2002 (3) TMI 534 - AT - Central Excise

Court Upholds Disallowance of Modvat Credit on Dutiable Final Products

HINDUSTAN LEVER LTD. Versus COMMISSIONER OF C. EX., BANGALORE

The court upheld the Tribunal's decision to disallow Modvat credit on dutiable final products even after subsequent exemption under Section 5A of the ... Reference to High Court - Rectification of Mistake Issues:1. Whether Modvat credit properly availed on dutiable final products needs to be disallowed when the final products get subsequently exempted by notification under Section 5A of the Central Excise Act, 1944Rs.2. Whether the Tribunal was correct in following the decision of the Single Judge of the Allahabad High Court over a decision of the Division Bench of the Delhi High CourtRs.Issue 1:The first issue revolves around the question of whether Modvat credit properly availed on dutiable final products should be disallowed if the final products are later exempted by a notification under Section 5A of the Central Excise Act, 1944. The appellant argued that the Tribunal's decision contradicted the Delhi High Court's ruling in the case of Good Year India Ltd. The appellant cited specific paragraphs from the Delhi High Court's judgment to support their contention that the credit availed could be used for payment of duty on any excisable products, regardless of subsequent exemptions. On the other hand, the respondent contended that the Delhi High Court's decision was not applicable to the current case and that the Tribunal had correctly followed a Larger Bench decision based on the Allahabad High Court's ruling. The respondent highlighted that the Tribunal's decision was in line with the legal position at the time and argued against the need to refer the matter to the High Court for further consideration. Ultimately, the judge rejected the reference application, emphasizing that subsequent court decisions should not be grounds for rectifying past judgments under the Central Excise Act, and upheld the Tribunal's decision disallowing the Modvat credit.Issue 2:The second issue pertains to whether the Tribunal was justified in following the decision of the Single Judge of the Allahabad High Court instead of a decision by the Division Bench of the Delhi High Court. The appellant argued that subsequent Supreme Court judgments supported their position, citing the case of Dai Ichi Karkaria Ltd., which held that credits validly availed and utilized during a period when final products were dutiable should not be reversed if the final products were later exempted from duty. The appellant also referenced a subsequent Larger Bench decision that aligned with the Supreme Court's view. However, the judge concurred with the Revenue's arguments that the Tribunal's decision was based on the legal position at the time of the order and that subsequent court decisions should not be used to challenge past judgments. The judge rejected the appellant's request to refer the matter to the High Court for consideration, thereby upholding the Tribunal's decision and dismissing the reference application.In conclusion, the judgment addressed the issues surrounding the disallowance of Modvat credit on dutiable final products upon subsequent exemption, as well as the Tribunal's decision-making process in following specific court rulings. The judge emphasized the importance of considering the legal landscape at the time of the decision and rejected the appellant's requests to refer the matter to the High Court based on subsequent court judgments.