2009 (7) TMI 818 - HC - Central Excise

High Court allows claiming Modvat credit later if not initially claimed; no time limit specified in Rule 57B.

COMMISSIONER OF C. EX. & CUSTOMS Versus GUJARAT BOTTLING CO. LTD.

The High Court ruled in favor of the assessee, allowing the claiming of Modvat credit at a later stage if not initially claimed, as long as it does not ... Cenvat/ Modvat credit - notional credit in terms of Rule 57B of the Central Excise Act - availed credit at a later date than the receipt of inputs in the factory of the credit – Held that: - Rule 57-B prescribes no time limit for claiming Modvat Credit – Case in favour of the assessee – Disposed of accordingly Issues:1. Interpretation of Rule 57B of the Central Excise Act, 1944 regarding the timing of claiming Modvat credit.2. Whether a higher notional credit under Rule 57B can be taken within a reasonable period.Issue 1: Interpretation of Rule 57B - Timing of Claiming Modvat CreditThe case involved a dispute where the respondent-assessee, engaged in manufacturing aerated water and soft drinks, took a higher notional Modvat credit after a delay due to lack of knowledge of the law's provisions. The Assistant Collector issued a show-cause notice disallowing the credit, leading to subsequent appeals. The Collector (Appeals) partially set aside the order, and the Tribunal dismissed the Central Excise department's appeal. The department argued that Rule 57B does not permit claiming credit at a later date. However, the Tribunal relied on precedents allowing credit within a reasonable time, emphasizing the absence of a specific bar in the rules disentitling such claims. The High Court concurred, citing previous cases where recovery of wrongly availed credit within a reasonable period was upheld, emphasizing the absence of a time limit in Rule 57B. The Court ruled in favor of the assessee, allowing the credit to be taken at a later stage if not initially claimed, as long as it does not exceed 90% of the duty paid.Issue 2: Higher Notional Credit within a Reasonable PeriodThe second issue revolved around whether a higher notional credit under Rule 57B could be claimed within a reasonable period. The Tribunal had allowed such credits within six months of receipt of inputs, based on the principle that the Central Excise Act permits claiming credit within a reasonable time. The High Court upheld this reasoning, citing precedents where recovery of wrongly availed credit within a reasonable period was deemed permissible. The Court emphasized that the absence of a specific time limit in Rule 57B did not bar claiming additional credit within a reasonable timeframe. Consequently, the Court answered the reference questions in favor of the assessee and against the revenue, disposing of both references without costs.This detailed analysis of the judgment provides insights into the interpretation of Rule 57B and the allowance of higher notional credits within a reasonable period, showcasing the application of legal principles and precedents in resolving the issues at hand.