ORDER
Gowri Shankar, Member (T)
1. The respondent to this appeal by the Collector M/s. JM Industries, who was and still is engaged in breaking up of ships at Alang ship breaking yard. The respondent purchased in 1986 a ship MV Neo Neo. The ship was provisionally assessed to duty in March, 1986 and duty finally assessed in December, 1989. It appears that breaking up of the ship was also delayed due to litigation and commenced only after finalising assessment on 29-11-1989. The assessee said part of the duty on the scrap obtained from breaking up of the ship. The assessee utilised the additional duty of customs paid by it after final assessment of the ship towards payment of the excise duty on the scrap obtained by breaking up of the ship. Debit was made on 17-12-1989. The deli partment noted that Modvat declaration under rule 57G was made only on 18-12-1989 and concluded that credit was taken prior to the declaration, and hence not admissible. The Assistant Collector confirmed this view contained in the show cause notice by his order denying Modvat credit and demanding duty on the goods to the extent of the credit taken towards payment of duty, credit applied towards duty on the scrap.
2. The assessee appealed this order. The Collector (Appeals) noted that the assessee had filed a declaration under rule 57G in May, 1986. The Assistant Collector had also accepted this fact. But said, since the duty on scrap obtained by breaking up of ship was withdrawn by exemption notification 386/86 issued on 20-8-1986 and introduced only with effect from 1-3-1989, the assessee must be considered to have opted out of Modvat scheme and therefore the earlier declaration was no longer valid. The Collector (Appeals) has not accepted this view. He said that the assessee continued to work under a Central Excise licence right from the date of filing the declaration and had not withdrawn that declaration filed in 1986 and therefore validly taken. This being questioned by the department in this appeal.
3. The departmental representative reiterates the ground in the appeal and the advocate for the respondent chooses to emphasise the findings of the Collector (Appeals).
4. It is not possible for me to accept the proposal in the appeal that because no duty was payable on scrap with effect from 20-8-1986 the assessee must be automatically considered to be out of the Modvat scheme from that date onwards. The rules relating to Modvat credit did not contain any such provisions expressly, nor is it possible to read such a situation into the rules. The assessee was engaged in breaking up of the ship from 1986 till 1989 and filed a declaration for breaking up of the ship since 1986. Neither the nature of the input nor the nature of the final product had changed. The fact that for part of the period the goods were liable to duty cannot justify the view that a declaration under rule 57A filed by the assessee ceased to be valid. All that the assessee was required to do and which it no doubt did, after the exemption notification came into effect…was not to utilise the credit towards payment of duty. There was in fact no question of being so since no duty was payable. However, it is a different thing to say that because the duty was withdrawn the declaration under rule 57G ceased to be valid. Given the situation why the input, the manufacturing process and the final product all continued unchanged, it cannot be said that the intention to take credit which was expressed in the 57G declaration was not relinquished. On the facts of this case, therefore, the declaration filed by the assessee in 1986 continued to be in force till 1989 and the validity of the declaration was not ceased by the fact that subsequently no declaration was filed. I therefore see no reason to interfere.
5. The other ground in the appeal relates to clearances by the assessee before the approval of the proper officer. This point has not been dealt with either in the Assistant Collector’s order or by the Collector (Appeals) and therefore cannot be considered now.
6. Appeal dismissed.