Modvat credit time limit ultra vires: procedural rule could not extinguish accrued credit absent statutory authority.

Rule 57G of the Central Excise Rules, 1944 authorised the Central Government only to prescribe documentary requirements and the procedure for availing Modvat credit; it did not permit the imposition of a time limit that extinguished an accrued substantive credit under Rule 57A. A notification requiring credit to be taken by 30 June 1994 therefore went beyond the rule-making power under Rule 57G and operated impermissibly as lapsing of already accrued credit, when no enabling provision then existed for such lapsing. The later retrospective insertion of lapsing power did not govern the case. The time-limit condition was held ultra vires and the assessee remained entitled to the Modvat credit.

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Issues: Whether the Central Government, while issuing a notification under Rule 57G of the Central Excise Rules, 1944, could prescribe a time limit within which Modvat credit had to be taken, and whether such restriction could validly operate to deny already accrued credit.

Analysis: Rule 57G empowered prescription of documents evidencing payment of duty on inputs and laid down the procedure for taking credit, but it did not authorise the Central Government to curtail the substantive right to credit conferred under Rule 57A. A time limit for taking credit, if at all, had to flow from the rule governing credit itself, not from a procedural provision governing documentation. The notification, insofar as it required credit to be taken by 30 June 1994, therefore travelled beyond the rule-making power under Rule 57G. The restriction also operated in substance as lapsing of credit already accrued in favour of the manufacturer, when at the relevant time there was no enabling provision authorising such lapsing; the later retrospective insertion of the rule-making power for lapsing did not apply to the case.

Conclusion: The time-limit provision in the notification was ultra vires Rule 57G and could not be sustained; the assessee was entitled to the Modvat credit.

Ratio Decidendi: A delegated authority empowered only to prescribe documentary requirements and procedure cannot, under that power, impose a time limit that extinguishes an accrued substantive credit unless the parent statute or the rule conferring the credit expressly authorises such curtailment or lapsing.

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