2000 (7) TMI 166 - AT - Central Excise

Summary

Issues Involved:
1. Disallowance of Modvat credit due to alleged contravention of Rule 57U read with provisions of Rule 57F(20)/(21) and Rule 57S(5)/(6) of the Central Excise Rules.
2. Validity of the permission granted by the Range Superintendent to transfer Modvat credit.
3. Applicability of Rule 57F(20) and Rule 57S(5) to the case.
4. Time-bar of the show cause notice.
5. Estoppel and irrevocability of the permission granted.

Issue-wise Detailed Analysis:

1. Disallowance of Modvat Credit:
The Commissioner of Central Excise Meerut confirmed a duty demand of Rs. 1,31,99,260/- and imposed a penalty of Rs. 1 lakh on the appellant for allegedly contravening Rule 57U read with Rule 57F(20)/(21) and Rule 57S(5)/(6) by transferring Modvat credit from Unit No. II to Unit No. I without proper permission.

2. Validity of Permission Granted by Range Superintendent:
The appellants argued that the transfer of accumulated credit balances was a consequence of the permission granted by the Range Superintendent on 28-8-1997, which was endorsed to the Assistant Commissioner. They contended that the letter was clear and unambiguous, and the Assistant Commissioner was aware of the permission being granted. Therefore, the allegation of improper authority was unfounded.

3. Applicability of Rule 57F(20) and Rule 57S(5):
The appellants claimed that Rule 57F(20) and Rule 57S(5) were not applicable as there was no shifting of the factory, change in ownership, sale, merger, or amalgamation. The Tribunal observed that the provisions require a manufacturer to make an application to the Commissioner for transferring unutilised credit under specific circumstances such as shifting, change of ownership, or merger. Since Unit No. II ceased to have a distinct site due to its merger with Unit No. I, the conditions of "change in the site of a factory resulting from sale, merger" were met, making the provisions applicable.

4. Time-bar of the Show Cause Notice:
The appellants argued that the show cause notice issued on 2-4-1998 was barred by limitation as it covered the period from September 1997 to December 1997. The Tribunal accepted the respondent's contention that the notice was within the six-month period under Section 11A(1) as the time for finalisation of assessment extended up to 5-10-1997.

5. Estoppel and Irrevocability of Permission:
The appellants relied on the Supreme Court decisions in Kasinka Trading and Shrijee Sales Corporation, arguing that the permission granted by the Superintendent had become final and irrevocable. They contended that since Unit No. II ceased to exist and no RG 23A account was available for restoring the unutilised credit, the withdrawal of permission was not permissible. The Tribunal found merit in this contention and accepted it, similar to the decision in India Piston Ltd. v. Assistant Commissioner.

Conclusion:
The Tribunal held that the disallowance of Modvat credit and the duty demand of Rs. 1,31,99,260/- along with the penalty were unsustainable. The impugned order was set aside, and the appeal was allowed.