ORDER
S. Kalyanam, Vice President
1. Since a common issue is involved in all the above appeals, they are taken up together for disposal by a common order.
2. At the outset, we would like to note that a Division Bench of the Madras High Court in Writ Appeal Nos. 1186 to 1190/94 disposed of on 14-12-1994 allowing the appellants’ writ appeals in part by a common order directed the appellants to “file appeals’ within 30 days from 14-12-1994 complying with all the requirements of law” and further directed that if appeals are filed the CEGAT shall decide the appeals without going into the question of limitation. All contentions of the party were left open and the High Court Division Bench also further directed the Tribunal “to decide the appeals within a period of three months from the date of filing of the appeals.” The appeals were filed on 16-1-1995 and as directed by the Division Bench of Madras High Court, the appeals were listed for hearing on 29-3-1995 and after few adjournments the appeals were taken up finally for disposal today.
3. Ms. Hema, the learned Counsel at the outset submitted that the short question arising for determination is as to whether the impugned common orders of the learned Collector (Appeals) dated 8-2-1988 confirming the order of the original authority and directing reversal of credits taken on the inputs besides penalty is sustainable in law and on facts. The learned Counsel submitted that for purposes of convenience in respect of each appeal she has furnished the data relating to the date of show cause notice, the date of declaration filed under the MODVAT scheme, date of acknowledgement, date on which the credit was taken, the date of utilisation of the credit, the date on which RT 12s were filed and also the amounts of duty and penalty and the relevant particulars are extracted hereunder :-
_________________________________________________________________________
Name of party Appeal Date of Show Declaration
Nos. cause notice filed Ack.
_________________________________________________________________________
_________________________________________________________________________
1 Medopharm Labs. 42/95 29-6-1987 17-3-1986 25-3-1986
2.Medopharm Pharm 40/95 -do- -do- do
3.Medopharm 38/95 -do- 26-3-1986 27-3-1986
4.Medopharm 39/95 -do- -do- -do-
5.Medopharm 41/95 -do- -do- -do-
__________________________________________________________________________
Credit taken Credit utilised RT 12s assessed Duty Penalty
(in Rs.)
28-3-1986 29-3-1986 10-4-1986 71,554.75 1,500
-do- -do- -do- 1,19,990.97 2,000
-do- 28-3-1986 -do- 4,78,250.02 5,000
-do- -do- -do- 21,586.64 1,000
-do- -do- -do- 37,451.88 1,000
__________________________________________________________________________
4. The learned Counsel submitted that at the relevant time Rule 57H dealing with the transitional provisions clearly stated that notwithstanding anything contained in Rule 57F, the Assistant Collector of Central Excise may allow credit of the duty paid on inputs received by a manufacturer before filing a declaration under Rule 57G if he is satisfied that such inputs are lying in stock or are received in the factory on or after 1-3-1986. The learned Counsel submitted that the inputs in the present case were lying in stock in the factory of the appellants on or after 1-3-1986 and the main ground on which the authorities directed reversal of the MODVAT credit was that the appellants took credit before getting the permission of the learned Asstt. Collector of Central Excise. The learned Counsel submitted that through the transitional provisions a liberal view was taken and in respect of the goods lying in stock the Rule itself permits for the Asstt. Collector to allow the credit being taken even before the filing of the declaration and therefore this is Only a procedural provision. Ms. Hema, the learned Counsel therefore submitted that the appellants had purchased the goods from the dealers in the market who had received the goods under valid documents and inasmuch as the goods were lying in stock in terms of Rule 57A even if the appellants had taken credit on the inputs without the permission of the Asstt. Collector, it is only a procedural irregularity which would call for regularisation and since it does not go to the root of the matter, the impugned orders directing reversal of the credit would not be sustainable in law or on facts of the case.
5. The learned Counsel further submitted that having regard to the date of show cause notice dated 29-6-1987 the demand is also plainly barred by limitation as periodical RT12 returns were filed and it is not the case of the department that any information was withheld from the knowledge of the department. The learned Counsel therefore submitted that the impugned orders may be set aside.
6. Shri Murugandi, the learned DR contended that in terms of Rule 57H even in respect of the inputs lying in stock even though the appellants are entitled to take credit before filing a declaration under the MODVAT scheme, they should have done it after obtaining the permission of the Asstt. Collector. In the present case, the appellants took credit even though they filed a declaration, without obtaining the permission of the Asstt. Collector. The learned DR further submitted that the assessments were of provisional in nature and therefore bar of limitation will not be applicable. The learned DR urged that the further question that would require consideration would be as to whether the inputs have already suffered duty. At this stage, Ms. Hema, the learned Counsel, intervened to clarify that the inputs had suffered duty and were purchased from the dealers in the market who had imported under valid documents and it is certainly open to the department to verify as to whether the goods had suffered duty at the hands of the appellants’ suppliers and the same should be considered in accordance with law.
7. We have considered the submissions made before us. We agree with the learned DR that the issue regarding limitation will not be applicable in the facts of the case because the assessments have been endorsed as provisional in the RT12 verifications. We are also not going into that aspect at this stage. But in regard to other plea of the learned Counsel, we find considerable force in the same having regard to the fact that admittedly the inputs were lying in stock covered by the transitional provisions under Rule 57H, the relevant part of it reads as under :-
“(1) Notwithstanding anything contained in Rule 57F, the Assistant Collector of Central Excise, may allow credit of the duty paid on inputs received by a manufacturer before filing a declaration under Rule 57G if he is satisfied that –
(a) such inputs are lying in stock or are received in the factory on or after the 1st day of March, 1986.”
We note that even if the appellants had taken the credit without getting the permission of the Asstt. Collector, it would only be a procedural irregularity which could be regularised after verification by the Asstt. Collector regarding the duty paid nature of the inputs as pleaded by the learned Counsel. We also note that a liberal view was taken in regard to the transitional provisions when the Modvat credit was first introduced and we would also note that the transitional provision in terms of Rule 57H is in the nature of an exception to the statutory requirements under Rule 57A read with Rule 57G of the Central Excise Rules, 1944. Keeping all these factors in mind having regard to the facts and circumstances of the case and also the fact that the inputs were lying in stock of the appellants in regard to which declaration has been filed and the inputs were received on or before 1-3-1986 coming within the purview of Rule 57H dealing with the transitional provisions, we are inclined to think that the impugned order directing reversal of the MODVAT credit mainly on the ground that the appellants had taken the credit without obtaining the permission of the Asstt. Collector is not sustainable in law or on facts. In this view of the matter, the impugned order is set aside and the appeals are allowed. It will be open to the department to make verifications about the duty paid nature of the inputs in accordance with law. Ordered accordingly.