ORDER
Archana Wadhwa
1.
Vide impugned order the Commissioner, Central Excise, Patna has confirmed demand of duty of Rs. 66,77,197/- (Rupees sixty six crore seventy seven lac twenty two thousand one hundred ninety seven only) and has imposed equivalent amount of personal penalty upon them.
2. Briefly stated the facts of he case are as under:
2.1. The appellants are producing Superior kerosene Oil (hereinafter referred to as SKO). the said SKO has poor illuminative characteristics and has 15/16 mm smoke point and technically known as Straight Run Kerosene Oil. Appellants, in order to improve the quality of SKO, imported kerosene oil for the purpose of mixing the same with their own produced as SKO and as such raising the smoke point of the same. The imported kerosene oil was cleared by them on payment of Countervailing duty. The appellants availed the benefit of modvat credit of such CVD after a declaration was made under the provisions of Rule 57G. The said imported kerosene oil was used by them for blending with the indigenous kerosene oil. Such activity was treated by them as manufacturing activity and final product so obtained was cleared by them on payment of duty. They continued with the said activity during the period April, 1994 to March, 1999.
2.2. The appellants were severed with a Show cause Notice on 4.5.99 alleging that imported kerosene oil cannot be considered as input used in the manufacture of similar product and as such the modvat credit availed by them was irregularly availed inasmuch as the same was not admissible. Accordingly, the Notice alleged that the appellants had wrongly availed modvat credit on the imported SKO by misdeclaring the same as an input. The said Show-cause Notice was challenged by the appellants on merits as also on the point of limitation. Appellant’s contentions were not accepted by the Adjudicating authority who confirmed the demand of duty and imposed personal penalty upon them.
3. Shri R. Venkatraman, General Manager (Excise & Customs) appearing for the appellants submits that the modvat scheme was extended to their product in the year 1994. Prior to such period, the appellants were undertaking the same activity with due permission of their jurisdictional Central Excise authorities and were clearing the final blended kerosene oil on payment of duty. No objections were raised by the Revenue that the activity as undertaken by them does not amount to manufacture. With extension of the Modvat credit to their final product, the appellants filed a declaration under the provisions of Rule 57G which was duly acknowledged by their jurisdictional proper officer. He clarifies that inasmuch as the quantum of credit availed by them was higher than the duty paid by them on their final product, the Revenue took an objection that the activity undertaken by them is not a manufacturing activity and as such, credit was not available to them. However, the Revenue is silent about the quantum of duty paid on their final product.
3.1. Apart from assailing the impugned order on merits, learned Representative also draws our attention to the fact that the period involved in the present appeal is form April 1994 to March, 1999 whereas the Show-cause Notice was issued on 4.5.99. As such, major part of the demand is barred by limitation. Drawing our attention to the finding of the Adjudicating authority as regards the limitation, he submits that the learned Commissioner has admitted that there was a declaration under the provisions of Rule 57G but has attributed suppression to them by observing that they have interpreted the Modvat rules according to their own interpreted the Modvat rules according to their own interpretation and as such, has misdeclarred the imported kerosene oil as an input with sole intention to avail the credit irregularly. He submits that when the entire facts were before the Revenue, there was no justification for invoking a longer period of limitation against the appellants.
4. Shri R.K. Mukherjee, learned Advocate appeared on behalf of the Revenue and submitted that the activity undertaken by the appellants by blending of the kerosene oil cannot be held as manufacturing activity as no new product comes into picture. He submits that the appellants started with imported kerosene oil, mixe the same with the indigenous kerosene oil and mixture so obtained was again kerosene oil. Such an act cannot be treated as an act of manufacture and the imported kerosene oil cannot be treated as an input. As such he submits that Modvat credit has been rightly denied to the appellants. However, on a query from the Bench as to why the Revenue was charging duty on the final product, if the activity undertaken by the appellants does not amount to manufacture, Shri Mukherjee could not give any satisfactory answer. As regards the limitation Shri mukherjee reiterated the stand of the Revenue reflected in the impugned order.
5. We have heard the submissions of both sides. Without adverting to the merits of the case we find that the appeal can be disposed on the pint of limitation. Admittedly, the Modvat credit was being taken by the appellants with the knowledge and consent of the Department inasmuch as the declaration under rule 57G was filed by them and was also acknowledged by the Department. In these circumstances, the charges of suppression as made by the Revenue cannot be upheld. Reasoning of the Adjudicating authority as regards the limitation as reflected in the impugned orders as under:
They have advanced an argument that since they were duly permitted by the Department to blend the imported kerosene with that the indigenous kerosene and that they duly declared the imported kerosene as an input under head the rule 57G declaration form which were also acknowledged by the Department as such, they can not be alleged for any suppression of fraud and thus the demand beyond six months period is time barred. I find that their above argument is not admissible for the reasons that the permission for blending was given in different circumstances when Modvat scheme was not in picture in relation to the said product. They took advantage of the permission and misdeclared the imported kerosene as an input when the Modvat scheme was extended to the said product and they thereby irregularly availed Modvat credit against the same. Availing of the said credit and utilisation of the same towards payment of duty on clearances of their products is not proper and is not admissible and they evidently contravened the provisions of Rule 57A, 57G and 173G of Central Excise Rules, 1944. The assessees are working under S.R.P. and are enjoying freedom in their normal business. They follow the Rules and procedures as per their own interpretations. It is the duty cast upon them to follow the Rules & Procedures correctly. I find that they fully misdeclared the imported kerosene as an input and thus contravened the provisions of Rule 1944 with sole intention to avail Modvat credit irregularly. As such invocation of provisions of Rule 57-I (ii) for the recovery of irregularly availed Modvat credit beyond six months period is lawful and justified. I hold the same.”
A reading of the above paragraph shows that the factum of filing Rule 57G declaration and acknowledgement of the same by the proper officer has been admitted by the Adjudicating authority. If the Revenue felt that availing of modvat credit in respect of kerosene oil is not admissible an objection could have been taken by them at the time of filing of the declaration. The Revenue happily collected the duty during the period in question without reasoning any objection as regards non-manufacturing activity of the appellants but raised objection after a gap of five years for denying the benefit of the Modvat credit to the appellants. Even while disallowing the Modvat credit in respect of imported Kerosene Oil on the ground of non-manufacture, there is no whisper in the said order about the duty paid by the appellants. As such we hold that invocation of longer period of limitation against the appellants is not justified. Appeal is thus allowed on the point of time-bar.
(Pronounced in the Court)