2000 (7) TMI 304 - AT - Central Excise

Summary

Issues:
1. Interpretation of rules 56A, 56B, 57A to 57-I, and 57H regarding Modvat scheme.
2. Refusal of transfer of proforma credit to Modvat account.
3. Application of the term "immediately before" in rule 57H.
4. Legislative intent behind the Modvat procedure.
5. Entitlement to credit under rule 56A.
6. Validity of denying transfer of credit to Modvat account.

Analysis:

1. The appellant initially obtained permission in 1971 to utilize the procedure under rule 56A, allowing credit of duty paid on goods used in manufacturing activities. Later, in November 1982, due to issues with the department, the appellant opted for rule 56B, clearing goods without duty payment. The Modvat scheme from 1-3-1986 introduced rules 57A to 57-I. The appellant declared under rule 57G in April 1986 and sought transfer of proforma credit to the Modvat account, which was refused by the Asst. Collector and upheld by the Collector (Appeals).

2. Rule 57H permits transfer of credit on application from a manufacturer previously using a special procedure under rule 56A. The authorities contended that the appellant switched to rule 56B in 1982, thus not fulfilling the "immediately before" requirement for credit transfer. The Tribunal highlighted past decisions emphasizing the legislative intent to widen the scope of the proforma credit scheme, supporting the appellant's entitlement to credit.

3. Despite the department's argument that the appellant was not actively availing rule 56A before the 57G declaration, evidence showed the permission was valid, as demonstrated by account transactions. The Tribunal stressed that denial of credit transfer would contradict the legislative objective of enhancing the credit procedure, citing relevant case law to support the appellant's position.

4. The Tribunal concluded that there was no justification for denying the credit transfer to the Modvat account, affirming the appellant's entitlement to the transfer. Consequently, the appeal was allowed, and the impugned order refusing credit transfer was set aside.

This detailed analysis of the judgment highlights the interpretation of relevant rules, application of legal principles, and the ultimate decision in favor of the appellant's entitlement to credit transfer under the Modvat scheme.