1991 (10) TMI 153 - AT - Central Excise

Issues Involved:
1. Admissibility of MODVAT credit under Notification No. 201/79
2. Jurisdiction and limitation regarding the notice issued by the Superintendent of Central Excise
3. Inclusion of value of inputs in the assessable value of finished goods
4. Applicability of Rule 57H(2) of the Central Excise Rules
5. Validity of the notice under Rule 57-I and Section 11A of the Central Excise Rules

Issue-wise Detailed Analysis:

1. Admissibility of MODVAT credit under Notification No. 201/79:
The appeal contended that the credit of Rs. 35,627.11 was allowed by the Collector (Appeals) based on the respondents availing benefits under Notification No. 201/79, which provided set-off rather than credit. The Tribunal found this argument without merit, stating that Notification No. 201/79 explicitly mentioned credit of duty in several paragraphs. Thus, the stipulation under Rule 57H(2) did not apply, as the notification fell within the exception allowing credit of duty paid on inputs used in manufacturing excisable goods.

2. Jurisdiction and limitation regarding the notice issued by the Superintendent of Central Excise:
The respondents argued that the notice dated 16.2.1988 was issued without proper jurisdiction, as only the Collector could issue such a notice if it related to clearances more than six months old, absent any allegation of suppression. The Tribunal noted that the Gujarat High Court in Torrent Laboratories v. Union of India held that recovery of wrongly taken MODVAT credit is regulated under Rule 57-I, which did not initially have a time limit. However, the Tribunal also considered the Supreme Court's judgment in J.K. Spinning & Weaving Mills Ltd. v. Union of India, which applied Section 11A's time limit to such cases. The Tribunal concluded that the notice issued by the Superintendent was time-barred and without jurisdiction.

3. Inclusion of value of inputs in the assessable value of finished goods:
The appeal argued that the inclusion of the value of inputs in the assessable value of finished goods was not established by documentary evidence. The Tribunal found that the Collector (Appeals) did not base his decision on this point and that the respondents had stated in their submissions that the value of free supply items was included in the assessable value of final products. The Tribunal held that the department's new contention lacked factual support and could not be raised at the appeal stage.

4. Applicability of Rule 57H(2) of the Central Excise Rules:
The appeal contended that the credits of Rs. 5,06,212.66 and Rs. 24,049.80 were wrongly allowed as the duty on inputs was paid before 31-1-1986, invoking Rule 57H(2). The Tribunal noted that the Assistant Collector had disallowed the credits based on doubts about whether the goods were duty paid. The Collector (Appeals) correctly concluded that the onus was on the department to prove the non-duty paid nature of goods. The Tribunal held that the department's new point about the timing of duty payment was raised only at the appeal stage and lacked merit.

5. Validity of the notice under Rule 57-I and Section 11A of the Central Excise Rules:
The Tribunal considered the arguments about the validity of the notice under Rule 57-I and Section 11A. It noted that the Gujarat High Court's judgment allowed for recovery of wrongly taken credit without a time limit under Rule 57-I, but subsequent Supreme Court judgments required adherence to Section 11A's time limits. The Tribunal concluded that the notice issued by the Superintendent was invalid due to being time-barred and lacking proper jurisdiction.

Conclusion:
The Tribunal found no reason to interfere with the Collector (Appeals)'s decision, dismissing the department's appeal and upholding the admissibility of the MODVAT credits in question. The Tribunal emphasized the importance of adhering to procedural requirements and established legal precedents in such cases.

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