2007 (11) TMI 258 - HC - Central Excise

Notification 177/86 restrict credit to specified inputs validity of this notification challenged by assessee on ground that Central Govt. is not empowered to restrict credit to specified inputs but can only specify the final products & duty u/r 57A held that Rule 57A can t be regarded as extraneous to the statutory provisions which empowers the govt. to exclude some inputs - held that the notification was not in any way repugnant to the rule making authority u/r 57A appeal dismissed

Summary

Issues:
Challenge to notification restricting Modvat credit of duty to certain inputs under Rule 57-A of Central Excise Rules 1944.

Analysis:
The writ appeals were filed against a single Judge's order regarding a notification issued in 1986 restricting Modvat credit of duty to specific inputs listed in the notification. The appellant argued that the Central Government exceeded its power under Rule 57-A by restricting the list of inputs eligible for credit. The Court analyzed Rule 57-A and concluded that the Central Government had the authority to specify final excisable goods eligible for credit and the duties for allowing credit on goods used in manufacturing. The Court emphasized that the utilization of credit was subject to restrictions specified in the notification. The single Judge held that the notification was not repugnant to the rule-making authority and that credit was available only for inputs specified in the notification used in manufacturing final products.

The Court heard arguments from the appellant's counsel, who reiterated the arguments made before the single Judge. Upon reviewing the single Judge's order, the Court determined that Rule 57A was not extraneous or repugnant to statutory provisions empowering the Central Government to exclude or specify inputs for Modvat Credit. The Court clarified that a rule could only be challenged if it exceeded the substantive Act or statutory provisions. Since there was no evidence of the rule being repugnant to the main statutory provision, the Court found no legal basis for the appellant to challenge the beneficial notification granting Modvat Credit for specific inputs. Consequently, the Court dismissed the writ appeals without costs.