ORDER
S. Kalyanam, Member (J)
1. This is an application for waiver of pre-deposit of a duty of Rs. 4,65,018.05 levied under the original order of the Assistant Collector of Central Excise, Mangalore, dated 3-8-1994 and duly confirmed in Appeal under the impugned order of the Collector (Appeals), Bangalore, dated 26-11-1993. The Assistant Collector has disallowed Modvat benefit in respect of LDPE on the ground that there was no proper declaration in terms of Rule 57G of the Central Excise Rules, 1944.
2. Shri G. Sampath, the learned Counsel for the petitioner submitted that the petitioners are manufacturers of articles of plastic holding Central Excise licence and they filed declaration under Rule 57G of the Central Excise Rules describing the goods as LDPE and even though there was mistake in regard to sub-heading of the tariff heading the petitioners had mentioned the correct chapter heading of the goods and they became eligible for the benefit of Modvat benefit in terms of Rule 57A for the first time since Nov., 1992. It was urged that an error in sub-heading should not be a reason for disallowing the Modvat Credit since the goods described in the declaration correspond with the description given in the gate pass. It was urged that the goods were purchased by the petitioners from IPCL, a Government of India undertaking. The learned Counsel further submitted that in similar circumstances, the authorities have given the benefit of Modvat credit in respect of HDPE granules and since there is no dispute in regard to the identity of the goods in question and since there is no Revenue implication, the Modvat Scheme should be liberally construed in favour of the petitioners. The learned Counsel also submitted that an error in regard to sub-heading of the Chapter is only a procedural irregularity. The learned Counsel also placed reliance on the ratio of the following rulings:
(1) Collector of C. Ex. v. Triton Valves Ltd. reported in 1993 (65) E.L.T. 289.
(2) Bihar Plastic & Chemicals v. C.C.E. reported in 1993 (64) E.L.T. 332.
(3) Miles India Ltd. v. AC reported in 1992 (57) E.L.T. 367.
(4) Madras Fabricators v. C.C.E. reported in 1990 (47) E.L.T. 367.
3. Heard Shri J.M. Jeyaseelan, the learned D.R.
4. The original authority in dealing with the question relating to eligibility to Modvat credit in regard to HDPE granules has observed as under :
“In the case of HDPE granules received by them, the description given by the assessee and description in the gate passes tallies. With regard to the classification there is a minor variation in sub-heading. It is clear from the documents that what has been received are HDPE granules only. It is well established law that Modvat credit should not be denied for minor variations in description or classification where the identity of the goods is clearly established.”
We note that even in respect of LDPE it is found by the AC that the goods received by the assessee as per the documents are granules falling under classification sub-heading 3901.10 and tallies with the description in the gate pass. When the benefit is given in respect of HDPE, we are of the view that similar benefit should be given in respect of LDPE also particularly when it tallies with the description in the gate pass and when there is no Revenue implication nor is there any doubt in regard to the identity of the goods and the mistake in the sub-heading is only a procedural irregularity. The ratio of the various rulings cited above would be applicable prima facie to the facts of this case. In view of the above, we grant waiver of pre-deposit of duty and also stay of the recovery of the amount pending appeal.
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(S. Kalyanam)
Member (J)
V.P. Gulati, Member (T)
5. I have given a careful thought to the order recorded by my learned Brother and I have not been able to agree with him that applicants have made out a prima facie on merits warranting dispensation of the pre-deposit of duty as demanded in terms of the impugned order.
