2000 (11) TMI 789 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 57A and Rule 57C regarding the stage for taking credit of duty paid on inputs.
2. Invocation of extended period of limitation under Rule 57-I(i)(ii) without allegations of fraud, misstatement, collusion, or suppression.

Analysis:

Issue 1:
The case involved a dispute regarding the interpretation of Rule 57A and Rule 57C of the Central Excise Rules, specifically concerning the stage at which credit of duty paid on inputs can be taken. The question raised was whether the relevant stage for taking Modvat credit is when the inputs are brought into the factory, even if the end product later becomes exempt from duty. The Tribunal had earlier held that Modvat credit must be reversed when the final product becomes exempt, relying on precedents like the decision of the Larger Bench in Khan Bhai Esoof Bhai & Ors. The High Court directed the Tribunal to refer this question of law for decision.

Issue 2:
The second issue revolved around the invocation of the extended period of limitation under Rule 57-I(i)(ii) without any specific allegations of fraud, misstatement, collusion, or suppression in the Show Cause Notice. The applicants argued against the reversal of Modvat credit, stating that they had already taken the credit but had not utilized it. They sought a stay on the Tribunal's order directing the reversal of the credit amount. The Tribunal, considering similar cases where references were made to the High Court and demands were stayed, granted a stay on the operation of its order. The Tribunal directed that the credit amount shall remain frozen in the Modvat account until further orders, maintaining the status quo until the disposal of the reference application by the High Court.

In conclusion, the judgment addressed the issues of interpreting the rules related to Modvat credit and the invocation of the extended period of limitation without specific allegations. The Tribunal granted a stay on the reversal of Modvat credit, considering the balance of convenience and the pending reference application to the High Court.