1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR -------------------------------------------------------- OTHER TAX REF. CIVIL No. 13 of 2001 UNION OF INDIA V/S M/S PREM CABLES (P) LTD Mr. VIVEK SHRIMALI, for Mr. RAVI BHANSALI, for the Union of India. Mr. LR MEHTA, Mr. RAMIT MEHTA & MR. AVINASH ACHARYA, for the respondent. Date of Order : 5.2.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI DEO NARAYAN THANVI,J. ORDER ----- This application under Section 35H(i) has been filed by the Department against the final order of the learned Tribunal dt. 8.11.2000, negativing the claim of the Department, about the assessee having mis-declared the article as aluminium plates, through M/s. P.G. Foils as, as a matter of fact the article was unwrought aluminium. The facts of the case are, that the officers of the Department visited the factory of the respondent assessee during 8.1.92 to 11.1.92, and found, that the assessee was availing Modvat Credit on aluminium plates, 2 falling under sub-heading 7606.10 of the Central Excise Tariff Act, 1985 on the central excise gate passes, issued by M/s. Padmavati Metal Industries and M/s. Prakash Metal Works, both of Ahmedabad. These units issued gate passes in the name of M/s. P.G. Foils Ltd. which later on endorsed the same in favour of the assessee. The visiting officers physically verified the article, and noticed, that the inputs did not fit within the definition of “aluminium plate” given in the Chapter note 1(d) of Chapter 76 of Central Excise Tariff Act, 1985. These articles were claimed by the assessee to be used as input (excise duty paid input) and the assessee was claiming Modvat Credit on the manufactured goods, with respect to the excise duty paid on these articles. According to the Department these inputs found in the factory premises were confirming to the specifications of unwrought aluminium, appropriately falling under classification sub-heading No. 7601.90. Some representative samples of the inputs were drawn, and were got examined by the Principal, Malvia Regional Engineering College, Jaipur, who reported, that the sample is not wrought, and then enquiry was conducted at Ahmedabad, from the producers of the input, who revealed, that the input was manufactured by melting the aluminium scrap, and pouring the molten metal into moulds. The product obtained was in rectangular shape, which was cleared as aluminium plate, under sub-heading 7606.10 on payment of 35% advance duty, and this was deposed to have been supplied to M/s. 3 P.G. Foils. Credit of the duty paid by the Ahmedabad unit was taken by the assessee, although the product received in actual i.e. unwrought aluminium, which was not declared by them in their Modvat declaration submitted under Rule 57-G of the Rules. Thus, the receipt of the product, received in their factory premises was alleged to have been suppressed by them willfully, and credit of central excise duty was incorrectly availed by the assessee amounting to Rs. 65,44,206.90. Thereupon a show cause notice was issued, to which a reply was submitted, and the learned Collector, Central Excise confirmed the demand of central excise duty, amounting to Rs. 65,44,206.90 against the assessee respondent, and a penalty of Rs. 5 lacs was also imposed under Rule 173Q(1)(bb). This order was challenged by the assessee by filing appeal before the Customs, Excise & Gold (Control) Appellate Tribunal, which was decided vide final order dt. 8.11.2000, Annexure-4. The learned Tribunal found, that the IVth proviso to Rule 57-G(2) prescribes, that the manufacturer should take all reasonable steps to ensure that the inputs acquired by them are goods on which the appropriate duty as indicated in the documents accompanying the goods have been paid. It was also considered, that the learned Collector has considered, that the classification 4 showed in the paying documents was obviously not the correct classification, and this burden cast by the proviso had not been discharged by the manufacturer. However, this interpretation was not found to be correct, and it was found to be the responsibility of the jurisdictional officers controlling the factory of the manufacturer of inputs, to ensure, that the classification is proper. It was also found, that if the receiving manufacturer is made responsible for the correct classification of the inputs, there would be total chaos. It was also held, that not only the receiving manufacturer, but also the jurisdictional officer of central excise, in charge of the receiving manufacturer, can not change the classification of any inputs received by any manufacturer availing of Modvat credit. Thus, it was found that the Collector did not have any authority to arbitrarily change the classification approved by another Collector, and that, since he has exonerated the supplier of the inputs from the charge of willfully entering the wrong classification, there was no reason for him to impose any penalty on the present appellant. The present application was admitted vide order dt. 23.7.2001. Assailing this order of the learned Tribunal the present application has been filed, requesting for calling 5 for a reference under Section 35H(i) of the Central Excise Act. Substantiating this application, it was contended by the learned counsel for the applicant, that it is more than clear on record, more so from the expert opinion report, given after chemical examination of the substance, that the input found was unwrought aluminium, and did fall under sub-heading 7601.90, and simply because the assessee got it under the documents from M/s. P.G. Foils, which in turn had purchased from M/s. Padmavati Metal Industries and M/s. Prakash Metal Works, describing it as aluminium plates, is not enough to entitle him to claim Modvat credit, as the requirement of Rule 57G specially IVth proviso is, that the assessee should take all reasonable steps to ensure, that the inputs acquired by it are the goods on which the appropriate duty is paid. On the other hand, learned counsel for the respondent submitted, that since it is not in dispute that the inputs found in the factory of the assessee were the same as were purchased by it from M/s. P.G. Foils, who in turn purchased it from M/s. Padmavati Metal Industries and M/s. Prakash Metal Works, and in accordance with the requirement of IVth proviso to Rule 57G, the assessee had ensured, that the input acquired by it are the goods on which appropriate duty, as indicated in the documents accompanying