2007 (3) TMI 257 - SC - Central Excise

Whether the assessee was entitled to avail Modvat credit on differential duty paid during the period 21-4-1986 to 2-4-1987 in respect of inputs received in his factory during the year 1986-87 which inputs were utilized between the period 16-8-1987 and 30-12-1987? Held that - The courts below were right in holding that Rule 57E was procedural, clarificatory and therefore would not affect the substantive rights of the manufacture of the specified final product to claim Modvat credit for the duty paid on the inputs subsequent to the date of the receipt of those inputs. Consequently, the respondent-manufacturer in the present case was entitled to take credit between the period 16-8-1987 to 30-12-1987 in the sum of Rs. 6,43,994.57. Appeal dismissed.

Summary

Issues:
Whether the assessee was entitled to avail Modvat credit on differential duty paid during a specific period in respect of inputs received in the factory.

Analysis:
1. The case involved a civil appeal regarding the entitlement of the assessee to avail Modvat credit on the differential duty paid for inputs received during a specific period. The Department argued that an amendment to Rule 57E of the Central Excise Rules, 1944 operated prospectively from a certain date, thereby affecting the claimant's eligibility for the credit.

2. The respondent-assessee, a manufacturer of motor vehicles, received inputs between a certain period, and the price of these inputs was later revised by the supplier, leading to additional duty payment by the assessee. The credit for this additional duty paid was taken during a different period. The Modvat Scheme, introduced in 1986, allowed credit adjustments for duty variations prior to its implementation, but the corresponding provision was omitted in the subsequent Rule 57A of the Modvat Scheme.

3. The judgment highlighted the distinction between Rule 57A, which recognizes the right to claim Modvat credit, and Rule 57E, which deals with the procedural aspect of duty credit adjustments. The purpose of these rules is to prevent duty on duty, ensuring the final product's price is not inflated. Rule 57E focuses on the adjustment of duty credit, while Rule 57G mandates record-keeping requirements for manufacturers.

4. The court concluded that Rule 57E was procedural and clarificatory, not affecting the substantive right of manufacturers to claim Modvat credit for duty paid on inputs post-receipt. Therefore, the respondent-manufacturer was deemed entitled to take credit for the specified amount within a specific period, as determined by the court.

5. Ultimately, the appeal was dismissed, with no costs imposed, affirming the respondent-manufacturer's entitlement to claim Modvat credit for the duty paid on inputs during the relevant period.