Jyoti Balasundaram, Member (J)
1. Common issues are involved in the above 13 appeals which are hence heard together and disposed of by this common order. Details of the appeals are as under:
Sl.No. Appeal No. Adjudication Order Duty demand Penalty No. & date -------------------------------------------------------------------------------- 1. E/23/96-NB 105-111/95/5-10-95 2,82,25,4317- 3 lakhs E/33 to 38/96- NB (7 appeals) 2. E/1193-1198/96- 64 to 69/96 23/24- 1,84,16,205/- 3 lakhs NB 5-96 -------------------------------------------------------------------------------- Order-in-Original No. 105-111/95 covers 7 show cause notices, details of which are given below: -------------------------------------------------------------------------------- Show cause notice Period of demand Amount dated -------------------------------------------------------------------------------- 30-12-1994 2-7-1994 to 31-7-1994 24,93,871.73 27-1-1995 August 1994 30,75,724.83 28-2-1995 September 1994 39,14,975.96 30-3-1995 October 1994 36,56,966.65 28-4-1995 November 1994 47,33,119.95 30-5-1995 December 1994 57,97,054.63 28-6-1995 January 1995 73,76,562.00 -------------------------------------------------------------------------------- The second adjudication order covers 6 show cause notices, details of which are furnished herein below: -------------------------------------------------------------------------------- Show cause notice Period of demand Amount -------------------------------------------------------------------------------- 27-7-1995 February 1995 32,20,824.78 31-8-1995 March 1995 33,18,384.58 29-9-1995 April 1995 91,91,884.89 31-10-1995 May 1995 39,73,127.66 5-12-1995 June 1995 9,31,392.94 29-12-1995 July 1995 38,62,903.74 --------------------------------------------------------------------------------
2. The brief facts of the case are that the appellants, M/s. Raaj Unocol Lubricants Ltd. (hereinafter referred to RUL) are registered with the Central Excise Department for the manufacture of clearing agents, gasoline additives, lubricating oils and greases falling under Chapter Headings 27 and 34 of the Schedule to the CETA 1985. They entered into a contract with Indian Oil Corporation Ltd. (hereinafter referred to as IOC) for manufacture of Servo brand lubricating oils, for the manufacture of which they received a letter dated 21-3-1994 from IOC authorising them to manufacture, blend/pack their base mineral oils and lubricating oils to be received from the factories of IOC situated at Bombay/Calcutta/Madras and other locations. The letter also stated that these activities were to be carried out on account of IOC and that RUL were authorised to comply with all procedural formalities as required under the Central Excise Act. Accordingly, RUL commenced manufacture of Servo lubricating oils from base mineral oils, additives and packaging material received by them from IOC. They also filed a declaration under Rule 57G of the Central Excise Rules on 27-7-1994 for availing Modvat credit on duty paid on these inputs. Show cause notices as set out above were issued alleging wrong availment of Modvat credit. The common allegations in all the show cause notices were as under:
(i) that the credit had been taken on the basis of documents which had not been issued in their name; that the documents had been issued in the name of M/s. IOC Ltd. care of M/s. RUL; that under the Modvat scheme no credit is admissible on the basis of the invoices which are not in the name of the assessees.
(ii) that as per first proviso to Rule 57G(2) as amended vide Notification No. 4/94-C.E. (N.T.) dated 1-3-1994 read with rule 52A of Central Excise Rules, 1944, no credit shall be taken unless the goods are received in the factory under the cover of an invoice marked as “Duplicate for Transporter”. The documents produced by the party are not marked as “duplicate for transporter” and hence are not valid documents for taking Modvat credit. Therefore, the credit taken by the party is not admissible to them.
(iii) the party has taken Modvat credit in respect of full quantity of inputs appearing in the documents but the inputs accounted for in RG-23A Part-I are less than those appearing in the documents. Therefore, the excess credit taken by the party as mentioned in each show cause notice is not admissible in view of Rule 57-I(2) ibid and is required to be recovered from them.
(iv) that certain documents do not have any particulars regarding debit of Central Excise duty in PLA/RG 23A Part II. There is also no reference of any duty paying documents issued under Rule 52A of Central Excise Rules, 1944 as required under Notification 15/94-C.E. (N.T.), dated 30-3-1994.
