ORDER
J.N. Srinivasa Murthy, Member (J)
1. This appeal is preferred by M/s. Ge-Apar Lighting Pvt. Ltd. against the Order-in-Appeal dt. 16.4.94 as captioned above praying for setting aside the same and for consequential relief deemed fit.
2. The brief facts of the case are that the appellant manufactures Electronic Bulbs and Fluorescent Tubes falling under Chapter Heading No. 8539.00 to the Schedule of the Tariff Act availing the benefit of credit of duty on the inputs used in relation or in the manufacture of the final product. They are holding Central Excise Registration Certificate No. 2303031756, and paying duty of Rs. 2 per tube plus 15% Basic and Special Excise duty, and are also availing the benefit of credit on excisable goods, used as inputs under the Modvat scheme under Rule 57F of the Central Excise Rules. The appellant submitted an application on 3.3.92 for taking Modvat credit on the inputs lying as such, and Rule 57H of Central Excise Rules after considerable period. He has imported the inputs Cathod Paste of 100 Lts. Under the Bill of Entry No. 004744 dt. 16.12.91 valued at Rs. 1,68,884 and had claimed credit of duty on 99 Ltrs. of the Cathod Paste which was not admissible as the appellant had filed a modvat declaration with the Customs authority Bombay giving the address, as Respondents No. 1, being their unit at Nadiad, instead of Limbasi unit and the said consignment had been consigned in to in fact and transferred it to their Limbasi unit without obtaining the prior permission from the Jurisdictional Supdt. and without intimating the Customs authority at Bombay of such transfer. The transitional credit on the inputs Cathod Paste of Rs. 60,692 was not admissible. On the scrutiny of RG 23A Part-I the stock of inputs that is Flare Tubes and the Exhaust Tubings lying as such on the date of application i.e. on 3.3.92 was 1620 Kgs. and 576 Kgs. Respectively. In the application the quantity was shown as 1800 Kgs and 612 Kgs. Respectively. As per Rule 57H of the Central Excise Rules, the transational credit is available only in respect of those inputs which are lying as such in stock on the date of filing the declaration or which would be received after the said declaration and such inputs should be kept as such for physical verification of the Jurisdictional Central Excise Officer (Para 3). Show cause notice was issued on 19.3.93 to the appellant to explain as to why the transitional Modvat credit of Rs. 1,22,422 claimed on 3.3.92 should not be disallowed under Rule 57A read with Rule 57H of Central Excise Rules. The appellant filed his reply on 15.4.93. The Modvat declaration was filed on 22.1.92 and the Limbasi Unit started its activities in October 1991 and the application for licence was made on 30.10.91 and the licence was issued on 18.2.92 Rule 57G declaration was filed on 22.2.92 from which date the appellant is eligible for the benefit of Modvat credit. There is an endorsement on the bill of entry regarding the transfer in favour of Limbasi Unit. The Assistant Collector, Customs, Incharge Refund Section has issued a certificate to the effect that no refund of this duty paid in the form of CVD has been claimed and submitted to the Central Excise Department. The benefit of credit cannot be denied as the original manufacturer who received the goods has not availed the Modvat credit or refund of CVD paid on the said inputs. Under Rule 57H the appellant is eligible for availing the Modvat credit on inputs which are lying in stock on the date of filing of the declaration under Rule 57G on 22.1.92 the stock records maintained discloses the same. The substantial benefit cannot be denied on mere technical ground. The appellant was heard in the personal hearing and after perusing the material available on record the Assistant Collector of Central Excise Nadiad has rejected the request of the appellant for the availment of transitional credit under Rule 57H of the Central Excise Rules. Against that order the appellant filed the appeal before the Collector (Appeals) Central Excise Customs Ahmedabad and it was dismissed under the impugned order. Hence this appeal.
4. In support of the appeal Shri S.J. Vyas the Ld. Counsel has filed his synopsis and has submitted arguments in support of it. Shri T.D. Bodade Ld. JDR has submitted arguments in support of the impugned order.
