1989 (9) TMI 272 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 57E of the Central Excise Rules regarding adjustment of duty credit.
2. Application of Rule 57E in the context of variation in duty payment on inputs.
3. Reversal of credit under Rule 57E and its sustainability in law.

Analysis:
1. The appeal in this case was against the order of the Collector of Customs & Central Excise (Appeals), Madras, related to the appellants taking MODVAT credit for duty on inputs in their RG 23A Part II register. The appellants claimed the credit based on subsequent variations in duty payment on the goods supplied by the manufacturer. The lower authority held that the appellants were not entitled to the credit adjustment under Rule 57E unless the duty paid on inputs varied subsequently due to specific reasons outlined in the rule. The lower authority referred to an amendment in Rule 57E through Notification 117/87, allowing credit adjustment in case of duty payment variations on inputs.

2. The issue involved in this case was compared to a ruling by the Bench in the case of Indo National Ltd. v. Collector of Central Excise, Hyderabad, where it was held that the reversal of credit under Rule 57E was not sustainable in law. The Tribunal observed that the appellants took MODVAT credit based on the correct rate of duty certified by the manufacturer after initially paying a lower duty. The Tribunal emphasized that for Rule 57E to apply, there must be a variation in the duty payable for the input, either by law or otherwise. In this case, the duty rate remained constant at 20%, and the mistake made by the supplier did not constitute a variation in duty rate as per Rule 57E. Therefore, the application of Rule 57E to reverse the credit was deemed unsustainable.

3. The Tribunal further clarified that in the present case, the duty was initially paid at a lower rate per metric ton compared to the actual rate, and the difference was later paid by the manufacturer. The Tribunal reiterated that Rule 57E did not apply as the inputs had originally suffered the correct duty as per law, and the credit claimed by the appellant was valid under the MODVAT Scheme. Following the precedent set by the earlier ruling, the Tribunal set aside the impugned order and allowed the appeal, granting consequential relief to the appellant.