(v) that certain credits have been taken under Rule 57Q as credits on capital goods; that such goods are not covered under the definition of “capital goods” as given in Explanation (1) to Rule 57Q of Central Excise Rules, 1944; that the party has also not produced the documents evidencing the payment of duty on these goods. Hence credit is not admissible on them.
The appellants submitted separate replies to the show cause notices.
3. After considering the replies and hearing them, the Commissioner dropped the first charge. The appellants themselves accepted the charge No. (iii) that they had taken excess credit and deposited a sum of Rs. 51,900.75 out of the excess credit of Rs. 54,400.84. The Commissioner confirmed the charges at Sl. Nos. (ii), (iv) and (v) and the amounts of duty as set out above were confirmed and penalties as set out above were imposed on the appellants. Hence these appeals.
4. The appellants filed applications for waiver of pre-deposit of duty and penalty. By Stay Orders dated 22-8-1996 1996 (87) E.L.T. 507 (Tribunal) and 17-3-1997 respectively, the Tribunal directed pre-deposit of Rs. 1.98 crores and Rs. 90 lakhs respectively. Civil Writ Petitions were filed by the appellants against the Stay Orders, before the Delhi High Court, which by its order dated 4-5-1999, directed the assessees to deposit Rs. 99 lakhs and Rs. 45 lakhs respectively within a period of 2 months and directed the Tribunal to hear the appellants on merits, on deposit of the amounts. The High Court also directed the Tribunal to hear IOC, in case IOC appeared before it. The High Court order is reproduced below:
“In case Nos . 104/95 to 111/95 and 64/95 to 69/95, the Commissioner of Central Excise, Delhi, passed adjudication orders on 5th October, 1995 and 24th May, 1996 respectively by confirming the demands of Rs. 2,82,25,481 /-and Rs. 1,84,16,205/- upon the petitioner under Rules 57A(2) and 57U of the Central Excise Rules, 1944 and imposing a penalty of Rs. 3,00,000/- each under Rule 173Q of the aforementioned Rules. The petitioner preferred two separate appeals before the CEGAT, Northern Region Branch, which was registered as E-23/32-38/96 and E/1193/96-NB/97. On the prayer for stay of recovery of demand, the CEGAT through the impugned orders stayed the operation of the demand by order dated 22nd August, 1996 and 17th March, 1997 respectively subject to the condition of pre-deposit of Rs. 1.98 crores and Rs. 90 lacs respectively. These writ petitions are against the said orders. There is stay operating that due to non-deposit, the petitioner’s appeals will not be dismissed by CEGAT.
Learned counsel for the petitioner contends that the liability, if any, to meet the demand as per the agreement between the petitioner and the Indian Oil Corporation is that of Indian Oil Corporation. Indian Oil Corporation has not been made party to the proceedings despite requests and moreover because of the financial hardships, the petitioner is not in a position to satisfy the condition of pre-deposit of the amount which aspect has not been duly considered by CEGAT.
Having considered the submissions, we are of the view that in so far as Indian Oil Corporation is concerned, it is not a necessary party to the proceedings. Merely that there is an agreement between the petitioner and the Indian Oil Corporation by which the Indian Oil Corporation has agreed to reimburse the petitioner of any central excise duty, the petitioner cannot avoid its liability.
Irrespective of the above, it has been conceded at Bar by Mr. Phoolka, learned counsel appearing for respondent No. 1 without prejudice to the rights and contentions of respondent No. 1 that there will be no objection in hearing Indian Oil Corporation also in case Indian Oil Corporation of its own will put in appearance on the date of hearing, but this may not be treated that hearing can be claimed as of right. Accordingly, it is ordered that in case the Indian Oil Corporation will put in appearance, its views will also be taken into consideration by CEGAT while deciding the petitioner’s appeals.
