TMI Blog2013 (9) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... INDIA ] - unnecessary technicalities, which were matter of form and not one of the substance would not justify the level of permission - The CBEC circular was issued on the representations for availing MODVAT credit on material, which was not received directly inside the manufacturer’s premise and which was required to be stored outside the factory premise and subsequently to the manufacturer's factory. The requirement under CBEC Circular was by way of relaxation to the mandatory provisions of storing the modvatable inputs inside the factory premises, which was the requirement of Rule 57AB (1) (d) - Any relaxation from the mandatory compliance of the Rules must be construed strictly - The CBEC relaxed the mandatory condition of storing the modvatable inputs outside the factory on specific grounds namely on account of shortage of storage space, hazardous nature of inputs or the like - The reasons for storage of modvatable inputs outside the factory could be many and thus the discretion of storing such goods outside factory premise was left to the Jurisdictional Commissioner, Central Excise, with a further condition that credit in such case will be taken in the books of accounts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the memo of appeal, which were found to be sufficient to cover the entire controversy:- "1. Whether the duty having been admittedly paid on the inputs stored outside the factory premises, which was received in the factory after 1.3.2001, the tribunal was not justified in not considering Rule 57 (A) (B) (1) for the purposes of CENVAT credit of Rs.30,05,054.00 2. Whether the principle of law i.e., the applicability of Rule 57 (A) (B) (1) being absolutely the same as for Rs.46,600.00 and also for Rs.30,05,054.00. The tribunal was not justified in taking conflicting view in the same order merely because the application for permission was filed by the appellant. 3. Whether the tribunal was not justified in holding that prior permission of the Commissioner is required for storing the inputs outside the factory premises when the circular dated 1.5.1996 does not put such condition. 5. Whether the very same Deputy Commissioner after keeping the Application with him for over 1 year, returning the same on 19.3.2002, was justified in issuing a Show Cause Notice dated 8.4.2002 denying the credit only on the procedural ground of lack of permission from the Commissioner without on meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in the factory after 1.3.2001. There was no allegation that the inputs in question were not so received in the factory nor it was alleged that the inputs were not duty paid and not used in manufacture. The CENVAT Credit was thus found to be disallowed without any justification. 6. For CENVAT Credit of Rs.51,811/-, it was admitted that the credit was taken by the company prior to the date on which their factory received the Central Excise registration. The Commissioner (Appeals) disallowed the credit on the ground that at the time, when the credit was taken the company was not within the control of the Central Excise authorities and was manufacturing and clearing goods, exempt from duty. The credit therefore according to CESTAT was not admissible. 7. So far as CENVAT credit of Rs.30,05,054/- in respect of inputs, which were stored outside factory premises without obtaining prior permission of the Commissioner, Central Excise in terms of CBEC Circular dated 1.5.1996, the CESTAT held that admittedly the permission as required under the Circular was not taken by the company. The credit on inputs stored outside the factory premise could be taken only when such storage was made w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age of space, we will continue to store our inputs outside the factory premises and receive them on pre-authenticated challans as per board circular No.206/40/96-CX dated 1.5.1996 and follow the procedure laid down under Bombay Collectorate T.N. No.46/96 dated 21.8.1996. In addition to the maintenance of registers at both the places we will take credit only when the total consignment covered under a single invoice is received in the factory. It is submitted for your kind information. We are willing to carry out other instructions that your honour may prescribe for the storage of inputs outside the factory premises. Submitted for information Thanking your. Yours faithfully, FOR SECURIPAX INDIA PVT. LTD. (DIRECTOR)" 9. Shri Bharat Ji Agrawal submits that in response to the information given by the appellant company dated 10.4.2001 the Deputy Commissioner, Central Excise, Division-II Noida by his letter dated 15.3.2002 had written to the assessee- appellant that in view of the Board's Circular dated 1.5.199 and the trade notice dated 20.6.1996 by the Central Excise Commissioner, Meerut, for grant of permission for outside storage of duty paid inputs for which necessary p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng given by the assessee in their letter dated 10.4.2001 to the Deputy Commissioner, Central Excise that they will take credit only when the total consignment covered under a single invoice is received in the factory. 11. Shri Bharat Ji Agrawal has relied on Mangalam Enterprises v. Commissioner of C. Ex. Cus., Vadodara, 2003 (159) E.LT. 393 (Tri.