5. Perused the show cause notice, reply, and the orders of the lower authorities, and the appeal memorandum, and the synopsis. Also perused the documents produced by the appellant as per the Index to the Paper Book that is copy of declaration L-4 licence and copy of the petition dt. 3.3.92 and the bill of Entry No. 5562 dt. 5.12.91 and the correspondence between the parties. The question involved in this appeal is eligibility of Modvat credit of inputs lying in stock as on the date of declaration under Rule 57G of the Rules. The show cause notice alleges that as per Rule 57H of the Central Excise Rules, a transitional Modvat credit is available only in respect of those inputs which are lying as such in stock on the date of filing the declaration or which will be received thereafter. The appellant is not entitled to take the same when inputs are not tying as such in stock on the date of the filing of the declaration, and also the Modvat credit cannot be allowed for the inputs in question, which were not kept as such for physical verification by the Central Excise Officer. The reply to the show cause notice denies the second condition as above on the ground that it is not supported by any provision. In the reply to the show cause notice the appellant has stated that when Limbasi unit started its activity in October 1991 they had applied for Central Excise licence on 30.1.91, but it was issued only after 4 months on 18.2.92. The appellant is entitled to take Modvat credit from the date 22.1.92 when declaration under Rule 57G was filed. These facts are not denied by the department. Prior to processing of excise application, advance action for procuring/transferring raw materials required for production was taken up and the inputs were received in their Limbasi plant, prior to the said declaration. Regarding the disallowance of Modvat credit on 99 Lts. Cathod Paste it was originally imported by their Nadiad unit declaring the modvat on this input is not availed, the same was transferred in Original packing with necessary endorsement to Limbasi unit favour, under certificate that no refund of this duty paid in the form of CVD has been obtained from the Assistant Collector of Customs Incharge Refund Section Bombay, and submitted to the Assistant Collector Central Excise. The bill of entry for the said input has been endorsed in favour of Limbasi unit and the original manufacturer who received the goods has not availed the Modvat facility or applied for refund of CVD paid on the said input. So the benefit of Modvat credit cannot be denied. The stock of inputs lying on 22.1.92 when the declaration was filed can be verified by the stores records. The stock on the date of verification is not required under Rule 57H. Most of the facts in this case are not in dispute. Procedural lapses, should not be cited for denying the benefit to the appellant when receipt of goods, their essential duty paid character, utilisation for further production is not disputed. The rules of procedure regarding the proforma credit are not to be observed mechanically. The rules are intended to further justice and not to hamper it. In support of this six case law are cited by the appellant in the reply to the show cause notice.
6. From the perusal of the finding portion in Order-in-Original it is seen that none of them are discussed by the Assistant Collector, though mentioned in page 2 of the Order-in-Original. Even in the impugned order also they are not considered even though the appeal memorandum makes recital of the same. From para 7 of the impugned order it is seen that the inputs are received in the factory between 23.10.91 to 31.10.93. Import is on 5.1.92 the declaration was filed on 22.1.92 and the grant of licence is on 18.2.92. The orders of the lower authorities, as contended by the appellant, do not consider, discuss, and given a clear finding on the vital points as pointed out in the synopsis, which are supported by the decisions of the Tribunal on all points. The first objections for not granting permission under Rule 57H is that the application is made after considerable period. It is made within 12 days from the date of the grant of licence. This cannot be said to be a considerable period. As per in the case of Devki Nandan & Sons v. Collector of Central Excise, it is held that the declaration made under Rule 57H within six months from Rule 57G declaration is within time. In this case the Rule 57T declaration was made on 22.1.92 and declaration under Rule 57H on 3.3.92 with a gap of one month 10 days. So the above objection cannot be upheld. As regards the endorsement of Bill of Entry it is a valid duty paying document when the entire consignment in original packed condition is diverted and no permission is necessary, as per 1997 (96) ELT 627 in the case of Commissioner of Central Excise, Jaipur v. Snow Cem India Limited, wherein it is held in para 8 of the orders by the Tribunal that “Modvat-duty paying documents — Input first sent to factory of multi-unit company — Entire consignment in Original packing transferred to their sister factory at Gotan– Benefit not deniable merely because gate pass was in the name of the assessee and issued in the name of the Bombay office in the case of Larsen & Toubro Limited v. Collector of Central Excise, Bhubaneswar also deals with the same aspect which consider the bill of entry, wherein it is held that even endorsement is not necessary. This case is on a better footing and so the credit cannot be denied. The third ground on which the permission was denied to avail credit was that the stock was less as compared to the stock shown in the application. In that regard it is submitted that the stock