Judgment:
1. These four appeals are on identical issues concerning the same appellant and are, therefore, being disposed of by a common order.
(1) Appeal No. E/3246/91-NRB is filed against the order in appeal dated 5-6-1991 passed by the Collector (Appeals). (2) Appeal No.E/3245/91-NRB is filed against the order in appeal dated 5-6-1991 of the Collector (Appeals). (3) Appeal No. E/3223/91-NRB against the order in appeal dated 18-6-1990 passed by the Collector Central Excise (Appeals) and (4) Appeal No. E/3224/91-NRB, dated 30-6-1990 filed against the order passed by the Collector Central Excise (Appeals).
2. Briefly stated the facts of the cases are that the appellants manufacture bare Copper Wires under sub-heading No. 7408.19. In the manufacture of the Bare Copper Wires the appellants use duty paid inputs namely, Copper Wire Bars received from M/s. Hindustan Copper Limited, a Public Sector Undertaking. These inputs are received accompanied by documents viz. Sale invoice/challans and certificates signed by M/s. Hindustan Copper Ltd. showing the payment of excise duty of Rs. 6,200 per MT + 5% as Special Excise Duty on the inputs. The Authorities below rejected the claim of the appellants for Modvat Credit on the ground that the Certificate issued by M/s. Hindustan Copper Ltd. is not covered by any circular/instruction issued by the Central Board of Excise and Customs in terms of Rule 57G(2) of the Central Excise Rules, 1944.
3. The main contention of the appellants is that the certificates issued by the M/s. Hindustan Copper Ltd., are in pursuance of the provisions of Circular issued by the CBEC under Rule 57G(2) and therefore it was the duty of Collector (Appeals) to have accepted the certificates issued by the H.C.L. evidencing the payment of duty @ Rs.6,200 per MT.4. When the case was called, Shri A.N. Sharma, the ld. Consultant of the appellants appeared and submitted that the appellant actually paid duty @ Rs. 6,200 per MT + 5% SED on Copper Wire Bars, but the authorities have not accepted the certificates and the challans issued by M/s. H.C.L. which is a Public Sector Undertaking; that the limit of confining the amount to Rs. 3,300 per MT + 5% in terms of Government of India's Order dated 20-5-1988 was wrongly applied in their case; that Circular Letter No. 267/17/88-CX. B, dated 19-2-1988 issued by the Central Board of Excise and Customs does lead to the bona fide impression that a certificate showing payment of duty issued by a Public Sector Undertaking on inputs are acceptable in lieu of Gate Pass and AR Is; that other Collectors and in the same Collector ate other Divisions are accepting challans and certificates issued by the H.C.L.
as duty paying document; that it is well settled that the benefit of the Modvat credit cannot be denied for mere technicality particularly when payment of duty on inputs at a particular rate and use thereof in the manufacture of final products is not in doubt. In support of his contention that in the same Collectorate other Divisions were accepting similar certificates issued by H.C.L. and therefore non-acceptance of such certificates in the appellants' case is discriminatory, the ld.Advocate relied for this contention on the judgment of the Tribunal in the case of G.K.W. Ltd. v. Collector of Central Excise reported in 1985 (22) E.L.T 504. In this case, the Tribunal had held "that for later period without any change in the Notification in the same Collectorate the appellants have been getting concessions under the Notification.
Besides, the appellants have urged that in similar circumstances other Steel manufacturers M/s. Durgapur Steel, M/s Mahindra Steel Ltd., and others had been availing concessions under the Notification, even though they were using the higher percentage of Ferro Alloys. In particular two of them - National Iron & Steel and Oriental Steel Ltd., both within the jurisdiction of the Calcutta Collectorate had been availing of these concessions though they had also been using similar ingredients in their manufacture. It is, therefore, clear that denial of concessions to the appellant was discrimnatory." 5. On the question of procedural lapses not to be cited for denying credit if receipt of duty paid goods and their utilisation for production is not disputed. The ld. Consultant cited the Tribunal's judgment in the case of Collector of C. Excise v. Vikrant Tyres Ltd. reported in 1986 (26) E.L.T 65 (Tri.). In this case the Tribunal observed that "we have carefully considered the facts of the case and the submissions made by both sides. It is not the department's case that the goods were not received; nor it is the Department's case that the goods were not duty paid. Furthermore it is not the department's case that the goods were not duly taken in for further production. All that they have stated is that there has been a violation of procedural requirements in delaying submitting D-3 document by a few hours and further that the goods were not available for verification. It would be understandable if the department, on this ground, were to consider warning the respondents or imposing any penalties for violation of procedures. To dis-allow credit of duty already paid even on satisfaction that such duty paid goods have been duly received and further consumed in the production of goods, which on clearance would be charged to duty, amounts to taking the stand that, on account of some default in following the procedural requirement the department would collect duty at both ends. This stand is not supportable. It is this principle which guides the earlier decision of this Tribunal in the case of Chemiequip Ltd. v. Collector of C. Excise, Thane reported in 1984 (18) E.L.T. 135 (Tri.) which undoubtedly covers the point at issue that procedural lapses should not be cited for denying the assessee the benefit of set off, where the receipt of goods, their essential duty paid character and their utilisation for further production is not disputed." The ld. Consultant relied on the ratio of the judgment of the Tribunal in the case of SBS Organic (P) Ltd. v C.C.E. reported in 1990 (45) E.L.T. 701 (Tri.). In this the Tribunal had held "We have carefully considered the arguments from both sides.
