1995 (4) TMI 168 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 57H regarding the allowance of credit for duty paid on inputs before filing a declaration under the MODVAT scheme.
2. Application of limitation period in demand for duty payment.
3. Consideration of whether the inputs have already suffered duty.

Analysis:

The judgment by the Appellate Tribunal CEGAT, Madras involved a common issue in multiple appeals regarding the sustainability of the orders directing reversal of MODVAT credit, along with penalty, by the Collector (Appeals). The Tribunal noted the directions of the Madras High Court to file appeals complying with legal requirements and decide them within a specified period. The appeals were based on the question of whether the orders confirming the reversal of credits taken on inputs, along with penalties, were legally sustainable.

The learned Counsel argued that the inputs were in stock as per Rule 57H and the reversal of credit was based on a procedural irregularity of not obtaining permission from the Assistant Collector before taking credit. The Counsel contended that this procedural issue could be regularized and did not affect the substance of the matter. Additionally, the Counsel highlighted that the demand was time-barred due to timely filings of RT12 returns, and thus, the impugned orders should be set aside.

On the other hand, the Departmental Representative (DR) argued that even though inputs were in stock, the permission of the Assistant Collector was necessary before taking credit. The DR also claimed that the assessments were provisional, making the limitation period inapplicable. The DR raised concerns about whether the inputs had already suffered duty, suggesting further verification.

After considering the arguments, the Tribunal agreed with the DR that the issue of limitation did not apply due to provisional assessments. However, in light of Rule 57H and the liberal view towards transitional provisions, the Tribunal found merit in the Counsel's argument. The Tribunal concluded that the reversal of MODVAT credit solely based on the lack of permission from the Assistant Collector was not legally sustainable. Therefore, the impugned orders were set aside, allowing the appeals. The Department was permitted to verify the duty paid nature of the inputs in accordance with the law.