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TMI Blog1996 (10) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect. The said quantity was stated to be 178.1782 M. Tonne and the differential credit amount taken was Rs. 2,17,324.91p. The Superintendent of Central Excise, Sikandrabad issued a notice dated 31-5-1991 to the appellants asking them to show cause why the credit amount in question should not be disallowed and why penalty should not be imposed. After grant of hearing to them the Additional Collector of Central Excise, Ghaziabad passed the impugned order confirming duty demand of Rs. 2,00,450.47 after taking into account payment of a sum of Rs. 16,874.44 made by them. He also imposed a penalty of Rs. 1 lakh on them. The appeal challenges the said order. 2. Shri Gopal Prasad, learned Counsel for the appellants made a two-fold plea in the appellants defence, on merits and on the point of limitation. On merits he submitted that the deemed credit order dated 12-7-1990 which came into effect on 16-7-1990 granted credit of Rs. 2100/- per M. Tonne for the inputs purchased from outside and lying in stock on or after 16-7-1990 and this will not be allowable only where the credit had already been availed of under any Rule or notification granting such credit. The Department has wrongly app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject order of the Ministry. Again, the Ministry s subject order lays down that the inputs mentioned in the Table annexed thereto purchased from outside and lying in stock on or after 16-7-1990 with the manufacturers manufacturing the final products may be deemed to have paid the specified duty at the rate specified in the Table. Credit of such specified duty is to be allowed at such specified rates without the production of documents evidencing payment of duty. It is also seen that the term specified duty occurring in the restrictive or prohibitive provision in the order was [what] was also used in the earlier order of the Ministry dated 1-6-1989 under which they had taken credit originally at the rate of Rs. 975/- per M. Tonne which was the rate provided thereunder. The expression specified duty has been used in the same manner in both the orders. The appellant s plea is that what they had taken earlier was deemed credit and not credit of specified duty paid on the inputs and hence the same did not attract the prohibition applicable to specified duty provided for in the second deemed credit order. If this plea had been taken to its logical conclusion, the appellants could as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not reversible, the right to credit having got crystallised in terms of money. On a similar consideration, the credit taken originally at the rate applicable at the time when the inputs were received could not have been increased by applying a rate which came into force later on. In that view of the matter, the quantity of such inputs, received earlier and on which credit had already been taken remaining in stock on the date when the new rate of credit had come into force is of no import. The new rate was applicable only for the inputs received on or after the date of the order prescribing revised rates. The appellants plea on merits accordingly fails. 6. We now turn to the defence taken by the appellants on the ground of limitation. We find that the appellants had taken the disputed additional or differential credit at the rate of Rs. 1125 viz. Rs. 2100 Rs. 975/- vide entry dated 11-11-1990 in their RG 23A account. Under Rule 57-I as it stood at the material time a notice for disallowance of credit taken on account of an error, omission or misconstruction or for recovery of an amount equal to the credit if it had already been utilised had to be issued within a period of six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice was given before disallowing the said credit taken by the manufacturer petitioner. A specific assertion has been made in the writ petition that no show cause notice was given by the Superintendent before making the impugned endorsement (See Paras 9 and 11 of the writ petition). In the absence of the counter affidavit, we accept the said statement. On that basis we direct that the impugned endorsement dated 27-8-1987 shall be treated as a show cause notice within the meaning of sub-rule (1) of Rule 57-I of the said Act. The petitioner shall furnish the explanation within one month from today. A certified copy of this order shall be filed along with explanation/objection to be filed by the petitioner before the proper officer. The proper officer shall thereupon consider the said objection/explanation and pass appropriate orders in accordance with the law. In the present case the appellants had replied to the Superintendent s letter and raised their defence plea. It can be said that they treated the said letter as a notice and the same was considered by the adjudicating authority before deciding the matter. 8. In Devidayal Rolling and Refineries Pvt. Ltd. v. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Modvat credit and when this was objected to, they took an invalid and unacceptable defence plea besides the technical objection of the notice being time barred. They had not maintained their RG 23A Part II account properly as stated in Paragraph 3 of the show cause notice. The inputs on which the disputed differential credit had been taken are stated to have been in balance on 16-7-1990. The said disputed credit was taken by them only on 11-11-1990 making it impossible for the department to verify whether the inputs were in stock on 16-7-1990 or the same had already been used before that day. Their conduct is clearly blameworthy. The show cause notice properly brings out the wrong availment of Modvat credit. Penalty has been imposed under Rule 173Q. The irregularity clearly falls within the ambit of Rule 173Q(1)(bb) which, inter alia, provides that if any person takes credit of duty in respect of inputs wrongly he will be liable to penalty. In this connection, it will be useful to refer to the observations of the Supreme Court in Gujarat Travancore Agency v. Commissioner of Income Tax - 1989 (42) E.L.T. 350 S.C. It was held by the Supreme [Court] in that case that unless there is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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