1997 (1) TMI 270 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit by the Collector of Central Excise, Jaipur.
2. Contesting the disallowance on the grounds of merit and limitation.

Analysis:
1. The appellants contested the disallowance of Modvat credit amounting to Rs. 1,41,353.05 by the Collector of Central Excise, Jaipur. The dispute arose from the allegation that the inputs used in manufacturing tyre retreading equipments were not properly declared. The appellants filed declarations in 1986 and 1987, but the department claimed that certain items were not covered in the declarations. A show cause notice was issued, prompting the appellants to argue that the inputs were broadly described, and any discrepancies were due to the newness of the Modvat scheme. The appellants offered to reverse the credit on trading items. The appellants relied on a circular by the Central Board of Excise and Customs and a Tribunal decision to support their case.

2. The appellant's legal counsel argued on two grounds - merit and limitation. Regarding merit, the counsel contended that the broad description in the declaration covered the inputs used, as supported by private records. The counsel cited precedents and a circular to bolster their argument. On the issue of limitation, the counsel referred to a Gujarat High Court judgment and a Tribunal decision to assert that the demand for the period in question was time-barred under Rule 57-I. The counsel emphasized that the demand notice issued beyond six months was invalid.

3. The department, represented by a JDR, maintained that the disallowance was justified as the inputs were not declared, leading to the inadmissibility of Modvat credit. The JDR argued that since there was no prescribed time limit under Rule 57-I, the demand could extend beyond six months, citing a Gujarat High Court ruling. The department contended that both on merit and limitation, the case favored them.

4. The presiding judge considered the arguments on merit and limitation. On the merit aspect, the judge found that the broad description of goods in the declaration sufficed, especially when supported by duty paying documents and private records. Referring to a circular by the Central Board of Excise and Customs and a Tribunal decision, the judge ruled in favor of the appellants. Some trading items were excluded from Modvat credit. Concerning limitation, the judge sided with the appellants, citing a Larger Bench decision that Rule 57-I should be read with Section 11A, making the demand time-barred. Consequently, the appeal was allowed, granting relief to the appellants in accordance with the law.