ORDER
P.G. Chacko, Member (J)
1. The facts of this case are briefly as stated below.
2. The appellants are manufacturers of sugar and molasses falling under Chapter 17 of the Schedule of the Central Excise Tariff Act, 1985 and are availing the facility of Modvat credit on inputs and capital goods under Rules, 57A and 57Q respectively of the Central Excise Rules, 1944. In March, 1996, the appellants took Modvat credit of the duty paid on certain inputs in their RG 23A Part II on the strength of invoices received from registered dealers and the credit so taken amounted to Rs. 10,745/-. They also took the credit of duty paid on the input, namely, ‘floculating agent’, which amounted to Rs. 1,645/-. The appellants also took the credit of duty paid on certain capital goods, in their RG 23C Part II and such credit amounted to Rs. 17,638.52. All the aforesaid credits totalling to Rs. 30,028.52 were disallowed by the jurisdictional Assistant Commissioner of Central Excise, who also imposed a penalty of Rs. 5,000/- on the party for alleged contravention of the Modvat rules. The order of the Assistant Commissioner was one passed against the assessee ex-parte. The party, aggrieved by the order of the Assistant Commissioner, appealed to the Commissioner of Central Excise (Appeals) and the latter upheld the order of adjudication. The present appeal is against the order of the Commissioner (Appeals).
3. I have carefully examined the orders of both the lower authorities and connected records. The input-credit of Rs. 10,745/- was disallowed on the ground that the details regarding the goods and of the duty paid thereon were not shown in the invoices received from the registered dealers of the manufacturers of the goods. The input credit of Rs. 1,645/- on floculating agent was disallowed on the ground that the input was not declared in the declaration submitted by the party under Rule 57G of the Central Excise Rules. Similarly, the capital goods credit of Rs. 17,638.52 was disallowed on the ground that the goods were not declared in the declaration submitted by the party under Rule 57T of the Rules ibid. The party had contested the department’s proposal to disallow the Modvat credits on the aforesaid grounds, by way of their reply to the show cause notice issued by the department. They, however, did not avail 1 themselves of the repeated opportunities of being heard/afforded by the jurisdictional Assistant Commissioner of Central Excise, who passed ex-parte order of adjudication disallowing the Modvat credit and seeking to recover the amount from the party and also imposing on them a penalty of Rs. 5,000/-. In the appeal filed by the party against the said order of adjudication, the Commissioner of Central Excise (Appeals) upheld the adjudicatory order in toto. As regards the Modvat credit of Rs. 10,745/- taken by the party, the Commissioner (Appeals) observed that the appellants did not produce the copies of the invoices in proof of their submission that the necessary details of description of goods, quantity, value, rate of duty and amount of duty paid by the manufacturer had been shown in certain columns of the invoices and further held that the lack of essential details like rate of duty and amount of duty rendered the invoices invalid. The Commissioner, therefore, held the aforesaid credit to be inadmissible. Regarding the credit of Rs. 1,645/- taken on floculating agent, the Commissioner (Appeals) observed that the description ‘chemicals’ in the declaration filed by the party under Rule 57G was a very broad one covering a wide range of items. He further observed that only a proper description of inputs would serve the purpose of Rule 57G ibid. He, therefore, held the credit on floculating agents to be inadmissible, after relying on the decisions of the Tribunal in the case of C.C.E., Jamshedpur v. Shrimm Needle Bearing Indus. Ltd. reported in 1995 (78) E.L.T. 699 (Tribunal) and the case of Indian Hume Pipe Co. Ltd. v. C.C.E., Bangalore reported in 1995 (77) E.L.T. 885 (Tribunal). In respect of the credit of Rs. 17,638.52, the Commissioner (Appeals) found that neither the description of the goods nor the tariff sub-headings shown in the declaration filed by the party under Rule 57T tallied with the respective goods. He, therefore, disallowed the Modvat credit taken in this behalf too. Finally, as regards the penalty imposed by the adjudicating authority, learned Commissioner (Appeals) upheld the same on the ground that the. party had availed the credits which were not due to them.
