (4) should be processed and returned by the job worker within a period of 60 days or such extended period as might be allowed by the Asstt. Comissioner of Central Excise. These rules pre-supposed that the manufacturer of final product should apply for the Asstt. Commissioner’s permission for receiving the processed inputs beyond a period of 60 days. Apparently, the period was not extended by the jurisdictional Asstt. Commissioner, in the instant case, for want of application in that behalf. In other words, the receipt of the processed inputs beyond the period of 60 days in the factory of the appellants was itself unauthorized. It would follow that any credit taken on such inputs by the appellants cannot be considered to have been regularly taken. In my view, authorities below correctly disallowed the credit of Rs. 32,364/- to the appellants.
7. In respect of the credits of Rs. 4,044/- and Rs. 650/- disallowed by the lower authorities, the appellants have a case that these amounts formed a part of the above credits already disallowed to them. Ld. DR has not been able to counter this case successfully. In the circumstances, I am of view that the original authority should look into this aspect of the case. Accordingly, the orders of the authorities below in relation to denial of the credits of Rs. 4,0447- and Rs. 650/- will be set aside.
8. In the result, the impugned order will stand set aside in relation to the Modvat credits of Rs. 17,438/- Rs. 4044/- and Rs. 650/-. The order is uphold in relation to the remaining credit. The original authority is directed to carefully examine the question whether the credits of Rs. 4,044/- and Rs. 650/- formed a part of any of the other credits in question. If they are not, the original authority shall decide afresh on the question whether the credits of Rs. 4,044/- and Rs. 650/- are admissible. A reasonable opportunity of being heard on this limited question shall be given to the party. The appeal stands disposed of in these terms.