1993 (7) TMI 177 - AT - Central Excise

Summary

Issues:
1. Recovery of credit availed under the modvat scheme for aerated waters.
2. Validity of utilising credit on inputs post-withdrawal from modvat scheme.
3. Imposition of penalty under Central Excise Rules.
4. Interpretation of statutory provisions regarding the right to utilize credit earned.

Analysis:
The case involved manufacturers of aerated waters who opted for the modvat scheme but faced a recovery demand for credit availed when aerated waters were removed from the scheme. The Department contended that unutilized credit on inputs lapsed post-withdrawal. The adjudicating authority confirmed a demand under Rule 57-1 and imposed a penalty under Rule 173Q. The lower appellate authority upheld the demand, stating that post-withdrawal, the concept of final product or input lost validity. The matter was remanded to verify the limitation period for the demand. The issue hinged on the interpretation of Rule 57N and the right to utilize earned credit post-withdrawal, citing the decision of the Hon'ble Gujarat High Court in Dipak Vegetable Oil Industries Ltd. v. Union of India. The Tribunal, following this precedent and others, set aside the impugned order, allowing relief to the appellants.

The key contention revolved around the right to utilize credit earned under the modvat scheme even after withdrawal of the final product from the scheme. The Tribunal relied on legal precedents to establish that the right acquired under statutory provisions cannot be taken away retrospectively unless explicitly provided for. The Tribunal emphasized that the rescission of notifications did not nullify the right to utilize earned credit. It highlighted that manufacturers relied on rules and notifications to use notified inputs, expecting credit, which could not be unfairly deprived post-withdrawal. Therefore, the Tribunal ruled in favor of the appellants, allowing them relief based on the established legal principles.

The issue of penalty under Rule 173Q of the Central Excise Rules was also addressed in the judgment. The penalty amount was reduced to Rs. 10,000. Additionally, the appellants succeeded in obtaining relief on the ground of limitation before the Assistant Collector. Consequently, one appeal was dismissed as infructuous while the other was allowed with consequential relief due to the appellants. The judgment provided a comprehensive analysis of the legal principles governing the utilization of credit under the modvat scheme, emphasizing the protection of acquired rights under statutory provisions.