2000 (10) TMI 167 - AT - Central Excise

Issues Involved:
1. Eligibility of inputs for Modvat credit under Rule 57A of the Central Excise Rules.
2. Limitation period for taking Modvat credit under Rule 57G(2).
3. Validity of denial of Modvat credit on certain inputs.
4. Imposition of penalty under Rule 173Q and interest under Rule 57-I.

Issue-wise Detailed Analysis:

1. Eligibility of Inputs for Modvat Credit under Rule 57A:
The appellants were engaged in the manufacture of paper and paper board and had been availing Modvat credit on inputs since 1-3-87. A dispute arose regarding the eligibility of certain inputs for Modvat credit under Rule 57A, leading to litigation. The Tribunal's Final Order dated 18-7-96 held that all inputs except two (Wetnol and Lissapol) were eligible for Modvat credit. The appellants, based on this order, took Modvat credits for the period March 1987 to September 1996. The Department, however, issued a show cause notice on 14-3-97, proposing to disallow these credits and recover them under Rule 9(2) and Rule 57(I) read with Section 11A of the Central Excise Act, along with interest and penalties.

2. Limitation Period for Taking Modvat Credit under Rule 57G(2):
The Department argued that most of the credits taken by the appellants were beyond the six-month limitation period prescribed under the proviso to Rule 57G(2), as amended by Notification No. 28/95-C.E. (N.T.) dated 29-6-95. The appellants contended that the limitation should not apply as they were prevented by the Department from taking credit due to the earlier adverse orders. The Board's Circular No. 275/109/96-CX., dated 26-11-96, clarified that the six-month restriction applies only when the assessee himself delays taking credit. The Tribunal held that the period of six months should be computed from the Tribunal's order date (18-7-96), thus making the credits taken within six months from this date admissible.

3. Validity of Denial of Modvat Credit on Certain Inputs:
The adjudicating authority disallowed credits totaling Rs. 2,68,54,536/-. The credit of Rs. 86,72,247/- taken on inputs held eligible by the Tribunal was deemed admissible, subject to the limitation decision. The credit of Rs. 58,50,833/- taken on inputs not explicitly covered by the Tribunal's order required further examination post the High Court's decision. For the credit of Rs. 1,23,31,456/-, the part related to inputs mentioned at Sl. Nos. 8 and 11 was admissible, while the rest required a decision post the High Court's ruling.

4. Imposition of Penalty under Rule 173Q and Interest under Rule 57-I:
The Tribunal found no justification for the penalty of equal amount under Rule 173Q or for any interest under Rule 57-I, as the appellants had taken Modvat credits based on the Tribunal's favorable order and had not contravened any legal provisions.

Conclusion:
The Tribunal allowed the appeal to the extent that the credit of Rs. 86,72,247/- was to be given. The credit of Rs. 1,23,31,456/- related to inputs at Sl. Nos. 8 and 11 was also allowed. The Commissioner was directed to decide on the credit of Rs. 58,50,833/- and the remaining part of Rs. 1,23,31,456/- post the High Court's decision. The Tribunal set aside parts (i), (iv), and (v) of the impugned order, upheld part (iii) with modifications, and directed that no part of the credit should be denied on the ground of limitation. The appeal was allowed to the specified extent.

← Previous Next →