ORDER
P.G. Chacko, Member (J)
1. The appellants are manufacturers of motor vehicle parts and are availing the facility of CENVAT credit (earlier MODVAT credit) in terms of the relevant Rules. In January, 1997, they had taken Modvat credit to the extent of 15% of the duty paid on lubricating/cutting/hydraulic, etc., oils claiming under Notification No. 5/94, dated 1-3-94. The Department, by letter dated 29-7-1997, directed them to limit the credit to 10% in terms of Notification No. 14/97, dated 3-5-97. The party complied with this direction without any whisper of protest. However, subsequently, they took recredit to the FULL extent of 15%. This was on 4-6-99, at a time when the maximum limit of Modvat credit that could be taken on the above oils, stood fixed at 10% with retrospective effect from 1-3-94 as per notification No. 14/97-C.E. ibid which amended Notification No. 5/94 ibid. At this juncture, the Department issued a show cause notice to the appellants, which was replied to, but no satisfactory explanation was given in the reply as to why the recredit of Rs. 47,490 had been taken by the appellants on their own. In adjudication of the dispute, the original authority disallowed the credit to the appellants and imposed on them a penalty of Rs. 10,000/-. Aggrieved, the party preferred appeal to the Commissioner (Appeals), which did not succeed.
2. Heard both the sides. The learned Consultant for the appellants raises various grounds in this appeal. Firstly, the Department, instead of issuing a letter directing reversal of the excess credit, ought to have issued a regular show cause notice to the appellants. Secondly, the inputs in respect of which the credit in question was taken did not attract any of the notifications. Thirdly, it was not open to the Department to deny the Modvat credit on the ground of want of duty paying documents required under Rule 57G as the documents on the strength of which the credit was originally taken during July, 1996 to March, 1997 were available to the Department.
3. The learned DR, contests these arguments of the Consultant. He submits that, when the Department issued letter dated 27th July, 1997 to the assessee directing them to reverse the excess credit they complied with the direction without any objection whatsoever. Had they had a grievance that a show cause notice ought to have been issued instead of the letter, they would have raised the objection at that time or at least reversed the excess credit under protest. As they did neither of these, the appellants cannot legitimately plead that the direction contained in the Department’s letter dated 29-7-97 was not legally enforceable for want of regular show cause notice. The learned DR further argues that the plea of non-applicability of the notifications to the inputs under reference was not taken by the assessee at any stage prior to the present appeal. Even in their reply to the show cause notice, the assessee did not satisfactorily explain as to why they had taken recredit on the inputs after a long time since the date of reversal of the original credit.
4. I have carefully examined the submissions. It is not in dispute that the appellants had originally taken Modvat credit to the extent of 15% on the inputs claiming under Notification No. 5/94-CE., dated 1-3-94. They limited the credit, later on, to 10% by reversing the credit taken in excess of this limit, acting upon the department’s direction contained in letter dated 29-7-97. However, in June, 1999, they took recredit of what had been reversed, this time again claiming under Notification No. 5/94 ibid. It is this action of the assessee that they have been defending throughout the proceedings up to the present stage. Now they, again, turn round and say that the notification was not applicable to the inputs under reference. The Notification No. 5/94, dated 1-3-94 stood amended with retrospective effect from 1-3-94 as per Notification No. 14/97, dated 3-5-97. Under the amended notification, the maximum limit of Modvat credit on the inputs was 10% w.e.f. 1-3-94. This provision was, admittedly, applicable to the inputs for the period of dispute. Hence the appellants were not entitled to Modvat credit in excess of 10% in respect of the inputs during the period of dispute.
5. It is an admitted fact that the appellants had wilfully carried into effect the Department’s direction (as contained in the letter dated 29-7-1997) for reversal of the excess credit as evidenced by the fact that such reversal was done without protest. Even in their reply to the show cause notice which was issued by the Department subsequent to the recredit having been taken of 15%, they did not raise any objection on this score.
6. In the circumstances, the appellants will be considered to have waived show cause notice in respect of the excess credit taken. The allegation raised in the show cause notice for denying the Modvat credit taken on 4-6-99 was that the credit was taken without any valid duty paying documents required under Rule 57G. There is no satisfactory answer to this allegation till this stage of the proceedings. The allegation will, therefore, stand vindicated and consequently the department’s case will succeed. The learned Counsel has relied on the following decisions of the Tribunal:
Veera Spinning Mills v. CCC [2001 (131) E.L.T. 437 (Tribunal) = 2001 (46) RLT 333]
Elgitread (India) Ltd. v. CCE [2002 (149) E.L.T. 1012 (Tribunal) = 2002 (53) RLT 1052]
In the first of the above two cases, a Two Member Bench of this Tribunal set aside a demand of excise duty on the ground that no show cause notice had been issued by the Department under Section 11A of the Central Excise Act to demand it. This decision cannot be applied to the instant case inasmuch as no demand of excise duty simpliciter is involved in this case and there is very much a show cause notice in the present case.
7. In the second case aforecited, it was held by a learned Single Member of this Tribunal that a letter issued by the jurisdictional Superintendent of Central Excise asking the assessee to reverse Modvat credit was not a show cause notice and that the credit was not to be denied without a proper show cause notice. Again, this decision is also inapplicable inasmuch as in the instant case, there is a show cause notice proposing denial of Modvat credit.
In the result, the appeal is rejected.