Per Jyoti Balasundaram :

The issue for determination in this appeal is the eligibility of the appellants to Modvat Credit of Rs. 4,07,871.51 P. Availed of by them on 28.1.88 on Selenium drums and ASM Blades-280 utilised as inputs in the manufacture of Photocopiers cleared during the period April 1986 to April 1987.

2. Initially, the appellants' stand was that these items did not form part of the Photo copying Machines as they were imported and supplied under separate invoices and therefore, were in the nature of consumables and hence not includible in the assessable value of the finished product namely Photo copying machines. Vide order dated 20th October, 1987, the Assistant Collector held that the above mentioned items are parts of Photo copying machines and are to be included in the value of the Photo copying machines. This order was confirmed by the Collector (Appeals) by order dated 4.3.87. On the introduction of the Modvat Scheme in March, 1986, the appellants filed a declaration containing details of inputs and final products on 10.3.86. At that point of time, there was no proforma prescribed for the Modvat declaration.

3. In December, 1986, the Excise Department wrote to the appellants directing them to submit the declaration in the prescribed form and on 20.12.86, the appellants filed another declaration. Since the contention of the appellants was that the two items did not form part of the finished product, they did not take credit of duty paid on these inputs in RG-23-A. subsequent to the order of the Collector (Appeals) dated 5.3.87 confirming that the items were to be included in the assessable value of the Photo copying machines, the appellants submitted a modvat declaration for Selenium drums and also informed the department that earlier they were not claiming Modvat on this item as it did not form part of the machines. On 28.1.88, the appellants took credit of duty paid on Selenium drums and ASM Blades-280 used in the manufacture of Photo copying machines cleared during the period 1st April 1986 to 30th April, 1987.

4. A show cause notice dated 26.7.88 was issued to the appellants proposing disallowance of Modvat credit for contravention of Rule 57-G on the ground that under the Modvat Rules, no credit of duty paid on inputs prior to first February, 1986 can be taken. The Adjudicating authority disallowed the credit holding that the modvat declaration had been filed on 22nd March, 1987 and therefore, Modvat credit for the period prior to that date, was not permissible as the Modvat rules had not been complied with.

5. The lower Appellate authority confirmed the order of the Assistant Collector holding that the goods were actually received by the appellants well beyond one year from 20th December, 1986 i.e. the date on which the appellants filed the Modvat declaration and started maintaining C RG-23-A register in respect of the disputed items only from 28.1.88 onwards. Hence this appeal.

6. Shri V. Sridharan, learned counsel contends that the appellants had already filed a declaration in March 1986. Even if it is construed that the declaration had been filed only on 20.12.86, still none of the requirements of Rule 57-G have been contravened as the inputs had been received prior to filing of the declaration and credit was availed of only subsequently. He relies upon the decision of this Tribunal in the case of Kerala State Electronics Development Corporation (1991 (55) ELT 128) in support of the proposition that there is nothing in the rules which stipulates that inputs must be received by an assessee only after the filing of the declaration under Rule 57-G. He submits that at the time when the inputs were received and when the final products were manufactured and cleared, the valuation dispute was pending and therefore, it was not possible for the appellants to avail of Modvat credit till the dispute was settled in March, 1987. He relies upon the order of the Tribunal in the case of M/s Sundaram Fasteners Ltd. vs