2000 (5) TMI 40 - SC - Central Excise

Whether prior to 6-10-1988 as Rule 57-I existed? Held that - The provisions of Section 11A of the Central Excises and Salt Act, 1944, would have no application to any action taken under Rule 57-I of the Central Excises and Salt Rules, 1944, prior to its amendment on 6-10-1988, and Rule 57-I of the Rules are not in any manner subject to Section 11A of the Act. Hence, we approve of the view taken by the Gujarat High Court in the decision reported in TORRENT LABORATORIES PVT. LTD. Versus UOI.(1989 (10) TMI 173 - AHMEDABAD HIGH COURT) and further hold that the contra view expressed by the Madras, Karnataka, Bombay and Patna High Courts in the various decisions does not lay down the correct position of law.

Issues Involved:
1. Applicability of Section 11A of the Central Excises and Salt Act, 1944 to actions taken under Rule 57-I of the Central Excises Rules, 1944.
2. Validity of credit availed under Modvat Scheme prior to filing the mandatory declaration.
3. Time limitation for issuing show cause notices under Rule 57-I prior to its amendment on 6-10-1988.

Detailed Analysis:

1. Applicability of Section 11A to Rule 57-I Actions:

The core issue was whether the provisions of Section 11A, which prescribe a six-month limitation period for recovery of duties not levied or paid, short-levied, short-paid, or erroneously refunded, apply to actions taken under Rule 57-I of the Central Excises Rules, 1944. The court held that Section 11A is not an omnibus provision applicable to all actions under the Act or Rules. Section 11A is specific to recovery of excise duties, whereas Rule 57-I deals with the disallowance and recovery of credit wrongly availed under the Modvat Scheme. The court concluded that the provisions of Section 11A do not apply to actions under Rule 57-I, as they address distinct and different categories.

2. Validity of Credit Availed Under Modvat Scheme:

The respondent filed a declaration under Rule 57G on 10-3-1987 but availed of Modvat credit from 1-3-1987. The authorities found this to be a wrongful credit of Rs. 62,710.61, of which Rs. 41,872.68 remained undisputed. The Assistant Collector directed the reversal of this credit, which was upheld by the Collector (Appeals). The court emphasized that lawful earning of credit is a sine qua non for proper utilization under the Modvat Scheme. The credit availed without filing the mandatory declaration was not legitimate, and the proper officer had the authority to direct its reversal.

3. Time Limitation for Issuing Show Cause Notices:

The respondent argued that the show cause notice issued on 5-8-1988 was beyond the six-month period stipulated in Section 11A. The Tribunal had accepted this argument, but the Supreme Court disagreed. The court pointed out that Rule 57-I, as it stood before the amendment on 6-10-1988, did not specify a limitation period for disallowing credit. The court held that it is not for the courts to import a specific period of limitation by implication where none exists. The absence of a limitation period in Rule 57-I does not make it subject to Section 11A's six-month limitation.

Conclusion:

The Supreme Court concluded that Section 11A of the Central Excises and Salt Act, 1944, does not apply to actions taken under Rule 57-I of the Central Excises Rules, 1944, prior to its amendment on 6-10-1988. The court approved the view taken by the Gujarat High Court and rejected the contrary views of the Madras, Karnataka, Bombay, and Patna High Courts. Consequently, the reference was answered in favor of the Revenue, affirming that the proper officer's actions under Rule 57-I were not constrained by the six-month limitation period of Section 11A.

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