2009 (8) TMI 1214 - HC - Central Excise

Summary

Issues involved:
The issues involved in this case are:
1. Interpretation of Modvat credit under Rule 191B/191BB of the Central Excise Rules, 1944.
2. Differentiation between exemptions under Rule 191B/191BB and other exemptions.
3. Reliance on a previous decision of CEGAT when the matter is sub judice in Orissa High Court.

Issue 1: Modvat credit under Rule 191B/191BB
The petitioner sought direction on whether Modvat credit taken on inputs should be expunged for clearances under Rule 191B/191BB, despite Rule 57C placing an embargo on credit if the final product is wholly exempt from duty. The respondent, a manufacturer of Polyester staple fibre, cleared products without duty payment under Rule 191B/191BB, not reversing the Modvat credit as required by Rule 57C.

Issue 2: Differentiation between exemptions
The Tribunal's differentiation between exemptions under Rule 191B/191BB and other exemptions regarding the applicability of Rule 57C was questioned by the petitioner, arguing that there was no valid ground for such differentiation.

Issue 3: Reliance on previous decision
The Tribunal's reliance on a previous decision of CEGAT in the case of M/s. Orissa Synthetics Ltd. was challenged by the petitioner, as the decision was being contested in the Orissa High Court and was sub judice.

The Assistant Commissioner decided in favor of the respondent, following the CEGAT judgment in M/s. Orissa Synthetics Ltd., which held that Rule 57C did not apply to clearances under Rule 191B/191BB. The Commissioner (Appeals) upheld this decision, stating that until the CEGAT order was overturned, its ratio had to be followed. The CEGAT also supported this stance, leading the department to seek a reference to the Tribunal.

The department's request for reference was based on the disagreement with the Orissa Tribunal's decision in the Orissa Synthetics Ltd. case, which was under appeal in the Orissa High Court. The Punjab and Haryana High Court's decision in a similar case supported the respondent's position, stating that Modvat credit was admissible. Consequently, the petition was dismissed as no referable question of law arose.

In conclusion, the High Court dismissed the petition, aligning with the Punjab and Haryana High Court's view that no referable question of law existed in this case, thus not warranting a direction to the Tribunal for reference.