1997 (2) TMI 335 - AT - Central Excise

Summary

Issues:

1. Transfer of unutilized credit to Modvat account under Rule 57H.
2. Interpretation of Notification No. 225/86-C.E.
3. Discrepancy in following Central Excise Rules.

Analysis:

Issue 1: Transfer of unutilized credit to Modvat account under Rule 57H

The case revolved around the transfer of unutilized credit of excise duty to the Modvat credit account. The respondents had initially availed credit for inputs used in manufacturing paper and paperboard. The Assistant Collector allowed this credit under Rule 56A, but later, the respondents were instructed to stop following this procedure. Despite this, they continued to take credit for a certain period, leaving a balance unutilized. Subsequently, the Modvat facility was extended to the paper industry, and the respondents opted for Rule 57A procedure. The lower appellate authority allowed the transfer of unutilized credit to the Modvat account, emphasizing that the respondents were entitled to transfer the credit under Rule 57H(3) of the Central Excise Rules. The appellate tribunal upheld this decision, stating that the transfer was rightly ordered as the credit remained unutilized before the introduction of the Modvat credit scheme.

Issue 2: Interpretation of Notification No. 225/86-C.E.

The Revenue contended that the Notification No. 225/86-C.E. was not applicable as the benefit of availing credit under this notification had been withdrawn. They argued that the Collector (Appeals) erred in considering this notification and allowing the transfer of credit. However, the tribunal disagreed with the Revenue's interpretation, stating that the notification was relevant under proviso (ii)(b) to Rule 56A(2) and was eligible for availing credit. The tribunal emphasized that denying the benefit of this procedure to the appellants was contrary to the law, and hence, the appeal by the Revenue was dismissed.

Issue 3: Discrepancy in following Central Excise Rules

The Revenue raised concerns about the procedure followed by the appellants, stating that they did not comply with Rule 57H(3) for transferring unutilized credit. They argued that the appellants had maintained an RG23 account under Rule 56A, which was discontinued before the introduction of the Modvat scheme. However, the tribunal found that the credit was indeed unutilized before the Modvat credit scheme was introduced, and the transfer was correctly ordered under Rule 57H. Therefore, the tribunal dismissed the Revenue's appeal, upholding the lower appellate authority's decision regarding the transfer of credit.