4. In the present appeal, the appellants have submitted that the
two decisions of the Tribunal, relied upon by the lower appellate
authority, are not applicable to the facts of the case and also that
the latest judgment of the Tribunal relied upon by them were ignored by the lower authorities. Regarding the credit of Rs. 10,745/-, the appellants have submitted that the-requisite details were specified in the upper part of the invoices issued by the registered dealer. They have further stated that the factual details could have been verified by the adjudicating authority from the said dealer or even from the manufacturer of the goods. As regards the credit taken on floculating agents, the appellants have submitted that the said item of inputs is a chemical as shown against Sl. No. (4) in the declaration submitted on 1-1-1995 under Rule 57G of the Rules. It is further contended that the adjudicating authority could have directed them to specify the item covered by the description ‘chemicals’, if at all necessary. With regard to the capital goods credit of Rs. 17,638.52, the appellants have produced a copy of the declaration submitted by them under Rule 57T and have referred to Sl. Nos. 1,25, 26 & 31 therein. SI. No. 1 of the description column of the declaration shows ‘Nickel Screens’ (tariff sub-heading 7403.23). The appellants have submitted that this item of capital goods, described as ‘Nickel Micro’ in the relevant invoice, is a component of centrifugal machine and is, therefore, eligible for the Modvat credit under Rule 57Q. Sl. No. 25 in the declaration shows ‘Gear Boxes and Other Speed Changers’ (8483.00). According to the appellants, this item of capital goods, described as ‘Hypo Rotary Gear Pump’ in the relevant invoice, is used for changing the movement speeds of various machines in their factory and is, therefore, eligible for the Modvat credit under Rule 57Q ibid. At SI. No. 26 of the declaration, the capital goods have been described as ‘Generating Set-Parts’ (8503.00). The appellants have submitted that ‘Excitation Coil’ shown in the relevant invoice is a part of generating set and hence, eligible for the Modvat credit under Rule 57Q ibid. The description ‘shaft coupling’ (8483.00) shown against Sl.No. 31 in the declaration corresponds to ‘Pinion Shafts’ in the relevant invoice, according to the appellants. These goods are also components of various machines and hence, eligible for the credit under Rule 57Q, contend the appellants. As regards penalty imposed on them, the appellants have submitted in their memorandum of appeal that there was no allegation in the show cause notice that they had taken the credits with the mala fide intention of using the credit amount for unlawful gains, nor was there any evidence on record to show any mala fide intention on the part of the appellants. The appellants, therefore, challenge the legality of the confirmation of penalty by the lower appellate authority.
5. I have heard the learned Advocate Shri Bipin Garg for the appellants and learned JDR Shri T.A. Arunachalam, for the respondent-Revenue. The learned Advocate has reiterated the aforesaid grounds of the present appeal. On the issue relating to the Modvat credit of Rs. 10,745/- taken in respect of inputs on the strength of dealers’ invoices, the learned Advocate has submitted that the lower authorities have over-looked the requisite details such as description of goods, quantity, value, rate of duty and amount of duty specified in certain columns of the invoices. He has further submitted that the authorities below have refused to accept the invoices as valid duty-paying documents on the flimsy ground that the aforesaid details were not given in the relevant columns of the invoices. The non-mention of the aforesaid details in the relevant columns of the invoice is, at best, a mere technical irregularity or a curable defect which cannot be raised as a ground for denying the substantial benefit of Modvat credit to the assessee. In support of this submission, the learned Advocate has relied on the decision of the Tribunal in the case of Pahladrai Confectioneries Pvt. Ltd. v. C.C.E., Allahabad reported in 1997 (93) E.L.T. 86 (Tribunal). On the issue relating to the Modvat credit taken by the appellants on floculating agent, the learned Advocate has submitted that it is a matter of common knowledge that one and the same item is marketed by different manufacturers under different brand names so that it is difficult to mention all such different names, for a single item, in the Modvat declaration. It was for this reason, the learned Advocate argues, the appellants chose to give the broad description ‘chemicals’ so as to cover all the different brand names, in the Modvat declaration. He, therefore, submits that in such circumstances, the authorities below ought not to have denied the substantive benefit of the Modvat credit on floculating agent on the technical ground that the item was not specified in the Modvat declaration. In support of this argument, the learned Advocate has drawn my attention to the decisions of the Tribunal in the case of Rajasthan Transformers & Switch Gears v. C.C.E., Jaipur reported in 1995 (59) ECR 128 (Tribunal) and in the case of Pawan Tyres Ltd. v. C.C.E., Chandigarh reported in 1994 (73) E.L.T. 212 (Tribunal). On the question relating to the capital goods-credit amounting to Rs. 17,638.52 taken by the party, the learned advocate has reiterated grounds 5.1 to 5.4 in the memorandum of appeal and has submitted that the finding of the lower appellate authority that the appellants had not declared the goods under Rule 57T is factually erroneous inasmuch as the goods were declared more or less specifically against Sl. Nos. 1,25,26 & 31 in the Modvat declaration filed by the party. He has, again, submitted that the substantial benefit of Modvat credit cannot be denied on such minor procedural lapses in a case where there is no dispute regarding the receipt of the goods by the appellants and the utilisation thereof in their factory and also regarding the duty-paid nature of the goods. On the issue of modvatability of the parts of generating sets, the learned Advocate has relied on the decision of the Tribunal in the case of Eveready Industries (I) Ltd. v. C.C.E., Allahabad reported in 1998 (103) E.L.T. 672 (Tribunal). In the absence of allegation of malafides against the appellants in the show cause notice issued to them, the learned Advocate has submitted, the imposition of penalty on the appellants is totally unwarranted. The learned Advocate has, therefore, submitted that the orders of both the lower authorities are unsustainable in law and hence, liable to be set aside. He has, therefore, prayed for allowing the appeal.