of subsequent date could be less as the application was dated 3.3.92 for receipts up to 18.2.92. Even otherwise the credit as per the stock should have been granted. The credit cannot be denied simply because the inputs were not available for verification. No attempts are made by the department to verify the position from the books and other records kept regularly in factory in 1994 (69) ELT 222 (M.R) Guilt Pack Ltd. v. Assistant Collector of Central Excise, Indore. It is held that credit cannot be denied because pre-declaration input was not available for declaration. Second limbs of group Rule 57H of the Central Excise Rules, 1944 did not require that such inputs ought to be lying in stock. Rule 57H has two limbs–one pertains to such inputs as are lying in stock or are received in the factory after filing the declaration made under Rule 57G, and the second limb of the rule pertains to those inputs which are used in the manufacture of final products and which are cleared from the factory on or after 1st March, 1987 provided that no credit has been taken by the manufacture in respect of such inputs under any other Rule or Notification or that the final products of such inputs under any other Rule or Notification or that the final products of such inputs are dutiable. A bare reading of the aforesaid two provisions shows that a manufacturer is entitled to get credit on the inputs which are lying in stock or are received in the factory after filing the declaration and also on such inputs which are already used in the manufacture of the final products and those final products are cleared from the factory on or after 1st March, 1987. As such when an argument is advanced that the inputs are not available for verification as they are not lying in stock acceptance of such an argument would result in making the provision of second clause of Rule 57H nugatory. In the instant case the manufacturers have submitted the details of the inputs used by them for the manufacture of the goods which were cleared by Central Excise Authorities on 1.3.1987 and thereafter, till filing of the declaration. As there is no time limit for filing the declaration and there being no definition of the words “immediately before filing the declaration” it should be held that if the declaration is filed by the manufacturers claiming the credit, that declaration has to be considered in the light of the record available with the Central Excise Authorities.
7. The appeal against the above order has been dismissed as per 1995 (75) ELT A 111 in in the case of Engineers Prestressed Structures Put. Ltd. Wherein it is held that Rule 57H permits credit but inputs lying in stock or such inputs already used in the manufacture of final products which are lying in stock as on notified date. Such credit is not subject to verification of inputs by the department vide para 5. The Modvat credit is permissible for inputs contained in semi-finished rules as per in the case of Navdeep Packaging Industries v. CCE, Ahmedabad. In the first decision in para 4 of the order it is held that modvat transitional credit in respect of the inputs contained in the processed semi-finished goods are final product admissible subject to the satisfaction of the Jurisdictional Assistant Collector regarding the duty paid character of input contained therein. The object of Rule 57H giving transitional credit is to allow the benefit of duty paid on inputs received prior to filing declaration. Rule 57H cannot be read in a disjointed manner, giving the benefit only to the inputs lying as such and denying the credit in respect of the goods lying in the process. In the case of Balaji Products (P) Ltd. a Collector of Central Excise, Pune in that case is also on the same line as per para 4 & 5 of the said order that is modvat transitional credit is admissible not only for pre-declaration stock of inputs but also for inputs used in the manufacture of final products. The credit is also allowable for inputs contained in material in process, used in the manufacture of final product lying in the stock. In view of this legal position, which were not considered by the lower authorities, the appellant is entitled to take credit under Rule 57H as prayed.
8. The contention of the Ld. JDR and the finding of the lower authorities that the licence comes into operation from 18.2.92, which was granted on the basis of the application dt. 31.10.91 cannot be accepted for the reason that the factory is started functioning in October 1991 and immediately applied for licence. In the natural course of events the licence comes into force from the date of application, and not from the date of sanction. The finding that the modvat declaration was filed earlier to the grant of licence and the inputs received prior to it cannot be taken into consideration does not hold good. The application under Rule 57H dt. 3.3.92 was for permitting Modvat credit on inputs received up to 18.2.92 when the licence was granted. So it was natural for the party to expect that the licence is granted according to his application, which was done after series of letter exchange between the department and the appellant as evident from the records. The rejection of the application and confirmation of the same by the appellate authority is not in true spirit of Rule 57H existing at the relevant time. The decisions of the Tribunal referred above makes it very clear in that regard. So the contention of the appellant in support to the appeal gains force and it is upheld. Hence I pass the following order.
ORDER
1. For the reasons discussed above, the impugned order is set aside and the appeal is allowed with consequential relief according to law if any.