S. Kalyanam, Member (J)

1. This is an appeal directed against the order of the Additional Collector of Central Excise, Hyderabad, dated 24-2-88 directing the appellants under Rule 571 of the Central Excise Rules, 1944, hereinafter referred to as the "Rules", to reverse the credit in a sum of Rs. 1,20,567.70 on the ground that the credit taken is not in accordance with law besides imposing a penalty of Rs. 1,000 under Rule 173Q of the Rules.

2. The appellants had taken credit in respect of the duty suffered by cans and barrels, which were used as packing material for fruit products produced by the appellants and cleared. The MODVAT credit taken by the appellants in regard to the said inputs was sought to be reversed on the ground that the appellants were not having the goods on stock as on 1-3-87 or 8-4-87 when the appellants filed a declaration for taking MODVAT credit under Rule 57G of the Rules. The proceedings thus instituted against the appellants eventually culminated in the present impugned order now appealed against.

3. Shri Sriram Panchu, the learned Counsel for the appellants, submitted that the appellants actually had the inputs in question on stock as on 1-3-87 even though the stocks were not entered in the Stock Ledger Account. The learned Counsel, therefore, submitted that the transitional provisions for availing MODVAT credit in terms of Rule 57H would become applicable as the appellants had the goods in stock on 1-3-87 and entered the same in RG-1 Register after the receipt of the relevant gate passes on 5-5-87. The learned Counsel alternatively contended that even if the transitional provisions under the Rules are not applicable, having regard to the admitted fact that the appellants filed the declaration for taking MODVAT credit on 8-4-87 and received the goods and gate passes as contended by the Department on 5-5-87, Rule 57G of the Rules would become operative entitling the appellants to take MODVAT credit in respect of the duty suffered by the inputs in question. The learned Counsel also contended that as on 24-11-87 the Assistant Collector of Central Excise, Nellore, in his Reference C. No. V/20/30/129/87B4 has held that "The credit taken by you is in order", and in the teeth of this finding in favour of the appellants by the competent authority in exercise of quasi-judicial power if the Department feels inclined to review the same, it can be done only by having recourse to Section 35E of the Central Excises and Salt Act, 1944 and not by initiating parallel proceedings by issue of another show cause notice.

4. Shri Vadivelu, the learned D.R., contended that the evidence on record does not establish that the appellants had the inputs in question on stock as on 1-3-87 and he has also received instructions to the same effect from Collector of Central Excise, Hyderabad. The learned D.R. left to the Tribunal for consideration of the applicability of Rule 57G in the facts and circumstances of the case.

5. We have carefully considered the submissions made before us. Even assuming for the purpose of argument that the appellants did not have the inputs in question on stock as on 1-3-87, having regard to the admitted fact that the appellants had filed the declaration under the Rules on 8-4-87 and had also received the necessary gate passes on 5-5-87 the appellants would become entitled to avail MODVAT credit in terms of Rule 57G. In other words the appellants had filed the declaration and subsequent to the filing of the declaration, even according to the Department, the duty paid inputs were received by the appellants into their factory. We also incidentally note that the appellants had taken credit in respect of the inputs only on 2-7-87. The learned D.R. was not able to convince us as to how in the facts and circumstances of this case Rule 57G would not be applicable to the appellants. We would also like to point out that when the Assistant Collector of Central Excise, Nellore, by his communication dated 24-11-87