2008 (9) TMI 291 - AT - Central Excise

A manufacturer who is working under the Modvat Scheme can certainly utilize the credit of the duty paid on the inputs used in or in relation to the manufacture of final product for payment of duty on such final product; but he has to take credit on such inputs within six months from the date of issue of the duty paying documents. After the amendment credit cannot be taken on duty paying documents which are more than six months old (now one year).

Issues:
1. Denial of Modvat credit due to delay in taking credit beyond six months of the date of the relevant invoice.
2. Interpretation of Rule 57A regarding the time limit for taking credit.
3. Applicability of judicial authorities in denying Modvat credit.
4. Reference to the decision of the Larger Bench in Kusum Ingots & Alloys Ltd. v. CCE.
5. Analysis of statutory provisions and case laws to determine the outcome of the appeal.

Issue 1: Denial of Modvat credit
The appeal was filed against the demand of credit of Rs. 64,994/- due to taking credit beyond six months of the date of the relevant invoice, which was dated 06-10-95. The appellant took the credit on 24-7-96, which was beyond the six months' time limit. The impugned order upheld the denial based on Rule 57G(2) of the Central Excise Rules, 1944, which stipulates a time limit of six months from the date of issue of any specified duty paying document to take credit.

Issue 2: Interpretation of Rule 57A
The main argument in the appeal was that Modvat credit should not be denied when substantive conditions were met. Rule 57A states that a manufacturer cannot take credit before receiving inputs in the factory. As the inputs were received on 24-07-96, the appellant argued they had six months from that date to take the credit, thus claiming no delay in taking credit. The prohibition as perceived by the authorities was not envisaged in Rule 57A of the Central Excise Rules.

Issue 3: Applicability of judicial authorities
The appellant relied on various judicial authorities to support their case, emphasizing that Modvat credit should not be denied on procedural lapses if substantive conditions were fulfilled. The cited cases highlighted that procedural lapses should not defeat Modvat benefits if the payment of duty and use of goods in the manufacturing process were in compliance with the law.

Issue 4: Reference to the decision of the Larger Bench
The respondent referred to a decision by a Larger Bench which stated that credit of duty paid on inputs must be taken within six months from the date of issue of duty paying documents. This decision emphasized the importance of adhering to the time limit for claiming credit under the Modvat Scheme.

Issue 5: Analysis of statutory provisions and case laws
The presiding member analyzed the statutory provisions and the case laws cited by both sides. It was noted that none of the cited cases directly addressed the specific issue at hand. The presiding member emphasized the importance of adhering to the statutory provisions, especially Rule 57G(2), which mandates taking credit within six months from the date of duty paying documents. Based on the statutory provisions and binding case law, the appeal was dismissed, upholding the impugned order.

In conclusion, the judgment emphasizes the significance of complying with the statutory provisions and time limits for claiming Modvat credit, ultimately leading to the dismissal of the appeal filed by the appellant.

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