6. I observe the learned lower appellate authority has followed the ratio of the decisions of this Tribunal in the case of Paro Food Products v. Collector of Central Excise, reported in 1988 (38) E.L.T. 332 (Tribunal) and also in the case of Aluminium Industries Ltd. v. Collector of Central Excise, reported in 1990 (47) E.L.T. 28 (Tribunal). The ratio of these decisions is that the assessee is entitled to take Modvat credit in respect of such of those inputs in respect of which a specific declaration filed in this regard would not suffice. The ratio of these decisions has been upheld by the Hon’ble Supreme Court while dismissing the Civil Appeal filed by M/s. Ajanta Steel Corporation against the Order No. 1993-NRB and Misc. Order No. Misc/208/93-NRB, dated 12-5-1993. In that case the Tribunal has held that the general description given in the declaration for the inputs as rolling/re-rolling/re-rolled material was not adequate for taking deemed Modvat credit under Rule 57G(2) and the Tribunal had followed its earlier ruling in the case of Paro Food Products, referred to supra, while deciding this matter. The above has been reported in 1994 (69) E.L.T. A 169 (1st February issue) as under :
“Modvat Deemed Credit – Specific description of input necessary
The Supreme Court Bench comprising of Hon’ble Mr. Justice P.B. Sawant and Hon’ble Mr. Justice Yogeshwer Dayal on 28-10-1993 has dismissed the Civil Appeal (C.A. No. 4682 of 1993) filed by M/s. Ajanta Steel Corporation against the judgment and Order No. A/321/1993-NRB and Misc. order No. Misc/ 208/93-NRB, dated 12-5-1993 passed by the CEGAT (Ajanta Steel Corporation v. Collector of Central Excise, Chandigarh).
The main issue involved in this appeal is the eligibility to deemed credit on input material received by the appellants which has been broadly described as rolling/re-rolling/re-rolled material in the related bills and invoices, purchased from the open market and whether the appellants were rightly taking deemed credit in terms of the Govt. of India, Ministry of Finance Order dated 7-4-1986 issued in exercise of the powers under Rule 57G(2).
The Appellate Tribunal following its earlier decisions in the case of Paro Food Products and Collector of Central Excise v. Ganesh Steel Industries dismissed the appeal and held that specific description of the input is a necessary requirement for availing of the Modvat.”
In the case of Paro Food Products, where the appellants had given the description of the inputs as ‘packing material’ and had sought Modvat credit in respect of ‘tin containers’ the Tribunal, while holding that they could not take the Modvat credit in that regard, held as under:
“5. We have carefully considered the submissions made before us. We are not able to accede to the plea of the learned Consultant in regard to the availment of the Modvat credit for metal containers. It is not disputed before us and is indeed admitted that the appellant had not filed any declaration in respect of ‘metal containers’ for availing Modvat credit. In interpreting the scope and ambit of Rule 57G(2) this Tribunal in a number of decisions has already taken the view that a manufacturer who has not filed a declaration under Rule 57G will not be entitled to take credit of duty paid on the inputs received by him under the Modvat scheme. The plea of the learned consultant that it is only a condonable lapse or irregularity is not acceptable.”
7. In the present case it is seen from the narration of facts and the orders of the learned lower authorities and the pleas made by both the sides that there was no specific declaration of the input LDPE granules made by the applicants.
The description of the inputs as given in the declaration filed is as under :
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Final product Tariff Input Used Classification
obtained. Classifica- Sub-heading No.
tion No.
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A
High Density 39 High Density 3901.20
Polyethelene Polyethelene
Tapes
B
High Density 39 1. High Density 3926.90
Polyethelene Polyethelene Fabric.
