1994 (3) TMI 180 - AT - Central Excise

Summary

Issues:
1. Applicability of Modvat Scheme to differential duty payment.
2. Permissibility of adjustment in credit account under Rule 56A.
3. Entitlement to adjustment of duty paid before and after the introduction of Modvat Scheme.

Analysis:
1. The appellants, manufacturers of Detonators and Detonating fuses, availed credit of duty under Rule 56A on inputs received from their supplier. The supplier revised prices, leading to a payment of differential duty, which was recovered from the appellants. The issue revolved around the applicability of the Modvat Scheme to this differential duty payment.

2. The authorities contended that since the original credit was taken under Rule 56-A, any subsequent variation in credit was impermissible under the Modvat Scheme. However, the Tribunal referenced the Fifth proviso to Rule 56A(2), allowing adjustment in credit account for variations in duty payment, as seen in the case of Hematic Motors Pvt. Ltd. v. Collector of Central Excise. This provision permitted recovery of extra duty from manufacturers and adjustment in the credit account.

3. The Tribunal held that the appellants were entitled to adjustment of the duty paid before the introduction of the Modvat Scheme and after its implementation. For duty paid before the scheme's introduction, adjustment could be made in RG-23A, PLA, or cash. Post-implementation, the appellants were entitled to adjustment as per the Tribunal's orders in cases like Collector of Central Excise v. Steel Authority of India and SAIL Rourkela Steel Plant. The Tribunal emphasized that Modvat credit was admissible for duty payments subsequent to clearance, and Rule 57-E did not restrict upward adjustment of Modvat credit before 1-3-1987.

4. Consequently, the Tribunal ruled in favor of the appellants, allowing the adjustment of the paid differential duty and overturning the previous order. The appellants were granted relief based on the provisions of the Fifth proviso to Rule 56A(2) and the precedents cited regarding the entitlement to adjustment under the Modvat Scheme.