2019 (2) TMI 1787 - HC - Central Excise

Money Credit - Rule 57-O(2) of the Central Excise Rules, 1944 - applicability of the provisions only on inputs received after filing of the declaration under sub-rule (1), or it is also applicable or covers the inputs received before filing the declaration and if it covers the inputs received before filing the declaration - benefit of money credit under Rule 57-O of the said Rules - HELD THAT - An assessee is put under a statutory obligation to file a declaration indicating to the Department the input intended to be used in the manufacture of the finished product and sub-rule (2) of Rule 57-O further makes it clear that a manufacturer who has filed a declaration in terms of sub-rule (1) may after obtaining the acknowledgment take credit of money on the inputs - Close reading of Rule 57-O of the Rules, 1944 makes it clear that filing a declaration is a condition precedent and it is only after filing a declaration and intimating the Department the input which the manufacturer intends to use, which would be only prospectively and only after satisfying the Assistant Collector of Central Excise with reference to any information which he may require and obtaining the acknowledgment may take the credit of money on the inputs.

Issues:
Interpretation of Rule 57-O of the Central Excise Rules, 1944 regarding the eligibility of money credit on inputs received before filing the declaration.

Analysis:
1. The case involved a dispute regarding the interpretation of Rule 57-O of the Central Excise Rules, 1944, specifically concerning the eligibility of money credit on inputs received before filing the declaration under sub-rule (1).

2. The assessee, a manufacturing company, had filed a declaration under Rule 57-O for availing money credit on minor oils used in the manufacture of final products. The company subsequently claimed money credit on the stock of inputs received before filing the declaration, leading to a show cause notice proposing to disallow the credit.

3. The Deputy Commissioner's order highlighted the absence of transitional provisions for money credit similar to those under Rule 57H for MODVAT credit. The Deputy Commissioner reasoned that Rule 57-O(2) did not restrict credit to inputs received after filing the declaration, unlike Rule 57G(2) under the MODVAT scheme, making the money credit availed by the assessee permissible under the law.

4. The Commissioner (Appeals) set aside the order of adjudication, emphasizing that the assessee failed to follow the prescribed procedure and safeguards under Rule 57Q for claiming money credit on inputs received before filing the declaration. The Commissioner noted that the assessee did not raise the question of admissibility of credit under Rule 57Q initially.

5. The Customs, Excise and Service Tax Appellate Tribunal held that money credit under Rule 57-O should be available only on inputs received after the date of acknowledgment of the declaration, declining to refer the matter to a larger bench. This decision prompted the assessee to file an application under Section 35H of the Central Excise Act, 1944.

6. The reference for opinion arose from various tribunal decisions, including those in Oswal Vanaspati & Allied Industries and Hindustan Lever Ltd., leading to a detailed analysis of Rule 57-O and its procedural requirements for availing money credit on inputs used in manufacturing final products.

7. Rule 57-O outlines the procedure for manufacturers to take credit, requiring a declaration to be filed with the Assistant Collector of Central Excise, specifying the final products manufactured, the inputs to be used, and other necessary information. Subsequent provisions detail the maintenance of accounts and submission of returns related to the inputs used.

8. The interpretation of sub-rule (2) of Rule 57-O was crucial in determining the eligibility of money credit, with past tribunal decisions emphasizing that credit could extend to inputs received earlier, not just after the acknowledgment date.

9. The analysis reaffirmed that filing a declaration under Rule 57-O is a prerequisite for taking credit on inputs, emphasizing the prospective nature of the credit after satisfying the Assistant Collector and obtaining acknowledgment.

10. Ultimately, the substantial question of law was answered in favor of allowing money credit on inputs received before filing the declaration under Rule 57-O, provided the procedural requirements were met, ensuring compliance with the statutory obligations outlined in the Central Excise Act, 1944.

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