1998 (11) TMI 134 - HC - Central Excise

Court Limits Time for Recovery of Modvat Credit, Rejects Independent Rule 57-I Interpretation

The court held that the six months' limitation period under Section 11A of the Central Excise Act applies to demands for recovery made under Rule 57-I for ... Demand - Recovery of Modvat credit - Limitation - Appeal Issues Involved:1. Applicability of the six months' period of limitation u/s 11A of the Central Excise Act to notices issued under Rule 57-I for recovery of wrongly availed Modvat credit.2. Whether the decision in the Collector's conference regarding the application of the time limit prescribed in Section 11A for the recovery of wrong credit is binding.3. Admissibility of Modvat credit for Endless P.B. Wire Mesh and Industrial Cloth used in the manufacture of printing paper.Summary:1. Applicability of Limitation Period u/s 11A to Rule 57-I:The primary question was whether a demand for recovery of Modvat credit wrongly availed of can be made under Rule 57-I regardless of any period of limitation or whether the period of limitation provided u/s 11A of the Act would also govern a demand for recovery under Rule 57-I. The court noted that before the amendment of Rule 57-I on 6-10-1988, no period of limitation was explicitly provided in the rule. However, the court held that the six months' period of limitation provided u/s 11A of the Act would also apply to demands made under Rule 57-I. This view was supported by the decisions of the Bombay High Court in Fabril Gasosa v. U.O.I. and the Madras High Court in Advani Oerlikon Ltd. v. Assistant Collector of Central Excise. The court rejected the Gujarat High Court's decision in Torrent Laboratories Pvt. Limited v. U.O.I., which had held that Rule 57-I was independent of Section 11A.2. Binding Nature of Collector's Conference Decision:The Tribunal restricted the demands for recovery within the period of limitation as provided u/s 11A, without stating that the decision in the Collectors' conference was binding. The court noted that the Tribunal did not base its order on the decision of the Collectors' conference but merely referred to it as being in accord with its view. Therefore, the question of whether the decision in the Collectors' conference was binding did not arise from the Tribunal's order and needed no answer from the court.3. Admissibility of Modvat Credit for Specific Inputs:The court also addressed whether Modvat credit of excise duty paid on Endless P.B. Wire Mesh and Industrial Cloth would be available in the manufacture of printing paper. The Tribunal had initially denied the Modvat benefit for these inputs, but later decisions by the Tribunal and a Larger Bench held that Modvat credit was available for these items. The court agreed with the later decisions, holding that these inputs were eligible for Modvat credit.Conclusion:All the questions in all the tax cases were answered in favor of the respective assessees and against the Revenue. The court directed that a copy of the judgment be sent to the Tribunal for necessary action and disposed of the writ petition accordingly, with no order as to costs in any of these cases.