Judgment:
1. These appeals arising out of the common impugned order of the Collector (Appeals), Madras, have been filed by the Revenue.
2. The brief facts of the case are that the Respondents are manufacturers of Miner's cap lamps. For this purpose, they declared 'cables' classified under Chapter Heading 44, as one of the inputs.
These cables were sent to job worker who cut the cables to required sizes and fixed the connectors. These 'cables complete' as they are called, were captively consumed in the manufacture of the final product and were also sold as spares. The cables were sent to job workers in terms of the permission obtained under Rule 57F(2). Some of the cables were used for the manufacture of the final product viz. Miner's cap lamps and a portion of them were cleared as spares on payment of appropriate duty for which classification list and a price list were filed. While clearing these cables complete for home consumption, appropriate duty was debited in RG 23A Part II, instead of paying it through PLA. It is the contention of the lower original authority that the company had been availing Modvat credit on cables among other inputs since 7-3-1986, but they had not declared cables complete falling under Heading 85.44 as final products for the purpose of Rule 57A. The company had also been utilising the credit for payment of duty on cables complete. Therefore, the lower authority has concluded that the company has contravened the provisions of Rule 57G of the Central Excise Rules, since they utilised the credit for payment of duty without having declared the cables complete as finished goods for input cables.
"In this case, it is not disputed that the appellants had not declared the cable with connectors or 'cable complete' as (me of the end products in terms of the Modvat Rules. However, the lower authority has also not disputed the fact that the appellants had duly filed the classification list and the price list in respect of this item and the same was being cleared on payment of duty through RG 23A Part 11 account, from time to time since 1986. They were also filing the prescribed returns regularly by which the Departmental officers were fully aware that such cables were being cleared on payment of duty through RG 23A account. The lower authority in her order dated 12-12-1989 has stated that the demands are not time barred, since the assessments for removals were provisional. The lower authority has not indicated in her order as to on what grounds these were provisional. On specific enquiries by this authority from the Divisional Office, it was intimated that the assessments were provisional only in respect of the clearance of batteries due to their being sold through a 'related person'. Therefore, it is clear that as regards the cable connectors, the assessments were not provisional. The appellants have contested the contention of provisional assessment on the ground that they had not executed any bond in respect of this item under Rule 9B. On this point, they have relied on a number of decided cases. In any case, it is not disputed that in the show cause notices which have been issued by the Supdt.
of Central Excise, there are no allegations regarding the suppression, mis-statement or collusion etc. 1 find that in all the cases, the orders have been passed by the lower authority without much concern to the facts on record and without taking into consideration the submission of the appellants. It is not disputed that the appellants were clearing the said cables on payment of duty for which the classification list and price list were duly approved.
The only ground for demand of duty is that there was no declaration made in respect of these cables as finished product and therefore the party was not entitled to pay duty through RG 23A Part II account. That they should have paid duty only through PLA account.
If that may be so it cannot be stated that the goods were being cleared without payment of duty. The payment of duty through Modvat credit account is as valid and legal as through the PLA. Since the department was fully aware of the facts and since there is no allegation of suppression or mis-declaration etc., no duty can be demanded in this case. Had the departmental officers pointed out to the party that the duty was to be paid through PLA instead of RG 23A Part II account, they would have done so. The lower authority in the order dated 12-12-1989 appears so un-convinced of her own stand that she has asked the assessee to pay a sum of Rs. 9,71,988.43 through PLA or TR. 6 challan and take credit of an equivalent amount in their RG 23A Part II".
4. The appellant-Collector has urged the following grounds in his appeal : "(b) In terms of Rule 57-1(2), if any inputs in respect of which credit has been taken are not fully accounted for as having been disposed of in the manner mentioned above, the manufacturer shall on demand pay duty of. excise leviable on such inputs within 10 days of the notice of demand.
(c) In this case, the "cables" were declared by M/s. Standard Batteries Limited, as inputs in respect of the miner's cap lamps for the purpose of availing Modvat Credit. The said cables were utilised either in the manufacture of Miner's cap lamp or in the manufacture of cable complete after processing outside. Hence when the cables were used in the manufacture of "cable complete" which are cleared on payment of duty they cannot said to be disposed of in the manner specified. Therefore, the order of the AC expunging credit of duty is correct in law." 5. The learned DR reiterated the grounds of appeal and submitted that the input taken was cables in length and the same were declared to be input for the manufacture of minor's cap lamps. He pleaded that even the cables were sent out to job workers under Rule 57F(2) and converted into the cables complete with connectors and these cables complete were partly used in the manufacture of the minor's cap lamps and the same were cleared as such. He pleaded that Modvat credit taken in respect of cables which was used in the manufacture of cables complete cleared from the factory was not correctly taken as the cables complete had not been declared as the finished final product, in the declaration filed under Rule 57G of the Central Excise Rules. He pleaded that since cables complete had not been declared as specified finished goods under Rule 57G, for their clearance for home consumption, the duty should have been paid either by cash or by PLA and not by debit entries under RG 23A Part II. He pleaded that as it is, the assessments were provisional and the cables complete were a separate item known in the trade answering to the specific use and therefore had to be considered as a separate finished product for the purpose of Modvat Credit. He pleaded that the lower authority has held that the demand is time barred and there was no suppression on the part of the Respondents.