The main issue to be decided in this appeal is whether the denial of Modvat credit in respect of inputs received under gate passes endorsed in favour of the appellants after passing through more than two hands, is sustainable. Rule 57G of the Central Excise Rules stipulates that inputs are to be received under the cover of a gate pass, an AR-1, a Bill of Entry or any other document as may be prescribed by the Board.
Gate pass is a document prescribed for removal of the goods from the factory of manufacturer to the first destination. This is evident from the provisions of Rule 52A and Rule 173G of the Central Excise Rules.
Hence, when there is a stipulation in Rule 57G that the inputs are to be received under gate pass by the claimant of Modvat credit, it should be normally taken to mean that the said Rule contemplates receipt of inputs straight from the factory of manufacturer under gate pass. In that case, the consignee is necessarily to be the Modvat claimant and consignor being the manufacturer of inputs. However, when this requirement created some difficulties in the case of Small Scale units to obtain the inputs through intermediaries the Board appears to have made relaxation to this requirement by permitting one endorsement in the gate pass initially and subsequently based on the representations permitting up to two endorsements in the gate passes. This relaxation made by the Board appears to be purely of administrative nature based on considerations of implementing the Modvat scheme, so long as the duty paid nature of the goods and duty paid thereon could be established. As seen from the Trade Notice cited by the learned advocate, it is evident that the Government is keen to extend the Modvat credit so long as the goods in factory packed condition as are covered by the gate passes are received by the parties intending to avail Modvat credit. Going by this spirit of the relaxation, we are unable to appreciate the routine and mechanical approach of the authorities below in rejecting the claim of the Modvat credit only on the ground that more than one endorsement has been made. When the Board themselves have taken a decision to relax the procedural requirement by way of administrative instruction it should be the endeavor of the authorities to extend Modvat credit wherever, the duty paid nature of goods is evident from the gate passes produced and quantum of duty paid on the inputs could be ascertained from them. A positive approach is called for in this regard. We also take note of the argument of Shri Arya that permitting a number of endorsements would involve inconsiderable administrative burden and the gate passes are likely to be abused. In this case, it is contended by the other side that the previous endorsements have been made not by any other manufacturer who could utilise these inputs but only by intermediaries in the trade channel. In any case, the department is entitled to make verification or investigation with regard to the genuineness of the gate pass and also on the question whether gate pass has been utilised for availment of Modvat credit at the earliest stages. In this case, no such inquiry appears to have been conducted and the Modvat credit has been denied only on the ground that more than that of permitted endorsements have been made in the gate passes. Such an order cannot be sustainable in the context of the scheme of Modvat credit read along with the relaxation made by the Board. We, therefore, set aside the order passed by the authorities below and permit availment of credit. While doing so, we allow the liberty to the Asstt. Collector to cause any inquiry or investigation to satisfy himself about the genuine nature of the gate passes and also about non-utilisation of the gate passes at the earlier stages of endorsements for availment of Modvat credit. The appeal is disposed of in the above terms." The ld. Consultant also cited the Tribunal's Order No. S. No. 559-560/91-NRB and S. No.84-85/91-NRB stating that under these Stay Orders the Tribunal was pleased to grant a Stay after upholding the contentions made by the Appellant. The ld. Consultant therefore prayed that the impugned order may be set aside and the appeal may be allowed.
5A. Shri K.N. Gupta, the ld. SDR appeared for the respondent and submitted that Rule 57G(2) of the Central Excise Rules, 1944 lays down that credit can be taken in respect of the inputs received in the factory under the ower of a Gate Pass or AR 1, a Bill of Entry or any other document as may be prescribed by the Central Board of Excise and Customs, in this behalf, evidencing payment of duty on such inputs; that the Central Board of Excise & Customs never indicated that certificates of payment of duty issued by M/s. H.C.L. should be accepted and therefore the lower authorities have correctly disallowed the Modvat credit on the inputs. He reiterated the findings of the lower authorities in the impugned order.
6. Heard both sides and considered their submissions. Under the proviso to Rule 57G(2), it has been provided that the manufacturer who has filed a declaration under Sub-rule (1) may after obtaining the acknowledgment aforesaid, take credit of the duty paid on the inputs received by him; provided that no credit shall be taken unless the inputs are received in the factory under the cover of a Gate Pass, an AR 1, a Bill of Entry or any other document as may be prescribed by the Central Board of Excise & Customs constituted under Central Board of Revenues Act, 1963, in this behalf, evidencing the payment of duty on such inputs. I also find that the Central Board of Excise & Customs by their letter No. 267/17/88-CX. B, dated 9-2-1988 clarified 'Trade is aware that the facility to avail credit under Rule 57A is available on the basis of the certificates issued by the Public Sector Undertakings/Canalising Agencies like MMTC/STC by treating such certificates as duty paying documents.' It is not the case of the Department that this letter is not relevant to the facts of the present case. It is also not the case of the department that H.C.L. is not a Public Sector Undertaking. As the CBEC can prescribe any other document evidencing the payment of duty on inputs in exercise of the powers under Rule 57G(2) and the clarification that the trade is aware that the facility to avail credit under Rule 57A is available on the basis of the certificates by Public Sector Undertakings/Canalising Agencies like MMTC/STC by treating such certificates as evidence for payment of duty. This clarification very clearly says that the certificate issued by Public Sector Undertaking should be treated as duty paying documents. There is nothing on record to show that this clarification was not issued by the Central Board of Excise and Customs. I, therefore, do not see any reason not to agree with this clarification or any reason to ignore this clarification given by the Board. In this view of the matter, I set aside the impugned order and allow the appeals. Consequential relief, if any, shall be admissible to the appellant in accordance with law.