Sacks
HDPE Fabric 2. Low Density 3920.32
Polyethelene
3. Master Batch 3206.90
4. Poly white 3906.90
5. Inks 3215.00
6. Reducers 3814.00
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It is seen that in respect of both the inputs viz. High Density Polyethelene and Low Density Polyethelene so far as the description is concerned it is similar inasmuch as it has not been stated whether the material is in the form of granules or in any other form including sheets or fabrics etc. as seen under the heading ‘Inputs’ at S1. Nos. A and B. It is, however, seen against both these items the tariff heading under which the goods would fall has been shown against the item High Density Polyethelene Tariff 3901.20 and against Low Density Polyethelene Tariff 3920.32. The learned lower appellate authority has allowed the benefit of Modvat credit in respect of HDPE granules, while rejecting the applicant’s claim for Modvat credit in respect of LDPE granules, holding that the description given by the applicant and the description in the gate pass tallied in case of HDPE and not in the case of LDPE. It is seen that Tariff heading shown against the description of HDPE is 3901.20 T.I. 3901.20 is Polyethelene having a specific gravity of .94 or more which is for HDPE. Granules are considered as primary form. Therefore, by reading the description High Density Polyethelene with Tariff Heading 3901.20 it conveys the understanding that the goods which have been declared are HDPE granules or HDPE in primary form. The benefit in this regard, therefore, can be said to have been rightly given to the applicants. In respect of Low Density Polyethelene the Tariff heading shown against the same is 3920.32 which is for other plastics and strips of plastics in flexible and plain form. This description is for products other than in primary form. Reading the description with the tariff heading does not convey that the applicants are going to get Low Density Polyethelene in primary form or granules form. It is for this reason the learned lower authorities have allowed the benefit in the case of HDPE and not in the case of LDPE. In this regard the learned lower appellate authority has clearly stated in his order as under :
“HDPE has been shown specifically as HDPE fabrics and HDPE separately under sub-heading Nos. 3926.90 and 3901.20 whereas no such specific heading i.e. whether it is a granule fabric, strip etc. has been shown against the LDPE.”
The learned lower appellate authority, therefore, prima fade has rightly followed the decisions of this Tribunal and has denied the benefit of Modvat credit in the case of LDPE in respect of which there was no specific declaration filed as seen from the analysis of the position above. Inasmuch as the orders of the Tribunal cited supra in this regard have been affirmed by the Hon’ble Supreme Court, I hold that prima facie there is no infirmity in the order of the learned lower appellate authority. A plea has also been made by the learned Advocate that the lapse in giving full description of the goods is only a procedural lapse. I observe the Tribunal in the case of Paro Food Products, referred to supra, has clearly held that this is not a condonable lapse and this ratio has been followed in a number of other decisions of the Tribunal, the latest being that of the North Regional Bench in the case of Collector of Central Excise, Chandigarh v. Ganesh Steel Industries, reported in 1992 (19) E.T.R. 367. The learned lower appellate authority’s order prima facie cannot be found fault with on this ground also. The ratio of the decisions of the Tribunal cited by the applicants, in view of the specific rulings on the point at issue, is therefore, not applicable to the issue before us prima facie.
8. The learned Advocate for the applicants pleaded that the applicants are in a bad financial shape and applicants have applied for a declaration of the unit as a sick unit within the meaning of clause (o) of Section 3(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 before the B.I.F.R. under Section 15 of the said Act. It is observed that the applicants’ turnover for the year ending 31st March, 1993 is over Rs. 1.76 crores and the applicants have an amount of Rs. 41 lakhs shown against sundry debtors/deposits and have also advanced an amount of over Rs. 11,76,832 which is recoverable in cash. The applicants have also access to loans, both secured and un-secured, and have loans outstanding at Rs. 83 lakhs and Rs. 12 lakhs.
9. Taking into consideration the totality of the facts and circumstances of the case, I order that on the applicants pre-depositing Rs. 1,55,000 (Rs. One lakh and fifty-five thousand) the pre-deposit of the balance amount of duty demanded shall stand dispensed with pending appeal. The date before which the pre-deposit has to be made and compliance reported shall be fixed depending upon the outcome of the reference to be made to the Third Member.
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(V.P. Gulati)
Dated: 13-7-1994 Member (T)\
POINT OF DIFFERENCE
Whether in the facts and circumstances of the case prima facie case has been made out by the applicants for dispensation of the pre-deposit of duty demanded by the lower authorities’ orders for reasons given by Member (J) and on the ratio of the judgments cited by the Petitioner Appellant and, therefore, pre-deposit of duty has to be dispensed with, as held by Member (J).
or
in view of the fact that there was no specific description in respect of LDPE granules in the declaration filed by the applicants under Rule 57G of the Central Excise Rules, 1944 and taking together the description of the item and the Tariff heading declared in the declaration and in the absence of any specific declaration, following the ratio of the decisions cited by Member (Technical) in his order including the Supreme Court’s ruling, no prima facie case has been made out by the applicants and taking into account the financial position of the applicants the applicants have to pre-deposit a sum of Rs. 1,55,000 (Rs. One lakh & fifty-five thousand) as held by Member (Technical).
