K.K. Bhatia, Member (T)
1. This appeal relates to the admissibility of the Modvat credit in terms of the deemed credit order dated 7-7-1992. The appellants submitted claim under Rule 57H where they claimed credit of duty amounting to Rs. 4,14,716/- on the inputs viz. old scrap of railway material, M.S. Ingots and other M.S. Scrap. Such inputs had either been purchased from the open market or from the Railways. The Assistant Commissioner of Customs Excise, Lucknow vide his order dated 29-3-1996 allowed this credit. The department filed an appeal against the above order and Commissioner (Appeals), Allahabad vide his order dated 27-11-1997 allowed the appeal of the department to the extent of Rs. 81,926/-. The party is in appeal against the above order of Commissioner (Appeals). I have heard Shri Gopal Prasad, Advocate for the appellants and Shri Ashok Kumar, JDR for the respondents. At the outset it may be stated that the appellants in the Form EA-3 of appeal have stated that the amount of duty involved in the appeal is Rs. 4,14,716/- but it is observed that though the department had filed an appeal before Commissioner (Appeals) for this amount but the lower appellate authority has allowed the appeal of the department only for the amount of Rs. 81,926/- and rejected the appeal for the balance of the amount. Therefore, the amount for the purpose of present appeal is only Rs. 81,926/-.
2. The Commissioner (Appeals) in his order has observed that the main issue before him is whether M.S. Scrap purchased from the railways in auctions and from the open market are recognisable as duty paid or not. He has observed that the inputs in question auctioned by railways did not come into existence as a result of any manufacturing activity, but they have taken the form of scrap and broken parts as the result of prolonged use of railway parts and have become unusable by railways. Thus clearly, no duty is chargeable on those items, when they are auctioned by the railways. The purchase bills/ invoices of scrap from railways in auction do not indicate the rate and amount of duty paid on the scrap inputs at the time of clearance/sale by railways. The Commissioner (Appeals) in his order also repulsed the contention of the party that the Board’s Order No. TS/36/94-TRU, dated 1-3-1994 and Allahabad Collectorate Trade Notice No. 32/92, dated 13-7-1992 which allowed deemed credit on the re-rollable materials did not lay down conditions to the effect that the inputs should be clearly recognisable as duty paid by observing that these orders only determined the rate at which the duty may be deemed to have been paid and the same had been issued under the second proviso to Rule 57G(2) which prescribes the condition that the deemed credit may be allowed in respect of all stocks of inputs except such stocks which are clearly recognisable as non-duty paid. Shri Gopal Prasad, ld. Advocate for the appellants has on the contrary relied on the Final Order Nos. A/765-766/98-NB, dated 10-7-1998 1999 (107) E.L.T. 437 (T) in Ravi Steels v. CCE, Allahabad a copy of which is also filed. In this order passed by ld. Single Member of the CEGAT/f. agreeing with an earlier decision of the Tribunal in Pareek Ferro Pvt. Ltd. v CCE, Bhubaneswar 1997 (21) RLT 178, has observed that since the goods were not lying in a factory, in a Customs area or a warehouse (stocks lying in these three places were considered non-duty paid under Rule 57G(2), the inputs lying at any other place can be treated by the Central Government as duty paid and the Govt. may direct that the Modvat credit may be taken on any such stock purchased from any such place except the aforesaid three places unless of course it puts a condition in the order that it is otherwise clearly recognisable as non-duty paid. Accordingly, in that order it is held that in the absence of any condition of non-duty paid character as clearly recognisable, the benefit of Modvat credit cannot be denied under order dated 1-3-1994 of the Board.
3. I have carefully considered these submissions. In my view this issue is no more res Integra. It is squarely settled by the CEGAT Larger Bench decision in Machine Builders v. CCE, Bolpur – 1996 (83) E.L.T. 576 (Tribunal). This decision is taken support of by Commissioner (Appeals) in his order in this case. The views arrived at in this order are subsequently affirmed in another Larger Bench decision in Indian Plastics Ltd. v. CCE, Allahabad – 2000 (118) E.L.T. 268 (Tribunal – LB). In this decision it is held, “The words “inputs are clearly recognisable as being not duty paid” comprehend all inputs on which it is patent that duty has actually not been paid for any reason i.e. rate of duty is stated to be nil rate in the Schedule to the Tariff Act or the inputs are wholly exempt from duty or for any other reason” (underline supplied).
4. It is also observed that in the case of Ravi Steels v. CCE, Allahabad Order No. A/246/97-NB, dated 4-2-1997 following the above decision of the Larger Bench, the Tribunal dismissed the case of the party for availing deemed Modvat credit on rejected/unserviceable rails purchased from railway as they are clearly recognisable as non-duty paid. In the case under consideration the scrap material is purchased in auctions from the railways and challans relating to them or any other invoice did not show payment of duty on them. In view of these facts, the scrap is clearly recognisable as non-duty paid and hence no Modvat credit is admissible.
5. In view of the preceding analysis, the appeal fails and the same is rejected upholding the order passed by Commissioner (Appeals).