2013 (2) TMI 162 - AT - Central Excise

Commencement of Period of limitation for filing refund claim - Lapse of Modvat Credit - manufacturer of tractors - as per the notification any credit of specified duty lying unutilized on the 16th day of March, 1995 shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods, whether cleared for home consumption or for export. Held that - In our opinion, when the credit will lapse and how much will lapse can be said to have been decided only when the matter gets finally decided. Even if we decide in this order that the credit shall lapse, the assessee may go in appeal against our order. Therefore whether the credit will lapse or not can be said to have been decided only when both the parties decide to call it a day and stop litigation. Therefore even if we uphold the view taken by the Department that the order passed by the ld. Commissioner before us is correct, the appellant would be entitled for refund within one year from the date of communication of the order because that will be the date on which the assessee can be said to have come to the conclusion that the credit has lapsed and cannot be adjusted any more and we have already taken a view that the words used For any reason would include the statutory provision relating to lapsing of the credit. Assessee becomes entitled to entire amount of credit of Rs. 237.7 Lakhs as refund. Adverse report by the cost auditor - held that - There is no explanation given by the cost auditor as to the logic and rationale adopted by him. He simply says that he could not verify the figures of total purchase and modvat credit availed. If he has not found any discrepancy with regard to specific inventory codes selected by him it cannot be understood how he could not believe the figures given by the company. In case he had found discrepancy even in respect of one inventory code, adoption of an alternative method probably can be justified.

Issues Involved:
1. Lapsing of Modvat credit under Rule 57F(4A).
2. Eligibility for refund of credit attributable to inputs used in exported goods.
3. Disallowance of credit based on the Cost Auditor's report.
4. Statutory provisions and limitations on refund claims.

Detailed Analysis:

1. Lapsing of Modvat Credit under Rule 57F(4A):
The appellants had unutilized Modvat credit of Rs. 25,69,44,928.69 on 16-3-1995. Rule 57F(4A) stated that any unutilized credit on this date would lapse, except for credit related to inputs in stock or finished products in stock. The appellants claimed Rs. 25,30,20,225/- as per the proviso to Rule 57F(4A), believing only Rs. 39,24,703/- would lapse.

2. Eligibility for Refund of Credit Attributable to Inputs Used in Exported Goods:
The appellants argued that Rule 57F(4) allowed for the utilization of credit for payment of duty on final products or refund if the credit could not be adjusted. They contended that Rule 57F(4A) did not override the additional right granted by the proviso to Rule 57F(4) for refund of credit on exported goods. The Tribunal in Samtel v. CCE supported this view, stating that refund claims for credit on exported goods could not be denied even if the credit lapsed.

3. Disallowance of Credit Based on the Cost Auditor's Report:
The Cost Auditor disallowed Rs. 4,05,75,212.22 under various categories, including inputs lying in stock, inputs in work-in-progress, shop-made parts, inputs with job workers, inputs in finished products, and inputs in shop-made forgings and springs. The Tribunal found several issues with the Cost Auditor's methodology, including reliance on theoretical calculations and discrepancies between computer records and manual records. The Tribunal directed a re-evaluation of these disallowances, emphasizing the need for accurate and consistent record-keeping.

4. Statutory Provisions and Limitations on Refund Claims:
The Tribunal discussed the statutory provisions under Rule 57F(4) and Rule 57F(4A), noting that Rule 57F(4A) did not negate the right to a refund for credit on exported goods. The Tribunal cited the Supreme Court's decision in Samtel India Ltd. v. CCE, which held that vested rights to refunds could not be overridden by subsequent rules. The Tribunal also addressed the issue of limitation, stating that the relevant date for filing a refund claim would be the date when it was determined that the credit could not be adjusted, as per the Tribunal's decision in Hindustan Motors Ltd.

Conclusion:
The Tribunal allowed the appeal in part, directing the Commissioner to re-evaluate the disallowed credit amounts based on accurate records and consistent methodologies. The Tribunal also upheld the appellants' right to claim refunds for credit attributable to inputs used in exported goods, emphasizing that such claims should not be denied on the grounds of lapsing credit or procedural limitations. The Tribunal directed that the appellants be allowed to utilize the credit or file a refund claim as appropriate.

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