Adjustment of credit in respect of duty paid for the period prior to 1-3-1986 - Central Excise - 9/88

Adjustment of credit in respect of duty paid for the period prior to 1-3-1986 Circular No. 9/88 Dated 9-2-1988 [From F. No. 211/43/87-CX.6] Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Adjustment of credit in respect of duty paid for the period prior to 1-3-1986 . I am directed to say that a case has come to the notice of the Board where a manufacturer of laminates was using paper as one of its major raw materials and availing of proforma credit of the duty paid on the paper under rule 56A prior to 1-3-1986. Consequent upon the Supreme Court's judgement in the Bombay Tyres International case the paper mill supplying paper to the laminate manufacturer paid up certain amount as differential duty towards PME. These payments were made after 1-3-1986. In the meantime the laminate manufacturer had switched over to Modvat procedure after transferring from his RG.23 Pt. II the existing credit as on 28-2-1986 to his RG.23A Pt. II. After payment of differential duty to the Department, the paper mills informed the laminate manufacturer of the same, who sought variation of Modvat credit upwards in his RG.23A Pt. II. This was allowed by the jurisdictional Assistant Collector. 2. The matter has been examined and the Board is of the view that since the original credit (i.e. before 1-3-1986) had been taken by the laminate manufacturers under rule 56A, the subsequent variation in credit could not be allowed under Modvat scheme. Provisions of rule 57E, were modified in the 1987 Budget to allow upward variation of Modvat credit, would also not apply to the instant case as the original credit had been taken under rule 56A. 3. The Board, therefore, desires that similar cases arising in your Collectorates in respect of all commodities should be reviewed on the above lines and necessary action taken to recover the excess Modvat credit taken.