1992 (4) TMI 116 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of goods manufactured by the appellants to MODVAT credit under Rule 57-I of the Central Excise Rules.
2. Barred by limitation for the demand of Rs. 4,73,782.50.
3. Merits of the case regarding the eligibility of deemed credit for inputs.

Issue-Wise Detailed Analysis:

1. Eligibility of Goods to MODVAT Credit:
The primary question in these appeals was the eligibility of the goods manufactured by the appellants to MODVAT credit under Rule 57-I of the Central Excise Rules. The appellants manufacture aluminium pistons, pins, and rings using aluminium alloy ingots, which are specified as final products and inputs per Notification No. 177/86-C.E. The appellants were availing credit of duty on inputs after filing the requisite declaration under Rule 57G. The Government of India issued orders on 7-4-1986 and 2-11-1987 under Rule 57G(2), allowing deemed credit of Rs. 2300/- per tonne on aluminium alloy ingots, subject to conditions, including that no credit shall be allowed if the inputs are clearly recognisable as non-duty paid or charged to nil rate of duty.

2. Barred by Limitation for the Demand of Rs. 4,73,782.50:
The appellants contended that the demand for Rs. 4,73,782.50, covered by the show cause notice dated 17-12-1987 and subject matter of appeal No. E/59/89-NRB, was barred by limitation as it was raised after six months from the relevant date. The appellants were availing MODVAT credit under the deeming provision and were filing necessary declarations and statutory records. The RT 12 returns were assessed without objection. The Tribunal found force in the appellants' contention that non-declaration of receiving inputs at Nil rate of duty does not amount to suppression. The Collector (Appeals) had held that the five-year period under the proviso to Section 11A would apply due to alleged suppression. However, the Tribunal, citing the Karnataka High Court's decision in Tungabadhra Steel Products v. Superintendent of Central Excise, held that the demand under Rule 57-I could only be raised subject to the time limit prescribed under Section 11A. Therefore, the demand of Rs. 4,73,782.50 was barred by limitation.

3. Merits of the Case Regarding Eligibility of Deemed Credit for Inputs:
On the merits, the Tribunal noted that the Government of India issued the order dated 7-4-1986 under Rule 57G to reduce the cascading effect of payment of duty. The benefit of deemed credit cannot be extended if the inputs are clearly recognisable as non-duty paid or charged to nil rate of duty. The Tribunal referred to its decision in Arun Auto Spring Manufacturing Co. v. Collector of Central Excise, which held that goods charged to nil rate of duty as per the First Schedule are different from goods exempted by an exemption notification. The Tribunal concluded that the inputs received by the appellants, even if exempted under Notification 183/84, were eligible for deemed credit as per the order dated 7-4-1986. The Department's reliance on a certificate from the Jurisdictional Range Officer was insufficient to prove that the inputs were non-duty paid. The Tribunal held that the demand of Rs. 92,000/- was to be set aside on merits, and the demand of Rs. 1,61,000/- was also set aside as the goods were cleared under an exemption notification and cannot be treated as non-duty paid.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals with consequential relief, if any. The demands of Rs. 4,73,782.50 and Rs. 92,000/- were set aside on limitation and merits, and the demand of Rs. 1,61,000/- was also set aside as the goods were cleared under an exemption notification.