Gowri Shankar, Member (T)
1. The appellant is a manufacturer of soap and other products. It applied in 1986 to the Assistant Collector for permission to send its inputs to job workers for processing and return. The permission was granted. The appellant thereafter continued to avail of this procedure.
2. A notice was issued to the appellant in May, 1995, alleging that the intimation as required under Rule 57F(3) had not been filed and dated acknowledgement not obtained, and that the permission granted to the appellant was provisional and not having been confirmed, it ceased to be valid. The notice further alleged, that the inputs were not returned within sixty days from the despatch; the denial of Modvat credit taken on these inputs was proposed. The Assistant Commissioner whose order was confirmed by Collector (Appeals) confirmed the proposal in the notice. In his letter dated 23.04.1986, the Commissioner has granted post facto approval for the permission granted provisionally under Rule 57F(2). However, the law in this regard was changed with effect from 1994. From that date onwards, prior permission was not necessary. What was required was an intimation to the Assistant Commissioner of which a dated acknowledgement was required. The general permission earlier granted ceased to be valid from this date, since no permission was required at all. However, the appellant was required to give intimation to the Assistant Commissioner, before removing the inputs. It is not denied that this has not been done. At the relevant time, there was no requirement in the rules for the inputs to be returned within sixty days of their despatch. That requirement was only brought into the rule only from 01.03.1996, when Rule 57F(3) was further amended. There is no contravention by the appellant in this regard.
3. What now remains to be seen is, whether the failure by the appellant to furnish the intimation itself would justify denial of credit. It is not questioned that the inputs were in fact sent to the job workers and returned by the job workers. The purpose for which the intimation is provided, that enabling the department to keep a watch, if it so chooses, over the movement of the inputs to and from the factory of the manufacturer, has been fulfilled. The basis of denying the credit therefore ceases to exist. What therefore remains is the contravention of the rules. In normal circumstances, a penalty for that reason may be justified. In the present case, however, the department was already aware by means of the permission granted that the appellant was sending out its goods to job workers. The department would no doubt have made such enquiries as it considered necessary before granting necessary permission and so regulated grant of permission that the interest of the revenue was safeguarded. The essential requirement of the rule has thus been fulfilled. I therefore do not think a penalty is warranted.
4. The appeal is therefore allowed and the impugned order set aside.