ORDER
S.L. Peeran, Member (J)
1. In this stay petition, the applicants are seeking waiver of pre-deposit of duty amount of Rs. 1,50,523/-being the duty demanded and confirmed by the lower authorities for the period 13-1-1991 to 19-6-1991 under Rule 57(i) read with Section 11 of Central Excises and Salt Act, 1944. The allegation made in the show cause notice is that the applicants had purchased copper wire falling under Chapter sub-heading 7408.19 and have taken Modvat credit of the said amount in their RG 23A Part II without declaring the input in the Modvat declaration filed on 21-12-1990 under Rule 57G of Central Excise Rules, 1944. The Department’s case is that they are not entitled to the said modvat credit on account of non-filing of declaration of the input under Rule 57G of the Central Excise Rules, 1944. The assessee has contended that they had filed Modvat credit on 19-7-1988 mentioning therein Copper wire bars, Copper wire rods, Copper wire thicker than 14 SWG, Copper wire finer than 14 SWG and the said declaration had been received in the office on 19-7-1988. In response to the department’s letter dated 2-8-1988, their representative had gone to the office and due to inadvertence and in confusion, without realising its implication, had deleted from the declaration the items namely Calcium carbonate, Titanium Dioxide, Aluminium Hydroxide, Stearic Acid etc. They stated that on 23-9-1988, they also filed amended declaration but did not receive reply and submitted reminder for permission on 18-9-1990 and 29-10-1990. On 14-9-1990, they received a letter stating that specific names of inputs be given in the proper proforma. They deputed one Shri B. Kumar on 29-12-1990. He had unintentionally struck the entire “others” and such a striking was not intentional and hence the Modvat was not taken wrongly.
2. We have heard Shri V. Sridharan, learned advocate for the appellants and Shri Ashok Mehta, learned D.R. for the respondents. Shri Sridharan submitted that the party had already deposited Rs. 40,000/- and in proof thereof, has produced DR-6 challan. He has contended that the Assistant Collector had issued permission for utilising the modvat upto 30-6-1991 as per letter dated 15-6-1990 referred in pages 19-20 of the paper book. He also contended that they had been filing gate passes, RT-12 returns showing all the inputs. He submitted that it is mere mistake on the part of their clerk to have deleted it but however, the department was aware of the utilisation of the inputs and also taking modvat credit. He also submitted that there were earlier declarations and subsequent declarations. He also relied on the order passed by this Bench in the case of C.C.E. v. V.K. Industries (Order No. A-255/91/NRB, dated 29-5-1991).
3. Shri Ashok Mehta, learned DR submitted that the declarations filed on 19-7-1988 as well as on 23-9-1988 had in fact disclosed all the details but their representative having struck off the details of inputs, it meant that they were not utilising the same and also it meant that there was no declaration. Therefore, the Modvat credit cannot be utilised without filing declaration under 57G of the Central Excise Rules.
4. We have carefully considered the submissions made by both the sides and have perused the citation relied by the learned counsel. The applicants have in fact filed the declaration giving all the details of the inputs and they have explained that it is only through inadvertence that their clerk had struck off the three entries and on account of this, the benefit cannot be denied to them as the Assistant Collector has already given permission by his letter dated 15-6-1990 upto the period 30-6-1991. They have also stated that they are regularly filing their RT-12 returns and gate passes declaring the details of the inputs. There have been declarations filed for earlier and subsequent periods. The applicants have also deposited Rs. 40,000/-. The question is whether the deletion made by their clerk inadvertently, would result in non-declaration. This can be decided at the final stage. However, at this stage, prima facie, the benefit of the declaration filed in the first instance can be taken into consideration and also the permission given by the Assistant Collector upto the period 30th June 1991 and also all other documents which are showing utilisation of the credit. These documents go to show that the deletion has been done inadvertently and unmindfully and it did not mean that there was no declaration at all. Prima facie, the citation relied by the applicants is also applicable to the facts of the case. The balance of convenience and hardship is also in favour of the applicants. The mistake appears to be technical and not so serious as in a case where there is no declaration at all and without any supporting documents. In the result, we allow the stay application by dispensing with the pre-deposit of the balance duty amount demanded by taking into consideration the deposit of Rs. 40,000/- already made and the recovery stayed till the disposal of the appeal.
N.K. Bajpai, Member (T)
5. I have seen the order proposed by learned Member (Judicial) Shri S.L. Peeran but regret my inability to agree with his findings that the applicants have a prima facie case for dispensing with the requirement of deposit of duty.
