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TMI Blog2000 (5) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... s Pvt. Ltd. v. Collector of Central Excise [1990 (48) E.L.T. 518] and Arvind Detergents Ltd. v. Collector of Central Excise [1987 (10) ECR 44] and observed that these decisions needed to be reviewed in the light of the Supreme Court's decision in the case of Government of India v. Citedal Fine Pharmaceuticals Others [1989 (24) ECR 440 (S.C.)]. 2.In Bakeman's Home Products (supra), the Tribunal had dealt with a case of credit taken on input by a biscuit-manufacturer under Notification No. 201/79, dated 4-6-1979. A subsequent decision of the Delhi High Court rendered the input exempt from duty and consequently the duty paid on such input was refunded to the input-manufacturer. The Department, by invoking proviso (3) to the Notification, sought to recover the amount of credit taken in respect of the input by the biscuit-manufacturer. Proviso (3) to Notification No. 201/79 contained a provision similar to Rule 57E of the Rules. Like Rule 57E, the said proviso (3) prescribed no period of limitation for such recoveries. The Tribunal held that, in the absence of mention of period of limitation in proviso (3) to the Notification, any notice of demand of duty under the proviso would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been decided upon by the Tribunal in Bakeman's Home Products (supra) was pending before the Supreme Court vide 1994 (69) E.L.T. A199. The Bench therefore felt that the issue which arose before it should be examined by a Larger Bench in the light of the Apex Court's ruling in Citedal Fine Pharmaceuticals (supra). 6.The brief facts of the case necessary for a decision on the referred issue are as follows : The appellants namely M/s. Utkal Asbestos Ltd. were manufacturers of asbestos cement products falling under Chapter sub-heading 6804.10 of the Schedule to the Central Excise Tariff Act, 1985 and were availing the facility of Modvat credit on inputs under Section 57A of the Central Excise Rules, 1944 during the period of dispute (April-May 1987). One of the inputs used for the manufacture of their final products was cement. The appellants purchased 1646.800 M.T. of cement from M/s. Modi Cement Ltd. (hereinafter referred to as the input-manufacturers) during the above period. They took Modvat credit of the Central Excise duty paid by the input-manufacturers on the said quantity of cement @ Rs. 225/- per M.T. on the strength of valid documents (gate passes). Subsequently Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise some time in January, 1988. The show cause notice raising the demand of duty of Rs. 82,340/- on the appellants was issued by the Department on 19-8-1988. From these facts, which are not disputed, we have noted that the Department raised the said demand of duty on the appellants after a period of about 15-16 months from the dates of taking of Modvat credit by the party and also that the demand was made after a period of about 7-8 months from the date on which the refund of duty was made by Department to the input-manufacturers. 8.We have heard ld. Consultant for the appellants and ld. DR for the respondent-Revenue. We have also heard ld. Advocate Shri V. Sridharan as intervener who has argued in support of the assessees. Ld. Consultant has, after ruling out the applicability of Rule 57-I to the Department's demand in question, conceded that Rule 57E was applicable to the demand and has further submitted that, in the absence of mention of any period of limitation under this rule, any demand under the rule would be subject to the limitation provision under Section 11A(1) of the Act. According to him, the period of six months prescribed under Section 11A(1) is a reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I was not applicable to the facts of the case has become final inasmuch as there is no challenge in the present appeal against such finding. Ld. Advocate has sought to broaden the issue by introducing Rule 57-I and arguing that the limitation provisions of this rule should be held to be applicable to demands under Rule 57E in the event of applicability of Section 11A(1) being ruled out. We shall consider the arguments of ld. Advocate also and render our view thereon, having regard to the fact that he has relied on a High Court decision to establish his point. 