1989 (3) TMI 260 - AT - Central Excise

Summary

Issues:
- Appeal against order of Collector of Central Excise directing recrediting of Modvat credit and imposing penalty under Rule 173-Q(bb) of Central Excise Rules, 1944.
- Validity of Modvat credit availed by appellant on re-rollable waste and scrap of iron and steel.
- Interpretation of statutory direction issued by Government of India under Rule 57 (G)(2) of Central Excise Rules, 1944.
- Applicability and retrospective effect of statutory direction on deemed Modvat credit.

Analysis:
1. The appellant, engaged in re-rolling of steel materials, availed Modvat credit but was directed by the Collector of Central Excise to recredit a sum and penalized for erroneous credit. The appellant submitted a declaration for Modvat credit on 31-3-1987, acknowledged by the Department on 1-4-1987, and regularly submitted R.T. 12 returns without objection until Preventive Officers found erroneous credit of Rs. 4,86,054.07 for the period 1st April, 1987 to 30th August, 1987, leading to the present appeal against the order.

2. The appellant contended that the credit was availed in accordance with a statutory direction issued by the Government of India regarding re-rollable waste and scrap of iron and steel, enabling Modvat credit. The Government's direction allowed credit without production of duty-paying documents for ingots and re-rollable materials purchased from outside on or after 1-4-1987, which the appellant argued made the credit legally permissible.

3. The Departmental Representative argued that the statutory direction was not in force when the Department scrutinized the appellant's case in September 1987, and the Government's view at that time did not allow credit for such goods. However, the Tribunal examined the statutory direction issued under Rule 57 (G)(2) of the Central Excise Rules, finding it expressly covering the period in question and allowing deemed Modvat credit for inputs consumed by the appellant.

4. The Tribunal held that the statutory direction, effective from 1-4-1987 to 30-8-1987, entitled the appellant to avail deemed Modvat credit for the inputs in question. Despite the Department's argument for a limited retrospective effect, the Tribunal found the wording of the direction clear and categorical, rejecting contentions that would render the direction purposeless. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.