6. The admitted position is that the applicants after submitting a declaration under Rule 57G on 19-7-1988, revised it on 23-9-1988. On receipt of a letter, dated 14-11-1990 from the Assistant Collector that they had not mentioned the name of the final product and the nature of the input against the entry “other”, a “representative” visited their office and deleted the entry relating to Copper wire on 29-12-1990. Nowhere in the documents in these proceedings has the representative been described as the “Clerk” of the applicants. The permission for availing of the facility under Rule 57F(2) was granted by the Assistant Collector on 15-6-1990 upto 30-6-1991. Thus, the entry in the declaration was deleted subsequent to the grant of the permission under Rule 57F(2). It would not, therefore, be correct to hold that in spite of having deleted the entry in the declaration, the authorities themselves did not take note of it and granted the permission under Rule 57F(2).
7. The applicants do not, in my view, have a prima facie case – much less a “strong prima facie case”. They have not pleaded financial hardship; nor have they pleaded in their application that the balance of convenience is in their favour. These aspects were also not argued during the hearing. Initially their plea was that their representative had innocently deleted the entry and later they have claimed that they were “misguided” by the authorities. This plea has been considered and rejected by Collector (Appeals) and the applicants have not shown anything to us to support the view that the order is prima facie not sustainable. The learned SDR had submitted during the hearing that the applicant’s argument that he was misguided not being borne out of the record could, at best, be taken up at the stage of final hearing of the appeal. I agree with this view and propose rejection of the application.
In view of the difference of opinion, the Hon’ble President may be pleased to refer the matter to the Third Member to decide the difference of opinion between the Members :-
(i) Whether the pre-deposit of duty amount has to be dispensed with and recovery stayed till the pendency of appeal as held by Member (Judicial)?;
or
(ii) Whether the stay application has to be rejected as the applicants do not have a prima facie case as held by the Member (Technical).
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(N.K. Bajpai) (S.L. Peeran)
Member (Tech.) Member (Judl.)
The points of difference are referred to Shri P.K. Kapoor Member (T)
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Harish Chander
28-9-1992
P.K. Kapoor, Member (T)
8. On the point of difference both sides were heard by me on 30-11-1992 when the submissions made earlier when the matter was heard by the Bench were reiterated.
9. It is seen that the applicants had filed a declaration on 23-9-1988 under Rule 57G in respect of various inputs including Refined Copper covered by Heading 7408.29. The declaration filed by the applicants was acknowledged by the Department. Thereafter in their letter dated 12-9-1990 the applicants requested the Assistant Collector for permission to avail Modvat credit even though no such permission was required after they had filed the declaration dated 23-9-1988. The case of the applicants is that on 21-12-1990 when one of their clerks visited the Central Excise office he was advised to delete the relevant item in the declaration filed on 23-9-1988 under Rule 57G. They have contended that the deletion of the said item was carried out on the advice of the Central Excise officer by a person who was not aware of the implications of such action. They have stated that the deletion of the relevant item from the declaration was unintentional since the applicants continued to get the inputs falling under deleted item for the manufacture of their final product and such inputs were also sent by them regularly for further processing under Rule 57F(2) to other job workers with the knowledge of the Central Excise Department. On this basis it has been contended that the deletion of the relevant item from the declaration filed by the applicants was purely a technical error.
10. Considering the fact that the applicants had filed a detailed declaration under Rule 57G on 23-9-1988 covering the input on which Modvat credit has been held as inadmissible under the impugned order, I am of the view that subsequent deletion of the said item from the declaration by a representative of the applicants during his visit to the Central Excise office was purely unintentional and the lapse was, therefore, essentially technical in nature. On these considerations prima facie it appears that the applicants have a good case on merits. They have already deposited a sum of Rs. 40,000/- out of the total amount of Rs. 1,50,523/- demanded in terms of the impugned order. Under these circumstances I am of the view that requiring the applicants to deposit the balance amount of duty pending the disposal of the appeal will amount to undue hardship. I, therefore, agree with the learned Member (Judicial) that pre-deposit of the balance amount of duty should be dispensed with and the recovery thereof stayed till the pendency of the appeal.
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Dated 1st December, 1992 P.K. Kapoor, Member (T) In view of the majority order, pre-deposit of balance amount of duty is dispensed with and recovery thereof stayed till the pendency of the appeal.