Justice Ajit Bharihoke, President - This appeal is filed against the impugned order of Commissioner (Appeals) dated 17-12-2004 whereby he partially accepted the appeal filed by the assessee maintaining the Modvat credit demand to the extent of Rs. 6,35,398/- adjudicated by the adjudicating authority. He, however, reduced the penalty imposed on the appellants from Rs. 5 lakhs to Rs. 1 lakh.

2. Briefly facts relevant to the dispute in this appeal are that the Company by the name of M/s. Indra Polyfab P. Ltd., a manufacturer of detergent powder, stood merged with M/s. Amar Polyfab P. Ltd. under the orders of Hon'ble Punjab & Haryana High Court. At the time of merger, Modvat credit to the extent of Rs. 6,35,398/- was available in the account of M/s. Amar Polyfab P. Ltd. It was lying unutilized in RG-23A, Part-II in the account of M/s. Amar Polyfab P. Ltd. After the merger, the appellants M/s. Amar Polyfab P. Ltd. wrote a letter dated 10-8-1994 addressed to Superintendent, Central Excise, Kharar Range, Ropar, informing the department about merger of the companies and requesting for sanction, approval and amendment of the original registration certificate. Pursuant to the letter on 12-10-1994 in the registration certificate of M/s. Amar Polyfab P. Ltd., the name of the assessee was changed M/s. Indra Polyfab P. Ltd. On 14-10-1994, the appellants wrote another letter to Assistant Collector, Central Excise requesting them that Modvat declaration, classification list price declarations and other documents filed by M/s. Amar Polyfab P. Ltd. before the merger, may be treated as that of M/s. Indra Polyfab P. Ltd. w.e.f. 12-10-1994. The appellants, however, did not file declaration under Rule 57H of Central Excise Valuation Rules. The appellants company subsequent to the merger utilized the aforesaid Modvat credit to the tune of Rs. 6,35,398/- against the central excise duty payable by them for their finished goods.

3. Department took a view that in absence of declaration under Rule 57H and approval by the competent authority, the appellants company should not have utilized suo motu the Modvat credit lying in the account of M/s. Amar Polyfab P. Ltd. Accordingly, a show cause notice along with various other issues which are not relevant to present case, was issued. The appellants contested the show cause notice and stated that failure to file declaration under Rule 57H and seeking approval for utilization was only a technical lapse and for that demand raised in the show cause notice was not sustainable.

4. The adjudicating authority after considering the reply to the show cause notice as well as submissions of the parties confirmed the demand of Rs. 6,35,398/- as an amount of wrongly availed credit by the appellants and also imposed penalty of Rs. 5 lakhs on the appellants. On other issues also the demand was confirmed which is not relevant for the purpose of this appeal.

5. Feeling aggrieved by the order of the adjudicating authority, the appellants preferred an appeal. The appellate authority quashed the other demand but the demand of Rs. 6,35,398/- was upheld. However, the penalty was reduced from Rs. 5 lakhs to Rs. 1 lakh.

6. Ld. Counsel for the appellants has drawn our attention to the copy of the order of the adjudicating authority filed today, (correctness of which is not disputed by ld. DR). In the said order, reply of the appellants to the show cause notice is reproduced thus :—

"1. That under Central Excise law and rules, it is the buyer of the goods who alone is entitled to take Modvat of duty paid on invoices.

2. That the duty paid inputs having been received by a manufacturer who has filled the requisite declaration under Rule 57G and who uses the inputs in the manufacture of the specified final products or contemplated under Rule 57A and in the manner laid down under Rule 57F is irrelevant to determine the eligibility of Modvat."

7. It is submitted by ld. Counsel for the appellants that perusal of this reply as also the copies of