2010 (9) TMI 402 - HC - Central Excise

Cenvat credit Documents for availing credit - Notification dated 16/94 dated 30-3-1994 invoice was prescribed as a document for the purpose of availing of Modvat credit. By a further Notification No. 21/94 dated 12-5-1994 it was prescribed that the invoice should contain particulars mentioned in clauses (a) and (b) therein and it was declared in the said notification that the same would cease to have effect after 30-6-1994 - amendment to the Rule 57H, inter alia permitted acceptance of an invoice or any document as may be prescribed by the CBEC as a valid document under Rule 57G for the purposes of Modvat credit It was more so as gate passes, which were a document as prescribed by CBEC Circular, were submitted prior to 31-12-1994. Petitioners would be entitled to Modvat credit on the basis of the circular issued by the Central Board of Excise and Customs dated 8-11-1994. Although a circular is not binding on a Court or an assessee, it is not open to the Revenue to raise the contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute. - Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. - A show cause notice and demand contrary to existing circulars of the Board are ab initio bad. - It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars.

Issues Involved:
1. Validity of Notification dated 30-3-1994 preventing Modvat Credit after 30-6-1994 based on a gate pass issued prior to 1-4-1994.
2. Legality of the orders/letters dated 20-12-1994, 6-1-1995, and communication dated 8-7-1998.
3. Entitlement of the Petitioners to Modvat Credit based on the circular dated 8-11-1994 by the Central Board of Excise and Customs (CBEC).

Issue-wise Detailed Analysis:

1. Validity of Notification dated 30-3-1994:
The Petitioners challenged the Notification dated 30-3-1994, which prevented them from taking Modvat Credit after 30-6-1994 on a gate pass issued prior to 1-4-1994. The Modvat scheme, introduced on 1-3-1986, allowed manufacturers to take credit of duty paid on excisable goods used as inputs. The Petitioners had filed a declaration under Rule 57G of the Central Excise Rules for Caustic Soda and Metal Anodes. Due to a lockout, the Petitioners could not take delivery of the Anodes until 3-12-1994. They availed Modvat Credit in the first week of December 1994. The 3rd Respondent directed the Petitioners to reverse the credit, stating that after 30-6-1994, the gate pass issued prior to 1-4-1994 was not valid. The Petitioners argued that credit availment was extended up to 31-12-1994 by Notification No. 21/94 CE(NT) dated 12-5-1994 and Notification No. 30/94-N T dated 29-6-1994. The 3rd Respondent's refusal to consider these notifications was a key point of contention.

2. Legality of Orders/Letters dated 20-12-1994, 6-1-1995, and Communication dated 8-7-1998:
The Petitioners also challenged the orders/letters dated 20-12-1994, 6-1-1995, and communication dated 8-7-1998. The letter dated 8-7-1998 rejected the Petitioners' application under Rule 57H(1) to the Assistant Commissioner of Central Excise, stating that the admissibility of Modvat Credit on the basis of the gate pass had already been communicated on 6-1-1995. The Respondents argued that the Petitioners did not submit the invoice prior to 31-12-1994, as required by the circular of the Board, thus disqualifying them from the credit.

3. Entitlement to Modvat Credit Based on Circular dated 8-11-1994:
The principal argument of the Petitioners was based on the CBEC circular dated 8-11-1994, which prescribed the invoice/document issued by the manufacturer from his factory as a valid document for allowing Modvat Credit. The circular extended the acceptance of such documents up to 31-12-1994. The Petitioners argued that since they availed the Modvat Credit in the first week of December 1994 and had all necessary documents, they should not be deprived of the credit. The Respondents contended that the invoice was produced only in 1996, beyond the stipulated date.

Court's Findings:
The Court noted that the substantive provision for availing Modvat Credit remained unchanged despite procedural changes. The Petitioners had complied with the formalities and availed the credit in December 1994. The Court emphasized that the CBEC circular dated 8-11-1994, which allowed the acceptance of invoices/documents up to 31-12-1994, was binding on the authorities. The Court found that the Petitioners had the necessary documents and had availed the credit within the extended period. The Court held that the refusal to grant Modvat Credit based on the technicality of not submitting the invoice before 31-12-1994 was unwarranted, considering the circular aimed to mitigate difficulties arising from budgetary changes.

Conclusion:
The Court set aside the impugned orders/letters dated 20-12-1994, 6-1-1995, and communication dated 8-7-1998, ruling that the Petitioners were entitled to Modvat Credit of Rs. 23,85,653/- based on the CBEC circular dated 8-11-1994. The Court underscored that circulars issued by the CBEC are binding on the Revenue, as established in the judgments of the Apex Court in Collector of Central Excise, Meerut v. Maruti Foam (P) Ltd. and Commissioner of Customs, Calcutta v. Indian Oil Corporation Ltd.

← Previous Next →