1996 (5) TMI 97 - AT - Central Excise

Summary

Issues Involved:
1. Entitlement to Modvat credit under Rule 57A.
2. Applicability and interpretation of Rule 57E.
3. Procedural requirements under Rule 57G.
4. Retrospective application of amendments to Rule 57E.
5. Harmonious reading of Rules 57A, 57E, and 57G.

Summary:

Entitlement to Modvat Credit under Rule 57A:
The appellants, manufacturers of motor vehicles and detergents, claimed Modvat credit u/s 57A for duty paid on inputs. The inputs were initially cleared at Nil duty due to an exemption notification, which was later withdrawn. The lower authorities disallowed the Modvat credit availed by the appellants for the subsequently paid duty.

Applicability and Interpretation of Rule 57E:
Rule 57E deals with the adjustment in duty credit when the duty paid on inputs is varied. The Tribunal noted that Rule 57E, as originally framed, provided for variation of credit only in cases of refund of duty to the manufacturer of inputs. Amendments to Rule 57E extended its scope to include cases where more duty was recovered from the manufacturer of inputs due to reclassification or other reasons. The Tribunal held that Rule 57E is clarificatory and procedural, and its amendments are retrospective in nature.

Procedural Requirements under Rule 57G:
Rule 57G outlines the procedure for availing Modvat credit, requiring a declaration and specified documents evidencing payment of duty. The Tribunal observed that the appellants complied with these requirements. The second proviso to Rule 57G(2), which bars taking credit after six months from the date of issue of specified documents, was not applicable as it was introduced after the relevant period.

Retrospective Application of Amendments to Rule 57E:
The Tribunal held that the amendments to Rule 57E are retrospective and apply to all situations of adjustment, recovery, or refund of credit which had not become concluded before 15-4-1987. This interpretation prevents manifest injustice to the manufacturers of final products and aligns with the broad contours of the Modvat scheme under Rule 57A.

Harmonious Reading of Rules 57A, 57E, and 57G:
The Tribunal emphasized a harmonious reading of Rules 57A, 57E, and 57G. Rule 57A defines the applicability and scope of the Modvat scheme, while Rules 57E and 57G provide specific procedural and substantive provisions. The Tribunal concluded that Rule 57E is merely clarificatory and procedural, reinforcing the rights and obligations under Rule 57G.

Conclusion:
The appeals were decided in favor of the manufacturers, allowing them to avail Modvat credit for the duty or differential duty paid subsequently on inputs. The Tribunal set aside the impugned orders in the appeals, except for Appeal No. E/607/89, which was dismissed.