As these petitions have been pending since January, 1997 and stay is in operation, considering all aspects and the financial hardship of the petitioner, we partly allow the petitions by modifying the impugned order passed by the CEGAT and directing that instead and in place of the amount of Rs. 1.98 crores and Rs. 90 lacs, the petitioner will deposit a sum of Rs. 99 lacs and Rs. 45 lacs respectively in the two appeals within a period of two months from today as a condition precedent for continuance of stay. On deposit of the amount, the CEGAT will hear the appeals on merits. Ordered accordingly. In case the Indian Oil Corporation will put in appearance, the CEGAT will also hear at. Parties to appear before the CEGAT on 15th June, 1999.”
Petitions stand disposed of.
In view of the High Court direction, we allow the miscellaneous applications filed by M/s. IOC for intervention in these cases.
5. We have heard Shri Mahesh Agarwal, learned Counsel for RUL, Shri A.N. Haksar learned Senior Counsel for IOC and Shri Mewa Singh, learned SDR for the Revenue.
6. Our findings are recorded below:
Issue No. I (Charge at Sl. No. 2)
The findings of the Commissioner on this issue are contained in paragraphs 9 and 10 of the adjudication order Nos. 105-111/95 dated 5-10-1995 (which have been followed in the second adjudication order) and are reproduced below:
“9. The next charge against the party is that as per the first proviso to Rule 57G(2) as amended vide Notification No. 4/94-C.E. (N.T.) dated 1-3-1994 read with rule 52A, no credit shall be taken unless the inputs are received in the factory under the cover of an invoice marked as ‘Duplicate copy for transporter’. It is alleged that the documents produced by the party are not marked as “Duplicate copy for transporter”. Hence they are not valid documents for taking the credit and therefore the credit taken by the party is not admissible to them. RUL both in their written submissions and during the course of personal hearing have generally not disputed the fact that the Mod-vat credit is available only on the duplicate copies of the documents, and documents on the strength of which they had taken the Modvat credit in all the cases (with the exception of a few) were not the duplicate copies of such documents. In para 3.0 of their separate replies they have stated mat in terms of Rule 57G credit of duty paid on inputs received by the manufacturer can be taken upon receipt of the inputs itself under the cover of an invoice issued under Rule 52A or Rule 57GG as the case may be. In both the rules, the duplicate copy is recognised as the copy on the basis of which the credit of duty could be taken; that in Rule 57G there is also a provision for using the original invoice for taking the credit of duty if the duplicate copy of the invoice is lost in transit, about which the Assistant Collector should be satisfied. It is contended that for the purpose of uniformity in the practice and clarity with the matter of availing Modvat credit, the Central Govt. have specified that the duplicate copy of the invoice should be the document based on which the manufacturer could take Modvat credit. However, there is provision for taking Modvat credit of original invoice, if the duplicate copy is lost in transit. It is, therefore, contended that since there is alternative provision for taking credit on original invoice, they should be allowed the credit on the same. It is further argued that the following invoices are marked as “duplicate for transporter” and therefore they should be admissible for the purpose of Modvat credit:
(i) Invoices at Sr. Nos. 55 to 58, 71 and 80 in respect of show cause notice dated 30-12-1994 at Sr. No. 2 of the Table in Para 2 above.
(ii) Invoices at Sr. Nos. 136 to 157 in the show cause notice dated 27-1-1995 at Sr. No. 2 of the Table at para 2 above.
(iii) Invoices at Sr. Nos. 88 to 111 in show cause notice dated 28-2-1995 at Sr. No. 3 of the Table in Para 2 above.
10. To the above submissions of the party, it may be stated that vide Notification No. 4/94-C.E. (N.T.) dated 1-3-1994, Rule 57G was amended and in the first proviso to Rule 57G(2) it has since been specified that no credit shall be taken unless inputs were received in the factory under the cover of an invoice, issued under Rule 52A or any other documents as may be prescribed by the Central Govt. in this behalf evidencing the payment of duty on such inputs. In terms of the same Notification it was provided under Rule 52A(2) that the invoice shall be made out in quadruplicate. The original copy shall be for the buyer, the duplicate for the transporter, the triplicate shall be sent along with the RT-12 return and the quadruplicate shall be retained by the manufacturer. It is further provided in Sub-rule (3) of rule 52A that the copies of the invoices shall be marked at top in bold capital letters in the following manner, namely :-
(i) the original copy shall be marked as ORIGINAL FOR BUYER;
(ii) the duplicate copy shall be marked as DUPLICATE FOR TRANSPORTER for taking credit under rule 57G and rule 57T;
(iii) the triplicate copy shall be marked as TRIPLICATE FOR CENTRAL EXCISE; and
(iv) the quadruplicate copy shall be marked as QUADRUPLICATE FOR ASSESSEE.
