1990 (5) TMI 142 - AT - Central Excise

Issues Involved:
1. Interpretation of sub-rule (9) of Rule 56A of the Central Excise Rules.
2. Applicability of the bar under Rule 56A(9) to the manufacturer.
3. Retroactive nature of the amendment to Rule 56A(9) by Notification No. 117/87 dated 15-4-1987.

Detailed Analysis:

1. Interpretation of sub-rule (9) of Rule 56A of the Central Excise Rules:
The primary issue revolves around the interpretation of sub-rule (9) of Rule 56A, which states, "Nothing contained in this Rule shall apply to a manufacturer availing of the credit of the duty paid on the inputs under Rule 57A." The applicants argued that this bar should not apply to them because they were not availing of the MODVAT credit under Rule 57A for the same inputs for which they had taken the proforma credit. They contended that the inputs for which they availed of the MODVAT benefit were entirely different from those for which they availed of the proforma credit. The department, however, argued that the bar applies to the manufacturer per se and does not distinguish based on the inputs.

2. Applicability of the bar under Rule 56A(9) to the manufacturer:
The Tribunal considered whether the bar under sub-rule (9) of Rule 56A applies to the manufacturer as a whole or only to the specific inputs for which MODVAT credit was taken. The Tribunal noted that the sub-rule (9) puts a total bar on a manufacturer availing of the benefit under Rule 56A if the manufacturer avails of MODVAT credit under Rule 57A. The Tribunal did not accept the applicants' interpretation that the bar should apply only if proforma credit has been availed of for the same inputs for which the manufacturer has opted for the MODVAT scheme. The Tribunal's view was that a plain reading of sub-rule (9) indicates that if a manufacturer avails of the credit of duty paid on inputs under Rule 57A, proforma credit under Rule 56A shall not apply.

3. Retroactive nature of the amendment to Rule 56A(9) by Notification No. 117/87 dated 15-4-1987:
The applicants argued that the amendment to sub-rule (9) of Rule 56A by Notification No. 117/87 dated 15-4-1987 was clarificatory in nature and should be considered retroactive. They contended that the amendment was necessitated due to erroneous interpretations by excise authorities and was intended to clarify the existing position. The department, however, argued that the amendment was a result of policy changes and should be applied prospectively. The Tribunal observed that the issue of whether the amendment is retroactive in operation is a significant question of law that needs to be referred to the High Court for determination.

Conclusion:
The Tribunal decided to refer the following questions of law to the Hon'ble High Court for determination:
1. Whether on a true and proper interpretation of sub-rule (9) of Rule 56A of the Central Excise Rules, as it stood prior to the amendment dated 15-4-1987, the benefit of proforma credit under Rule 56A can be denied to the applicants merely because the manufacturer has availed of MODVAT benefit for totally different materials covered by the MODVAT scheme under Rule 57A of the Central Excise Rules?
2. Whether Rule 56A can be interpreted in such a manner that the manufacturer does not avail of the MODVAT benefit in respect of the same inputs covered by Rule 57A, especially when the said sub-rule (9) of Rule 56A talks of availment of credit of duty paid on inputs under Rule 57A?
3. Whether the amendment to sub-rule (9) of Rule 56A by Notification No. 117/87 dated 15-4-1987 can be construed to be of a clarificatory nature and is retroactive in operation?

The Tribunal's decision to refer these questions to the High Court underscores the complexity and significance of the legal issues involved in the interpretation and application of sub-rule (9) of Rule 56A.

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