2000 (5) TMI 71 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of the six-month limitation period under Section 11A of the Central Excises & Salt Act, 1944 to demands under Rule 57E of the Central Excise Rules, 1944.
2. Whether Rule 57-I of the Central Excise Rules, 1944 can be invoked for demands under Rule 57E.
3. Determination of the reasonable period for issuing demands under Rule 57E in the absence of a prescribed limitation period.

Detailed Analysis:

1. Applicability of the Six-Month Limitation Period under Section 11A:
The central issue was whether the six-month limitation period prescribed under Section 11A of the Central Excises & Salt Act, 1944, applies to demands made under Rule 57E of the Central Excise Rules, 1944, for variation of Modvat credit due to variations in the duty paid on inputs.

- Tribunal's Previous Decisions: The Tribunal's earlier decisions in Bakeman's Home Products Pvt. Ltd. v. Collector of Central Excise and Arvind Detergents Ltd. v. Collector of Central Excise were reviewed. In Bakeman's, it was held that any notice of demand under a provision similar to Rule 57E would be subject to the limitation provisions contained in Section 11A. In Arvind Detergents, a similar conclusion was drawn regarding the limitation period for demands under a comparable rule.

- Supreme Court's Ruling: The Supreme Court in Government of India v. Citedal Fine Pharmaceuticals held that in the absence of a prescribed period of limitation, authorities must exercise their power within a reasonable period, which depends on the facts of the case.

- Tribunal's Conclusion: The Tribunal concluded that Section 11A's limitation provisions are not applicable to demands under Rule 57E. This is because Rule 57E is an independent provision and does not inherently carry the limitation period prescribed under Section 11A. The Tribunal emphasized that Rule 57E deals specifically with the variation of credit due to subsequent changes in the duty paid on inputs, which is distinct from the scenarios covered under Section 11A.

2. Invocation of Rule 57-I for Demands under Rule 57E:
- Arguments Presented: The appellants argued that if Section 11A is inapplicable, then the limitation provisions of Rule 57-I should apply to Rule 57E demands. However, the lower appellate authority had already ruled that Rule 57-I was not applicable to the facts of the case.

- Tribunal's Analysis: The Tribunal found that Rule 57-I and Rule 57E operate in different contexts and for different purposes. Rule 57-I deals with recovery of credit wrongly availed or utilized irregularly, while Rule 57E addresses variations in credit due to changes in the duty paid on inputs. Therefore, the Tribunal held that Rule 57-I's limitation provisions do not apply to Rule 57E demands.

3. Determination of the Reasonable Period:
- Facts of the Case: The appellants took Modvat credit on inputs during April-May 1987. The Department issued a show cause notice on 19-8-1988 after a refund of duty to the input-manufacturer in January 1988, which was beyond six months from the date of taking credit but within 7-8 months from the date of the refund.

- Reasonable Period Concept: Following the Supreme Court's ruling in Citedal Fine Pharmaceuticals, the Tribunal held that in the absence of a specific limitation period under Rule 57E, demands must be issued within a reasonable period from the date the cause of action arises, which in this case was the date of the refund to the input-manufacturer.

- Conclusion: The Tribunal found that the period of 7-8 months from the date of the refund to the issuance of the show cause notice was reasonable. Therefore, the demand under Rule 57E was upheld as being within a reasonable period.

Final Judgment:
The Tribunal upheld the order of the lower appellate authority, rejecting the appeal and confirming that the demand under Rule 57E was issued within a reasonable period. The Tribunal's decision was guided by the Supreme Court's ruling in Citedal Fine Pharmaceuticals, establishing that demands under Rule 57E are not subject to the six-month limitation period under Section 11A but must be made within a reasonable period based on the facts of each case.