TMI Blog1993 (4) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the meaning of the Companies Act, 1956 engaged in the manufacture of bulk drugs including Ethambutol Hydrochloride, Rifampicin, Trimethohprim etc. For the said purpose the appellant has, among others, a factory at Mandideep, in Raisen District, Madhya Pradesh and a factory at Ankleshwar in Gujarat, both holding Central Excise licences. At the Ankleshwar factory, the appellant manufactures 7ADCA which is an antibiotic and an intermediate product for Cephalexin. 7ADCA is also classified under Chapter 29. The process of manufacture of 7ADCA is as follows :- ****** 3. At Mandideep, the appellant manufactures Cephalexin/Cefadroxil, which are antibiotics (Chapter 29). The process of manufacture is as follows : * * * * * *4. On 23-6-1988, prior to commencement of the manufacturing activity, the appellant wrote to the Superintendent, Central Excise, Bhopal informing him that the appellant proposed to start production of Cephalexin in the first week of August, 1988 and, therefore, the excise licence may be issued. The appellant also furnished the details of raw materials and manufacturing process as well as final products. The appellant also made a reque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith this the appellant furnished an undertaking on 8-9-1988 under Notification No. 214/86 dated 25-3-1986 to the central excise authorities at Baroda (Page 92 of paper book) and made an application on 6-8-1988 under Rule 57F(2) (Page 87). The undertaking is reproduced hereunder : ***** It was submitted to the authorities that the raw materials will be sent directly to Ankleshwar where they would be processed into 7ADCA and the 7ADCA so manufactured shall be received at Mandideep where it would be used in the manufacture of Cephalexin/Cefadroxil. 5.1 In the application under Rule 57F(2) the appellant described the manufacturing process and submitted that Penicillin G, one of the main raw materials, would be used in the manufacture of 7ADCA. The credit in respect of the raw materials so received at Ankleshwar was taken at Mandideep only after 7ADCA was received at Mandideep. The procedure required to be followed by the appellant was specifically discussed by the appellant s representatives with the jurisdictional Superintendent/Assistant Collector as averred by Shri Shrivastava, Manager, Administration and P.R. in his affidavit dated 31-1-1991 (Pages 128-131) and not controvert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hwar and that the application under Rule 57F(2) may be treated as having been amended accordingly. 8. On 22-9-1988, the Assistant Collector issued permission under Rule 57F(2) permitting direct transport of inputs to Ankleshwar to produce 7ADCA and to receive 7ADCA at Mandideep for use in or in relation to the manufacture of final products, the details whereof were already submitted by the appellant to the excise authorities (Page 103 reproduced below) ***** 9. On 28-9-1988, the appellant submitted a declaration under Rule 57G for availing of the credit of duty paid on inputs which were proposed to be used at Ankleshwar for conversion of Penicillin G to 7ADCA under Rule 57F(2). On 10-2-1988 the appellant informed the Superintendent that the commercial production of Cephalexin has started with effect from the same date. 10. On 4-1-1989, the appellant addressed a letter to the Superintendent with a copy to the Assistant Collector, Central Excise, Bhopal detailing therein various raw materials which would be sent for conversion into 7ADCA directly from various suppliers to its Ankleshwar factory without bringing them to the factory at Mandideep and the said letter specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ***** Hence, this appeal. 14. We have heard Shri C.S. Lodha, learned Counsel and Shri Bhartiya, learned DR, weighed their submissions and carefully perused the records. 15. We see great force in learned Counsel s submissions that there was no question of any wrong availment of modvat credit as alleged during the period January 1989 to August 1990. The appellant had fully submitted all the details to the authorities and sought their guidance from time to time. The appellant had made an application for permission under Rule 57F(2) which was granted. The appellant had furnished an undertaking under Notificaton No. 214/86. The appellant had complied with all the procedural formalities. The entirety of raw materials was used in the manufacture of 7ADCA and the entirety of 7ADCA manufactured by the appellant was used in the manufacture of final dutiable products. In view of the above, there was neither any justification for invoking the extended period of limitation alleging suppression of facts nor was there any justification for denial of the credit. There was a series of communications between the appellant and the Central Excise authorities of Bhopal which clearly demonstrated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar was used in the manufacture of 7ADCA which, in turn, was used in the manufacture of Cephalexin at Mandideep. Every ounce of the material was thus fully accounted for. 15.3 The allegation of evasion of payment of duty cannot be sustained for the simple reason that instead of following the procedure under Rule 57F(2) it would have been perfectly open to the appellant - in the alternative - to avail of the credit of the duty paid on various raw materials at Ankleshwar factory (after utilising the said credit) and avail of the credit of duty paid on 7ADCA at the time of receipt of 7ADCA at Mandideep and utilise such credit while paying duty on Cephalexin. In such an event also the net revenue receipt would have been the duty paid on Cephalexin less credits availed of on raw materials at Ankleshwar. 16. The appellant had filed a declaration with the authorities declaring that it will be manufacturing Cephalexin using various raw materials which were declared in terms of Rule 57G. The appellant had also declared and sought permission of the authorities that the main raw material, namely, Penicillin G which is imported will be sent directly to Ankleshwar factory and the permission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit of exemption/modvat credit availment could not be denied merely because the raw materials were first converted into an intermediate product and were then used in the manufacture of final product. Since there was no requirement to use raw materials directly in the manufacture of final product the denial of modvat credit by the Collector was clearly uncalled for and contrary to judicial pronouncements which has settled this position beyond any pale of doubt. Failure to appreciate this has vitiated the impugned order which deserves to be quashed and set aside. 19. In the present case the Mandideep factory of the appellant was the manufacturer of the final product and insofar as the said factory was concerned 7ADCA was an intermediate product and had to be so regarded. The fact whether 7ADCA is dutiable, marketable or otherwise is of no relevance at all. What is of relevance is determination of the question whether cycle of conversion of raw materials into final product has been completed and whether the manufacturer is in a position to demonstrate that the entirety of the raw materials has been used for the purposes for which they were brought and that it is possible for the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Notification No. 214/86 both by the parent factory and the job worker have been substantially complied with. 21. It is well settled by a series of decisions of the Hon ble Supreme Court, various High Courts and the Tribunal that what is relevant is substantial compliance with the provisions of law and as long as a manufacturer has substantially complied with the law, the benefit in accordance with law cannot be denied for non-observance of technical requirement. In the case of Maschmeijer Aromatics reported in 1990 (46) E.L.T. 395 the Tribunal has held that the scheme of modvat has been introduced with a view to lessen the burden on assessees by allowing credit of duty on inputs and so long as such credit was available and the inputs have actually been used for the declared finished product, benefit of concession should not be denied and to deny benefit for procedural lapse would be to defeat the purpose of the rule providing for substantive relief by way of provisions of credit of duty on inputs to reduce the financial burden on a manufacturer. In the case of M.R.F. Ltd. v. Collector of Central Excise reported in 1990 (50) E.L.T. 546 the Tribunal has held that the benefit cann ..... X X X X Extracts X X X X X X X X Extracts X X X X
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