10.Rule 57E as it stood on the date of issue of the show cause notice in question reads as follows : "If duty paid on any inputs in respect of which credit has been allowed under Rule 57A, is varied subsequently due to any reason resulting in payment of refund to or recovery of more duty from the manufacturer or importer, as the case may be, of such inputs, the credit allowed shall be varied accordingly by adjustment in the credit account maintained under sub-rule (3) of Rule 57G or in the accounts maintained under Rule 9 or sub-rule (1) of Rule 173G; Or if such adjustment is not possible for any reason, by cash recovery f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus : Recovery of duties not levied or not paid or11A. short-levied or short-paid or erroneously refunded. - (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. The dues which can be recovered under the above provision of law are duties not levied or not paid or short-levied or short-paid or erroneously refunded. Any demand for such recovery should, in the normal course, be made within six months from the relevant date. "Relevant date" has been defined under sub-section (3). The cause of action for a demand under Section 11A is non-levy, non-payment, short-levy, short-payment or erroneous refund. In the appellants' case there was no refund of any duty to them, nor did any of the other four contingencies exist. When they paid duty on their final products by availing credit of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months similar to the one provided under Section 11A of the Act. Though Rule 57E (which also provided for cash recovery of duty in a certain situation) was also amended from time to time no provision of limitation was inserted in the rule at any stage nor was it said anywhere in Section AA ibid that the limitation provision of Section 11A would be applicable to adjustment or recovery of credit under Rule 57E. The Modvat scheme embodied in Section AA ibid is a self-contained scheme. Every aspect of the scheme is fully taken care of by one or the other rule contained in the said Section AA. Situations resulting from variation of the duty paid on specified input by the manufacturer thereof, subsequent to availment of credit of such duty by a manufacturer of specified final products, are fully covered by Rule 57E, which enables the Department to require the manufacturer of final products to make corresponding variation of credit by adjustment in the appropriate account or by cash payment. It is true that the rule does not prescribe any period of limitation for such a departmental requisition or demand. But it is also true; as rightly submitted by ld. DR, that no legislative intent can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 6-10-1988. The former, like the latter, did not prescribe any period of limitation for recovery of wrongly taken credits of duty on inputs. The Larger Bench decided the aforesaid issue by holding that Section 11A would be applicable to a demand under para (4) of the Appendix to the Notification ibid. The Bench, while holding so, was following the ruling of Bombay High Court in Zenith Tin Works (P) Ltd. v. Union of India Others [1986 (23) E.L.T. 357]. The High Court had held in that case that a demand for recovery of erroneously availed credit of duty already paid on inputs was a demand for short-levied duty. The decision of the Tribunal in Premier Tyres (supra) was on the question of applicability of Section 11A to recovery of wrongly taken credit under para (4) of the Appendix to the Notification and not on any question of applicability of the said Section to any demand for variation of credit under the 3rd proviso to the Notification. It was the latter question which arose in the case of Bakeman's Home Products (supra) in which the Tribunal followed the Larger Bench decision in Premier Tyres on the former question, without establishing any analogy between the two question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department can have recourse to general provisions of Section 11A of the Act. The Bench further observed : "On such an understanding of Rule 57G, it is manifest that the intention underlying Rule 57E is to state expressly what is clearly implicit in Rule 57G. Rule 57E is merely clarificatory in its ambit..... A harmonious reading of Rules 57G and 57E in the light of the broad contours of the scheme contained in Rule 57A makes it manifestly clear that Rule 57E is clarificatory in content and procedural in nature, indicating the procedure to be adopted in such case...." Ld. Advocate's emphasis is on the view expressed by the Bench in the sentence : "Even if such assessment is completed, the department can have recourse to general provisions of Section 11A of the Act." This view, in our opinion, is not well-founded. The order of the Bench does not give any reasoning for such a view. We respectfully disagree with the view taken in TELCO that the provisions of Rule 57E are implicit in Rule 57G and therefore Rule 57E is only clarificatory. Such a view appears to be inconsistent with what the Bench correctly understood of the import of the Modvat rules as stated in an earlier part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olence to the very purport of the Modvat scheme. They have got to make any demand for variation of credit under the rule