ORDER
K.S. Venkataramani, Member (T)
1. The appellants, herein, manufacture Automobile coolant liquid cum Anti-Freezing preparation which is classifiable under Heading 3820.00 of the Central Excise Tariff Act. On 30-6-1987, the Central Excise Officers visited their premises and found that they had been clearing these goods upto 9-2-1987 without taking out a Central Excise license and without payment of duty thereon. Shri Uday Singh, the Director of the appellants in a statement on 30-6-1987, said that they had been manufacturing the goods since May, 1986. They import Mono Ethylene Glycol from Japan which is their main raw material. He informed the officers that they had obtained a Small Scale Industries Certificate, but had not taken out the Central Excise license. The officers found, on the basis of value of clearances of the appellants from the financial year 1986-87 to 1987-88 that the appellants should have paid Central Excise duty @ 5% and which would come to Rs. 5,16,363.21. This demand was computed after considering the eligibility of the appellants for the Small Scale Industries exemption under Notification No. 175/86. At the conclusion of the proceedings, initiated against the appellants, the Principal Collector of Central Excise, New Delhi passed the impugned order dated 26-9-1988/30-9-1988 demanding the aforementioned duty and also imposing a penalty of Rs. one lakh on the appellants.
2. Shri Gopal Prasad, ld. Counsel for the appellants submitted that the appellants had no mala fide intention to evade payment of duty. They had, in fact, written to the department on 2-5-1986 seeking their advice to take out the Central Excise licence for their product. Again, they wrote on 25-11-1986 to the department intimating that they are manufacturing their product from imported Mono Ethylene Glycol and whether they should apply for Central Excise licence. When the department did make enquiries that they had furnished all the material particulars in relation to their product and the ld. Counsel urged that there is no intention to evade payment of duty which would be clear from the fact that the duty paid on the imported raw-material is much higher than the duty on their final product and they can easily discharge the duty liability thereon by opting for Modvat credit. The ld. Counsel pleaded that the Commissioner has unjustly denied them their claim for Modvat credit holding that it cannot be granted to them at the belated stage of adjudication since the appellants have never applied for the same.
3. Hear Shri Mewa Singh, ld. S.D.R., who reiterated the reasoning in the Commissioner’s order and pointed out that, admittedly, the appellants have never taken out the Central Excise license and also there is no evidence of the receipt of their letters which they claim to have sent to the department seeking clarification.
4. We have carefully considered the submissions made by both the sides, herein. It is not disputed that the product manufactured by the appellants is excisable under Chapter 38 of the Central Excise Tariff Act, 1985. The appellants had to take out a Central Excise licence and pay duty on the clearances exceeding exemption limit as a Small Scale Industries Unit under Notification No. 175/86. Therefore, the duty demand on the appellants is well founded and is upheld. The plea has, further, been made by the appellants that they should be allowed the facility on Modvat credit on the inputs, which has suffered countervailing duty at the time of import. The Commissioner, we find, has rejected their claim for modvat, as having been made belatedly. However, we are of the view that such a rejection of the claim is not well founded. This plea has to be considered in the context of this case where the Commissioner had computed the demand of duty payable by the appellants after considering their eligibility for exemption as a small scale unit under Notification No. 175/86. It is to be noted that the eligibility for this exemption is also granted subject to certain conditions like declaration, which admittedly, the appellants had not complied with. However, they have been granted the exemption in a fair manner. Similarly, we are of the view that the appellants’ claim for availing of Modvat credit on their input Mono Ethylene Glycol should be considered by the Commissioner and the facility may be granted to them if it is shown to the satisfaction of the Commissioner that the raw-material has suffered duty with the supporting duty paying document and that further the appellants are able to satisfy the Commissioner that such raw-material has gone in the production of their final product during the relevant period. For facilitating such an exercise, it is seen that the appellants had, at one stage, filed a declaration apparently when the proceedings had already been initiated on 20-7-1987. The department can take this declaration for the purpose of the procedural requirements under the modvat scheme in the peculiar facts of this case. It is also borne in mind, in this context, that the Tribunal in similar situations had extended such benefit to the appellants in some of its decisions. Therefore, the appeal is disposed of by upholding the duty demand and.directing the Commissioner to consider the claim of the appellants for Modvat credit on their input in the above terms. We also are of the view that on the facts and in the circumstances of the case, the quantum of penalty needs to be reduced. We, accordingly, reduce the penalty to Rs. 10,000.00. The appeal is disposed of in the above terms.