2009 (3) TMI 770 - AT - Central Excise

Cenvat/Modvat credit - Limitation for taking credit - Held that - matter referred to Larger Bench to decide the issue Whether the demand has to be confirmed along with confirmation of interest and only penalty is to be set aside, as observed by Member (Technical) or entire impugned orders is to be set aside and appeal to be allowed, as observed by Member (Judicial)?

Summary

Issues Involved:
1. Eligibility for Modvat credit on imported raw materials.
2. Applicability of the six-month time limit for availing Modvat credit.
3. Imposition of penalty under Rule 57(i) of the Central Excise Rules 1944.

Detailed Analysis:

1. Eligibility for Modvat Credit on Imported Raw Materials:
The appellants, engaged in manufacturing P or P medicines, received imported raw materials and took Modvat credit on these materials. The credit was disallowed by the authorities, and interest was demanded along with a penalty of Rs. 2 Lakhs.

2. Applicability of the Six-Month Time Limit for Availing Modvat Credit:
The appellants argued that the delay in taking credit was due to the late receipt of endorsed bills of entry from the customs appraiser. They cited several decisions supporting their eligibility for credit despite the delay. However, the respondent relied on the Larger Bench decision in MRP Limited, which stipulated that credit cannot be taken after six months from the issue of the documents as per Rule 57C.

The Tribunal considered both sides' submissions and noted that all decisions cited by the appellants were prior to the Larger Bench decision in MRP Limited. The Tribunal emphasized that the six-month period for availing credit starts from the date of issue of any document specified in sub-rule (3) of Rule 57G. Therefore, the Tribunal held that the demand for Modvat credit was justified as it was taken after six months from the date of issue of the documents.

3. Imposition of Penalty under Rule 57(i) of the Central Excise Rules 1944:
While upholding the demand for Modvat credit and the interest thereon, the Tribunal set aside the penalty. The Tribunal reasoned that there were contrary decisions during the relevant period, and the issue was only resolved by the Larger Bench decision. Thus, the penalty was deemed unwarranted.

Separate Judgments Delivered:

Judgment by Member (Technical):
The Member (Technical) upheld the demand for Modvat credit and interest but set aside the penalty, stating that the Larger Bench decision clearly covered the issue, and the facts of the case were similar to those considered by the Larger Bench.

Judgment by Member (Judicial):
The Member (Judicial) disagreed with the Member (Technical), arguing that the Larger Bench decision did not explicitly address the scenario where inputs were received within six months, but documents were received later. The Member (Judicial) emphasized that the receipt of inputs within six months should entitle the appellant to credit, even if the documentation process took longer. Consequently, the Member (Judicial) set aside the entire impugned order and allowed the appeal with consequential relief to the appellant.

Final Decision:
The difference of opinion between the Members was resolved in favor of the Member (Judicial)'s view, leading to the setting aside of the entire impugned order and allowing the appeal with consequential relief to the appellant. The final pronouncement was made in court on 19th March 2009.