2008 (2) TMI 737 - AT - Central Excise

Summary

Issues:
- Applicability of Proforma Credit Scheme and Modvat credit
- Refund claim rejection based on Proforma Credit Scheme withdrawal
- Interpretation of Rule 57H of the erstwhile Central Excise Rules
- Comparison with the decision in National Industrial Corporation case
- Eligibility for Modvat credit for the duty paid on inputs

Analysis:

The case involved the appellants engaged in spinning woollen yarn, weaving, and processing fabrics, availing Proforma Credit under Rule 56A of the Central Excise Rules. The Proforma Credit Scheme was withdrawn on 20-5-94, replaced by Modvat credit. The issue arose when the Revenue refused to allow transfer of Proforma credit to Modvat scheme for the period from 20-5-94 to 2-6-94. The refund claim by the appellants was rejected by the adjudicating authority and the Commissioner (Appeals).

The advocate for the appellant argued that the case aligns with the Division Bench decision in the National Industrial Corporation case and Rule 57H applies. The Departmental Representative supported the Commissioner (Appeals) findings, stating the National Industrial Corporation decision is not applicable.

The judge, after considering both sides, noted that the Proforma Credit Scheme was replaced by Modvat credit, and the appellants lacked awareness of this change, hence continued Proforma Credit for 14 days. Referring to Rule 57H, the judge found similarity with the National Industrial Corporation case where the Tribunal allowed credit for duty paid on inputs despite scheme withdrawal. The judge highlighted the discretionary powers of the Assistant Collector under Rule 57H to grant Modvat credit if inputs are used in final products cleared after a specific date.

Consequently, the judge set aside the previous order, ruling in favor of the appellants, making them eligible for Modvat credit for the duty paid on inputs used during the period in question. The appeal was disposed of accordingly.

In conclusion, the judgment clarified the applicability of Proforma Credit and Modvat credit schemes, interpreted Rule 57H, compared the case with the National Industrial Corporation decision, and upheld the appellants' eligibility for Modvat credit based on the specific provisions and transitional provisions under the erstwhile Central Excise Rules.