“These provisions very clearly specify that the duplicate copy has to be very clearly marked as DUPLICATE FOR TRANSPORTER and this copy alone is eligible for taking credit under Rules 57G and 57T. Therefore, there is no discretion with any person to transport the goods on a copy of the invoice other than the duplicate one and no credit can be taken on any other copy of the invoice. No one shall be held arguing that it is only a procedural lapse and a substantive benefit cannot be denied to a party on account of any procedural lapse. This argument is not valid for more than one reasons. First of all the first proviso under rule 57G(2) very clearly provides that no credit shall be taken unless inputs are received in the factory under the cover of an invoice issued under Rule 52A. This is a prohibitive provision, prohibiting the taking of the credit on documents other than those issued under Rule 52A. I have already shown that for this purpose only duplicate copy of the invoice is prescribed and no other document. This provision leaves no discretion either with an assessee or any quasi-judicial authority to allow the Modvat credit on the goods received under the cover of a copy of an invoice other than the duplicate copy. Secondly, in terms of the provision of rule 57A(1) the power is ‘vested in Central Govt.’ to specify the conditions and restrictions for taking and utilising the credit under the Modvat scheme. The Central Govt. in their wisdom have specified only duplicate copy of an invoice for the purpose of taking Modvat credit and therefore a quasi-judicial authority cannot usurp the statutory powers of the Central Govt. and nullify these provisions in the name of procedural lapse. I therefore, hold that the goods wherever not received in the factory of the party under the cover of a duplicate copy of the invoice, the taking of the Modvat credit on such documents is prohibited and if already taken, such credit is liable to be reversed or the credit utilised is liable to be recovered in cash from the party. The party has referred to certain invoices which indeed have been marked as “duplicate for transporter”. I have got these invoices verified by the Supdt. of the Range concerned. I admit them as genuine documents for the purpose of taking Modvat credit thereon. The credit involved in respect of these invoices amounts to Rs. 28,22,794.50.”
6.1 The contention of RUL is that credit was availed on the strength of a copy of the stock transfer challan which is the transporter’s copy and that as per the procedure adopted by IOC, the transporter’s copy is not surrendered at the consignee’s premises, (RUL) but returned after acknowledgement of receipt of the goods to the transporter for production of the same to IOC’s Regional Office/despatching locations as back-up documents for claiming freight charges. They submit that the transporter’s copy is available with the IOC and they are in a position to furnish such copies on the basis of which the Commissioner can satisfy himself about the taking of credit on duplicate invoices. To support their claim, they rely upon the affidavit dated 3-1-1996 filed by the IOC, explaining the procedure followed by IOC. The prayer is strongly opposed by the learned SDR who submits that since admittedly the credit was taken on the basis of invoices which were not clearly marked “duplicate for transporter” as required under Rule 52A(3) of the Central Excise Rules, credit is not admissible to the appellants and in this connection, he relies upon the decision of the Larger Bench of the Tribunal in the case of Commissioner of Central Excise, New Delhi v. Avis Electronics Ltd., reported in 2000 (117) E.L.T. 571, wherein it has been held that a manufacturer can take credit only on the basis of the duplicate copy of the invoice unless such copy has been lost in transit in which case, credit can be taken on the basis of the original copy of the invoice provided the Assistant Commissioner is satisfied about the loss of the duplicate copy.
6.2 We have carefully considered the rival submissions. We note that IOC made several efforts to be heard by the Commissioner in respect of the procedure adopted by them for transport of base oils/additives to RUL but they were not heard by the adjudicating authority. The Hon’ble Delhi High Court has directed the Tribunal to hear IOC. Therefore, we take into account IOC’s affidavit dated 3-1-1996, which is reproduced below:
“1.0 M/s. Indian Oil Corporation Ltd., a Public Sector oil refining and marketing company, has been observing/discharging all Central Excise and Customs procedures/formalities as envisaged under Self Removal Procedure.
