TMI Blog2001 (11) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... it towards payment of duty on their final product cleared during the period 30-9-95 to 30-11-97. The department, therefore, issued show cause notice (SCN) dated 22-3-99 to the appellants for recovering, inter alia, the amount of duty allegedly short-paid on account of the above (allegedly erroneous) availment and utilization of Modvat credit on capital goods. The demand, raised under Rule 96ZL of the Central Excise Rules, 1944, was based on the substantive allegation that the appellants were not entitled to avail Modvat credits as they were working during the relevant period under the CL Scheme of Section E-IX (Rules 96ZH to 96ZM) of Chapter V of the Central Excise Rules (CER) 1944. The SCN also proposed to impose penalty on the appellants under Rules 96ZL, 209 and 226 of the CER, 1944. The demand of duty and the proposal for imposition of penalty were resisted by the party. The Commissioner of Central Excise, who adjudicated the dispute, confirmed the demand against the party under Rule 96ZL and imposed on them a penalty of Rs. 2,000/- under the same rule. Hence the present appeal. 2. Heard both sides. Ld. Advocate, Sh. Y.K. Kumar, for the appellants, submitted that it was only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the CL Scheme, general provisions like Modvat Rules ceased to be applicable to them. Rule 96ZH expressly excluded the applicability of the general provisions to embroidery manufacturers who had opted for working under the CL Scheme. The second proviso to Rule 96ZI(1), which was added to the Rule on 2-6-98, was only clarificatory of such exclusion of applicability of Modvat Rules. Ld. DR further submitted that, when the appellants were found to have short-paid duty (by wrong availment and utilization of credit on capital goods) under Rule 96ZI, they were asked, by show cause notice, to pay up the differential amount under Rule 96ZL. The question of time-bar did not arise as these rules did not prescribe any period of limitation for demand of duty. The DR urged for rejecting the appeal. 4.1 We have examined the submissions. The moot question that arises for our consideration is whether a manufacturer who, having opted for working under the Compounded Levy Scheme of Section E-IX of Chapter V of the CER 1944, manufactured embroidery with the aid of vertical type automatic shuttle embroidery machines and paid duty in terms of Rule 96ZI (under the said Section E-IX) du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... current with the Commissioner, all payments under Rule 96ZI having to be made by debits in this account. It also made the manufacturer liable to maintain a daily account of the particulars (number, year of installation, speed, metre length etc.) of the machines actually employed in each shift in the production of embroidery as also to intimate any change of such particulars to the proper officer. Rule 96ZK exempted the manufacturer from the operation of the provisions of Rule 9 [except the 3rd proviso to sub-rule (1)] and Rules 47, 49, 50, 51, 51A, 52, 52A, 53, 55, 223, 223A, 223B, 224, 224A and 229. That rule also created a bar to payment of rebate of excise duty under Rule 12 in respect of embroidery exported out of the stock manufactured by him under the CL Scheme. Rule 96ZL provided for demand of short-paid duty as also for confiscation and penalty for non-maintenance of account, misdeclaration etc. Rule 96ZM conferred discretion on the Commissioner to apply, subject to such conditions as he might lay down, the special procedure of Section E-IX to an embroidery manufacturer who had failed to avail of the procedure or to comply with any condition within the prescribed time-limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of duty envisaged under Section E-IX. Therefore, we reject ld. advocate's plea of prospective operation of the proviso and hold that an embroidery manufacturer, like the present appellant, who had opted for availing himself of the special provisions of Section E-IX of Chapter V of the CER, 1944 for any period prior to 2-6-98, was not entitled to avail himself of the Modvat credit facility in respect of inputs or capital goods. The availment of Modvat credit on capital goods under Rule 57Q and utilization thereof by the appellants for payment of duty on embroidery under Rule 96ZI during 9/95 to 11/97 were not lawful and an amount of duty equal to the quantum of credit so utilized was recoverable in accordance with law. 5. Now we shall deal with the limitation issue. Sub-rule (4) of Rule 96ZI provided that, if payment of duty at the compounded rate fixed by the Government was not made in the manner and within the time-limit laid down under the Rule, the manufacturer shall be liable to pay duty on his entire production of the embroidery during the shift at the Tariff rate, unless otherwise directed by the Commissioner. In the instant case, the Commissioner did not issue any di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically found that the jurisdictional Assistant Commissioner had permitted Modvat credit to be availed on capital goods by the appellants, although he has also observed that the Assistant Commissioner did not pay due heed to the provisions of Central Excise law on the subject. In view of these facts and circumstances, we find that the department was fully aware of the wrong availment and utilisation of capital goods credit by the appellants for payment of duty on embroidery in terms of Rule 96ZI and that only the departmental laches and lackadaisical approach occasioned such recourse to wrong procedure by the appellants for payment of duty under Rule 96ZI. In such circumstances, in our view, there was a heavy burden on the department to explain the delay in raising the demand of duty. The SCN does not even attempt to explain the delay. In the circumstances, we have to hold that the period of over 15 months taken by the department to demand the duty under Rule 96ZL is not a reasonable period on the touchstone of the Supreme Court's decision in Citedal Fine Pharmaceuticals (supra). This view appears to be supported by the decision of the Tribunal's Larger Bench in the case of Utkal As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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