1990 (2) TMI 207 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of duty credit under Rule 57A for inputs on which additional duty was paid subsequently.
2. Applicability of Rule 57E for adjustments in duty credit.
3. Time bar for demand under Rule 57-I in conjunction with Section 11A of the Central Excise Act.

Detailed Analysis:

1. Eligibility of Duty Credit under Rule 57A:
The appellants, M/s. Mahindra & Mahindra Ltd., argued that under Rule 57A, credit should be allowed for any duty of excise paid on inputs used in the manufacture of the final product, even if the duty was paid subsequently. They contended that the scheme of MODVAT aims to prevent the cascading effect of input taxation, and thus, credit should be extended as long as there is evidence of duty payment on the same inputs. The lower authorities denied this credit, stating that Rule 57E, as it existed, did not provide for such adjustments. The Tribunal noted that the credit could not be enhanced based on subsequent payment of additional duty, as there was no enabling provision in the MODVAT scheme for such adjustments at the time.

2. Applicability of Rule 57E:
The appellants relied on a precedent set by the South Regional Bench in Indo National Limited v. Collector of Central Excise, Hyderabad, which held that Rule 57E did not apply when there was no variation in the rate of duty but only a correction of an initial mistake in duty payment. The Tribunal acknowledged this but pointed out that the amendments to Rule 57E on 1-3-1987 and 15-4-1987 provided for adjustments due to subsequent payment of duty. However, these amendments were not retroactive and did not apply to the period in question. Consequently, the Tribunal concluded that the appellants could not claim additional credit under Rule 57A or Rule 57E as they stood during the material period.

3. Time Bar for Demand under Rule 57-I:
The appellants argued that even when Rule 57-I did not prescribe a time limit, it should be read in conjunction with Section 11A of the Central Excise Act, which limits the demand period to six months. The Tribunal agreed, noting that it had consistently held that demands under Rule 57-I must adhere to the six-month limitation prescribed by Section 11A. The demand in question was beyond this period, and thus, the Collector (Appeals) was justified in setting it aside as time-barred.

Conclusion:
Both appeals were dismissed. The Tribunal upheld the order of the Collector (Appeals), rejecting M/s. Mahindra & Mahindra Ltd.'s appeal on the merits of duty credit eligibility and confirming the time bar for the department's demand. The Tribunal emphasized adherence to the provisions of the MODVAT scheme and statutory limitations, reinforcing the principle that authorities must operate within the bounds of the law as explicitly stated in the rules.