1993 (10) TMI 88 - HC - Central Excise

Issues Involved:
1. Tenability of the petition in view of the availability of an alternative remedy.
2. Interpretation and application of Rule 57H of the Central Excise Rules, 1944.
3. Entitlement to MODVAT Credit for inputs used in the manufacture of final products cleared from the factory on or after 1st March 1987.

Issue-wise Detailed Analysis:

1. Tenability of the Petition in View of the Availability of an Alternative Remedy:

A preliminary objection was raised regarding the tenability of the petition due to the availability of an alternative remedy. However, this objection was dismissed as the petition had already been admitted, and the period for filing an appeal had expired during its pendency. The Court referenced the case of Madhumilan Syntex (P) Ltd. v. Union of India, where it was held that once a petition is admitted, it cannot be dismissed on the ground of an alternate remedy after the appeal period has expired. Similarly, in Tata Exports Ltd., Dewas v. Union of India, the Court reiterated that an admitted petition should not be dismissed on the ground of an alternate remedy. Therefore, the preliminary objection was not upheld.

2. Interpretation and Application of Rule 57H of the Central Excise Rules, 1944:

The petitioners argued that Rule 57H was introduced to provide MODVAT Credit to manufacturers for duty paid on inputs used in the manufacture of final products, which were cleared from the factory on or after 1st March 1987. Rule 57H has two limbs: one for inputs lying in stock or received after filing the declaration under Rule 57G, and the other for inputs used in the manufacture of final products cleared on or after 1st March 1987. The Assistant Collector, Central Excise, interpreted Rule 57H to allow credit only for inputs lying in stock or received after filing the declaration, thereby disallowing credit for inputs used in the manufacture of final products cleared on or after 1st March 1987. The Court found this interpretation to be unreasonable and not in line with the purpose of Rule 57H, which aims to provide credit for both categories of inputs.

3. Entitlement to MODVAT Credit for Inputs Used in the Manufacture of Final Products Cleared from the Factory on or after 1st March 1987:

The petitioners had filed a declaration under Rule 57G on 12-12-1988 and sought MODVAT Credit for inputs used in the manufacture of final products cleared from the factory on or after 1st March 1987. The Assistant Collector disallowed this credit, stating that only inputs lying in stock on 12-12-1988 were eligible. The Court held that this approach was neither reasonable nor fair, as it ignored the second clause of Rule 57H, which provides for credit on inputs used in the manufacture of final products cleared on or after 1st March 1987. The Court emphasized that the Central Excise Authorities have records of goods cleared and inputs used, and these records should be considered when granting credit. The Court directed that credit should be given for inputs used in manufacturing goods cleared on or after 1st March 1987, based on the petitioners' declaration and input details, subject to verification.

Judgment:

The Court quashed the order of the Assistant Collector, Central Excise, Indore, dated 9/11-4-1991, to the extent it disallowed credit for inputs used in the manufacture of final products cleared from the factory on or after 1st March 1987. The Court directed that credit for such inputs should be given based on the petitioners' declaration and input details, with verification to be completed within one month. The petitions were allowed with no order as to costs, and any security cost deposited by the petitioners was to be refunded after due verification.

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