ORDER
Archana Wadhwa, Member (J)
1. After dispensing with the condition of pre-deposit of the duty amount in question, we take up the appeal itself with the consent of both sides.
2. The appellants are engaged in the manufacture of the alloy as well as non-alloy steel ingots in their Induction Furnace. The commercial production was started with effect from 1-1-98. Intimation to that effect was given by the appellants vide their letter dated 30-12-97, wherein they clarified that they would be manufacturing 70% of the non-alloy steel ingots and 30% of the alloy steel ingots. The Revenue Authority was also informed subsequently, vide letter dated 21-1-98, that they would be primarily manufacturing alloy steel ingots and incidentally, they would also be manufacturing non-alloy steel ingots.
3. In response to the above letters, the appellants received a letter dated 20-3-98 intimating that the Commissioner of Central Excise, Kolkata-II was pleased to grant them permission with a view to eliminating inconvenience in practical operation and to safeguard Government Revenue, permitted them to continue under Section 3 of the Central Excise Act, 1944 in respect of all the products intended to be cleared on payment of duty. Accordingly, in terms of the said letter, the appellants cleared their product on payment of duty on ad valoram basis and in terms of the provisions of Section 3 of the Central Excise Act during the period relevant for the purposes of the present appeal i.e. for the period from 1-1-98 to 15-5-98.
4. Subsequently, with effect from 16-5-99, the appellants opted for payment of duty in terms of the provisions of Rule 96ZO(3) in respect of the non-alloy steel ingots being manufactured by them. And during the period from 16-5-99 to 31-3-2000, they discharged their duty liability in terms of Rule 96ZO(3) of Central Excise Rules, 1944, and there is no dispute about the said period in question.
5. The appellants were, vide Commissioner’s letter dated 12-10-99 informed that inasmuch as the revenue performance was not satisfactory during the period from January, 1998 to 15-5-99, it has been decided that the appellants should pay duty under Rule 96ZO(1) of the Central Excise Rules, 1944 for the above period also. Accordingly, for the period from January, 1998 to 15-5-99 for which the appellants had cleared their goods on payment of duty on ad valoram basis, an additional duty of Rs. 89,80,845.00 (Rupees eighty-nine lakhs eighty thousand eight hundred and forty-five) was directed to be paid. The impugned Order has been passed by the Commissioner confirming the said amount of duty along with confirmation of interest.
6. The appellants’ grievance during the course of adjudication before the Commissioner as also before us, is that the Revenue having themselves permitted the appellants to operate under the provisions of Section 3 of the Central Excise Act, 1944, cannot now demand the duty under the provisions of Rule 96ZO(3) for the past period. We find that the Commissioner admits in his impugned Order that such permission was granted to the appellants and they have discharged their duty liability, but states that since their revenue performance was not satisfactory inasmuch as they have paid duty out of the Modvat credit amount during the relevant period, the subsequent direction to pay duty as per Section 3A and calculation of the duty-demand as per Rule 96ZO(3) was in accordance with law. He has also observed that as per the Induction Furnace Annual Capacity Determination Rules, 1997, the assessee who manufactures incidentally the non-alloy steel but ordinarily manufactures alloy steel ingots/castings will have to work under this Rule and hence the demand of duty raised as per Rule 96ZO(3) of Central Excise Rules, 1944 is correct and consistent with the provisions of the Rule supra. Accordingly, he has confirmed the demand and has also ordered that the Modvat credit availed by the appellants during the period from 1-1-98 to 15-5-99 is irregular and has been disallowed.
7. On the other hand, the appellants’ grievance is that they were working under Section 3 in terms of the permission granted by the Commissioner himself. As such, it is not open to the Commissioner to hold that such permission was not correct after a period of more than one year, the Department cannot reverse the same and ask the appellants to pay the duty. In any cases submits the learned Consultant that they were manufacturing alloy steel, but were manufacturing non-alloy steel ingots only incidentally, in which case the Induction Furnace Annual Capacity Determination Rules, 1997 do not apply. Reliance has been placed on the earlier Order of the Tribunal in the case of Commissioner of Central Excise, Kolkata-IV v. Hooghly Ispat Ltd. vide Tribunal’s Order Nos. A-116-117/KOL/2002, dated 22-1-2002, wherein the appeal filed by the Commissioner against the Orders of the Commissioner (Appeals), was rejected after observing as follows :-
“2. Inasmuch as the Commissioner vide his Order dated 25-3-99 allowed the respondents to work under the provisions of Section 3 with effect from 1998 and the respondents had discharged the duty burden under the said provisions after availing the Modvat credit, I find no infirmity in the Orders passed by the Commissioner (Appeals)…”
8. After considering the submissions made from both sides, we find that the Commissioner, while dealing with the appellants’ contention that they had discharged the duty burden in accordance with Section 3 of the Act and in accordance with a permission granted by the Commissioner himself, has observed as follows :-
“………However, the Department passed an order to the said assessee to work under Section 3 of Central Excise Act on the basis of the assessee’s application subject to the condition that after one year the revenue performance would be reviewed and further order would follow as the Department was in a hurry at that time to dispose of the assessee’s representation without causing any hindrance to their normal functioning and to safeguard Government revenue.”
9. We find no justification in the above reasoning of the adjudicating authority. Admittedly, vide the letter dated 20-3-98, the Additional Commissioner has intimated the Commissioner’s decision to the appellants stating that they were permitted to work under Section 3 of the Central Excise Rules, 1944. For better appreciation, we reproduce the said letter as follows :-
“Please refer to your letter reference GEL:033:036:97-98, dated 21-1-98 on the above subject.
In response to the above request, the Commissioner of Central Excise, Calcutta-II has been pleased to grant you permission, with a view to eliminate the inconvenience in practical operation and to safeguard Government Revenue, permit you to continue under Section 3 of the Central Excise Rules, 1944 in respect of all the products intended to be cleared on payment of duty. This concession will be reviewed at the end of each financial year on the basis of revenue performance.”
In accordance with the above letter, the appellants discharged their duty liability in terms of the provisions of Section 3 of the Central Excise Rules, 1944, which permit them to avail the Modvat credit. After a period of one year, the Revenue cannot be expected to take a reverse stand and to take a view that such a permission was granted in a hurry to demand duty under the provisions of Section 3A for the period in question. We also note that the assessments were not provisional during the period in question and as such, the raising of demand of duty after a period of one year and that too, without issuance of any show cause notice, is not justified at all.
10. As such, the Commissioner having himself permitted the appellants to work under the provisions of Section 3, cannot review his own permission. It is on record that such permission granted vide latter dated 20-3-98, has not been appealed against by the Revenue and as such, has attained finality. In these circumstances, we are of the view that the demand of duty against the appellants or the direction to reverse the Modvat credit and imposition of interest upon them, is not justified. Accordingly, we set aside the impugned order and allow the appeal with consequential reliefs to the appellants.