1.1 In terms of the same and in accordance with the Departmental instructions contained in the Supplementary instructions for Petroleum products, IOC was preparing daily out-turns for receipts and withdrawals, separately, on a consolidated basis, for each day, for the purpose of determining and payment of Excise duties, in lieu of the Gate-Pass under Rule 52A.
1.2 IOC was therefore preparing their Sales Invoices for the Commercial transactions as well as their own internal and inter-unit movements of Petro-products without containing the details as required under Rule 52A, as such details were otherwise provided for in their daily outturns (in a Consolidated manner)
1.3 With a view to adopt uniformity in practice on All India basis, a fully Computerised Software System was developed for Terminal documentations (such as invoices, stock transfer documents etc.)
2.0 However, w.e.f. 1-3-1994, with the introduction of Sales invoices or like documents as the basic assessment documents under Rule 52A, it became necessary to realign the contents of the Commercial Invoices so as to contain the additional details as required to be provided under Rule 52A in replacement of the Gate-Passes.
2.1 The above major changes envisaged in-depth discussions amongst the various groups concerned within the organisation, before suitable changes could be incorporated in the Computer Programme for implementation on All India basis.
2.2 Secondly, there was a need to re-print the Computer Stationery also, so as to contain the details which are required to be pre-printed as provided under Rule 52A.
2.3 The process as mentioned above took considerable time before the implementation could be undertaken.
2.4 Further, there was also a need to maintain uninterrupted movements of Petro-products, in the overall national interests and for that the process of incorporating the additional contents had to be staggered over a period of time.
2.5 Under the above stated circumstances, IOC could not incorporate quite sometime the details relating to Distribution such as ORIGINAL FOR BUYER, DUPLICATE FOR TRANSPORTER etc. in the Commercial invoices, while the other basic requirements under Rule 52A with regard to assessable value, rate and amount of duty, PLA debit references etc. were incorporated.
2.6 However, after continued efforts to re-do the programming changes in the Software package, IOC could succeed only recently for developing and finalising a revised Software version which meets the requirements under Rule 52A as well as Rule 57GG as well as the requirements under MODVAT Rules.
1.7 As of date, IOC has commenced implementation of all details as per Central Excise Rules and the Commercial invoices are accordingly prepared so that the availment of MODVAT Credit either by IOC’s own units or by its Customers is facilitated.
3.0 As regards the period during which the compliance could not be achieved in its totality, IOC wish to submit that:
(a) the Duplicate Copies of all Commercial invoices were generated right from the beginning but Copies were, as per the past practice, utilised by the Transport Contractors for the purpose of their claiming the Transportation charges, as such copies carried the description “2. acknowledgement Copy”.
(b) all such duplicate Copies were therefore attached to the Transport Bills Payment Vouchers and got retained by the Region which were effecting the payments of Transportation Costs to the Transport Contractors.
(c) in certain cases, however, the duplicate copies marked as “2. acknowledgement Copy” could be provided to the M/s. Raaj Unocol Lubricants Ltd., Ballabgarh, while majority of the cases could not be met with.
(d) the duplicate copies were also not containing the pre-printed description “Duplicate Copy for transporter” till such time IOC could finalise the reprinting of the computerised stationery around mid 1995.
(e) the duplicate copies can be located from the respective regions by tracing the related payment vouchers but considering the very high volume of invoice documents ranging around 600 to 800 nos. per day at each of the supply locations and the numerous Transport Contractors involved in the process of Transportation of petro-products, it is apprehended that it will be a near impossible task to locate such duplicate copies which are relevant in the impugned appeal matter.
(f) however, as a Public Sector Undertaking, IOC, do hereby solemnly affirm :-
(a) that against such duplicate copies of invoices, no MODVAT Credit was availed as they were utilised by the Transport Contractors for obtaining their Transportation Costs only;
(b) that IOC would undertake to produce the duplicate copies to the extent possible (say at least 60 to 70% of the total documents required to be produced) by tracing out all the Transportation bills payment vouchers from different regions, for verification & to the satisfaction of the C. Excise Department that such duplicate Copies were not otherwise utilised for claiming MODVAT Credit elsewhere.”
