1995 (12) TMI 168 - AT - Central Excise

Issues Involved:
1. Eligibility for Modvat Credit under Rule 57H.
2. Applicability of Notification No. 149/87-C.E. restricting credit to Rs. 800 per M.T.
3. Interpretation of Rule 57G and Rule 57H in relation to the date of acknowledgment.
4. Retrospective effect of Notification No. 149/87-C.E.
5. Anomalies in the application of Modvat Credit rates.
6. Majority opinion on the applicable Modvat Credit rate.

Issue-Wise Detailed Analysis:

1. Eligibility for Modvat Credit under Rule 57H:
The appellant company filed a declaration under Rule 57G on 9-6-1987 to avail Modvat Credit on base/decorative papers used in the manufacture of fibre board. They requested credit for 28.55 M.T. of imported papers lying in stock before the acknowledgment date. The Assistant Collector allowed credit of Rs. 22,840.00 based on the restriction imposed by Notification No. 149/87-C.E., which was less than the actual duty paid of Rs. 3,36,514.96.

2. Applicability of Notification No. 149/87-C.E. restricting credit to Rs. 800 per M.T.:
The notification restricted Modvat Credit to Rs. 800 per M.T. or the actual duty paid, whichever is less, for paper and paper-board used in the manufacture of final products. This restriction was in force from 20-5-1987 to 7-12-1987. The appellant argued that the restriction should not apply to inputs received before the restriction period and used after the restriction was lifted.

3. Interpretation of Rule 57G and Rule 57H in relation to the date of acknowledgment:
The appellant contended that Rule 57H allowed credit for duty paid on inputs lying in stock before the acknowledgment date, and the Assistant Collector should be satisfied only about whether the inputs were in stock. The Department argued that the restriction was in force when the acknowledgment was obtained, thus the credit should be limited to Rs. 800 per M.T.

4. Retrospective effect of Notification No. 149/87-C.E.:
The appellant argued that Notification No. 149/87-C.E. was not given retrospective effect and should not apply to inputs received before its issuance. The Tribunal agreed, stating that applying the restriction retrospectively would be contrary to the Modvat Scheme's purpose.

5. Anomalies in the application of Modvat Credit rates:
The Tribunal noted that applying the restriction based on the date of acknowledgment would lead to anomalies. For instance, if the declaration was filed before or after the restriction period, full credit would be allowed. Therefore, the relevant factor should be the date of receipt of inputs.

6. Majority opinion on the applicable Modvat Credit rate:
The majority opinion held that the appellant was entitled to full credit of the duty paid on inputs received before the restriction period. The restriction imposed by Notification No. 149/87-C.E. was not applicable as the inputs were received before its issuance, and the application under Rule 57H was made after the restriction was lifted.

Separate Judgments:
- Member (Judicial): Held that the appellant was entitled to full credit of the duty paid on inputs, as the restriction was not in force when the inputs were received or when the application under Rule 57H was made.
- Member (Technical): Held that the credit should be restricted to Rs. 800 per M.T. based on the date of acknowledgment of the declaration under Rule 57G.
- Third Member (Technical): Agreed with the Member (Judicial), stating that the restriction was not applicable as the application under Rule 57H and the Assistant Collector's permission were after the restriction period.

Final Order:
In view of the majority opinion, the appeal was allowed with consequential reliefs to the appellants, entitling them to full credit of the duty paid on the inputs.

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