2014 (1) TMI 1209 - HC - Central Excise

Availment of MODVAT Credit - Whether Rule 57G, sub-rule (5) of Central Excise Rules can be applied to deny the balance amount of Modvat credit when portion of the credit has already been availed by the appellant against the invoices - Held that - The present case is not a case of taking credit beyond six months, but of taking balance credit amount, which the appellant wrongly availed only 50%. Since the input (furnace oil) was entered in Part I and since the appellant has already availed 50% of the Modvat credit, for availing of the balance 50% Modvat, six months time cannot be computed as contemplated by Rule 57G, sub-rule (5). The authorities did not keep in view that availing of balance 50% was only rectification of the earlier inadvertent mistake committed by the appellant and the order of the Tribunal cannot be sustained - Decided against assessee.

Summary

Issues:
Application of Rule 57G, sub-rule (5) of Central Excise Rules to deny balance Modvat credit already partially availed.

Analysis:
The appellant, engaged in manufacturing, availed 50% Modvat credit against invoices for "furnace oil" within the prescribed time but failed to take the remaining 50% due to inadvertence. Upon realizing the error, they sought permission to claim the balance credit, which was granted by the Assistant Commissioner. However, a show cause notice was issued for availing the credit beyond the six-month period as per Rule 57G, sub-rule (5). The adjudicating authority confirmed the demand, which was upheld by the appellate authority and CESTAT, stating the limitation period starts from the duty paying document dates. The appeal questions the denial of the balance credit under Rule 57G(5) and the need to reapply the rule for the same invoices.

The appellant argued that the limitation period should start from the date of permission granted for the balance credit, citing a Delhi Tribunal decision. They contended that rectifying the initial error by claiming the balance credit should not affect the time limit calculation. The department's stance was that the appellant availed 50% without following Rule 57G(5), leading to CESTAT's dismissal of the appeal, which was supported by the Commissioner (Appeals).

Central Excise Rule 57G mandates manufacturers to claim Modvat credit within six months and maintain specific registers. The appellant received furnace oil under the disputed invoices and initially claimed 50% credit within the time limit. They later requested permission for the balance credit, considering it a rectification of their inadvertent mistake.

Legal precedents like S.R.F. Ltd. v. Commissioner and Commissioner of C. Ex., Lucknow v. Gyan Packaging India (P) Ltd. support that rectifying an error should not impact the time limit calculation under Rule 57G(5). Another case, Commissioner of C. Ex., Daman v. Sidmak Laboratories (I) Ltd., ruled that correcting short credit taken, even beyond six months, is permissible without Rule 57G(5) application.

The judgment emphasized that the appellant's situation involved rectifying the initial mistake of availing only 50% credit, not exceeding the six-month limit. The balance credit was seen as a correction rather than a new claim, making Rule 57G(5) inapplicable. The Tribunal's order was set aside, favoring the appellant on the grounds of rectification. No costs were awarded in the judgment.