1996 (7) TMI 259 - AT - Central Excise

Summary

Issues:
- Whether Modvat credit can be taken under Rule 57H before filing the declaration.

Analysis:
The case involved an appeal by the Collector, Central Excise against an order allowing Modvat credit under Rule 57H to the respondents. The respondents, engaged in manufacturing washing powder, had taken Modvat credit of Rs. 55,639.20 on certain inputs before filing the declaration under Rule 57G. The Additional Collector had denied the credit, citing that the Modvat scheme required following the prescribed procedure. However, the Collector (Appeals) held that prior permission was not necessary for taking credit under Rule 57H and allowed the credit.

Upon hearing both sides, the issue before the Tribunal was whether Modvat credit could be taken under Rule 57H before filing the declaration. Rule 57H allows the Assistant Collector to allow credit of duty paid on inputs received by a manufacturer before obtaining the dated acknowledgement of the declaration under Rule 57G. In this case, the declaration under Rule 57G was filed on 6-2-1989, while the application for Rule 57H was filed on 3-2-1989, after the Modvat credit was taken on 1-2-1989. The Tribunal noted that the critical point was not the need for prior permission but whether the benefit of Rule 57H could be taken before filing the application.

The Tribunal emphasized that Rule 57H requires a declaration under Rule 57G, and the application filed on 3-2-1989 needed to be assessed if it constituted a proper declaration. Additionally, the term "allow" in Rule 57H was crucial, as it signifies taking credit. Since the credit was taken before filing the application, it was deemed a violation of Rule 57H. Consequently, the Tribunal set aside the Collector (Appeals) order and modified it to disallow the Modvat credit of Rs. 55,639.20 to the respondents. The appeal by the Revenue was disposed of accordingly.