6.3 We note that the plea that credit was taken on the strength of transporter’s copy, sent back through the transporter to IOC, was raised by RUL before the Commissioner in the proceedings culminating in the second adjudication order. They also pleaded that the transporter’s copies were available at the Regional Office/despatching locations of IOC where freight charges of transporters were settled by the IOC. In view of this and in view of the fact that IOC was not heard by the adjudicating authority on this issue, we set aside the denial of Modvat credit on this account and remand the cases for fresh decision by the Commissioner in the light of the Larger Bench decision cited supra holding that “when a particular thing is directed to be performed in a manner prescribed by Rule, it should be performed in that manner itself and not otherwise and a combined reading of the provisions contained in the Rules make it clear that a manufacturer who wants to take credit of duty paid on inputs must base his claim on the duplicate copy of the invoice”, after hearing both RUL and IOC on this point.
6.4 Issue No. 2 (Charge No. 4) of adjudication order:
The finding of the Commissioner on this issue is contained in paragraph 13 of Order Nos. 105-111/95 dated 5-10-1995, which is reproduced below :
“13. There are allegations in the show cause notices dated 28-2-1995, 30-3-1995, 28-4-1995, 30-5-1995 and 28-6-1995 alleging that the documents mentioned at Sr. Nos. 79 to 87, Sr. Nos. 66 to 78, Sr. Nos. 93 to 108, Sr. Nos. 173 to 195 and Sr. Nos. 171 to 194 respectively in the Annexure ‘A’ to these notices did not have any particulars regarding the debit of Central Excise duty in PLA/RG.23A Pt. II; that there was also no reference of any duty paying documents issued under rule 52A as required under Notification No. 15/94-C.E. (N.T.) dated 30-3-1994. Therefore, the Modvat credit in respect of these documents was also inadmissible on this ground. To this charge of the department the party in their replies have not disputed the discrepancy pointed out in these documents and inadmissibility of the Modvat credit under Notification Nos. 15/94-C.E. (N.T.). They have however stated that these documents were issued by IOC, Bijwasan who had received the goods under stock transfer challans from Bombay which had evidence of duty payment. It is stated that they were preparing reconciliation statement by which it could be established that the goods were transferred to them by IOC Bijwasan. Therefore, it is stated that these ‘documents were cleared on payment of duty by IOC at Bombay; that they would produce the evidence of the same at the time of personal hearing. The party has been heard in extenso on 5-9-1995 and 13-9-1995. However, so far they have not able to produce the evidence of duty payment in .respect of these invoices. M/s. RUL sent a communication dated 11-9-1995 in which they stated that some reconciliation in this regard has been done but their co-relation with the duty payment at IOC, tube Complex, Bombay is still pending. Since, there is no evidence of duty payment in respect of these invoices, the Modvat credit availed by them in respect of these invoices is not admissible to them on account of not mentioning the particulars of duty payments in contravention of the provisions of Notification No. 15/94-CE.(N.T.), apart from the ground which I have already upheld in the preceding paragraphs. The wrong credit taken on this account is Rs. 25,80,584.04 + Rs. 21,48,502.35 + Rs. 25,05,571.87 + Rs. 24,44,443.14 + Rs. 41,32,569.40 respectively totalling it up to Rs. 1,38,11,670.80. This Modvat credit is accordingly denied to them”.
RUL submits that they have prepared a reconciliation chart containing all particulars of debit of Central Excise duty in PLA/RG 23A Part II and duty paying documents issued under Rule 52A of the Central Excise Rules and plead that this issue may be remanded to the Commissioner for verification of the reconciliation chart. Learned SDR has no objection to this request. We, therefore, remand this issue covering credit of Rs. 138,11,670.80 and Rs. 5039,583.15 for verification by the Commissioner.
