2009 (3) TMI 90 - HC - Central Excise

Court affirms Superintendent's authority on Modvat Credit disallowance, upholding six-month limitation rule

Bharat Heavy Electricals Ltd. Versus Commissioner Central Excise Meerut.

The court concluded that the proceedings were a continuation of the original Show Cause Notices issued by the Superintendent Central Excise. It held that ... Credit – event - insertion of proviso in Rule 57 G (2) vide Not. No. 28/95 dated 29.06.1995 - object of insertion is to provide limitation in taking benefit of the Modvat Credit Scheme and not to misuse or abuse the same - held that the crucial event determining the admissibility of credit is the receipt of the inputs and not the act of taking credit - Therefore, the amendment made on 29.06.1995, would not be applicable to the credits that had crystallised before 29.06.1995 - CESTAT is right in holding that the credit would be available not beyond the period of six months from the date of duty paying documents Issues Involved:1. Continuation of proceedings from the Superintendent Central Excise's Show Cause Notices.2. Legal competence of the Superintendent Central Excise to issue Show Cause Notices.3. Applicability of Supreme Court rulings on Modvat Credit and the impact of amendments to the Central Excise Act.Detailed Analysis:Issue 1: Continuation of ProceedingsThe first issue addressed whether the matter heard and decided by the CESTAT on 21/03/2003 was a continuation of the proceedings initiated by the Superintendent Central Excise's Show Cause Notices dated 26/06/1996 and 27/08/1996. The court concluded that the proceedings were indeed a continuation of the same, as the appeals and subsequent decisions were all part of the ongoing adjudication process initiated by the original Show Cause Notices.Issue 2: Legal Competence to Issue Show Cause NoticesThe second issue pertained to the legal competence of the Superintendent Central Excise to issue Show Cause Notices for disallowance of Modvat Credit. The assessee argued that only the Assistant Collectors (now Assistant Commissioners) were authorized to issue such notices, citing several circular letters from the Central Board of Excise and Customs. However, the court found that the relevant circular letters and Rule 57-I of the Central Excise Rules, 1944, did not bar the Superintendent Central Excise from issuing Show Cause Notices. The court noted that the circular letter dated 27.02.1997 clarified that Range Superintendents could issue Show Cause Notices for matters to be adjudicated by the Assistant Commissioners. Therefore, the court found no illegality in the Show Cause Notices issued by the Superintendent Central Excise.Issue 3: Applicability of Supreme Court Rulings and AmendmentsThe third issue involved multiple sub-questions regarding the applicability of Supreme Court rulings on Modvat Credit and the impact of amendments to the Central Excise Act. The court discussed the Eicher Motors Ltd. case, which held that the right to credit under the Modvat Scheme became absolute when the input was used in the manufacture of the final product. However, this ruling pertained to a period before the amendment made on 29.06.1995, which introduced a six-month limitation for taking credit.The court referred to the Kusum Ingots and Alloys Ltd. case, where it was determined that the crucial event for admissibility of credit was the receipt of inputs, not the act of taking credit. The amendment made on 29.06.1995, which imposed a six-month limitation, was applicable to credits that crystallized after this date. The court noted that the CESTAT had already decided in favor of the six-month limitation in its judgment dated 19.10.2000, which was not challenged by the assessee, thus attaining finality. Therefore, the court upheld the six-month limitation for taking Modvat Credit as per the amended rules.ConclusionThe court answered all the referred questions, concluding that:1. The proceedings were a continuation of the original Show Cause Notices.2. The Superintendent Central Excise was competent to issue the Show Cause Notices.3. The six-month limitation for taking Modvat Credit, as per the amended rules, was applicable and had attained finality in the case.