VAMITEX PVT LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) Rule. Mr. Asim J. Pandya, learned standing counsel waives service of Rule for the respondents. With the consent of the learned counsel for the parties, the petition is taken up for final disposal today. What is challenged in this petition under Article 226 of the Constitution is the order dated 9-5-2003 (Annexure "E") passed by the Customs, Excise and Gold (Control) Appellate Tribunal at New Delhi dismissing the petitioners' appeal and confirming the order dated 20-3-2002 (Annexure "D") passed by the Commissioner of Central Excise & Customs (Appeals), Vadodara by which the Commissioner set aside the order dated 29-1-1998 (Annexure "C") of the Assistant Commissioner, Central Excise, Division-I, Mehsana allowing the Modvat credit of Rs. 1,92,026/- and discharging the show cause notice dated 26-9-1994.

(2.) The petitioner-Company is a private limited Company engaged in the business of manufacture of polyester textured yarn. The factory of the Company is closed down for the last several years and the properties of the Company have been taken over by and auctioned by GSFC. In the year 1994-95, the Company was manufacturing textured filament yarn. The yarns were covered under the Proforma Credit Scheme under erstwhile Rule 56A of Central Excise Rules, 1994 and the petitioner-Company was availing the proforma credit benefit as per the said rule. As per the said rule, the petitioner was required to maintain RG-23 Parts-I and II register as prescribed under Rule 56A at the relevant time and the yarns purchased and procured by the petitioner-Company and the duties paid thereon were recorded in the said register, whereas the textured yarn produced by the petitioner-Company was recorded in Daily Stock Account i.e. RG-I register and the duties were paid on such yarns at the time of removal thereof from the factory. On and with effect from 20-5-1994, Rule 56A came to be deleted and Rule 57A came to be inserted providing for Modvat credit Scheme of yarns w.e.f. 20-5-1994. The petitioner-Company accordingly became eligible for Modvat benefit under Rule 57A w.e.f. 20-5-1994 instead of Proforma Credit benefit under erstwhile Rule 56A. The basis Schemes of Proforma Credit under Rule 56A as well as Modvat credit under Rule 57A were similar and even the registers required to be maintained under the said Schemes were also very similar to each other. Under Rule 56A the petitioner-Company was required to maintain the register in form RG-23 for the Proforma Credit Scheme but under Rule 57A the petitioner-Company was required to maintain the register in form RG-23A Parts-I and II for the Modvat credit Scheme. The petitioners were not aware about the aforesaid change in the rules and the consequential procedural change regarding maintenance of separate registers . The petitioners, therefore, took credit of duties paid on four consignments of yarns which were received in the petitioners' factory on 23rd May, 24th Mary, 2nd June and 6th June 1994 and entered the same in register form RG-23 under Rule 56A on the respective dates. Those transactions were also reported to the Range Superintendent while filing returns for the months of May and June 1994. On the basis of the said four transactions, the petitioners took Proforma Credit of Rs. 1,92,026/-. The Assistant Collector of Central Excise Division-II, Mehsana issued show cause notice dated 26-9-1994 calling upon the petitioners to show cause why the above credit of Rs. 1,92,026/- should not be disallowed and recovered along with imposition of penalty as Rule 56A was deleted w.e.f. 20-5-1994 and the petitioners had not entered the transactions in register RG-23A Parts-I and II. The petitioners submitted their reply dated 1-8-1995 submitting that there was no misuse of any facility by the petitioners and that the petitioners were a much entitled to Modvat credit Schemes under Rule 57 as Proforma Credit Schemes under Rule 56A. The petitioners had undisputedly paid Rs. 1,92,026/- on the inputs received by the petitioners after 20-5-1994 and, therefore, there was nothing wrong in taking credit of this amount. The mistake in making the entries in register form RG-23 instead of making the entries in register form RG-23A after 20-5-1994 was not such a material fact that the petitioners be denied the entire credit. There was substantial compliance with the procedural rules and, therefore, the show cause notice was required to be discharged. The Assistant Collector accepted the above defence and held that since there was no short levy and there was only a procedural lapse due to change in procedure w.e.f. 20-5-1994 and that the procedural mistake had occurred only for 15 days i.e. from 20-5-1994 to 10-6-1994, denial of Modvat credit was not justified. This view was taken by the Assistant Commissioner in the Order-in-Original dated 29-1-1998 at Annexure "C" and the demand raised by the show cause notice was accordingly dropped. However, the department took the matter in appeal before the Commissioner (Appeals), Vadodara. It appears that the notice sent by the Commissioner (Appeals) was not received by the petitioners because the notice was probably served on the petitioners' factory which was closed and the factory was taken over by the GSFC. Ultimately, the Commissioner (Appeals) recorded the absence of the petitioners and allowed the appeal on the ground that the Assistant Commissioner had no jurisdiction to condone the lapse of not making the entries in register form RG-23A under Rule 57A and that the credit could not be claimed under Rule 56A which was deleted w.e.f. 20-5-1994. The petitioners, therefore, preferred an appeal before the Appellate Tribunal which confirmed the order of the Commissioner (Appeals). Hence, this petition under Article 226 of the Constitution.

(3.) Mr. Sanjanwala, learned counsel for the petitioners has submitted that when the Assistant Collector held, and the Commissioner (Appeals) or the Tribunal have not held otherwise, that the petitioner-company was entitled to get the benefit of Modvat credit under Rule 57A for the transactions in question which were admittedly entered into register RG-23, the petitioner-company ought not have been penalized by denying it the benefit of the Modvat Scheme.