6. Shri Anand, the learned Chartered Accountant appearing for the respondents pleaded that the assessments were not provisional and the appellants have been filing the classification and price lists for the clearance of the cables. He pleaded that the cables were as it is manufactured through the job workers after obtaining permission for removal of the inputs under Rule 57F(2). He pleaded that the authorities were all along aware about the manufacture and clearance of the cables from the Respondents' factory and therefore the demand as it is would be hit by limitation. He pleaded that the Respondents have been submitting all the necessary returns in regard to payment of duty as well as the nature of the goods cleared and the mode of payment in regard to the same. Therefore, the lower authority's order is sustainable in law.
7. We observe that demand has been made in the present case for payment of duty in cash through PLA in respect of cables complete which were cleared by the appellants as spare parts out of the factory. The appellants have paid duty out of the credit standing in their books in the RG 23A Part II. The reason given by the original authority was that the appellants have not declared cables complete as a finished product under Rule 57G and for that reason they were not entitled to pay duty of the MODVAT Credit taken in respect of cables in length which was declared as input in the manufacture of cap lamps and out of which cables complete were manufactured. The original authority also demanded an amount of Rs. 6,53,052.98 as the MODVAT Credit taken in respect of the input cables in lengths which were used for manufacture of cables complete cleared from the appellants as spare parts as mentioned above.
The lower appellate authority has held that the demand is time barred for the reason that the appellants had all along filed classification and price list and RT 12 returns in respect of both cables in length and also cables complete. He has also entered a finding that the assessment could not be considered as provisional. In the grounds of appeal no ground has been taken in regard to the assessment being provisional. We, therefore, proceed on the basis that the assessments were final. We observe that the appellants had declared cables in length as input for the manufacture of cap lamps and the authorities had also allowed the appellants to send the cables in lengths to job workers under Rule 57F(2) for manufacture of cables complete which were later cleared on payment of duty as also used as component in the cap lamps. The authorities therefore could be taken to have all along been aware that cables in lengths were being converted into cables complete and that these cables complete were being used in the cap lamps and also being cleared out of the factory. The appellants are clearly on record about their clearance of cables complete and had recorded the payment of duty on these out of the Modvat Credit taken on cables in length through RG 23A Part II account. In this background it has to be held that there was no suppression of facts on the part of the appellants in regard to taking Modvat Credit as also utilisation of the same for payment of duty on cables complete.
8. The next point that arises for consideration is that at the relevant time there was no limitation provided under Rule 57-1 for recovery of Modvat Credit wrongly taken and therefore whether any limitation can be imposed for recovery in this regard. We observe that the Supreme Court in the case of Citadel Chemicals reported in 1989 (42) E.L.T. 515 (SC) have held that where no limitation is provided a reasonable period of limitation has to be read into the concerned provisions of law. The Hon'ble High Court of Karnataka in the case of Thungabhadra Steel Products v. Supdt. of Central Excise -1991 (56) E.L.T. 340 has held that limitation provided under Section 11A of the Central Excises and Salt Act, 1944 can be read into Rule 57-1 of the Central Excise Rules, 1944. In view of the above, we hold that the lower authority's order so far as recovery in respect of Modvat Credit wrongly taken is concerned, the same is maintainable.
9. In regard to the demand for payment by cash or PLA in respect of the cables complete cleared from the appellants' factory we observe that the item was not declared as a finished product under Rule 57G. The appellants could not have paid duty in respect of the same by utilising Modvat Credit taken as payment could have been in cash and clearance of the goods therefore have to be taken to have been made without payment of proper duty. However, since there was no suppression on the part of the appellants as we have held above inasmuch as the authorities had knowledge about the mode of payment of duty, the extended period of limitation under Section 11A cannot be applied for recovery of duty in respect of the same. In view of the above, we find no merit in the appeal of the Revenue and we dismiss the same.