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TMI Blog1996 (3) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... the higher notional credit was available under Rule 57H read with Rule 57B for the inputs received by the respondents from small scale sector. The ld. lower authority issued show cause notice as to why the higher notional credit allowed should not be recovered and the credit allowable should not be limited to the actual duty paid as per the duty paying documents under which goods were received as inputs. The original authority held that the respondents were eligible for the higher notional credit as the conditions precedent for allowing higher notional credit were satisfied. The said authority however, did not enter into any discussion as to the scope of Rule 57H under which initial Modvat credit was allowed in respect of the inputs which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. (1A) Notwithstanding anything contained in Rule 57G, the Assistant Collector of Central Excise may allow credit of the duty paid on inputs received by a manufacturer immediately before obtaining the dated acknowledgement of the declaration made under the said rule if he is satisfied that - (a) such inputs are lying in stock, or are received in the factory after filing the declaration made under Rule 57G, or (b) such inputs are used in the manufacture of final products which are cleared from the factory after filing the declaration made under Rule 57G, and that no credit has been taken by the manufacturer in respect of such inputs under an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty towards the final product as may be notified under Rule 57A. That would mean that if an assessee was to procure goods from the duty paying sector i.e. from a manufacturer who pays full rate of duty he will get the input credit to the extent of the actual duty paid. In case he procured the goods from small scale sector under partial exemption based on the value of clearances, in the absence of Rule 57B, the credit available would be the duty actually paid at the exempted rate. In case the goods were procured from fully exempted unit, no credit will be allowed. In such a situation, the assessee who purchased inputs would find no real incentive to purchase goods from the exempted sector as benefit accruing to him under the Modvat Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal credit and in case he opted for the Modvat credit subsequent to the purchase of the inputs, he should be given the benefit of higher notional credit under Rule 57H. In this context it is relevant to consider the main provisions of Rule 57A which is reproduced below for convenience of reference : RULE 57A. Applicability. - (1) The provisions of this section shall apply to such finished excisable goods (hereinafter referred to as the final products ), as the Central Government may, by notification in the Official Gazette, specify in this behalf, for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975) as may be specified in the said notification (herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal products under Section 4 of the Act; (iv) cylinders for packing gases; (v) plywood for tea chests or. (vi) bags or sacks made out of fabrics (whether or not coated, covered or laminated with any other material) woven from strips or tapes of plastics. It is seen that credit allowable under this rule is the entire duty of excise or additional duty under Section 3 of the Act as may be specified in the Notification issued under this rule paid on the goods which are referred to as inputs for use in or in relation to the specified finished product. The Government also has reserved the power to restrict the credit of specified duty in respect of certain specified goods or class of goods. From the above it is clear that it is not as if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has not complied with the provisions under Rule 57G even in that event in respect of inputs lying before dated acknowledgement was received, the assessee could still be given the benefit of Modvat credit. The words used, as mentioned above, are duty paid on the inputs . Rule 57H which carves out an exception to the general rules for allowing Modvat credit has to be read on its own words and these words clearly state that the benefit of Modvat credit would be equal to the duty paid on the inputs i.e. the duty actually paid. Rule 57H confers the benefit which otherwise under the Modvat Scheme would not be available. This as would be seen, is in respect of the inputs purchased before a manufacturer opted for the Modvat Scheme. He could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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