ORDER
C.N.B. Nair, Member (T)
1. The dispute in the present appeal relates to availability of Modvat credit (capital goods) on two ‘Die Casting Machines’ installed by the appellants in their factory. The credit of about Rs. 13 lakhs has been denied and penalty of equal amount imposed on the appellants. The denial of credit is on two grounds. The first ground is that the machines in question were used in the manufacture of final product which is exempted from duty of excise leviable thereon. The second ground is that declaration under Rule 57T was not filed within the stipulated time in respect of one of the machines.
2. The appellants contest the findings both on merits as well as on the ground of limitation. It has been pointed out that the machines were used for manufacture of castings and the castings were not exempted. Instead, they were sent without payment of duty for further manufacture as permitted under Rule 57F(3). The appellants contend that clearances without payment of duty under Rule 57F(3) is not a case of exemption from duty. A further contention of the appellants is that the machines in question had also been used for the manufacture of castings which they had cleared on payment of duty. In support of this contention, the appellants have filed invoice-wise statement in respect of the clearances (on payment of duty) made from February, 1996 onwards. It is the appellants’ contention that even if the goods cleared under Rule 57F(3) are treated as manufacture of exempted goods, in view of payment of duty on other goods, the Modvat credit would be available to the assessee. It is pointed out that under Rule 57R(1), the prohibition against allowing of credit is in respect of ‘capital goods’ used ‘exclusively’ for production of exempted goods and not to capital goods partly used for production of exempted goods and partly used for production of dutiable goods. In regard to the denial of credit on the ground of delay in filing of declaration, it has been pointed out that delay up to three months was within the competence of jurisdictional Assistant Commissioner to condone and condonation had been allowed by the said Assistant Commissioner. The impugned order held to the contrary merely because the use of the machine (18-11-95) has been entered in the production record during the period prior to date of receipt of the machine in the appellants’ factory. The appellants point out that the machine was purchased from H.M.T. Bangalore under Invoice No. 71, dated 21-10-95 and same was received in the factory on 29-11-95. Rule 57T declaration was filed on 27-2-1996. The delay in filing the declaration was condoned by the Assistant Commissioner under his Order dated 15-3-1996. It is the appellants’ submission that the declaration was filed within the permissible time-limit of three months and this is borne out by the ‘Goods Receipt Note’ in the appellants’ records. It is pointed out that the Goods Receipt Note indicated full details about the receipt of the machine in question. Therefore, it is contended that the mere fact that this machine is one of the machines against which production is reported on 18-11-95 cannot be the basis for holding that the machine had been received earlier than 29-11-1995. It is their submission that there is no evidence corroborating the production reports and the entry could as well be a case of error. The appellants have also pointed out that this Tribunal has held in the case of J.M.B. Tools Ltd. v. Commissioner of Central Excise, Pune – Order Nos. C-I/2501-07/WZB/2001, dated 23-8-2001 [2002 (144) E.L.T. 561 (T)] that credit cannot be denied on the ground of failure to file declaration.
3. The learned SDR has submitted that credit was available only in conformity with the rules covering the taking of credit and since the production report has shown production against the machine in question on 18-11-95 it was clear that it was in use on 18-11-1995. Thus, the appellants’ request for condonation of delay in making the declaration was clearly beyond the time permitted under the rules. This also shows that condonation was obtained by misdeclaring the date of receipt of machine.
4. On the allegation of use of the capital goods for manufacture of exempted goods, we find that the bar on credit operated only in cases where the machine was “exclusively” used for the manufacture of exempted goods. In the present case, it is seen that the machines were not merely used for production of goods cleared under Rule 57F(3), they were also used for the manufacture of goods which were cleared on payment of duty. It is in the nature of capital goods that during their long period of use, they may, for part of the time, be used in the production of exempted goods, let alone goods cleared under Rule 67F(3) procedure. Such partial use in the manufacture of exempted goods is no bar under Rule 57R. This is clear from a mere perusal of the Rule. The order is, therefore, clearly in error in holding that credit was not permissible in respect of the two machines on the ground of use in the production of exempted goods. On the question of delay in making the declaration under Rule 57G, it is seen that the appellants’ declaration about the date of receipt of the machine (29-11-95) is supported by the Goods Receipt Note. That note gave full particulars including particulars of carrier etc. This Goods Receipt Note or its contents had not been proved to be false in the proceedings which culminated in the impugned order. The only evidence for holding the date of receipt to be prior to 29-11-95 is that production is mentioned against this machine prior to 29-11-95. Thus, there is conflicting evidence on the issue. The Assistant Commissioner had allowed condonation of delay in March, 1996 itself and the credit had been taken based on that condonation. The present order has been passed without taking into account the Goods Receipt Note. We are of the opinion that the finding in the impugned order is not sustainable since it has been passed without considering the Goods Receipt Note, even apart from the decision of this Tribunal that credit cannot be denied on the ground of failure to make declaration.
5. In view of the above, the appeal is allowed with consequential relief to the appellants.