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2016 (4) TMI 284 - HC - Central ExciseUtilization of unutilized input credit amount - Manufacture of dutiable and exempted goods and had availed Modvat Credit in respect of inputs used - Held that - it is evident that the non-utilization of the input credit were solely on account of the pending dispute between the parties which had arisen due to the failure of the Excise authorities to come up with a proper procedure in the matter of utilization of input credit coupled with the restraint order as a result of which the respondent could not utilize the said amount and the same continued to remain lying in it s account except for an amount of ₹ 46 lacs which the respondents had taken out in the year 1994. Thus, the Tribunal has taken a correct view in the matter and allowed the said credit to be taken in the CENVAT account of the respondent. Also, sub-rule (7) of Rule 57H has been brought into force, as stated on enquiry by learned counsel for the Revenue itself, on 1.3.1997 and thus the same was not at all in existence on 1.1.1997 when the respondents had opted out of the Modvat credit. In the circumstances, it is not at all open for the appellant to place reliance upon the said rule for denying the benefit of the input credit lying in the Account of the respondent on the basis of the said sub-rule.
Issues:
Dispute over utilization of input credit amount, interpretation of Rule 57H (7) of Central Excise Rules, 1944, inaction of Excise authorities leading to accumulation of credit, whether respondent should be allowed to avail input credit despite opting out of Modvat Scheme. Analysis: The appeal was filed against an order passed by the Customs, Excise & Service Tax Appellate Tribunal, Eastern Zonal Bench, Kolkata. The respondent used to manufacture dutiable and exempted goods and had availed Modvat Credit in respect of inputs used. A show cause notice was issued regarding the practice of debiting Modvatable credit resulting in a short debit. The dispute continued through various stages of litigation, with the authorities unable to devise a proper procedure for determining the quantum of credit to be expunged. The respondent was denied the utilization of input credit, leading to accumulation. The Tribunal, in the impugned order, noted the history of litigations and the inaction of the Revenue, allowing the respondent to take credit in the CENVAT account. The Revenue contended that the respondent had opted out of the Modvat Scheme, and thus, the amounts would lapse under Rule 57H (7) of the Central Excise Rules, 1944. The Tribunal found that the non-utilization of input credit was due to the pending dispute and inaction of the Excise authorities. The Tribunal's decision to allow the credit was upheld, considering that the respondent was unable to utilize the credit due to the ongoing dispute and restraint order. The Tribunal's view was deemed correct, as the input credit remained unutilized primarily due to the failure of the Excise authorities to establish a proper procedure. Additionally, it was noted that Rule 57H (7) was not in force when the respondent opted out of the Modvat credit scheme, rendering it inapplicable in this case. The Court dismissed the appeal, stating that no substantial question of law was raised. The decision to allow the respondent to take credit in the CENVAT account was upheld, emphasizing the circumstances surrounding the non-utilization of the input credit and the inaction of the Excise authorities in resolving the matter promptly. The Court found that the Tribunal's decision was appropriate given the facts and circumstances of the case, and the reliance on Rule 57H (7) by the Revenue was deemed invalid due to its timing in relation to the respondent's opt-out of the Modvat Scheme.
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