6.5 Issue No. 3 (Charge No. 5).
This issue arises only out of adjudication order No. 105 to 111/95 dated 5-10-1995. The findings of the Commissioner which is in paras 14 & 15 of the order are reproduced below:-
“14. Further allegation in the show cause notice dated 28-2-1995 is that the party took a credit of Rs. 39,163.00 on capital goods under Rule 57Q in respect of the receipt of M. S. Plates from SAIL. It is alleged that M. S. Plates are not capital goods as given in Explanation (1) to Rule 57Q and also the party did not, produce the documents covering the receipt of the goods. Therefore, this credit is not admissible. The party in their reply have stated that M. S. Plates imported by them are covered under sub-heading No. 7208.19 of the Central Excise Tariff Act, 1985; that such M. S. Plates have been used for tankage and blenders used in the manufacturing process of the excisable goods. Therefore, the Modvat credit is admissible on these goods under Rule 57Q. With regard to this allegation my observation is that the Asstt. Collector of Central Excise should not have included this charge on the admissibility of the Modvat credit on capital goods with other charges having entirely a different subject matter. It is within his competency and he should have decided the issue. However, since this question has been raised, my findings in this regard are that the term capital goods has been defined in the Explanation (1) to Rule 57Q. I don’t find the M. S. Plates falling under any of the clauses specified therein including those introduced vide Notification No. 11/95-C.E. (N.T.) dated 16-3-1995. The noticee have not referred to any particular clause which would cover M. S. Plates. I therefore hold that the modvat credit of Rs. 39,163.00 is not admissible under Rule 57Q and for want of proof of payment of duty on them. This credit is liable to be recovered from the party.
15. In the show cause notice dated 30-5-1995 referred to at Sr. No. 6 of the Table appended in the paragraph 2 of this order, there is an allegation that the party had taken a credit of Rs. 30,491.00 under rule 57Q in respect of the duty paid on the lab instruments. It is alleged that the definition of the capital goods given under Rule 57Q before 16-3-1994 did not cover lab instruments. It is further stated that the party has taken credit without filing declaration under Rule 57-I. Therefore, it is contended that this amount of Modvat credit is not admissible and is liable to be recovered from them. The party in their reply have stated that they had filed declaration under rule 57T on 21-9-1994 and another letter on the subject was addressed to the Central Excise office on 28-12-1994 advising them the number of Bill of Entry under which the equipments was cleared from Customs. It is contended that the finished goods to be supplied to IOC must meet the quality control parameters laid down by IOC and should accompany test report of their laboratory. Therefore, it is contended that this Modvat credit is admissible to them. In this regard it may be stated even if the allegation of not filing the declaration under rule 57T is not found sustainable against the party, the lab equipment was not covered under definition of “capital goods” given under Explanation to rule 57Q(1) before the introduction of the Notification No. 11/95-C.E.(N.T.) dated 16-3-1995. The “capital goods” have been defined as machines/ machinery, plant, equipment, apparatus, tools of appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products. The lab equipment in respect of which the party has taken the Modvat credit on 27-12-1994 was meant for testing for the purpose of quality control parameters laid down by IOC. The testing is not one of the purpose mentioned in definition of “capital goods” for admissibility of the Modvat credit at the relevant time. Therefore, I hold that the Modvat credit of Rs. 30,491/- in respect of the lab equipment for testing is not admissible and the same is liable to be recovered from the party”.
6.6 M.S. plates were not covered by the definition of capital goods under Explanation 1 to Rule 57Q at the relevant time July 94 to January 95. Therefore, we uphold the Commissioner’s finding that Modvat credit of Rs. 39,163/- is not admissible on M. S. plates. However, lab instruments used for testing and ensuring that finished goods supplied to IOC meet the quality control parameters laid down by IOC, are used for processing goods, and hence they are capital goods within the meaning of Rule 57Q and hence we hold that Modvat credit of Rs. 30,491 /- availed on lab equipment is admissible to RUL and set aside denial of this amount of credit.
6.7 In respect of availing excess credit of Rs. 54,400.84 which is admitted by the appellants, the charge of availment of excess credit of Rs. 54,400.84 has been accepted by the appellants. Since they have only deposited Rs. 51,900.75 out of the above amount, we confirm the liability to pay the balance amount of Rs. 2500.09.
7. Since duty demands will have to be requantified by the Commissioner, we set aside tine penalties imposed in the impugned orders and leave open the question of imposition of appropriate penalties to be decided by the Commissioner.
8. The appeals are disposed of in the above terms.