1994 (5) TMI 107 - AT - Central Excise

Modvat Credit taken in respect of inputs received before filing of declaration not permissible

Summary

Issues:
1. Appeal against rejection of Modvat Credit by Collector of Central Excise (Appeals)
2. Compliance with Rule 57G regarding availing of Modvat Credit
3. Procedural lapse in filing declaration under Rule 57G
4. Interpretation of Rule 57G and Rule 57H regarding Modvat Credit
5. Recovery of disputed Modvat Credit amount
6. Refund of cash deposit made for compliance with stay Order

Analysis:

The appeal before the Appellate Tribunal CEGAT, CALCUTTA was lodged by M/s. Flexaire against the rejection of their Modvat Credit by the Collector of Central Excise (Appeals). The Collector upheld the Assistant Collector's decision that the Modvat Credit of Rs. 36,639.63 was unauthorized as the declaration under Rule 57G was not filed before availing the credit. The Appellants argued that they filed the declaration within 21 days of becoming liable to pay duty and that the credit was taken before the declaration due to a procedural lapse, which they believed was condonable based on precedents. They contended that substantive rights under the law should not be denied to them.

The key point of contention was the interpretation of Rule 57G, with the Appellants asserting that the rule only requires the credit to be taken after the declaration, not necessarily for inputs received post-declaration. The Departmental Representative argued that the credit cannot be taken before filing the declaration, questioning the permissibility of credit utilization in such circumstances. The Tribunal noted that the Appellants' classification list initially indicated their intent to avail Modvat benefit after exhausting duty-free exemption, but this declaration was later struck out by the Assistant Collector without their consent.

The Tribunal found merit in the Appellants' argument that they had been taking Modvat Credit post-declaration and that the credit was legitimate. It was acknowledged that a portion of the disputed credit amount had already been recovered from the Appellants' account, leaving a balance of Rs. 36,639.63 to be retrieved. The Tribunal allowed the appeal by remanding the case to the Assistant Collector for a fresh decision. The recovery of the disputed amount was to be made from the Appellants' RG 23A balance, ensuring it was from their admissible credit earnings post-declaration. Additionally, the Tribunal ordered the refund of Rs. 10,000/- deposited by the Appellants for complying with a stay Order, as the disallowance of the unutilized balance was to be debited from their account.

In conclusion, the Tribunal allowed the appeal on the specified terms, emphasizing the importance of compliance with procedural requirements while ensuring the legitimate utilization of Modvat Credit in accordance with the law.