1989 (12) TMI 60 - HC - Central Excise

Issues Involved:
1. Validity of the impugned assessments.
2. Interpretation and application of the MODVAT Scheme and related notifications.
3. Compliance with procedural requirements under the Central Excise Rules, 1944.
4. Retrospective application of notification dated August 29, 1986.
5. Burden of proof regarding inputs being non-duty paid or charged to nil rate of duty.
6. Availability of alternative statutory remedies.

Detailed Analysis:

1. Validity of the Impugned Assessments:
The petitioners challenged the assessment orders (Annexures P-17 and P-18) disallowing credit claimed under the MODVAT Scheme. The court found that the assessments were made without issuing a show cause notice, violating principles of natural justice. Consequently, the preliminary objection that the petition was premature was rejected, and the assessments were set aside.

2. Interpretation and Application of the MODVAT Scheme and Related Notifications:
The MODVAT Scheme, introduced in the Finance Bill, 1986, allowed manufacturers to claim credit for excise duty paid on inputs. The Central Government issued Notification No. 177/86-C.E., and subsequent orders under Rule 57G, specifying inputs and final products eligible for deemed credit. The court clarified that the notification dated August 29, 1986, modifying the earlier order dated April 7, 1986, was not retrospective. Therefore, the benefit of the earlier notifications remained available for the period from March 1, 1986, to August 29, 1986.

3. Compliance with Procedural Requirements Under the Central Excise Rules, 1944:
The petitioners were required to maintain various accounts and file returns under Rule 57G and other relevant rules. The court noted that the petitioners had filed the necessary declarations and classification lists. However, the respondents contended that the petitioners failed to comply with the conditions for maintaining accounts and submitting returns, leading to the disallowance of credit.

4. Retrospective Application of Notification Dated August 29, 1986:
The court held that the notification dated August 29, 1986, was not retrospective. The order only aimed to clarify that deemed credit was not available for waste and scrap of steel exempt from excise duty. The benefit of the earlier notifications was available for inputs purchased from outside and lying in stock from March 1, 1986, to August 29, 1986.

5. Burden of Proof Regarding Inputs Being Non-Duty Paid or Charged to Nil Rate of Duty:
The court rejected the petitioners' contention that the burden of proving inputs as non-duty paid or charged to nil rate of duty was on the department. The court held that the initial burden was on the manufacturer claiming deemed credit to take a definite stand regarding the inputs. The department could then verify and either accept or contest the claim.

6. Availability of Alternative Statutory Remedies:
The respondents argued that the petitioners had an alternative statutory remedy under Chapter VI-A of the Central Excises and Salt Act, 1944. The court acknowledged that the existence of an alternative remedy does not bar the jurisdiction of the court under Article 226. Given that the assessments were made without a show cause notice, the court found no merit in the objection regarding the alternative remedy.

Conclusion:
The court set aside the impugned assessments (Annexures P-17 and P-18) and directed that fresh assessments be made after considering the petitioners' reply to the show cause notice, in light of the observations made in the judgment. The petitions were disposed of accordingly, with each party bearing its own costs.

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