6. Opposing the above arguments of the learned Advocate, the learned JDR has submitted that the appellants had not produced copies of invoices and declarations before the lower authorities so as to establish their case. He has also relied on the Tribunal’s decisions in the cases of Shriram Needle Bearing Indus. Ltd. (supra) and Indian Hume Pipe Co. Ltd. (supra) in his attempt to justify the decision of the lower appellate authority holding Modvat credit to be inadmissible in respect of floculating agents for want of proper description of inputs in the Modvat declaration filed under Rule 57G. The learned JDR has further submitted that the ratio of the decision of the Tribunal in the case of Rajasthan Transformers & Switch Gears (supra) is not applicable to the facts of the present case.
7. I have carefully considered the rival submissions and the case law cited. Regarding the Modvat credit of Rs. 10,745/-, taken on inputs on the strength of registered dealers’ invoices, I find much force in the submissions of the learned Advocate and his reliance on the decision of the Tribunal in the case of Pahladrai Confectioneries (supra), wherein there was no dispute about the receipt of the inputs and their utilisation in the factory of the assessee or about the duty-paid character of the goods. The Tribunal in that case held that, in such circumstances, the substantial benefit of Modvat credit could not be denied to the party on the ground of any technical irregularity in the invoice. In the instant case, it is not in dispute that the requisite details of description of goods, quantity, value, and particulars of duty were stated in a part of the invoices, though not in the relevant columns thereof. There is no dispute about the receipt and utilisation of the inputs in or in relation to the manufacture of the final products or about the duty-paid nature of the goods. The credit was taken, undisputedly, by the party after filing the necessary declaration. In such circumstances, the mere non-mention of the aforesaid particulars in the relevant columns of the invoices cannot be a good ground for denial of the substantive benefit of Modvat credit. In this view of the matter, I accept the learned Advocate’s arguments and hold that the Modvat credit of Rs. 10,745/-taken by the appellants is admissible in law.
8. As regards the Modvat credit of Rs. 1,645/- taken on ‘floculating agent’ by the party describing the inputs as ‘chemicals’ in the Modvat declaration, I observe that the tariff sub-headings shown against the said description (chemicals) at Sl.No. 4 of the Modvat declaration were 28.01 to 28.05. These sub-headings, I observe, were meant for chemical elements in the Central Excise Tariff Act at the material time. The appellants have never had a case that the ‘floculating agent’ was one of the chemical elements classified under the tariff sub-headings 28.01 to 28.05. Therefore, the broad description of the input as ‘chemicals’ coupled with the mention of the tariff sub-headings as 28.01 to 28.05 in the Modvat declaration filed by the appellants under Rule 57G cannot by any stretch of imagination be considered to serve the purpose of Rule 57G ibid. The reliance placed by the lower appellate authority on the Tribunal’s decisions reported in 1995 (78) E.L.T. 699 and 1995 (77) E.L.T. 885 cannot be faulted. The case law cited by the learned Advocate in the context does not appear to have advanced the appellants’ case. In the circumstances, I am inclined to hold that the decision of the lower authorities dis-allowing the Modvat credit on ‘floculating agent’ on the ground of absence of proper description of the input in the Modvat declaration is sustainable.