-Mumbai) in which it was held in paragraph 3 as follows:- "3. It is clear from the records of the case that there is no dispute whatsoever about the receipt of the inputs in the factory and its utilization by the appellant in the manufacture of finished products. Similarly the aforesaid circulars of the Commissioner and Circular No. 206/40/96 CX., dated 1-5-96 issued by the Central Board of Excise and Customs permit storage of inputs outside the factory premises. The decision of the Tribunal in Thermax case also relates to storage of goods outside the licensed factory premises and the Tribunal held that the credit was permissible. Since both the sides are not disputing the actual receipt of duty paid inputs and their utilization in manufacture of specified final products, we find no justification for denying the credit or imposition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the inputs." There was no finding nor any suggestion in the show cause notice that the assessee was party to the incorrect endorsement. The assessee cannot be blamed for the same and in any case the liability, if it was not discharged, was of the manufacturer of the inputs. It could not be fastened on the assessee without any reason. 14. Learned counsel appearing for the revenue submits that it is admitted that the inputs were found lying outside the factory. The party had not taken permission from the Jurisdictional Commissioner, Central Excise for storing goods outside the factory premise in accordance with CBEC Circular dated 1.5.1996. The party also did not comply with its undertaking in the letter dated 10.4.2001 sent for permission that the credit will be taken only when the total consignment covered under single invoice is received in the factory. There was no compliance with the procedure in the relevant period and thus the CESTAT did not commit any error in allowing appeal of the revenue and denying MODVAT credit of Rs.30,05,054/-. He has relied on CBEC Circular dated 1.5.1996, which reads as follows:- "Subject-Admissibility of Modvat on inputs stored outside the facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y invoice are received inside the factory for being put to use in production. It is not denied that the party had applied for permission by their letter dated 10.4.2001 to the Deputy Commissioner of Central Excise to which reply was given by him on 19.3.2002 that the applicant was required to file application to the Commissioner, Central Excise, Noida and not to the addressee namely Deputy Commissioner, Central Excise, Division-II, Noida. The permission was not granted, which was the essential condition for removal of duty paid inputs without payment of duty for storage outside the factory. In this case the Deputy Commissioner, Central Excise, Division-II had informed the petitioner that he is not competent to consider the intimation. 16. The CBEC circular dated 1.5.1996 was issued on the representations for availing MODVAT credit on material, which is not received directly inside the manufacturer's premise and which were required to be stored outside the factory premise and subsequently to the manufacturer's factory. After considering this point in the 35th Central Advisory Council in its meeting dated 4th November, 1995, it was found that in such case there is danger of MODVAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the inputs were not used in the manufacturing process or that appropriate duty paying documents on the basis of which the credit has been taken were not available. 20. The requirement under CBEC Circular dated 1.5.1996 are by way of relaxation to the mandatory provisions of storing the modvatable inputs inside the factory premises, which is the requirement of Rule 57AB (1) (d). Any relaxation from the mandatory compliance of the Rules must be construed strictly. The CBEC relaxed the mandatory condition of storing the modvatable inputs outside the factory on specific grounds namely on account of shortage of storage space, hazardous nature of inputs or the like. The reasons for storage of modvatable inputs outside the factory could be many and thus the discretion of storing such goods outside factory premise was left to the Jurisdictional Commissioner, Central Excise, with a further condition that credit in such case will be taken in the books of accounts only when the entire inputs covered by invoice are received inside the factory for being put to use in production. 21. In the present case findings have been returned by all the Central Excise authorities that the required perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Supra) the Court found that the conditions in the notifications on direct receipt of inputs from manufacturer and endorsement on invoice that excise duty was paid was satisfied; and in Union of India v. Bharat Aluminium Co. Ltd. (Supra) it was held that allegations, which were not part of show cause notice could not be made a ground for confirming the demand. It was held that non-observance of procedural condition could not be a ground to deny the credit when there was no dispute regarding duty payment and the use of goods in manufacture of final products. In Mangalore Chemicals Fertilizers Ltd. (Supra) it was held that unnecessary technicalities, which are matter of form and not one of the substance would not justify the level of permission. 24. For the aforesaid reasons, we do not find that CESTAT committed any error of law in recording finding that the Commissioner (Appeals) had erred in law in allowing the credit to the assessee after holding that the appellant had not observed the procedure prescribed for relaxation to store inputs outside the factory premises. 25. The questions of law nos.1, 2, 3 and 5 as framed in the memo of appeal are thus decided in favour of reven ..... 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