2010 (8) TMI 324 - HC - Central Excise

Court affirms entitlement to recredit under Rule 57G, clarifying Modvat Scheme benefits

The Court upheld the Tribunal's decision in a case involving the availing of benefits under the Modvat Scheme after reversal for other schemes. The Court ... Cenvat credit – Limitation for taking credit - no dispute about cancellation of the advance licence and there was no requirement on the part of the respondent to reverse the credit and as such already reversed credit was liable to be credited back to them - Rule 57G requiring the assessee to take credit within a period of six months from the date of issuance of the invoice - Tribunal on fact found that the appellant had already availed of the credit within the said period - Tribunal held that provisions of Rule 57G(2) do not have any role to play in these circumstances and their contravention cannot be alleged against the appellant – Tribunal’s order not to be interfered Issues:1. Availing benefits under Modvat Scheme after reversal for other schemes.2. Extending Modvat Scheme credit after six months.3. Recredit as new entry or continuation.Issue 1: Availing benefits under Modvat Scheme after reversal for other schemesThe case involved a show cause notice issued to the respondent regarding irregular/wrong availment of Modvat credit. The Assistant Commissioner disallowed the credit, imposed a penalty, and ordered interest payment. The Tribunal allowed the appeal, setting aside the order and granting relief to the respondent. The revenue argued against allowing credit after six months from the date of taking wrong credit. The Tribunal found that the respondent, after initially availing benefits and later reversing them for other schemes, was entitled to recredit as per Rule 57G. The Tribunal's factual findings supported the respondent's position, and the Court upheld the Tribunal's decision, stating that the proviso inserted in Rule 57G did not apply in this case.Issue 2: Extending Modvat Scheme credit after six monthsThe issue revolved around whether Modvat Scheme credit could be extended after six months from the issuance of documents, especially when initially availed within six months but later reversed for other schemes. The revenue contended that the Tribunal erred in allowing the credit after the statutory period. However, the respondent argued that the six-month time limit mentioned in the proviso of Rule 57G did not apply to their case due to specific circumstances. The Court agreed with the Tribunal's findings, emphasizing that the credit was rightfully recredited to the respondent after the cancellation of the advance license, as per the provisions of Rule 57G.Issue 3: Recredit as new entry or continuationThe question of whether recredit or second credit constituted a new entry or a continuation of the first credit entry was crucial in this case. The Tribunal found that the respondent's recredit was not a new entry but a reversal of the credit earlier earned by them. The Court concurred with this finding, stating that the reverse entry was justified as the credit was initially availed within the prescribed period. The Court emphasized that the Tribunal's factual findings and correct application of the law supported the respondent's entitlement to the relief granted. The Court held that the provisions of Rule 57G(2) did not apply in the circumstances of the case, and the revenue's case had no merit, upholding the Tribunal's decision.In conclusion, the Court upheld the Tribunal's decision, dismissing the revenue's claims and affirming the respondent's entitlement to the relief granted. The judgment clarified the application of Rule 57G in the context of availing benefits under the Modvat Scheme and the permissibility of recrediting after reversal for other schemes, emphasizing the factual findings and appropriate legal interpretation in support of the respondent's position.