1988 (12) TMI 261 - AT - Central Excise

Issues Involved:
1. Admissibility of proforma credit under Rule 56A during the period prior to the amendment of sub-rule (9) of Rule 56A.
2. Interpretation of sub-rule (9) of Rule 56A.
3. Time-bar issue concerning the demands in the show cause notices.
4. Request for reversal of MODVAT credit but retention of proforma credit.

Detailed Analysis:

1. Admissibility of Proforma Credit under Rule 56A:

The appellants argued that they were not barred from availing proforma credit under Rule 56A for inputs not covered by the MODVAT scheme. They contended that the bar in sub-rule (9) of Rule 56A was not applicable as they did not avail MODVAT credit for the same inputs for which proforma credit was taken. The Tribunal, however, held that sub-rule (9) put a total bar on a manufacturer availing of Rule 56A if they also availed MODVAT credit under Rule 57A. The Tribunal concluded that the plain and straightforward reading of sub-rule (9) indicated that simultaneous availment of both credits was not permissible, irrespective of whether the inputs were different.

2. Interpretation of Sub-Rule (9) of Rule 56A:

The Tribunal emphasized that the wording of sub-rule (9) did not allow for simultaneous availment of proforma credit under Rule 56A and MODVAT credit under Rule 57A. The Tribunal agreed with the revenue's argument that the legislative intent was clear and that the sub-rule (9) was introduced to create two distinct categories of manufacturers. The Tribunal also referred to the decision of the South Regional Bench, which supported the view that simultaneous availment was barred until the amendment on 15-4-1987.

3. Time-Bar Issue:

The appellants raised the issue of time-bar for three show cause notices, arguing that the extended period of five years was wrongly invoked. The Tribunal found that the department's allegation of wilful mis-statement or suppression of facts was not substantiated. The Tribunal noted that the department was aware of the simultaneous availment of credits and had issued show cause notices accordingly. Therefore, the Tribunal held that the show cause notice dated 26-11-1986 was partly time-barred for the period prior to 26-5-1986, and the show cause notices dated 28-11-1986 and 13-8-1987 were totally time-barred. The show cause notice dated 5-3-1987 was found to be within the time limit and fully enforceable.

4. Request for Reversal of MODVAT Credit:

The appellants requested permission to reverse the MODVAT credit but retain the proforma credit. The Tribunal rejected this request, stating that the appellants should have raised this request when the Range Superintendent brought the provisions of sub-rule (9) to their notice. The Tribunal held that the appellants' failure to act on the opportunity provided at that stage could not be condoned.

Conclusion:

The appeal was partly allowed concerning the time-bar issue, with specific directions for the department to quantify the duty recoverable. However, the appeal was otherwise rejected, and the request for reversing the MODVAT credit while retaining the proforma credit was denied.

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