the goods, had been paid, and as such the order under appeal does not give rise to any substantial 6 question of law. We have considered the submissions, and have gone through the orders of the learned Collector, so also of the learned Tribunal. A look at para-18 of the order of the learned Collector shows, that it has positively been found by the learned Collector, that so far as the penal liability of M/s. Prakash Metal Works and M/s. Padmavati Metal Industries, so also M/s. P.G. Foils is concerned, he found, that it cannot be said that all these three parties had entered willfully any wrong particulars in the gate passes issued for the goods removed by them with intent to facilitate the buyer to avail of credit of the duty in respect of such goods. Surprisingly in this very para the last sentence had also been added, that M/s. Prem Cables (present respondent assessee) had not bought the goods from these parties, and therefore provisions of Rule 173Q(1)(bb) are not applicable. Likewise, a further look at the order of learned Collector shows, that before the Collector, the assessee claimed to have availed the Modvat credit under Rule 57G under valid GP-1s issued by the Ahmedabad units, on the strength of approved classification list, while the Department had not adduced any evidence, that the material received from the Units of Ahmedabad was disposed off, and other material was purchased, and the goods were not the 7 one described in the GP-I. Then, notices were also given to M/s. Prakash Metal Works and M/s. Padmavati Metal Industries, who submitted their written reply, contending that they cleared the input classified and approved by the Department under sub-heading No. 7606.10. Likewise, M/s. P.G. Foils in its reply also submitted that they were aware of the deemed definition of aluminium plates given in Chapter 76 where it was defined as a flat product of rectangular section generally cut to length whose thickness is 6 mm and above, and that the revised definition of the plates mentioned was not known to them. It was also contended by them, that they had not entered wrong particulars on the GP-1's. It was further contended that the goods were manufactured by Ahmedabad units, therefore, the case should be adjudicated by the competent authority at Ahmedabad. On being called for personal hearing, those parties did not turn up. However, after further opportunities representative for M/s. P.G. Foils appeared and maintained the previous submissions, but M/s. Prakash Metal Works and M/s. Padmavati Metal Industries did not turn up despite sufficient opportunities. Then, in para-14 it was observed, that as the goods received by the assessee under the gate passes endorsed by M/s. P.G. Foils were actually unwrought aluminium, and not aluminium plates, and the assessee could not have claimed credit on such gate passes. The contention about the assessee being not aware about the correct description of the goods was not believed. 8 In our view, the findings recorded by the learned Collector are self contradictory, inasmuch as all through the parties were ad-idem, on the question, that the inputs found in the factory of the assessee, were inputs, acquired by it under gate passes of M/s. Prakash Metal Works and M/s. Padmavati Metal Industries endorsed by M/s. P.G. Foils, and that the classification of the goods was incorrect. As against this, when it being nobody's case, and without there being any material in this regard, the last line of para-18 holds, that the assessee had not bought the goods from these parties, and what overall impression the order of the learned Collector creates is, that it is precisely on this basis, that the assessee had been held liable, while the other three parties have been exonerated. In our view, when the other three parties have been exonerated, by recording a positive finding, that it cannot be said that all the three parties had willfully entered any wrong particulars in the gate passes issued for the goods removed by them, with intent to facilitate the buyer to avail of credit of the duty in respect of such goods, and when those are the very goods, found as inputs with the assessee, the assessee could not be denied the Modvat credit. It could be understood, that the suppliers and purchasers were in hand and gloves in wrongly 9 describing the article, so as to facilitate the buyer to avail the credit of the duty, but then, as positively found, that this is not the case, that the manufacturers or suppliers to the assessee were in hands in glove. Once this finding is recorded by the learned Collector, and when the assessee is found to have been purchased the goods on the basis of regular gate passes, in our view, the learned Tribunal has rightly found the requirement of Rule 57G(2) (IVth proviso) to stand sufficiently complied with, and thus, we have no hesitation in concluding, that if the assessee purchased the goods on the basis of approved gate passes, in absence of any collusion between the supplier and the purchase, it cannot be said, that the manufacturer has not taken any reasonable step to ensure, that the inputs acquired by it are the goods, on which appropriate duty, as indicated in the documents accompanying the goods has been paid. (emphasis supplied) From a perusal of the order of the learned Collector, and the submissions of the Department, it transpires, that the whole plank of the Department is the subsequent chemical analysis of the substance found, and in such analysis, it being found to be unwrought aluminium. Suffice it to say, that when the suppliers have been exonerated, conceding any right, as claimed by the Department, in this matter, would indirectly amount to 10 allowing them to assail the correctness of the classification of the concerned jurisdictional authorities, who had duly certified the goods at the time of excise clearance by the manufacturers/suppliers, from whom the assessee had purchased the goods, and that right cannot be conceded under the scheme of things, under the Act. Thus, in our view, no such question is involved, which may require adjudication, regarding the rate of duty of the excise on the value of the goods, for the purpose of assessment, so as to persuade us to call for the reference, to refer any question of law, arising from the order of the learned Tribunal. Thus, no question of law arises. The application is, therefore, dismissed. Parties are left to bear their own costs. ( DEO NARAYAN THANVI ),J. ( N P GUPTA ),J. /sushil/