1990 (11) TMI 256 - AT - Central Excise

Summary

Issues Involved:
1. Availment of Modvat credit.
2. Recovery of Modvat credit alleged to be wrongly availed.
3. Applicability of Rule 57E for variation in credit.
4. Time bar under Section 11A of the Central Excises and Salt Act, 1944.

Detailed Analysis:

1. Availment of Modvat Credit:

The appeal was lodged by the Collector of Central Excise, Calcutta-1, concerning the availment of Modvat credit. The issue at hand was whether the differential duty paid subsequent to the clearance of eligible inputs could be availed as Modvat credit. The respondents cited several decisions, including those by the South Regional Bench and this Bench, which supported the eligibility of such differential duty for Modvat credit. The Collector (Appeals) had previously ruled that the substantive provision for taking credit was contained in Rule 57A of the Central Excise Rules, 1944, which allowed for credit of duty paid on goods used as inputs, even if the duty was paid subsequently.

2. Recovery of Modvat Credit Alleged to be Wrongly Availed:

The Departmental Representative argued that the variation in credit taken could only be regulated in terms of Rule 57E as it stood in March 1986. Since Rule 57E did not provide for variation of credit due to recovery of more duty from the manufacturer until amendments in 1987, the credit availed by the respondents was deemed irregular. The respondents, however, argued that the Collector (Appeals) correctly allowed the credit based on established case law and that Rule 57E's silence on the matter did not prohibit the grant of such credit.

3. Applicability of Rule 57E for Variation in Credit:

The Tribunal noted that Rule 57E, at the material time, did not expressly provide for the grant of additional Modvat credit for duty paid subsequent to clearance. However, it also did not expressly bar such credit. The substantive provision of Rule 57A, which allowed credit for any duty of excise paid on inputs, would prevail. The amendments to Rule 57E in 1987 were seen as clarificatory, making the benefits under Rule 57A more explicit. Therefore, the Tribunal concluded that the differential duty paid was correctly availed as Modvat credit by the respondents.

4. Time Bar under Section 11A of the Central Excises and Salt Act, 1944:

The Collector (Appeals) had also addressed the issue of whether the demand for recovery of wrongly availed credit was time-barred under Section 11A. The Tribunal referenced several decisions, including those by High Courts and Tribunal Benches, which held that the time limits under Section 11A applied to demands for recovery of wrongly availed credit. The Tribunal agreed with the Collector (Appeals) that the demand issued in August 1988 for credits taken in March and April 1986 was indeed time-barred.

Conclusion:

The Tribunal dismissed the appeal, upholding the Order-in-Appeal passed by the Collector (Appeals). It was determined that the differential duty paid subsequent to clearance was eligible for Modvat credit, and the demand for recovery of alleged wrongly availed credit was time-barred under Section 11A. The rulings emphasized the substantive provisions of Rule 57A and the clarificatory nature of the amendments to Rule 57E.