1996 (1) TMI 231 - AT - Central Excise

Issues Involved:
1. Availment of MODVAT credit on unauthorized documents.
2. Applicability of time-bar for the demand raised under Rule 57-I of the Central Excise Rules, 1944.

Detailed Analysis:

1. Availment of MODVAT Credit on Unauthorized Documents:

The appellants, engaged in the manufacture of metal containers, received inputs (tin sheets) from the depot of TPC, a subsidiary of TISCO, during the period 8-9-1987 to 18-8-1988. They availed MODVAT credit of Rs. 635,542.34 based on invoices issued by TPC. The department issued a show cause notice alleging that the appellants were only eligible for deemed credit of Rs. 301,199.26 and had thus taken excess credit of Rs. 334,343.08. The Additional Collector of Central Excise confirmed the demand under Rule 57-I but did not impose a penalty since the RT-12 returns had been assessed by the department.

The tribunal examined whether the invoices issued by TPC could be considered valid documents for availing MODVAT credit under Rule 57G. It was noted that under the Chandigarh Central Excise Collectorate Trade Notice No. 68-C.E./86, dated 23-12-1986, certificates from stockyards of SAIL and other government agencies were acceptable for credit under Rule 57A. However, the term "stockyard of other canalizing agency" did not cover the stockyard of a subsidiary like TPC for indigenous inputs. Therefore, the tribunal concluded that the appellant did not have a case on merit as the invoices from TPC were unauthorized for availing MODVAT credit.

2. Applicability of Time-Bar for the Demand Raised:

The appellant argued that the demand was time-barred, citing the Tribunal's decision in Atma Steels Pvt. Ltd. v. Collector of Central Excise, Chandigarh. The tribunal noted that before the issuance of Notification No. 28/88-C.E., dated 6-10-1988, no time limit was prescribed in Rule 57-I for recovering wrongly taken MODVAT credit. The show cause notice was issued on 14-9-1989 for the period from 8-9-1987 to 18-8-1988.

The tribunal referred to the Gujarat High Court decision in Torrent Laboratories Pvt. Ltd. v. Union of India, which held that the amendment to Rule 57-I, which introduced a period of limitation, did not imply amnesty for wrongful availment of credit before the amendment. The tribunal also cited the Supreme Court's decision in P.V. Mohd. Barnay & Sons v. Director of Enforcement, which maintained that liabilities incurred during the operation of a repealed act are preserved.

However, Member (J) disagreed, stating that the demands were barred by time as the RT-12 returns had been assessed and there was no allegation of suppression, misstatement, fraud, or misrepresentation. He cited the Karnataka High Court's decision in Thungabhadra Steel Products Ltd. v. Supdt. of Central Excise, which held that demands for wrong availment of MODVAT credit were time-barred under similar circumstances.

The third member, agreeing with Member (J), noted that consistent tribunal decisions and the Karnataka High Court's ruling supported the view that the limitation period under Section 11A of the Central Excises & Salt Act, 1944, applied to Rule 57-I. The tribunal's decision in Atma Steels Pvt. Ltd. was also relevant, establishing that the law in force at the time of issuing the show cause notice governed the case.

Majority Order:

In conclusion, the majority held that the demand raised in the show cause notice was barred by time even for recovery under Rule 57-I. The appeal was allowed based on the majority decision.

← Previous Next →