9. Coming to the question whether the authorities below were right
in denying the Modvat credit taken by the appellants on the capital
goods, namely, Excitation Coil, Pinion Shaft, Nickel Micro and Hypo
Rotary Gear Pump on the basis of the finding that neither the description nor the tariff sub-heading shown in the Modvat declaration tallied with the respective goods so much so that the declaration filed under Rule 57T was not good declaration in respect of the said goods, one has to closely look at the declaration filed by the appellants, copy of which is available on record. Excitation Coil is, according to the appellants, covered by the description ‘Generating Set-Parts’ shown against Sl. No. 26 in the declaration. ‘Pinion Shaft’ is covered by the description ‘Shaft Coupling’ shown against SI. No. 31 in the declaration. ‘Nickel Micro’ is taken in by the description ‘Nickel Screens’ given at Sl. No. 1 in the declaration and ‘Hypo Rotary Gear Pump’ is covered by the description ‘Gear Boxes and Other Speed Changers’ given against Sl. No. 25 in the declaration. In respect of any of these goods, there is no dispute about receipt and utilisation of the goods by the appellants in their factory for manufacture of their final products, nor is there any dispute regarding the duty-paid character of the goods. The only dispute is with regard to the nomenclature of the goods in the declaration filed by the party. Having carefully examined the entries in the copy of the declaration available on record, I observe that the description of goods given at Sl. Nos. 1,25 & 31 in the declaration tally, by and large, with the respective descriptions of the goods in the invoices. Any deficiency of nomenclature of these goods in the declaration is too minor to dis entitle the party to the Modvat credit taken thereon. It has been held time and again by this Tribunal that such minor curable deficiencies in the Modvat declaration cannot stand in the way of the competent authorities allowing Modvat credit on the goods covered by such declaration. As regards ‘Excitation Coil’, which according to the appellants is covered by the description ‘Generating Set-Parts’ given at Sl. No. 26 in the declaration, the Revenue has no case that the said goods are not part of the generating set used in the appellants’ factory for the manufacture of the finished products. On the other hand, the learned Advocate has drawn my attention to the decision of the Tribunal in the case of Eveready Industries (I) Ltd. (supra), wherein the Tribunal held that since generating sets fell under Clause (a) of Rule 57Q(1), parts of such generating sets would fall under Clause (b) to Rule 57Q(1) and would ipso-facto be eligible for the Modvat credit under Rule 57Q. The reliance placed by the learned Advocate on the Tribunal’s decision in the said case is apposite to the present case. Since I have already found that the said goods are otherwise eligible for the Modvat credit under Rule 57Q, such credit cannot be denied on the mere ground that ‘Excitation Coil’ was not described as such in the Modvat declaration. Since none of the lower authorities has taken a view that excitation coil is not a part of generating set, it should be held that the description ‘generating set-parts’ given in the Modvat declaration very well covered ‘excitation coil’ and therefore, the goods ought to have been taken as duly declared by the party under Rule 57T. Even otherwise, in the facts and circumstances set out hereinbefore, any deficiency of the description of the item in the declaration is only a minor curable defect which should not stand in the way of the party availing themselves of the substantive benefit under the Modvat scheme. Therefore, the orders of the lower authorities denying the capital goods – credit amounting to Rs. 17,638.52 taken by the appellants cannot be sustainable in law.
10. The learned JDR has, at the last leg of his arguments, prayed for reference of the issue of Modvatability of the goods in question to a Larger Bench of the Tribunal. The facts and circumstances of this case do not throw up any issue to be referred to a Larger Bench. Therefore, the prayer of the learned JDR for reference cannot be acceded to.
11. On the basis of the findings given hereinbefore, I hold that the input credit of Rs. 10,745/- and the capital goods credit of Rs. 17,638.52 taken by the appellants are in order, while the input credit of Rs. 1,645/- on ‘floculating agent’, taken by the party is not so. The order of the learned Commissioner (Appeals) shall stand modified to this extent. Since there was no allegation in the show cause notice that the party had taken Modvat credits with any mala fide intention, the imposition of penalty on them by the adjudicating authority and the confirmation thereof by the lower appellate authority cannot be sustained. Hence, the penalty stands vacated.
12. The appeal is partly allowed as above, with consequential benefits (if any) to the appellants.