2005 (12) TMI 95 - SC - Central Excise

Whether the Appellant had complied with the provisions for taking credit in terms of sub-rule (8) of Rule 56A of the Rules or not if it was not otherwise entitled thereto? Held that - It is now a well-settled principle of law that wrong mentioning of a section would not be a ground to refuse relief to an assessee if he is otherwise entitled thereto. While setting aside the order of all the authorities as well as the Tribunal, remit the matter back to the Assistant Commissioner for his determination as to whether the Appellant herein was entitled to take the credit in terms of sub-rule (8) of Rule 56A of the Rules or not. It would be open to the Appellant herein to show that it was so entitled. For the aforementioned purpose, thus, it is necessary that the claim of the Appellant be considered afresh by the Assistant Commissioner of Excise. The Appeal is allowed and the impugned judgments are set aside with the aforementioned directions.

Summary

Issues:
Claim of Modvat credit under Rule 57A, availability of credit on Naphthalene, applicability of Rule 56A, denial of credit, interpretation of sub-rule (9) of Rule 56A.

Analysis:
The appellant, engaged in manufacturing Hydrochloric Acid, claimed Modvat credit under Rule 57A for using Naphthalene as an input. However, a notification issued under Rule 57A stated that credit on inputs under Chapter Heading 27 would not be available. The appellant availed credit on Naphthalene falling under Chapter 27, leading to a show cause notice for wrong claim and proposed penalty. The Commissioner allowed the appeal, stating the appellant intended to avail credit under Rule 56A(8) instead of Rule 57A.

The respondent challenged the decision, arguing that since the appellant claimed credit under Rule 57A, sub-rule (9) of Rule 56A should apply. The High Court dismissed the writ petition, noting that the appellant did not claim credit under Rule 56A(8) and failed to satisfy the conditions precedent under Rule 56A.

The Supreme Court emphasized that wrong mentioning of a provision should not bar an entitled relief to the assessee. Citing precedents, the Court reiterated that relief can be granted based on valid grounds even if not specifically claimed by the assessee. Sub-rule (9) of Rule 56A prohibits an assessee from benefiting under both Rule 56A and Rule 57A. The Court clarified that an assessee can claim exemption under another rule if the credit claimed under one rule is found inapplicable and returned.

Setting aside all previous orders, the Court remitted the matter to the Assistant Commissioner to determine if the appellant was entitled to credit under Rule 56A(8). The appellant was given the opportunity to demonstrate their entitlement. The appeal was allowed, and the judgments were set aside with no order as to costs.