within a reasonable period from the date on which the cause of action for such demand arises, i.e. the date of refund of duty to, or recovery of more duty from, the input-manufacturer. This reasonable period would depend on the facts of the particular case. 18.The cause of action for the subject show cause notice in the instant case as we have already noted was the refund of duty of Rs. 82,340/- by the Department to the input-manufacturer some time in January 1988. The show cause notice was issued within a period of 7-8 months from the date on which the refund was made. During the interregnum between the date of refund and that of the show cause notice, Department had issued a letter to the party directing them to pay the amount of Rs. 82,340/-. It appears that the Department wanted to give them a fair chance for the payment before enforcing Rule 57E against them. In such facts and circumstances, in our view, the above period of 7-8 months was a reasonable period for issue of the subject show cause notice. The decision of the Honourable Supreme Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme and has argued that departmental demands for variation of credit under Rule 57E should be held to be subject to the period of limitation prescribed under Rule 57-I (as amended on 6-10-1988) following the ratio of the decision of the Bombay High Court in the case of Bharat Bijlee Ltd. v. CCE, Bombay [1996 (83) E.L.T. 496 (Bom.)] wherein the High Court had held that a demand for variation of proforma credit taken of the duty paid on input, under proviso (3) to sub-rule (2) of Rule 56A should be made within the period of limitation of six months prescribed under clause (i) of sub-rule (5) of that rule. After pointing out that Rule 57E and Rule 57-I presently under consideration in the instant case contain provisions similar to those contained in the said proviso (3) to Rule 56A(2) and Rule 56A(5)(i) respectively, Shri Sridharan has drawn our attention to the facts of the case of Bharat Bijlee Ltd. to buttress his point. M/s. Bharat Bijlee Ltd. (in short, M/s. Bijlee) had purchased from M/s Devidayal Electronics and Wires Ltd. (in short, M/s. Devidayal) duty-paid copper strips (input) which were required for manufacture of transformers (final products). They availed what was call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the said third proviso were similar to the provisions contained in Rule 57E as it stood during the period relevant to the case before us. Like Rule 57E, the third proviso to Rule 56A(2) did not contain mention of any period of limitation for variation of credit. However, under Rule 56A(5)(i), a period of limitation of six months from the date of taking credit had been prescribed for recovery of credits allowed under sub-rule (2) on account of error, omission or mis-construction on the part of Central Excise officer. The High Court held that this period of limitation prescribed under Rule 56A(5)(i) was applicable to demands for variation of credits under the third proviso to Rule 56A(2) also. 22.Ld. Advocate has submitted that the provisions of the erstwhile Rule 56A(5)(i) considered by the High Court have been incorporated into Rule 57-I as amended on 6-10-1988 and that the provisions of the third proviso to Rule 56A(2) were incorporated into Rule 57E as it stood at the time relevant to the case before us. In the light of this fact, he has contended that since the limitation provisions contained in Rule 56A(5)(i) were held to be applicable to the Department's demand for var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would, a fortiori, do likewise as between Rule 57E and erstwhile Rule 56A(5)(i). Therefore, the above ruling of the court in terms of the express provisions of Rule 56A(5)(i) cannot be applied to the situation in the case before us where the demand under Rule 57E is not subject to any specified period of limitation. We have already held that the cause of action for recovery of credits on inputs under Rule 57E is the refund of the duty paid on such inputs, to the input-manufacturer. Similarly, the cause of action for allowing more credit on inputs under Rule 57E is the recovery of more duty on such inputs from the input-manufacturer. This position is abundantly clear from the very text of Rule 57E extracted earlier in this order. On the other hand, a cause of action for recovery under Rule 56A (5)(i) arose when a credit of duty was allowed on account of error, omission or misconstruction on the part of excise officer, and, perforce, the date of taking the credit came to be recognised as the date of commencement of the period of limitation for such recovery. We do not see any parity between this rule and Rule 57E with regard to date of commencement of period of limitation. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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