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TMI Blog1995 (8) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... the beginning financial year and reversed only the quantum of credit which was allocatable to the inputs which were used in the manufacture of the exempted goods. Both the original authority and the appellate authority have ruled in favour of the respondents and have upheld the procedure adopted by the respondents in regard to the availment of MODVAT credit. 4. The appellant Collector in his grounds of appeal has urged as under : 1. In terms of Rule 57C no credit of the specified duty paid on the inputs used in the manufacture of a final product shall be allowed if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. Therefore, no credit of specified duty paid can be allowed to be taken on the inputs used in the manufacture of the goods cleared under full exemption under Notification 140/83, dated 5-5-1983. Also, the balance credit available at the end of a financial year cannot be allowed to be brought forward to the subsequent year since the respondents herein were allowed to enjoy full exemption under the aforesaid notification upto the permissible limits in respect of the first clearances. 2. The Collecto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s availing of the exemption notification, all operations under the MODVAT scheme cease. Any credit which may be available in RG-23A would stand expunged or extinguished. As seen from the rules, the credit can only be used for payment of duty on the specified finished goods when a person is operating under the MODVAT scheme. The moment the assessee is not under the MODVAT scheme the credit itself has to be taken to be extinguished. When the assessee again crosses the exemption limit and starts paying duty he will have to again establish his eligibility to the MODVAT credit by filing the necessary declaration under Rule 57G and take whatever benefits from that time as are made available to him under the rules framed for the purpose of MODVAT scheme by the new section introduced in this regard. If on the date when the respondents start paying duty some goods are lying in stock, they can ask for the credit in respect of the duty paid on such inputs under Rule 57H as may be applicable to the assessee. We confess it looks very attractive argument that a person who is availing of the exemption and also paying duty in a financial year, can be deprived of the credit of the inputs only to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g credit under the Modvat scheme. Likewise taking of credit is independent from utilisation of the same. If credit lawfully taken is in the books the same cannot be utilised when goods are cleared under exemption and likewise the credit could also lapse by the bar of limitation and apart from these in the absence of any specific statutory provision attracting expunction of credit, credit lawfully earned cannot be directed to be expunged. Indeed my learned brother has also referred to Rule 57H which would permit taking credit in respect of duty of the input lying in stock. I, therefore, hold that the impugned order is sustainable in law. Sd/- (S. Kalyanam) Member (J) POINT OF DIFFERENCE Whether the appeal of the Department should be allowed for the reasons stated by Member (T) or the impugned is sustainable for the reasons stated in the order of Member (J). Sd/- (V.P. Gulati) Member (T) Sd/- (S. Kalyanam) Member (J) 10. [Order per : S.L. Peeran, Member (J)]. - The points of difference in this appeal is already noted at page 5. 11. The facts of the case are that the assessees were availing MODVAT Credit of duty on the inpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held that the charge is baseless. As regards the method of expunging MODVAT Credit, while availing total exemption upto Rs. 5 lakhs in a financial year as per Notification No. 140/83, the Learned Collector has held that Credit is taken throughout the year, but as soon as the Rs. 5 lakhs limit is crossed, the credit availed in respect of inputs that went into manufacture of goods cleared duty free were expunged. Since no undue credit is utilised by the party, the Learned Collector, therefore, did not find any objection in the method adopted by the party for expunging credit in respect of inputs used in the manufacture of goods cleared duty free and therefore, he held that there was no cause for raising the demands against them. This finding of the Assistant Collector has held by the Collector (Appeals). The Learned Collector has held that the assessees had expunged the credit availed the inputs for manucacture of goods cleared without payment of duty, the mement exemption limit of Rs. 5 lakhs was crossed by them. Therefore, he has held that there was no justification for directing them for further expunging the balance credit liable in RG-23A at the end of financial year. He ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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