New alternative plea barred in second round after limited remand; Tribunal's rejection of Rule 173H defence was upheld.

After a limited remand that had attained finality, an assessee was not allowed to raise for the first time in the second round an alternative plea under Rule 173H of the Central Excise Rules, 1944. The plea had not been taken before the adjudicating authority or in reply to the show cause notice, and the assessee had earlier maintained that the rule was not applicable. The HC upheld the Tribunal's view that a new alternative ground could not be introduced at that stage, particularly where the earlier findings on the nature of the process had already been accepted. The disallowance of modvat credit was sustained.

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Issues: Whether the assessee could, in the second round of litigation after a limited remand, raise an alternative plea under Rule 173H of the Central Excise Rules, 1944 when that plea had not been taken before the adjudicating authority or in the reply to the show cause notice.

Analysis: The remand order had been confined to a limited factual inquiry and had attained finality. The assessee had not sought consideration of Rule 173H before the adjudicating authority in the remand proceedings and, on the contrary, had taken a stand that the rule was not applicable. In such circumstances, the assessee could not be permitted to introduce a new alternative plea for the first time before the Tribunal in the second round, especially when the earlier findings on the nature of the process undertaken were accepted.

Conclusion: The Tribunal was justified in rejecting the alternative plea under Rule 173H, and the disallowance of modvat credit was sustained against the assessee.

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