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(S. Kalyanam) (V.P. Gulati
Member (J) Member (T)
15-7-1994 14-7-1994
T.P. Nambiar, Member (J)
10. The point of difference between the learned Member (Technical) as well as Member (Judicial) (Vice President) is referred to me by the Hon’ble President. The learned Member (Judicial) has held that applicants had a prima facie good case for waiver of pre-deposit of the duty. The learned Member (Technical) on the other hand has held that the applicant should pre-deposit a sum of Rs. 1,55,000/- towards the duty demand of Rs. 4,65,018.05/-.
11. The applicant had declared under Rule 57G with reference to the inputs used by them. In so declaring, they declared the item as LDPE and the tariff heading of the same was not correctly given by them. They have given the Tariff Heading as 3920.32.
12. Sh. Sampath, the learned Counsel for the applicant, drew my attention to the fact that the applicants are using LDPE granules in the manufacture of final product. But, they have not specifically mentioned granules and in giving the classification they gave a wrong classification of the tariff heading. Had they declared LDPE granules then they certainly would have been entitled for the modvat credit. Therefore, it was his contention that the department would not be prejudiced and it is not the case of the department that if they had declared the same the applicant was not entitled for the Modvat credit. He pointed out that in such circumstances, in can only be treated as a procedural irregularity and for procedural irregularity Modvat credit should not be denied. He also relied on several decisions of the Tribunal as well as the decision of the Supreme Court reported in 1991 (55) E.L.T. 437 para 11.
13. Sh. Murugandy, the learned DR, vehemently contended before me that the applicant has no prima facie case. He stated that the classification given by the applicant is not correct and therefore, was to make a plea that it was not LDPE granules. In such circumstances, he reiterated the view expressed by the learned Member (Technical).
14. I have considered the submissions made by both the sides. The learned Member (Technical) has stated that in respect of LDPE the tariff heading shown by the applicant was 3920.32 which is for other plastics and strips in flexible and plain form. This description is for products other than primary form. He therefore held that the tariff heading does not convey that the applicants are going to get Low Density Polyethelene in primary form or granules form. But the learned Member (Judicial) on the other hand was of the view that even in respect of LDPE it has been found by the AC that the goods received by the applicant as per the documents are granules falling under sub-heading 3901.10 and tallies with the description in the gate pass. He therefore held that when the benefit was given in respect of HDPE, similar benefit should be given in respect of LDPE also when it tallies with the description in the gate pass and when there is no revenue implication nor is there any doubt in regard to the identity of the goods and the mistake in the sub-heading is only a procedural irregularity.
15. In the light of the above views expressed by the Hon’ble Members, it is necessary for me to look into the principles laid down by the Supreme Court in the decision reported in 1991 (55) E.L.T. 437. It was held in that decision that a distinction between the provisions of statute which are of substantive character and were built-in with certain specific objectives of policy on the one hand and those which are merely procedural and technical in their nature on the other must be kept clearly distinguished. Had the applicants declared the same as LDPE granules, there is no dispute that they would have got the Modvat credit. In this regard, there was a mistake in giving the tariff heading by the applicants. Keeping in view the observations of their Lordships of the Supreme Court and applying the principles laid down in the ruling of the Supreme Court to the facts of this case and also taking into consideration that the applicants’ financial position is very bad and that it is a sick unit within the meaning of clause (o) of Section 3(1) of the Sick Industrial Companies (Special Provisions) Act, 1985,1 am of the view that the balance of convenience is in favour of the applicant and therefore the pre-deposit of the duty demanded in this case requires to be waived during the pendency of the proceedings. I agree with the view of the learned Member (Judicial) that the pre-deposit of duty and stay is merited in this case. The matter may now be placed before the learned bench for passing final orders on this behalf.
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(T.P. Nambiar)
Member (J)
ORDER
In view of the majority decision, pre-deposit of duty is stayed.
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(V.P. Gulati) (S. Kalyanam)
Member (T) Vice President