1990 (5) TMI 137 - AT - Central Excise

Summary

Issues:
Entitlement to take additional credit under Rule 57E of the Central Excise Rules, 1944 in a situation where the supplier of raw material pays additional duty.

Analysis:
The appeal challenged the order of the Collector of Central Excise (Appeals), Madras, which upheld the decision of the Asstt. Collector of Central Excise, Cantt. Dn., Bangalore, denying the appellants the right to claim additional credit amounting to Rs. 1,17,795.28. The central issue revolved around whether the appellant could claim credit for the additional duty paid by the supplier on the inputs, even if the inputs had already suffered duty at the hands of the supplier. The interpretation of Rule 57E of the Central Excise Rules, 1944 was crucial in determining the appellant's entitlement to the additional credit.

The appellant's counsel argued that the amendment to Rule 57E, effective from 1-3-1987, clarified that adjustments in duty credit were permissible for both the assessees and the Revenue. It was contended that Rule 57A, allowing Modvat credit for duty suffered by inputs, did not restrict the appellant from claiming additional credit if the inputs incurred extra duty subsequently. The Tribunal referred to the case of 'Indo National Ltd. v. Collector of C. Ex., Hyderabad' and analyzed Rule 57E. The Tribunal concluded that as there was no variation in the duty rate for the inputs in question, despite the supplier's error in paying a lower duty initially and subsequently paying the differential duty, Rule 57E did not apply. Therefore, the reversal of credit based on Rule 57E was deemed unsustainable in law.

Moreover, the East Regional Bench's decision in the case of 'Collector of Customs & C. Ex., Bhubaneswar v. SAIL, Rourkela' emphasized that Rule 57A did not limit credit to duty paid at the time of original clearance and allowed for credit on duty paid subsequently for various reasons. The amended provisions of Rule 57E were seen as clarificatory and not restrictive, ensuring the benefit of Modvat credit from the introduction of the Modvat Scheme in 1986. Consequently, the Tribunal held that the appellants were entitled to claim Modvat credit for the additional duty paid by the supplier on the inputs.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal and remitting the issue to the original authority for verification. The judgment clarified that under the Modvat Scheme, there was no provision for a cash refund to the appellant, and the entitlement to claim Modvat credit for the additional duty paid by the supplier was upheld.