2000 (6) TMI 45 - AT - Central Excise

Summary

Issues Involved:
1. Scope of Rule 57H concerning 'transitional provisions' for Modvat credit.
2. Eligibility of inputs not in stock but processed or part of finished products for Modvat credit.
3. Conflicting Tribunal decisions on Rule 57H interpretation.
4. Prospective vs. retrospective application of Rule 57H amendments.
5. Correct procedure for Tribunal when differing from earlier decisions.

Detailed Analysis:

1. Scope of Rule 57H concerning 'transitional provisions' for Modvat credit:
The core issue in these appeals is the interpretation of Rule 57H, which deals with 'transitional provisions' for Modvat credit. Rule 57H allows the Assistant Commissioner of Central Excise to grant credit for duty paid on inputs received by a manufacturer before obtaining the dated acknowledgment of the declaration under Rule 57G. This rule is an exception to Rule 57G, which mandates manufacturers to file a declaration and obtain acknowledgment before taking credit. The dispute centers on whether Modvat credit can be claimed for inputs held during the transition from exemption to duty payment on final products.

2. Eligibility of inputs not in stock but processed or part of finished products for Modvat credit:
The eligibility of inputs that were not in stock but had been processed or were part of finished products before the credit was allowed by the Assistant Collector is contested. The Revenue's position is that after the amendment of Rule 57H on 5-5-1989, credit is permissible only for inputs in stock as such, not for inputs that have become part of the final product due to the deletion of sub-rule (ii). This view is based on the interpretation that the amendment restricted credit to inputs lying in stock and did not cover inputs in process or contained in final products.

3. Conflicting Tribunal decisions on Rule 57H interpretation:
The Tribunal had taken different views on this issue. In Konark Cement & Asbestos Ltd. v. CCE, Bhubaneshwar, it was held that after the amendment deleting sub-clause (ii), transitional credit could only be given for inputs lying in stock. This view was followed in CCE, Calcutta-II v. Okay Steel Private Ltd. However, in Suresafe Glass Works (P) Ltd. v. CCE, Calcutta-I, it was held that even after the deletion of clause (ii), the surviving clause (i) would cover 'inputs in process,' suggesting that inputs received after filing the declaration could still be eligible for credit.

4. Prospective vs. retrospective application of Rule 57H amendments:
In the case of M/s Zoloto Industries, the claim for Modvat credit was for stocks of inputs available before the deletion of clause (ii) on 5-5-1989. The Commissioner (Appeals) allowed the claim, stating that the amendment could not have retrospective effect and was applicable only prospectively. This decision was based on established legal principles that amendments are generally prospective unless explicitly stated otherwise.

5. Correct procedure for Tribunal when differing from earlier decisions:
The Tribunal noted that the proper procedure when differing from earlier decisions is to refer the matter to a Larger Bench rather than rendering a contradictory decision. This principle was emphasized by the Supreme Court in Union of India v. Paras Laminates (P) Ltd., which highlighted the need for continuity, certainty, and predictability in judicial decisions. The Tribunal should follow earlier decisions unless there is a compelling reason to refer the matter to a Larger Bench for reconsideration.

Conclusion:
The Tribunal concluded that Rule 57H(1) during the period from 5-5-1989 to 25-7-1991 permitted Modvat credit for both inputs lying in stock and inputs in process or used in the manufacture of final products, provided such inputs were received in the factory after filing the declaration under Rule 57G. The appeals of M/s Crown Industries and M/s Bhanu Chemicals were remanded to the jurisdictional Assistant Commissioner for reconsideration based on whether the inputs were received after filing the declaration. The appeal of the Revenue in the case of M/s Zoloto Industries was rejected, affirming the prospective application of the amendment.